UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549  FORM 10-Q  (Mark one)þQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2008  OR   ̈TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  FOR THE TRANSITION PERIOD FROM __________ TO __________  Commission File Number: 333-20277  PHL VARIABLE INSURANCE COMPANY (Exact name of registrant as specified in its charter)  Connecticut06-1045829(State or other jurisdiction of(I.R.S. Employer Identification No.)incorporation or organization)One American Row,
Hartford, Connecticut06102-5056(Address of principal executive offices)(Zip Code)(860) 403-5000(Registrants telephone number, including area code)   Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YESþ
NO ̈  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer o Accelerated filer o Non-accelerated filer þ Smaller reporting company o (Do not check if smaller reporting company)  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ̈
NOþ  PHL Variable Insurance Company is a wholly-owned indirect subsidiary of The Phoenix Companies, Inc., and there is no market for the registrants common stock. As of April 30, 2008, there were 500 shares of the registrants common stock outstanding.  The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format permitted by that General Instruction.       1  TABLE OF CONTENTS  PART IFINANCIAL INFORMATIONPageItem
1.Financial Statements3Item 2.Managements Discussion and Analysis of Financial Condition and
  Results of Operations18Item
3.Quantitative and Qualitative Disclosures About Market Risk24Item
4.Controls and Procedures24PART IIOTHER INFORMATIONItem
1.Legal Proceedings25Item
1A.Risk
Factors25Item
2.Unregistered Sales of Equity Securities and Use of Proceeds25Item
3.Defaults Upon Senior Securities25Item
4.Submission of Matters to a Vote of Security Holders25Item
5.Other Information25Item
6.Exhibits26Signature27   2   PART I. FINANCIAL INFORMATION  ITEM 1. FINANCIAL STATEMENTS  PHL VARIABLE INSURANCE COMPANY Unaudited Interim Condensed Balance Sheet ($ in thousands, except share data) March 31, 2008 (unaudited) and December 31, 2007  Mar 31,
Dec 31,2008
2007ASSETS:Available-for-sale debt
securities, at fair value$1,584,526
$1,709,586Policy loans, at unpaid
principal balances
23,980

22,819Other investments
1,214

1,251Total investments
1,609,720

1,733,656Cash and cash equivalents
116,307

108,200Accrued investment income
17,809

17,518Receivables
48,720

37,178Deferred policy
acquisition costs
1,140,249

1,007,811Receivable from related
parties
347

527Other assets
11,174

20,214Separate account assets
3,189,249

3,389,356Total assets$
6,133,575
$
6,314,460LIABILITIES:Policyholder deposit
funds$1,045,188
$1,134,635Policy liabilities and
accruals
1,063,317

966,945Deferred income taxes
129,751

140,115Payable to related
parties
22,097

28,969Other liabilities
54,623

48,304Separate account
liabilities
3,189,249

3,389,356Total liabilities
5,504,225

5,708,324CONTINGENT LIABILITIES
(Note 8)STOCKHOLDERS
EQUITY:Common stock, $5,000 par
value: 1,000 shares authorized; 500 shares issued
2,500

2,500Additional paid-in
capital
595,218

553,218Retained earnings
49,055

62,202Accumulated other
comprehensive loss
(17,423)

(11,784)Total
stockholders equity
629,350

606,136Total liabilities and
stockholders equity$
6,133,575
$
6,314,460  The accompanying notes
are an integral part of these financial statements.  3   PHL VARIABLE INSURANCE COMPANY Unaudited Interim Condensed Statement of Income and Comprehensive Income and Changes in Stockholders Equity ($ in thousands, except share data) Three Months Ended March 31, 2008 and 2007  2008
2007REVENUES:Premiums$(643)
$3,179Insurance and investment product fees
82,727

54,301Investment income, net of expenses
24,321

27,894Net
realized investment losses
(20,029)

(170)Total revenues
86,376

85,204BENEFITS AND EXPENSES:Policy benefits
65,232

35,676Policy acquisition cost amortization
15,516

25,263Other operating expenses
28,100

17,086Total benefits and expenses
108,848

78,025Income (loss) before income taxes
(22,472)

7,179Applicable income tax (expense) benefit
9,325

(2,340)Net income (loss)$(13,147)
$4,839COMPREHENSIVE INCOME:Net income (loss)$(13,147)
$4,839Net
unrealized investment gains (losses)
(5,639)
935Other comprehensive income (loss)
(5,639)

935Comprehensive income (loss)$(18,786)
$5,774ADDITIONAL PAID-IN CAPITAL:Capital contributions from parent$42,000
$--RETAINED EARNINGS:Net
income (loss)
(13,147)

4,839Adjustment for initial application of FIN 48 (Note 2)
--

(1,000)OTHER COMPREHENSIVE INCOME:Other comprehensive income (loss)
(5,639)

935Change in stockholders equity
23,214

4,774Stockholders equity, beginning of period
606,136

550,260Stockholders equity, end of period$629,350
$555,034  The accompanying notes are an integral
part of these financial statements.  4   PHL VARIABLE INSURANCE COMPANY Unaudited Interim Condensed Statement of Cash Flows ($ in thousands) Three Months Ended March 31, 2008 and 2007  2008
2007OPERATING ACTIVITIES:Net
income (loss)$(13,147)
$4,839Net
realized investment losses
20,029

170Investment income (loss)
(701)

594Deferred income taxes
(7,328)

9,662Increase in receivables
(10,607)

(166)Increase in deferred policy acquisition costs
(111,297)

(36,155)Increase in policy liabilities and accruals
98,163

35,991Other assets and other liabilities net change
8,327

(21,551)Cash for operating activities
(16,561)

(6,616)INVESTING ACTIVITIES:Investment purchases
(156,476)

(238,779)Investment sales, repayments and maturities
249,549

376,547Cash from investing activities
93,073

137,768FINANCING ACTIVITIES:Policyholder deposit fund deposits
82,265

65,580Policyholder deposit fund withdrawals
(183,455)

(168,722)Capital contributions from parent
32,785

--Cash for financing activities
(68,405)

