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 SEPTEMBER 30, 2007  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.  YES þ      NO  ̈  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):  Large accelerated filer  ̈      Accelerated filer  ̈      Non-accelerated filer þ  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES  ̈      NO þ  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 November 7, 2007, 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 Statements:Unaudited
Interim Condensed Balance Sheet as of
  September 30, 2007 and December 31, 20063Unaudited
Interim Condensed Statement of Income and Comprehensive Income
  and Changes in Stockholders Equity for the three and nine
months ended
  September 30, 2007 and 20064Unaudited
Interim Condensed Statement of Cash Flows for the
  three and nine months ended September 30, 2007 and 20065Notes to
Unaudited Interim Condensed Financial Statements for the
  three and nine months ended September 30, 2007 and 20066Item 2.Managements Discussion and Analysis of Financial Condition and
  Results of Operations15Item
3.Quantitative and Qualitative Disclosures About Market Risk21Item
4.Controls and Procedures21PART IIOTHER INFORMATIONItem
1.Legal Proceedings23Item
1A.Risk
Factors23Item
2.Unregistered Sales of Equity Securities and Use of Proceeds23Item
3.Defaults Upon Senior Securities23Item
4.Submission of Matters to a Vote of Security Holders23Item
5.Other Information23Item
6.Exhibits24Signature25   2   PART I.  FINANCIAL INFORMATION  ITEM 1.  FINANCIAL
STATEMENTS  PHL VARIABLE INSURANCE COMPANY Unaudited Interim Condensed Balance Sheet ($ in thousands) September 30, 2007 (unaudited) and December 31, 2006  Sept 30,
Dec 31,2007
2006ASSETS:Available-for-sale debt
securities, at fair value$1,814,017
$2,050,989Policy loans, at unpaid
principal balances
20,786

15,542Other investments
1,286

1,612Total investments
1,836,089

2,068,143Cash and cash equivalents
50,462

47,127Accrued investment income
19,324

19,882Receivables
42,947

54,534Deferred policy
acquisition costs
877,802

703,794Receivable from related
parties
6,595

300Other assets
6,532

2,356Separate account assets
3,356,412

2,953,063Total assets$
6,196,163
$
5,849,199LIABILITIES:Policyholder deposit
funds$1,175,918
$1,491,367Policy liabilities and
accruals
853,876

706,198Deferred income taxes
124,321

96,654Payable to related
parties
35,816

25,081Other liabilities
38,666

26,576Separate account
liabilities
3,356,412

2,953,063Total liabilities
5,585,009

5,298,939CONTINGENT LIABILITIES
(Note 7)STOCKHOLDERS
EQUITY:Common stock, $5,000 par
value: 1,000 shares authorized; 500 shares issued
2,500

2,500Additional paid-in
capital
553,218

503,234Retained earnings
64,806

47,215Accumulated other
comprehensive loss
(9,370)

(2,689)Total
stockholders equity
611,154

550,260Total liabilities and
stockholders equity$
6,196,163
$
5,849,199  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) Three and Nine Months Ended September 30, 2007 and 2006  Three Months Ended
Nine Months EndedSeptember 30,
September 30,2007
2006
2007
2006REVENUES:Premiums$4,199
$2,975
$10,260
$8,669Insurance and investment product fees
67,510

46,015

181,373

129,850Net
investment income
27,609

30,404

82,695

99,370Net
realized investment losses
(1,987)

(169)

(1,798)

(4,315)Total revenues
97,331

79,225

272,530

233,574BENEFITS AND EXPENSES:Policy benefits
39,107

28,548

107,338

109,036Policy acquisition cost amortization
29,251

27,480

82,757

61,304Other operating expenses
20,641

14,781

58,150

50,556Total benefits and expenses
88,999

70,809

248,245

220,896Income before income taxes
8,332

8,416

24,285

12,678Applicable income tax expense
(524)

(1,027)

(5,693)

(2,128)Net income$7,808
$7,389
$18,592
$10,550COMPREHENSIVE INCOME:Net income$7,808
$7,389
$18,592
$10,550Net
unrealized investment gains (losses)
(2,411)

6,666

(6,682)

(2,610)Comprehensive income$5,397
$14,055
$11,910
$7,940ADDITIONAL PAID-IN CAPITAL:Capital contributions from parent$24,984
$
$49,984
$RETAINED EARNINGS:Net
income
7,808

7,389

18,592

10,550Adjustment for initial application of FIN 48 (Note 2)




(1,000)

OTHER COMPREHENSIVE INCOME:Other comprehensive income (loss)
(2,411)

6,666

(6,682)

(2,610)Change in stockholders equity
30,381

14,055

60,894

7,940Stockholders equity, beginning of period
580,773

536,148

550,260

542,263Stockholders equity, end of period$611,154
$550,203
$611,154
$550,203  The accompanying notes are an integral
part of these financial statements.   4    PHL VARIABLE INSURANCE COMPANY Unaudited Interim Condensed Statement of Cash Flows ($ in thousands) Nine Months Ended September 30, 2007 and 2006  Nine Months EndedSeptember 30,2007
2006OPERATING ACTIVITIES:Net
income$18,592
$10,550Net
realized investment losses
1,798