(103,142)Change in cash and cash equivalents
8,107

28,010Cash and cash equivalents, beginning of period
108,200

47,127Cash and cash equivalents, end of period$116,307
$75,137  During the three months
ended March 31, 2008, we received $42,000 thousand in capital contributions,
of which $32,785 thousand was in cash and $9,215 was in securities.  The accompanying notes are an integral
part of these financial statements.  5   PHL VARIABLE INSURANCE COMPANY Notes to Unaudited Interim Condensed Consolidated Financial Statements Three Months Ended March 31, 2008 and 2007    1. Organization and
Description of Business  PHL Variable Insurance Company is a
life insurance company offering variable and fixed annuity and non-participating
life insurance products. It is a wholly-owned subsidiary of PM Holdings, Inc. PM
Holdings, Inc. is a wholly-owned subsidiary of Phoenix Life Insurance Company
(Phoenix Life), which is a wholly-owned subsidiary of The Phoenix
Companies, Inc. (PNX), a New York Stock Exchange listed company.   2. Basis of
Presentation and Significant Accounting Policies  We have prepared these financial
statements in accordance with accounting principles generally accepted in the
United States of America (GAAP), which differ materially from the
accounting practices prescribed by various insurance regulatory authorities.  Use of estimates  In preparing these financial statements
in conformity with GAAP, we are required to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from these estimates. We
employ significant estimates and assumptions in the determination of deferred
policy acquisition costs; policyholder liabilities and accruals; the valuation
of investments in debt and equity securities; and accruals for deferred income
taxes and contingent liabilities. Our significant accounting policies are
presented in the notes to our financial statements in our 2007 Annual Report on
Form 10-K.  Our interim financial statements do not
include all of the disclosures required by GAAP for annual financial statements.
In our opinion, we have included all adjustments, consisting of normal recurring
adjustments, considered necessary for a fair statement of the results for the
interim periods. Financial results for the three-month period in 2008 are not
necessarily indicative of the results that may be expected for the year 2008.
These unaudited financial statements should be read in conjunction with our
financial statements in our 2007 Annual Report on Form 10-K.  Adoption of new accounting standards  On February 15, 2007, the
Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities (SFAS 159), which gives
entities the option to measure eligible financial assets, financial liabilities
and firm commitments at fair value (i.e., the fair value option), on an
instrument-by-instrument basis, that are otherwise not permitted to be accounted
for at fair value under other accounting standards. The election to use the fair
value option is available when an entity first recognizes a financial asset or
financial liability or upon entering into a firm commitment. Subsequent changes
in fair value must be recorded in earnings. Additionally, SFAS 159 allows for a
one-time election for existing positions upon adoption, with the transition
adjustment recorded to beginning retained earnings. We adopted SFAS 159 as of
January 1, 2008 with no effect on our financial statements.  6   2. Basis of
Presentation and Significant Accounting Policies (continued)  In September 2006, the FASB issued SFAS
No. 157, Fair Value Measurements (SFAS 157).
SFAS 157 defines fair value, establishes a framework for measuring fair
value and expands disclosures about fair value measurements. SFAS 157
provides guidance on how to measure fair value when required under existing
accounting standards. The statement establishes a fair value hierarchy that
prioritizes the inputs to valuation techniques used to measure fair value into
three broad levels (Level 1, 2 and 3). Level 1 inputs are observable
inputs that reflect quoted prices for identical assets or liabilities in active
markets that we have the ability to access at the measurement date. Level 2
inputs are observable inputs, other than quoted prices included in Level 1, for
the asset or liability. Level 3 inputs are unobservable inputs reflecting our
estimates of the assumptions that market participants would use in pricing the
asset or liability (including assumptions about risk). Quantitative and qualitative disclosures
will focus on the inputs used to measure fair value for both recurring and
non-recurring fair value measurements and the effects of the measurements in the
financial statements. We adopted SFAS 157 effective January 1, 2008
with no material impact on our financial position and results of operations. See
Note 6 to these financial statements for more information.  We adopted the provisions of the FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes
(FIN 48), on January 1, 2007. As a result of the
implementation of FIN 48, we recognized an increase in reserves for
uncertain tax benefits through a cumulative effect adjustment of approximately
$1,000 thousand, which was accounted for as a reduction to the January 1,
2007 balance of retained earnings. Including the cumulative effect adjustment,
we had $1,840 thousand of total gross unrecognized tax benefits as of
January 1, 2007. The entire amount of unrecognized tax benefits would, if
recognized, impact the annual effective tax rate upon recognition.  In March 2006, the FASB issued SFAS No.
156, Accounting for Servicing of Financial Assets, an amendment of FASB
Statement No. 140 (SFAS 156). SFAS 156 provides guidance on
recognition and disclosure of servicing assets and liabilities and was effective
beginning January 1, 2007. We adopted this standard effective
January 1, 2007 with no material impact on our financial position and
results of operations.  In September 2005, the Accounting
Standards Executive Committee (AcSEC) of the AICPAs issued
Statement of Position 05-1, Accounting by Insurance Enterprises for
Deferred Acquisition Costs in Connection With Modifications or Exchanges of
Insurance Contracts (SOP 05-1). SOP 05-1 provides
guidance on accounting by insurance enterprises for deferred acquisition costs
on internal replacements of insurance and investment contracts other than those
specifically described in SFAS No. 97. The SOP defines an internal replacement
as a modification in product benefits, features, rights, or coverages that
occurs by the exchange of a contract for a new contract, or by amendment,
endorsement, or rider to a contract, or by the election of a feature or coverage
within a contract. This SOP is effective for internal replacements occurring in
fiscal years beginning after December 15, 2006. We adopted this standard
effective January
 1, 2007 with no material effect on our financial position and results of
operations.  Accounting standards not yet adopted  In March 2008, the FASB issued SFAS No.
161, Disclosures about Derivative Instruments and Hedging Activities, an
amendment of FASB Statement No. 133 (SFAS 161). This statement
amends and expands the requirement for qualitative disclosures about objectives
and strategies for using derivatives, quantitative disclosures about fair value
amounts of and gains and losses on derivative instruments, and disclosures about
credit-risk-related contingent features in derivative agreements. SFAS 161 will
be effective for us on January 1, 2009.  In December 2007, the FASB issued SFAS
No. 141(R), Accounting for Business Combinations (SFAS
141(R)). SFAS 141(R) requires the acquiring entity in a business
combination to recognize all (and only) the assets acquired and liabilities
assumed in the transaction, establishes the acquisition-date fair value as the
measurement objective for all assets acquired and liabilities assumed and
requires the acquirer to disclose all information needed to evaluate and
understand the nature and financial effect of the combination and is effective
beginning for fiscal years beginning after December 15, 2008. We will adopt
this standard effective January 1, 2009 and do not expect it to have a
material impact on our financial position and results of operations.  7   2. Basis of
Presentation and Significant Accounting Policies (continued)  In December 2007, the FASB issued SFAS
160, Noncontrolling Interests in Consolidated Financial Statements
(SFAS 160). SFAS 160 requires all entities to report noncontrolling
interests in subsidiaries in the same wayas equity in the consolidated
financial statements and requires that associated transactions be treated as
equity transactionsand is effective beginning for fiscal years beginning
after December 15, 2008. We will adopt this standard effective
January 1, 2009 and do not expect it to have a material impact on our
financial position and results of operations.   3. Deferred Policy
Acquisition Costs  Deferred Policy Acquisition Costs:Three Months Ended($ in thousands)
March 31,2008
2007Policy acquisition costs deferred$126,813
$61,418Costs amortized to expenses:Recurring costs
(18,290)

(24,699)Realized investment (gains) losses
2,774

(564)Offsets to net unrealized investment gains or losses included in 
  other comprehensive income
21,141

(4,350)Change in deferred policy acquisition costs
132,438

31,805Deferred policy acquisition costs, beginning of period
1,007,811

703,794Deferred policy acquisition costs, end of period$1,140,249
$735,599  For the three months
ended March 31, 2008, policy acquisition cost amortization includes an
accounting adjustment which was largely offset by an accounting adjustment to
premium revenues, both of which relate to the implementation of a new reserving
system for term products.   4. Investing
Activities  Debt securities  Fair Value and Cost of Debt Securities:
March 31, 2008
December 31, 2007($ in thousands)
Fair Value
Cost
Fair Value
CostU.S. government and agency$51,447
$49,811
$65,774
$64,884State and political subdivision
10,175

10,230

11,029

11,134Foreign government
28,656

25,698

30,423

27,716Corporate
931,315

961,361

975,058

998,982Mortgage-backed
322,102

347,535

358,479

372,733Other asset-backed
240,831

274,662

268,823

288,927Available-for-sale debt securities$1,584,526
$1,669,297
$1,709,586
$1,764,376   Unrealized Gains and Losses from Debt Securities:
March 31, 2008
December 31, 2007($ in thousands)
Gains
Losses
Gains
LossesU.S. government and agency$1,890
$(254)
$1,193
$(303)State and political subdivision
11

(66)

11

(116)Foreign government
2,959

(1)

2,732

(25)Corporate
12,001

(42,047)

8,774

(32,698)Mortgage-backed
1,356

(26,789)

2,654

(16,908)Other asset-backed
1,054

(34,885)

875

(20,979)Debt securities gains (losses)$19,271
$(104,042)
$16,239
$(71,029)Debt securities net losses

$(84,771)



$(54,790)  8  4. Investing
Activities (continued)  Aging of Temporarily Impaired
March 31, 2008Debt Securities:
Less than 12 months
Greater than 12 months
Total($ in thousands)Fair
Unrealized
Fair
Unrealized
Fair
UnrealizedValue
Losses
Value
Losses
Value
LossesDebt securitiesU.S. government and agency$--
$--
$3,688
$(254)
$3,688
$(254)State and political subdivision
1,361