4,315Investment income (loss)
(29)

2,623Deferred income taxes
31,264

19,867(Increase) decrease in receivables
1,149

(3,190)Increase in deferred policy acquisition costs
(156,904)

(124,129)Increase in policy liabilities and accruals
148,997

146,520Other
assets and other liabilities net change
5,679

(15,088)Cash
from operating activities
50,546

41,468INVESTING ACTIVITIES:Investment purchases
(745,205)

(656,568)Investment sales, repayments and maturities
988,353

1,318,340Cash
from investing activities
243,148
661,772FINANCING ACTIVITIES:Policyholder deposit fund deposits
190,437

156,231Policyholder deposit fund withdrawals
(505,796)

(848,320)Capital
contributions from parent
25,000

Cash
for financing activities
(290,359)

(692,089)Change in cash and cash equivalents
3,335

11,151Cash
and cash equivalents, beginning of period
47,127

25,818Cash
and cash equivalents, end of period$
50,462
$
36,969  The accompanying notes are an integral
part of these financial statements.   5    PHL VARIABLE INSURANCE COMPANY Notes to Unaudited Interim Condensed Financial Statements Three and Nine Months Ended September 30, 2007 and 2006    1.   Organization and
Operations  PHL Variable Insurance Company is a
life insurance company offering individual life insurance and annuity products
including universal life, variable universal life, term life and variable
annuities. It is a wholly-owned subsidiary of PM Holdings, Inc. PM Holdings is a
wholly-owned subsidiary of Phoenix Life Insurance Company (Phoenix Life), which
is a wholly-owned subsidiary of The Phoenix Companies, Inc., a New York Stock
Exchange listed company. During the nine months ended September 30, 2007, we
received $49,984 thousand in capital contributions from Phoenix Life, of which
$25,000 thousand was in cash and $24,984 thousand was in securities.   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, or GAAP, which differ materially from the accounting
practices prescribed by various insurance regulatory authorities. We have
reclassified certain amounts for 2006 to conform with 2007 presentation.  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 securities; and accruals for deferred taxes and
contingent liabilities. Our significant accounting policies are presented in the
notes to our financial statements in our 2006 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 and nine-month periods in 2007
are not necessarily indicative of the results that may be expected for the year
2007. These unaudited financial statements should be read in conjunction with
our financial statements in our 2006 Annual Report on Form 10-K.  Adoption of new accounting standards  The Company adopted the provisions of
the Financial Accounting Standards Board, or FASB, Interpretation No. 48, Accounting for Uncertainty in Income Taxes, or FIN 48, on
January 1, 2007. As a result of the implementation of FIN 48, we
recognized a cumulative effect adjustment of approximately $1,000 thousand
increase in reserves for uncertain tax benefits, 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.  It is reasonably possible that any
changes within the next twelve months to the uncertain tax positions recorded as
of September 30, 2007 will not result in a material change to our results
of operations, financial condition or liquidity. We do not anticipate that there
will be additional payments made or refunds received within the next twelve
months with respect to the years under audit. We do not anticipate any increases
to the unrecognized tax benefits that would have a significant impact on the
financial position of the Company.   6    We recognize
interest and penalties related to amounts accrued on uncertain tax positions and
amounts paid or refunded from federal and state income tax authorities in tax
expense. The interest and penalties recorded during the three and nine-month
periods ending September 30, 2007 and 2006 did not have a material impact
on the effective tax rate those periods. We did not have an accrual for the
payment of interest and penalties as of January 1, 2007.  In September 2006, the Securities and
Exchange Commission staff issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements, or SAB 108. SAB 108
provides guidance for how errors should be evaluated to assess materiality from
a quantitative perspective. SAB 108 permits companies to initially apply its
provisions by either restating prior financial statements or recording the
cumulative effect of initially applying the approach as adjustments to the
carrying values of assets and liabilities as of January 1, 2006 with an
offsetting adjustment to retained earnings. We adopted SAB 108 on
December 31, 2006 with no effect to the financial statements.  In March 2006, the FASB issued SFAS
156, Accounting for Servicing of Financial Assets, an amendment of FASB
Statement No. 140, or SFAS 156. SFAS 156 provides guidance on recognition
and disclosure of servicing assets and liabilities and is 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.  Effective January 1, 2006, we
adopted SFAS 155, Accounting for Certain Hybrid Financial Instruments, or
SFAS 155. SFAS 155 resolves certain issues surrounding the accounting for
beneficial interests in securitized financial assets. Our adoption of SFAS 155
did not have a material effect on our financial statements.  Effective January 1, 2006, we
adopted FASB Staff Position Nos. SFAS 115-1 and SFAS 124-1, The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments,
or FSP 115-1. FSP 115-1 provides guidance as to the determination of
other-than-temporarily impaired securities and requires certain financial
disclosures with respect to unrealized losses. These accounting and disclosure
requirements largely codify our existing practices as to other-than-temporarily
impaired securities and thus, our adoption did not have a material effect on our
financial statements.  In September 2005, the Accounting
Standards Executive Committee, or AcSEC, of the AICPA issued Statement of
Position 05-1, Accounting by Insurance Enterprises for Deferred Acquisition
Costs in Connection With Modifications or Exchanges of Insurance Contracts,
or SOP 05-1. SOP 05-1 provides guidance on accounting by insurance enterprises
for deferred policy acquisition costs on internal replacements of insurance and
investment contracts other than those specifically described in Statement of
Financial Accounting Standards No. 97, or 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 stand
ard effective January 1, 2007 with no material effect on our financial
position and results of operations.  Accounting standards not yet adopted  In February 2007, the FASB issued SFAS
No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities, orSFAS 159. SFAS 159 provides companies with an
option to report selected financial assets and liabilities at fair value.
SFAS 159 is effective for fiscal years beginning after November 15, 2007,
and early adoption is permitted provided the entity also elects to apply the
provisions of SFAS No. 157, Fair Value Measurements, at the same time. We
are currently assessing the impact of SFAS 159 on our financial position
and results of operations.  In September 2006, the FASB issued SFAS
No. 157, Fair Value Measurements, or 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   7    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
will adopt SFAS 157 effective January 1, 2008. Adoption of this
statement is expected to have an impact on our financial statements; however,
the impact has not yet been determined.   3.   Deferred Policy
Acquisition Costs  Deferred Policy Acquisition Costs:Three Months Ended
Nine Months Ended($ in thousands)
September 30,
September 30,2007
2006
2007
2006Policy acquisition costs deferred$105,261
$53,785
$239,661
$185,432Costs amortized to expenses:Recurring costs
(30,583)