(6)

8,302

(60)

9,663

(66)Foreign government
--

--

498

(1)

498

(1)Corporate
143,526

(14,360)

292,731

(27,687)

436,257

(42,047)Mortgage-backed
114,151

(12,205)

125,831

(14,584)

239,982

(26,789)Other asset-backed
134,286

(25,383)

70,483

(9,502)

204,769

(34,885)Total temporarily impaired securities$
393,324
$
(51,954)
$
501,533
$
(52,088)
$
894,857
$
(104,042)Below investment grade$
38,699
$
(5,014)
$
58,294
$
(10,228)
$
96,993
$
(15,242)Below investment grade after offsets
  for deferred policy acquisition cost
  adjustment and taxes

$
(789)


$
(1,697)


$
(2,486)Number of securities



264




286




550  Below investment grade debt securities
with a fair value of less than 80% of the securitys amortized costs
totaled $(1,198) thousand at March 31, 2008. However, none of this
unrealized loss remained more than 20% below amortized cost for greater than 12
months.  All of these securities are considered
to be temporarily impaired at March 31, 2008 as each of these securities
has performed, and is expected to continue to perform, in accordance with their
original contractual terms, and we have the ability and intent to hold these
securities until they recover their value.  In determining that the securities are
not other-than-temporarily impaired, we considered and evaluated the factors
cited below. In making these evaluations, we must exercise considerable
judgment. Accordingly, there can be no assurance that actual results will not
differ from our judgments and that such differences may require the future
recognition of other-than-temporary impairment charges that could have a
material effect on our financial position and results of operations. In
addition, the value of, and the realization of any loss on, a debt security or
equity security is subject to numerous risks, including interest rate risk,
market risk, credit risk and liquidity risk. The magnitude of any loss incurred
by us may be affected by the relative concentration of our investments in any
one issuer or industry. We have established specific policies limiting the
concentration of our investments in any single issuer and industry and believe
our investment portfolio is prudently diversified.  At the end of each reporting period, we
review all securities for potential recognition of an other-than-temporary
impairment. We maintain a watch list of securities in default, near default or
otherwise considered by our investment professionals as being distressed,
potentially distressed or requiring a heightened level of scrutiny. We also
identify securities whose carrying value has been below amortized cost on a
continuous basis for zero to six months, six months to 12 months and greater
than 12 months. Using this analysis, coupled with our watch list, we review
securities to determine if a security is other-than-temporarily impaired.  9   4. Investing
Activities (continued)  Our assessment of whether an investment
in a debt or equity security is other-than-temporarily impaired includes whether
the issuer has:  ·
defaulted on payment obligations;·
declared that it will default at a future point outside the
current reporting period;·
announced that a restructuring will occur outside the current
reporting period;·
severe liquidity problems that cannot be resolved;·
filed for bankruptcy;·
a financial condition which suggests that future payments are
highly unlikely;·
deteriorating financial condition and quality of assets;·
sustained significant losses during the current year;·
announced adverse changes or events such as changes or
planned changes in senior management, restructurings, or a sale of assets;
and/or·
been affected by any other factors that indicate that the
fair value of the investment may have been negatively impacted.   Aging of Temporarily Impaired
As of December 31, 2007Debt Securities:
Less than 12 months
Greater than 12 months
Total($ in thousands)Fair
Unrealized
Fair
Unrealized
Fair
UnrealizedValue
Losses
Value
Losses
Value
LossesDebt SecuritiesU.S. government and agency$--
$--
$15,629
$(303)
$15,629
$(303)State and political subdivision
--

--

10,516

(116)

10,516

(116)Foreign government
--

--

2,464

(25)

2,464

(25)Corporate
134,427

(9,598)

478,287

(23,100)

612,714

(32,698)Mortgage-backed
105,599

(9,822)

162,554

(7,086)

268,153

(16,908)Other asset-backed
137,632

(15,661)

81,534

(5,318)

219,166

(20,979)Total temporarily impaired securities$
377,658
$
(35,081)
$
750,984
$
(35,948)
$
1,128,642
$
(71,029)Below investment grade$
39,024
$
(1,797)
$
67,088
$
(7,484)
$
106,112
$
(9,281)Below investment grade after offsets
  for deferred policy acquisition cost
  adjustment and taxes

$
(292)


$
(1,306)


$
(1,598)Number of securities



243




411




654  Below investment grade debt securities
with a fair value of less than 80% of the securitys amortized costs
totaled $(3,933) thousand at December 31, 2007. However, none of this
unrealized loss remained more than 20% below amortized cost for greater than 12
months.  All of these securities are considered
to be temporarily impaired at December 31, 2007 as each of these securities
has performed, and is expected to continue to perform, in accordance with their
original contractual terms, and we have the ability and intent to hold these
securities until they recover their value.  10   4. Investing
Activities (continued)  Net investment income  Sources of Net Investment Income:Three Months Ended($ in thousands)
March 31,2008
2007Debt securities$23,589
$27,011Policy loans
335

254Other investments
25

11Other income
90

214Cash
and cash equivalents
799

921Total investment income
24,838

28,411Investment expenses
(517)

(517)Net investment income$24,321
$27,894  Net realized investment gains
(losses)  Sources and Types of Net Realized Investment Gains (Losses):Three Months Ended($ in thousands)
March 31,2008
2007Debt security impairments$(6,948)
$(500)Debt security transaction gains
366

869Debt security transaction losses
(1,759)

(1,431)Change in fair value of embedded derivative liabilities
(11,710)

777Other investments transaction gains (losses)
22

115Net transaction gains (losses)
(13,081)

330Net realized investment losses$(20,029)
$(170)  Debt security impairments during the
first quarter of 2008 included $6,096 thousand related to residential
mortgage-backed securities. Based on a projected cash flow analysis that
incorporates delinquency levels, foreclosures and expected losses on
foreclosures, and indicates that we will not receive our contractual principal
from certain investments, we recorded impairment losses on those investments.  Unrealized investment gains (losses)  Sources of Changes in Net Unrealized Investment Gains (Losses):Three Months Ended($ in thousands)
March 31,2008
2007Debt securities$(29,981)
$5,788Other investments
165

--Net unrealized investment gains (losses)$(29,816)
$5,788Net unrealized investment gains (losses)$(29,816)
$5,788Applicable deferred policy acquisition costs
21,141

(4,350)Applicable deferred income tax (expense) benefit
3,036

(503)Offsets to net unrealized investment gains (losses)
24,177

(4,853)Net unrealized investment gains (losses) included in other comprehensive
income$(5,639)
$935  11   5. Separate
Accounts, Death Benefits and Other Insurance Benefit Features  Separate account products are those for
which a separate investment and liability account is maintained on behalf of the
policyholder. Investment objectives for these separate accounts vary by fund
account type, as outlined in the applicable fund prospectus or separate account
plan of operations. Our separate account products include variable annuities and
variable life insurance contracts. The assets supporting these contracts are
carried at fair value and reported as Separate account assets with an equivalent
amount reported as Separate account liabilities. Amounts assessed against the
policyholder for mortality, administration, and other services are included
within revenue in insurance and investment product fees. During the three-month
periods ended March 31, 2008 and 2007, there were no gains or losses on
transfers of assets from the general account to a separate account.  Many of our variable contracts offer
various guaranteed minimum death, accumulation, withdrawal and income benefits.
These benefits are offered in various forms as described below. We currently
reinsure a significant portion of the death benefit guarantees associated with
our in-force block of business. We establish policy benefit liabilities for
minimum death and income benefit guarantees relating to certain annuity policies
as follows:  ·
Liabilities associated with the guaranteed minimum death
benefit (GMDB) are determined by estimating the expected value of
death benefits in excess of the projected account balance and recognizing the
excess ratably over the accumulation period based on total expected assessments.
The assumptions used in estimating the liabilities are generally consistent with
those used for amortizing deferred policy acquisition costs.·
Liabilities associated with the guaranteed minimum income
benefit (GMIB) are determined by estimating the expected value of
the income benefits in excess of the projected account balance at the date of
annuitization and recognizing the excess ratably over the accumulation period
based on total expected assessments. The assumptions used for calculating such
guaranteed income benefit liabilities are generally consistent with those used
for amortizing deferred policy acquisition costs.  For annuities with GMDB, 200
stochastically generated scenarios were used. For annuities with GMIB, we used
1,000 stochastically generated scenarios.  The GMDB and GMIB guarantees are
recorded in policy liabilities and accruals on our balance sheet. Changes in the
liability are recorded in policy benefits on our statement of operations. In a
manner consistent with our policy for deferred policy acquisition costs, we
regularly evaluate estimates used and adjust the additional liability balances,
with a related charge or credit to benefit expense if actual experience or other
evidence suggests that earlier assumptions should be revised.  We also offer
certain variable products with a guaranteed minimum withdrawal benefit
(GMWB), a guaranteed minimum accumulation benefit (GMAB)
and a guaranteed pay-out annuity floor (GPAF).  The GMWB guarantees the policyholder a
minimum amount of withdrawals and benefit payments over time, regardless of the
investment performance of the contract, subject to an annual limit. Optional
resets are available. In addition, we introduced a feature for these contracts
beginning in the fourth quarter of 2005 that allows the policyholder to receive
the guaranteed annual withdrawal amount for as long as they are alive.  The GMAB rider provides the contract
holder with a minimum accumulation of their purchase payments deposited within a
specific time period, adjusted for withdrawals, after a specified amount of time
determined at the time of issuance of the variable annuity contract.  The GPAF rider
provides the policyholder with a minimum payment amount if the variable annuity
payment falls below this amount on the payment calculation date.  The GMWB, GMAB
and GPAF represent embedded derivatives in the variable annuity contracts that
are required to be reported separately from the host variable annuity contract.
They are carried at fair value and reported in policyholder deposit funds. The
fair value of the GMWB, GMAB and GPAF obligation is calculated based on
actuarial and capital market assumptions related to the projected cash flows,
including benefits and related contract charges, over the lives of the
contracts, incorporating expectations concerning policyholder behavior. As
markets change, mature and evolve and actual policyholder behavior emerges,
management continually evaluates the appropriateness of its assumptions.  12   5. Separate
Accounts, Death Benefits and Other Insurance Benefit Features (continued)  In order to minimize the volatility
associated with the GMWB, GMAB and GPAF liabilities, we have entered into a
contract with Phoenix Life whereby we cede 100% of any claims for these
guarantees. Because this contract does not transfer sufficient risk to be
accounted for as reinsurance, we use deposit accounting for the contract. As of
March 31, 2008 and December 31, 2007, the embedded derivative liability for
GMWB, GMAB and GPAF was $11,683 thousand and $363 thousand, respectively. Benefit payments for the GMWB, GMAB and GPAF
during the three-month periods ended March 31, 2008 and 2007 were
immaterial.  For those guarantees of benefits that
are payable in the event of death, the net amount at risk is generally defined
as the current guaranteed minimum death benefit in excess of the current account
balance at the balance sheet date. For guarantees of benefits that are payable
upon annuitization, the net amount at risk is generally defined as the present
value of the minimum guaranteed annuity payments available to the policy holder
determined in accordance with the terms of the contract in excess of the current
account balance. For guarantees of accumulation balances, the net amount at risk
is generally defined as the guaranteed minimum accumulation balance minus the
current account balance.    Additional Insurance Benefits:
Net Amount
Average($ in thousands)Account
At Risk After
Attained AgeValue
Reinsurance
of AnnuitantGMDB return of premium$1,314,996
$17,837

59GMDB step up
1,692,008

102,200

60GMDB earnings enhancement benefit (EEB)
70,707

105

60GMDB greater of annual step up and roll up
38,209

6,071

63Total GMDB at March 31, 2008
$
3,115,920
$
126,213GMIB$640,559



59GMAB
389,430



55GMWB
264,837




61GPAF
25,311



74Total at March 31, 2008
$
1,320,137  With the return of premium, the death
benefit is the greater of current account value or premiums paid (less any
adjusted partial withdrawals).  With the step up, the death benefit is
the greater of current account value, premiums paid (less any adjusted partial
withdrawals) or the annual step up amount prior of the eldest original owner
attaining a certain age. On and after the eldest original owner attains that
age, the death benefit is the greater of current account value or the death
benefit at the end of the contract year prior to the eldest original
owners attaining that age plus premium payments (less any adjusted partial
withdrawals) made since that date.  With EEB, the death benefit is the
greater of the premiums paid (less any adjusted partial withdrawals) or the
current account value plus the EEB. The EEB is an additional amount designed to
reduce the impact of taxes associated with distributing contract gains upon
death.  With greater of annual step up and
annual roll up, the death benefit is the greater of premium payments (less any
adjusted partial withdrawals), the annual step up amount, the annual roll up
amount or the current account value prior to the eldest original owner attaining
age 81. On and after the eldest original owner attained age 81, the death
benefit is the greater of current account value or the death benefit at the end
of the contract year prior to the eldest original owners attained age of
81 plus premium payments (less any adjusted partial withdrawals) made since that
date.  Liabilities for universal life are
generally determined by estimating the expected value of losses when death
benefits exceed revenues and recognizing those benefits ratably over the
accumulation period based on total expected assessments. The assumptions used in
estimating these liabilities are consistent with those used for amortizing
deferred policy acquisition costs. A single set of best estimate assumptions is
used since these insurance benefits do not vary significantly with capital
markets volatility. At March 31, 2008 and December 31, 2007, we held
additional universal life benefit reserves of $31,555 thousand and $25,930
thousand, respectively.  13     6. Fair Value  SFAS No. 157
(SFAS 157) defines fair value, establishes a framework for
measuring fair value, establishes a fair value hierarchy based on the quality of
inputs used to measure fair value and enhances disclosure requirements for fair
value measurements. Fair value is defined as the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.  SFAS 157 establishes a three-level
valuation hierarchy for disclosure of fair value measurements. The valuation
hierarchy is based upon the transparency of inputs to the valuation of an asset
or liability as of the measurement date. The three levels, from highest to
lowest, are defined as follows:  ·
Level 1  inputs to the valuation methodology are quoted
prices (unadjusted) for identical assets or liabilities in active markets. Level
1 securities include highly liquid government bonds, mortgage products,
exchange-traded equities and exchange-traded corporate debt.·
Level 2  inputs to the valuation methodology include
quoted prices for similar assets and liabilities in active markets, and inputs
that are observable for the asset or liability, either directly or indirectly,
for substantially the full term of the financial instrument. Examples of such
instruments include certain high-yield debt securities.·
Level 3  inputs to the valuation methodology are
unobservable and significant to the fair value measurement. Securities
classified within Level 3 include broker quoted investments, certain residual
interests in securitizations and other less liquid securities. Most valuations
that are based on brokers prices are classified as Level 3 due to a lack
of transparency in the process they use to develop prices.  A financial instruments
categorization within the valuation hierarchy is based upon the lowest level of
input that is significant to the fair value measurement.  The following table presents the
financial instruments carried at fair value as of March 31, 2008, by
SFAS 157 valuation hierarchy (as described above).  Assets and Liabilities at Fair Value:
As of March 31, 2008($ in thousands)
Level 1
Level 2
Level 3
TotalAssetsAvailable-for-sale debt securities$8,234
$1,322,879
$253,413
$1,584,526Available-for-sale equity securities
13

--

--

13Separate account assets
2,764,719

424,530

--

3,189,249Total assets$2,772,966
$1,747,409
$253,413
$4,773,788LiabilitiesEmbedded derivative liabilities$--
$--
$11,683
$11,683Total liabilities$--
$--
$11,683
$11,683  We have an established process for
determining fair values. Fair value is based upon quoted market prices, where
available. If listed prices or quotes are not available, fair value is based
upon internally developed models that use primarily market-based or
independently-sourced market parameters, including interest rate yield curves,
option volatilities and currency rates. Valuation adjustments may be made to
ensure that financial instruments are recorded at fair value. These adjustments
include amounts to reflect counterparty credit quality, our own
creditworthiness, liquidity and unobservable parameters that are applied
consistently over time. Of the $253,413 thousand of Level 3 assets, 85% were
obtained from independent third-party broker quotes.  Separate Accounts  Separate account assets are primarily
invested in mutual funds but also have investments in fixed maturity and equity
securities. The separate account investments are valued in the same manner, and
using the same pricing sources and inputs, as the fixed maturity, equity
security and short-term investments of the Company. Mutual funds are included in
Level 1. Most debt securities and short-term investments are included in Level
2.  14   6. Fair Value
(continued)  Valuation of Embedded Derivatives  Embedded derivatives are guarantees
that we make on certain variable annuity contracts, including GMAB and GMWB.
These embedded derivatives are fair valued using a risk neutral stochastic
valuation methodology. The inputs to our fair value methodology include
information derived from the asset derivatives market, including the volatility
surface and the swap curve. Several additional inputs are not obtained from
independent sources, but instead reflect our own assumptions about what market
participants would use in pricing the contracts. These inputs are therefore
considered unobservable and fall into Level 3 of the fair value
hierarchy. These inputs include mortality rates, lapse rates and policyholder
behavior assumptions. Because there are significant Level 3 inputs included in
our fair value methodology for these embedded derivative liabilities, we
consider the above-described methodology as a whole to be Level 3.  Level 3 Financial Assets and
Liabilities  The following table sets forth a
summary of changes in the fair value of our Level 3 financial assets and
liabilities. As required by SFAS 157, financial assets and liabilities are
classified in their entirety based on the lowest level of input that is
significant to the fair value measurement. For example, a hypothetical
derivative contract with Level 1, Level 2 and significant Level 3 inputs would
be classified as a Level 3 financial instrument in its entirety. Subsequently,
even if only Level 1 and Level 2 inputs are adjusted, the resulting gain or loss
is classified as Level 3. Further, Level 3 instruments are frequently hedged
with instruments that are classified as Level 1 or Level 2 and, accordingly,
gains or losses reported as Level 3 in the table below may be offset by gains or
losses attributable to instruments classified in Level 1 or 2 of the fair value
hierarchy.  Level 3 Financial Assets and Liabilities:Three Months Ended($ in thousands, except per share data)
March 31, 2008Assets
LiabilitiesBalance at January 1, 2008$267,185
$(363)Purchases/(sales), net
(3,042)

--Net transfers in and out of Level 3
6,842

--Realized gains (losses)
(5,430)

(11,320)Unrealized gains (losses) included in other comprehensive income (loss)
(11,510)

--Amortization/accretion
(632)

--Balance at March 31, 2008$253,413
$(11,683)Portion of gain (loss) included in net income relating to those
  assets/liabilities still held$(6,948)
$(11,320)  7. Income Taxes  For the three months ended
March 31, 2008 and 2007, the effective income tax rates applicable to
income from continuing operations differ from the 35.0% U.S. federal statutory
tax rate. Items giving rise to the differences and the effects are as follows:  Analysis of Effective Income Tax Rates:Three Months EndedMarch 31,2008
2007Income taxes at statutory rate$(35.0%)
$35.0%Investment income not subject to tax
(6.5%)

(2.4%)Effective income tax rates applicable to continuing operations
$
(41.5%)
$
32.6%  15     7. Income Taxes (continued)  Our federal income tax returns are
routinely audited by the IRS and estimated provisions are routinely provided in
the financial statements in anticipation of the results of these audits.
Unfavorable resolution of any particular issue could result in additional use of
cash to pay liabilities that would be deemed owed to the IRS. Additionally, any
unfavorable or favorable resolution of any particular issue could result in an
increase or decrease, respectively, to our effective income tax rate to the
extent that our estimates differ from the ultimate resolution. As of
March 31, 2008, we had current taxes receivable of $1,347 thousand.  See Note 2 to these financial
statements for information regarding the implementation of FIN 48.   8. Contingent Liabilities  Litigation and Arbitration  We are regularly involved in litigation
and arbitration, both as a defendant and as a plaintiff. The litigation and
arbitration naming us as a defendant ordinarily involves our activities as an
insurer, investor, or taxpayer. It is not feasible to predict or determine the
ultimate outcome of all legal or arbitration proceedings or to provide
reasonable ranges of potential losses. We believe that the outcomes of our
litigation and arbitration matters are not likely, either individually or in the
aggregate, to have a material adverse effect on our financial condition.
However, given the large or indeterminate amounts sought in certain of these
matters and the inherent unpredictability of litigation and arbitration, it is
possible that an adverse outcome in certain matters could, from time to time,
have a material adverse effect on our results of operations or cash flows in
particular quarterly or annual periods.  Regulatory Matters  State regulatory bodies, the Securities
and Exchange Commission (SEC), the Financial Industry Regulatory
Authority (FINRA) and other regulatory bodies regularly make
inquiries of us and, from time to time, conduct examinations or investigations
concerning our compliance with, among other things, insurance laws and
securities laws. We endeavor to respond to such inquiries in an appropriate way
and to take corrective action if warranted.  In addition, federal and state
regulatory authorities from time to time make inquiries and conduct examinations
regarding compliance by Phoenix Life and its subsidiaries with securities and
other laws and regulations affecting their registered products. We endeavor to
respond to such inquiries in an appropriate way and to take corrective action if
warranted. There has been a significant increase in federal and state regulatory
activity relating to financial services companies, with a number of recent
regulatory inquiries focusing on late-trading, market timing and valuation
issues. Our products entitle us to impose restrictions on transfers between
separate account sub-accounts associated with our variable products.  In 2005, the Boston District Office of
the SEC completed a compliance examination of certain of PNXs affiliates
that are registered under the Investment Company Act of 1940 or the Investment
Advisers Act of 1940. Following the examination, the staff of the Boston
District Office issued a deficiency letter primarily focused on perceived
weaknesses in procedures for monitoring trading to prevent market timing
activity. The staff requested PNX to conduct an analysis as to whether
shareholders, policyholders and contract holders who invested in the funds that
may have been affected by undetected market timing activity had suffered harm
and to advise the staff whether PNX believes reimbursement is necessary or
appropriate under the circumstances. A third party was retained to assist PNX in
preparing the analysis. Based on this analysis, PNX advised the SEC that it does
not believe that reimbursement is appropriate.  Over the past several years, a number
of companies have announced settlements of enforcement actions with various
regulatory agencies, primarily the SEC and the New York Attorney Generals
Office. While no such action has been initiated against us, it is possible that
one or more regulatory agencies may pursue this type of action against us in the
future. Financial services companies have also been the subject of broad
industry inquiries by state regulators and attorneys general which do not appear
to be company-specific.  16   8. Contingent Liabilities (continued)  These types of regulatory actions may
be difficult to assess or quantify, may seek recovery of indeterminate amounts,
including punitive and treble damages, and the nature and magnitude of their
outcomes may remain unknown for substantial periods of time. While it is not
feasible to predict or determine the ultimate outcome of all pending inquiries,
investigations, legal proceedings and other regulatory actions, or to provide
reasonable ranges of potential losses, we believe that their outcomes are not
likely, either individually or in the aggregate, to have a material adverse
effect on our financial condition. However, given the large or indeterminate
amounts sought in certain of these actions and the inherent unpredictability of
regulatory matters, it is possible that an adverse outcome in certain matters
could, from time to time, have a material adverse effect on our results of
operation or cash flows in particular quarterly or annual periods.  17   ITEM 2. MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS  FORWARD-LOOKING
STATEMENTS  The discussion in this
Form 10-Q may contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. 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 strategies, operations and financial results, as well as other
statements including, but not limited to, words such as anticipate,
believe, plan, estimate, expect,
intend, may, should and other similar
expressions. Forward-looking statements are made based upon managements
current expectations and beliefs concerning trends and future developments and
their potential effects on us. They are not guarantees of future performance.
Actual results may differ materially from those suggested by forward-looking statements as a result of
risks and uncertainties which include, among others: (i) changes in general
market and business conditions, interest rates and the debt and equity markets;
(ii) the possibility that mortality rates, persistency rates or funding
levels may differ significantly from our pricing expectations; (iii) the
availability, pricing and terms of reinsurance coverage generally and the
inability or unwillingness of our reinsurers to meet their obligations to us
specifically; (iv) our dependence on non-affiliated distributors for our
product sales, (v) downgrades in our debt or financial strength ratings;
(vi) our dependence on third parties to maintain critical business and
administrative functions; (vii) our ability to attract and retain key
personnel in a competitive environment; (viii) the strong competition we
face in our business from banks and other insurance companies; (ix) 
tax developments that may affect us directly, or indirectly through the cost of, the demand
for or profitability of our products or services; (x) other legislative or
regulatory developments; (xi) legal or regulatory actions; (xii) changes in
accounting standards; and (xiii) other risks and uncertainties described
herein or 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.   MANAGEMENTS
NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS  This section reviews our results of
operations for the three months ended March 31, 2008 and 2007. This
discussion should be read in conjunction with the unaudited interim condensed
financial statements and notes contained in this filing as well as in
conjunction with our financial statements for the year ended December 31,
2007 in our 2007 Annual Report on Form 10-K.  Overview  For an overview of our current business
and an explanation of the key drivers of our revenues, expenses and overall
profitability, please see the Business Overview and Earnings Drivers
discussion in Item 7, Managements Discussion and Analysis of Financial
Condition and Results of Operations, in our 2007 Annual Report on Form 10-K.  Impact of New Accounting Standards  For a discussion of accounting
standards, see Note 2 to our financial statements in
this Form 10-Q.  Critical Accounting Estimates  The analysis of our results of
operations is based upon our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America (GAAP). GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Critical accounting estimates are reflective of significant
judgments, often as a result of the need to make estimates about the effect of
matters that are inherently uncertain.  See our 2007 Annual Report on Form 10-K
for a description of our critical accounting estimates.  18   Results of
Operations  Summary Financial Data:Three Months Ended
Increase (decrease) and($ in thousands)
March 31,
percentage change2008
2007
2008 vs. 2007REVENUES:Premiums$(643)
$3,179
$(3,822)

(120%)Insurance and investment product fees
82,727

54,301

28,426

52%Net investment income
24,321

27,894

(3,573)

(13%)Net realized investment losses
(20,029)

(170)

(19,859)

11,682%Total revenues
86,376

85,204

1,172

1%BENEFITS AND EXPENSES:Policy benefits
65,232

35,676

29,556

83%Policy acquisition cost amortization
15,516

25,263

(9,747)

(39%)Other operating expenses
28,100

17,086

11,014

64%Total benefits and expenses
108,848

78,025

30,823

40%Income before income taxes
(22,472)

7,179

(29,651)

(413%)Applicable income tax (expense) benefit
9,325

(2,340)

11,665

499%Net income$(13,147)
$4,839
$(17,986)

(372%)  Three months ended March 31,
2008 vs. March 31, 2007  The first quarter of 2008 results were
a net loss of $13.1 million compared with net income of $4.8 million during the
prior year period. This result reflected significant realized investment losses,
decreases in mortality margins, and net investment income, lower net fees, and
higher non-deferred expenses. This was partially offset by lower amortization of
deferred policy acquisition costs.  Net realized losses
increased approximately $20.0 million in 2008 primarily due to $6.1 million of
impairments in residential mortgage-backed securities, and the increase in fair
value of embedded derivative liabilities associated with guarantees on our
annuity products. While the guarantees are reinsured, we do not receive
reimbursement from the reinsurer until a claim is actually made on the
guarantees. Mortality margins in universal life and variable universal life
products decreased $2.3 million in 2008, reflecting a $25.3 million increase in
benefits, only partially offset by a $23.0 million increase in cost of insurance
fees. Several large claims during the quarter, while reinsured, resulted in a
significant increase in GAAP reinsurance liabilities. While premium-based and
asset-based fees in our life and annuity products increased $4.9 million in 2008
compared to the prior year quarter, this was more than offset by a $6.9 million
increase in the associated non-deferrable commissions and premium taxes. Also, a lower yield
curve, combined with lower fund balances as discontinued annuity products run
off, contributed to a $3.6 million decrease in net investment income for the
2008 quarter. While gross fee revenues increased $3.7 million in the first
quarter, the amount net of premium taxes and non-deferrable commissions
decreased $2.6 million in comparison to the prior year. In addition,
non-deferred expenses, including non-deferrable commissions, increased as we
invested in new product development and sales growth. However, lower mortality
and interest margins resulted in a $6.5 million decrease in amortization expense
from the comparable 2007 period.  General Account  The invested assets in our general
account are generally of high quality and broadly diversified across fixed
income sectors, public and private income securities and individual credits and
issuers. Our investment professionals manage these general account assets in
investment segments that support specific product liabilities. These investment
segments have distinct investment policies that are structured to support the
financial characteristics of the related liabilities within them. Segmentation
of assets allows us to manage the risks and measure returns on capital for our
various products.  19   Separate Accounts  Separate account assets are managed in
accordance with the specific investment contracts and guidelines relating to our
variable products. We generally do not bear any investment risk on assets held
in separate accounts. Rather, we receive investment management fees based on
assets under management. Assets held in separate accounts are not available to
satisfy general account obligations.  Debt and Equity Securities Held in Our General Account  Our general account debt securities
portfolios consist primarily of investment-grade publicly traded and privately
placed corporate bonds, residential mortgage-backed securities, commercial
mortgage-backed securities and asset-backed securities. As of March 31,
2008, our general account held debt securities with a carrying value of $1,584.5
million, representing 98.4% of total general account investments. Public debt
securities represented 78.6% of total debt securities, with the remaining 21.4%
represented by private debt securities.  Debt Securities by Type and Credit Quality:
As of March 31, 2008($ in thousands)
Investment Grade
Below Investment GradeFair Value
Cost
Fair Value
CostUnited States government and agency$51,447
$49,811
$--
$--State and political subdivision
10,175

10,230

--

--Foreign government
11,648

10,997

17,008

14,701Corporate
825,974

842,300

105,341

119,061Mortgage-backed
322,102

347,535

--

--Other asset-backed
228,319

260,982

12,512

13,680Total debt securities$1,449,665
$1,521,855
$134,861
$147,442Percentage of total debt securities
91.5%

91.2%

8.5%

8.8%  We manage credit risk through industry
and issuer diversification. Maximum exposure to an issuer is defined by quality
ratings, with higher quality issuers having larger exposure limits. Our
investment approach emphasizes a high level of industry diversification. The top
five industry holdings as of March 31, 2008 in our debt securities
portfolio are banking (6.9%), diversified financial services (6.7%), insurance
(3.2%), real estate investment trusts (2.9%) and broker dealers (2.2%).  20   The following
table presents certain information with respect to our gross unrealized losses
related to our investments in general account debt securities. Applicable
deferred acquisition costs and deferred income taxes reduce the effect of these
losses on our comprehensive income.  Duration of Gross Unrealized Losses
As of March 31, 2008on General Account Securities:
0 - 6
6  12
Over 12($ in thousands)
Total
Months
Months
MonthsDebt securitiesTotal fair value$894,857
$163,967
$229,357
$501,533Total amortized cost
998,899

174,182

271,096

553,621Unrealized losses$(104,042)
$(10,215)
$(41,739)
$(52,088)Unrealized losses after offsets$(16,914)
$(1,571)
$(6,607)
$(8,736)Number of securities
550

102

162

286Investment grade:Unrealized losses$(88,800)
$(9,601)
$(37,339)
$(41,860)Unrealized losses after offsets$(14,428)
$(1,477)
$(5,912)
$(7,039)Below investment grade:Unrealized losses$(15,242)
$(614)
$(4,400)
$(10,228)Unrealized losses after offsets$(2,486)
$(94)
$(695)
$(1,697)  Total net unrealized losses on debt
securities were $84,771 thousand (unrealized losses of $104,042 thousand less
unrealized gains of $19,271 thousand).  For debt securities with gross
unrealized losses, 85.3% of the unrealized losses after offsets pertain to
investment grade securities and 14.7% of the unrealized losses after offsets
pertain to below investment grade securities at March 31, 2008.  The following table represents those
securities whose fair value is less than 80% of amortized cost (significant
unrealized loss) that have been at a significant unrealized loss position on a
continuous basis.  Duration of Gross Unrealized Losses
As of March 31, 2008on General Account Securities:
0 - 6
6  12
Over 12($ in thousands)
Total
Months
Months
MonthsDebt securitiesUnrealized losses over 20% of cost$(45,677)
$(38,527)
$(7,150)
$--Unrealized losses over 20% of cost after offsets$(7,009)
$(5,912)
$(1,097)
$--Number of securities
81

73

8

--Investment grade:Unrealized losses over 20% of cost$(37,869)
$(35,196)
$(2,673)
$--Unrealized losses over 20% of cost after offsets$(5,811)
$(5,401)
$(410)
$--Below investment grade:Unrealized losses over 20% of cost$(7,808)
$(3,331)
$(4,477)
$--Unrealized losses over 20% of cost after offsets$(1,198)
$(511)
$(687)
$--  21   In
determining that the securities giving rise to the previously mentioned
unrealized losses were not other-than-temporarily impaired, we evaluated the
factors cited above. In making these evaluations, we must exercise considerable
judgment. Accordingly, there can be no assurance that actual results will not
differ from our judgments and that such differences may require the future
recognition of other-than-temporary impairment charges that could have a
material affect on our financial position and results of operations. In
addition, the value of, and the realization of any loss on, a debt security or
equity security is subject to numerous risks, including interest rate risk,
market risk, credit risk and liquidity risk. The magnitude of any loss incurred
by us may be affected by the relative concentration of our investments in any
one issuer or industry. We have established specific policies limiting the
concentration of our investments in any single issuer and industry and believe
our investment portfolio is prudently diversified.    Residential Mortgage-Backed
Securities  The weakness in the U.S. real estate
markets, increases in interest rates and the effects of relaxed underwriting
standards for mortgages and home equity loans have led to higher delinquency
rates for residential mortgage-backed securities, especially those originated in
2006 and 2007 and those designated as sub-prime. In addition, there have been
increased concerns in the financial markets about residential mortgage-backed
securities designated as Alt-A.  Sub-prime mortgage lending refers to
the origination of residential mortgage loans to customers with weak or impaired
credit profiles, including, but not limited to, those with the lowest credit
scores. Alt-A mortgage lending refers to the origination of residential mortgage
loans to customers who are rated above the sub-prime category but below top
rated prime borrowers, for reasons including, but not limited to, the election
not to provide documentation for items such as income sources.  We invest directly in residential
mortgage-backed securities through our general account. To the extent these
assets deteriorate in credit quality and decline in value, we may realize
impairment losses. We have been focused on identifying those securities that can
withstand significant increases in delinquencies and foreclosures in the
underlying mortgage pools before incurring a loss of principal.    Most of our residential mortgage-backed
securities portfolio is highly rated. As of March 31, 2008, over 92% of the
total residential portfolio was rated AAA or AA. We have $83,953 thousand of
sub-prime exposure, which represents 4.9% of our general account. Substantially
all of our sub-prime exposure is investment grade, and 88.5% is AAA rated, with
another 1.6% in AA securities. We have employed a disciplined approach in the
analysis and monitoring of our mortgage-backed securities. Our approach involves
a monthly review of each security. Underlying mortgage data is obtained from the
securitys trustee and analyzed for performance trends. A security-specific
stress analysis is performed using the most recent trustee information. This
analysis forms the basis for our determination of whether the security will pay
in accordance with the contractual cash flows. Our exposure to sub-prime
mortgages originated after 2005 is less than 3% of our general account, with 83%
of those securities rated AAA.  Residential Mortgage-Backed Securities:($ in thousands)
As of March 31, 2008Book
Market
% General








BB andValue
Value
Account(1)
AAA
AA
A
BBB
BelowCollateralAgency$50,825
$51,337
3.0%
100.0%
0.0%
0.0%
0.0%
0.0%Prime
151,490

140,294
8.1%
91.8%
0.5%
0.0%
7.7%
0.0%Alt-A
62,291

52,840
3.1%
81.8%
9.2%
2.9%
6.1%
0.0%Sub-prime
93,861

83,953
4.9%
88.5%
1.6%
9.9%
0.0%
0.0%Total$358,467
$
328,424
19.1%
90.6%
2.1%
3.0%
4.3%
0.0% _______ (1)Percentages based on Market Value.  22   Liquidity
and Capital Resources  In the normal course of business, we
enter into transactions involving various types of financial instruments such as
debt and equity securities. These instruments have credit risk and also may be
subject to risk of loss due to interest rate and market fluctuations.  Our liquidity requirements principally
relate to the liabilities associated with various life insurance and annuity
products and operating expenses. Liabilities arising from life insurance and
annuity products include the payment of benefits, as well as cash payments in
connection with policy surrenders, withdrawals and loans.  Historically, we have used cash flow
from operations and investment activities to fund liquidity requirements. Our
principal cash inflows from life insurance and annuities activities come from
premiums, annuity deposits and charges on insurance policies and annuity
contracts. Principal cash inflows from investment activities result from
repayments of principal, proceeds from maturities, sales of invested assets and
investment income.  Additional liquidity to meet cash
outflows is available from our portfolio of liquid assets. These liquid assets
include substantial holdings of United States government and agency bonds,
short-term investments and marketable debt and equity securities.  A primary liquidity concern with
respect to life insurance and annuity products is the risk of early policyholder
and contractholder withdrawal. We closely monitor our liquidity requirements in
order to match cash inflows with expected cash outflows, and employ an
asset/liability management approach tailored to the specific requirements of
each product line, based upon the return objectives, risk tolerance, liquidity,
tax and regulatory requirements of the underlying products. In particular, we
maintain investment programs intended to provide adequate funds to pay benefits
without forced sales of investments. Products having liabilities with relatively
long lives, such as life insurance, are matched with assets having similar
estimated lives, such as long-term bonds and private placement bonds.
Shorter-term liabilities are matched with investments with short-term and
medium-term fixed maturities.  Ratings  Rating agencies assign financial
strength ratings to Phoenix Life and its subsidiaries based on their opinions of
the Companies ability to meet their financial obligations. Ratings changes
may result in increased or decreased interest costs in connection with future
borrowings. Such an increase or decrease would affect our earnings and could
affect our ability to finance our future growth. Downgrades may also trigger
defaults or repurchase obligations. The financial strength ratings as of
March 31, 2008 were as follows:  Financial Strength Ratings ofRating Agency
Phoenix Life and PHL Variable LifeA.M.
Best Company, Inc.
A
(Excellent)Fitch
A+
(Strong)Moodys
A3
(Good)Standard & Poors
A-
(Strong)  On May 9, 2008, Fitch affirmed our
financial strength rating of A+. On May 8, 2008, Standard & Poors
affirmed our financial strength rating of A-.  These ratings are not a recommendation
to buy or hold any of our securities.  See our 2007 Annual Report on Form 10-K
for additional information as to liquidity and capital resources.  Contractual Obligations and
Commercial Commitments  As of March 31, 2008, there were
no significant changes to our outstanding contractual obligations and commercial
commitments as disclosed in our 2007 Annual Report on Form 10-K.  23   Off-Balance Sheet Arrangements  As of March 31, 2008 and December
31, 2007, we did not have any significant off-balance sheet arrangements as
defined by Item 303(a)(4)(ii) of SEC Regulation S-K.  Reinsurance  We maintain life reinsurance programs
designed to protect against large or unusual losses in our life insurance
business. Based on our review of their financial statements, reputations in the
reinsurance marketplace and other relevant information, we believe that these
reinsurers are financially sound and, therefore, that we have no material
exposure to uncollectible life reinsurance.  Risk Based Capital  At March 31, 2008, our estimated
Total Adjusted Capital level was in excess of 300% of Company Action Level. PNX
management is committed to maintaining appropriate capital levels for the
Company to conduct business.  Statutory Capital and Surplus  Our statutory basis capital and surplus
(including AVR) was $164.4 million at March 31, 2008.   ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK  We have omitted this information from
this report as we meet the conditions set forth in General Instruction H(1)(a)
and (b) of Form 10-Q and are therefore filing this Form with the reduced
disclosure format permitted by that General Instruction.   ITEM 4. CONTROLS AND PROCEDURES  Evaluation of Disclosure Controls
and Procedures  We have carried out an evaluation under
the supervision and with the participation of our management, including our
Principal Executive Officer and our Principal Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures. There are inherent limitations to the effectiveness of any system of
disclosure controls and procedures, including the possibility of human error and
the circumvention or overriding of the controls and procedures. Accordingly,
even effective disclosure controls and procedures can only provide reasonable
assurance of achieving their control objectives. Based upon our evaluation,
these officers have concluded that, as of March 31, 2008, the disclosure
controls and procedures were effective to provide reasonable assurance that
information required to be disclosed in the reports we file and submit under the
Securities and Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the SECs rules and forms.  Changes in Internal Control over
Financial Reporting  During the three months ended
March 31, 2008, there were no changes in our internal control over
financial reporting that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.  24   PART II. OTHER INFORMATION   ITEM 1. LEGAL PROCEEDINGS  We are regularly involved in litigation
and arbitration, both as a defendant and as a plaintiff. In addition, various
regulatory bodies regularly make inquiries of us and, from time to time, conduct
examinations or investigations concerning our compliance with, among other
things, insurance laws, securities laws, laws governing the activities of
broker-dealers and other laws and regulations affecting our registered products.
It is not feasible to predict or determine the ultimate outcome of all legal or
regulatory proceedings or to provide reasonable ranges of potential losses. We
believe that the outcomes of our litigation and regulatory matters are not
likely, either individually or in the aggregate, to have a material adverse
effect on our consolidated financial condition. However, given the large or
indeterminate amounts sought in certain of these matters and the inherent
unpredictability of litigation and regulatory matters, it is possible that an
adverse outcome
 in certain matters could, from time to time, have a material adverse effect on
our results of operations or cash flows in particular quarterly or annual
periods. See Item 1A, Risk Factors in our 2007 Annual Report on Form
10-K and Note 8 to our financial statements in this Form 10-Q for
additional information.   ITEM 1A. RISK FACTORS  There are no material changes to our
Risk Factors as described in our 2007 Annual Report on Form 10-K.   ITEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS  We have omitted this information from
this report as we meet the conditions set forth in General Instruction H(1)(a)
and (b) of Form 10-Q and are therefore filing this Form with the reduced
disclosure format permitted by that General Instruction.   ITEM 3. DEFAULTS UPON SENIOR
SECURITIES  We have omitted this information from
this report as we meet the conditions set forth in General Instruction H(1)(a)
and (b) of Form 10-Q and are therefore filing this Form with the reduced
disclosure format permitted by that General Instruction.   ITEM 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS  We have omitted this information from
this report as we meet the conditions set forth in General Instruction H(1)(a)
and (b) of Form 10-Q and are therefore filing this Form with the reduced
disclosure format permitted by that General Instruction.   ITEM 5. OTHER INFORMATION  (a)
None.(b)
No material
changes.  25   ITEM 6.
EXHIBITS  Exhibit3.1
Form of Amended and Restated Certificate of Incorporation (as amended and
restated effective May 31, 1994) (incorporated herein by reference to Exhibit
3.1 to the PHL Variable Insurance Companys Annual Report on Form 10-K
filed March 31, 2006)3.2
Bylaws of PHL Variable Life Insurance Company (as amended and restated effective
May 16, 2002) (incorporated herein by reference to Exhibit 3.2 to the PHL
Variable Insurance Companys Annual Report on Form 10-K filed March 31,
2006)10.1
Services Agreement effective as of January 1, 1995 by and among PHL Variable
Insurance Company, Phoenix Life Insurance Company, American Life and Reassurance
Company, Phoenix American Life Insurance Company and Phoenix Home Life Mutual
Insurance Company (incorporated herein by reference to Exhibit 10.1 to the PHL
Variable Insurance Companys Annual Report on Form 10-K filed March 31,
2006)10.2
Investment Management Agreement effective as of January 1, 1995 by and between
PHL Variable Insurance Company and Phoenix Investment Counsel, Inc.
(incorporated herein by reference to Exhibit 10.2 to the PHL Variable Insurance
Companys Annual Report on Form 10-K filed March 31, 2006)10.3
Amendment #1 (effective as of January 1, 1998) to the Investment Management
Agreement dated as of January 1, 1995 by and between PHL Variable Insurance
Company and Phoenix Investment Counsel, Inc. (incorporated herein by reference
to Exhibit 10.3 to the PHL Variable Insurance Companys Annual Report on
Form 10-K filed March 31, 2006)10.4
Amended and Restated Tax Allocation Agreement dated as of January 1, 2001 by and
among The Phoenix Companies, Inc. and most of its subsidiaries (incorporated
herein by reference to Exhibit 10.4 to the PHL Variable Insurance Companys
Annual Report on Form 10-K filed March 31, 2006)10.5
Amendment #1 (effective as of January 1, 2006) to the Amended and Restated Tax
Allocation Agreement dated as of January 1, 2001 by and among The Phoenix
Companies, Inc. and most of its subsidiaries (incorporated herein by reference
to Exhibit 10.5 to the PHL Variable Insurance Companys Annual Report on
Form 10-K filed March 31, 2006)31.1
Certification of Philip K. Polkinghorn, Chief Executive Officer, pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002*31.2
Certification of Peter A. Hofmann, Chief Financial Officer, pursuant to Section
302 of the Sarbanes-Oxley Act of 2002*32
Certification by Philip K. Polkinghorn, Chief Executive Officer and Peter A.
Hofmann, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002*  *
Filed
herewith  We will furnish any exhibit upon the
payment of a reasonable fee, which fee shall be limited to our reasonable
expenses in furnishing such exhibit. Requests for copies should be directed
to: Corporate Secretary, PHL Variable Insurance Company, One American Row, P.O.
Box 5056, Hartford, Connecticut 06102-5056.  26    Signature  Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.   PHL VARIABLE INSURANCE COMPANYDate:May 14, 2008By:/s/ Peter A. HofmannPeter A. HofmannSenior Executive Vice
Presidentand Chief
Financial Officer  27