(27,615)

(83,265)

(63,550)Realized investment gains (losses)
1,332

135

508

2,246Offsets to net unrealized investment gains (losses)
  included in other comprehensive income
8,778

(22,184)

17,104

(1,057)Change in deferred policy acquisition costs
84,788

4,121

174,008

123,071Deferred policy acquisition costs, beginning of period
793,014

648,265

703,794

529,315Deferred policy acquisition costs, end of period$877,802
$652,386
$877,802
$652,386   4.   Investing
Activities  Debt securities  Fair Value and Cost of Debt Securities:
September 30, 2007
December 31, 2006($ in thousands)
Fair Value
Cost
Fair Value
CostU.S. government and agency$75,507
$75,227
$92,579
$93,425State and political subdivision
11,948

12,147

15,900

16,281Foreign government
30,243

27,757

49,884

46,505Corporate
1,014,339

1,036,297

1,157,781

1,172,275Mortgage-backed
390,634

400,181

452,641

455,739Other asset-backed
291,346

303,073

282,204

280,086Available-for-sale debt securities$1,814,017
$1,854,682
$2,050,989
$2,064,311   Unrealized Gains and Losses from
September 30, 2007
December 31, 2006General Account Securities:
Gains
Losses
Gains
Losses($ in thousands)U.S. government and agency$753
$(473)
$295
$(1,141)State and political subdivision
13

(212)

17

(398)Foreign government
2,573

(87)

3,590

(211)Corporate
5,430

(27,388)

6,523

(21,017)Mortgage-backed
2,094

(11,641)

2,862

(5,960)Other asset-backed
1,111

(12,838)

3,857

(1,739)Debt securities gains (losses)$11,974
$(52,639)
$17,144
$(30,466)Debt securities net losses

$(40,665)



$(13,322)   8   Aging of Temporarily Impaired
September 30, 2007Debt Securities:
Less than 12 months
Greater than 12 months
Total($ in thousands)Fair
Unrealized
Fair
Unrealized
Fair
UnrealizedValue
Losses
Value
Losses
Value
LossesDebt securitiesU.S. government and agency$
$
$32,618
$(473)
$32,618
$(473)State and political subdivision




10,431

(212)

10,431

(212)Foreign government




4,435

(87)

4,435

(87)Corporate
191,563

(4,796)

568,876

(22,592)

760,439

(27,388)Mortgage-backed
119,445

(6,059)

183,601

(5,582)

303,046

(11,641)Other asset-backed
148,146

(10,299)

70,906

(2,539)

219,052

(12,838)Total temporarily impaired securities$
459,154
$
(21,154)
$
870,867
$
(31,485)
$
1,330,021
$
(52,639)Below investment grade$
44,885
$
(2,959)
$
70,048
$
(6,377)
$
114,933
$
(9,336)Below investment grade after offsets
  for deferred policy acquisition cost
  adjustment and taxes

$
(456)


$
(1,077)


$
(1,533)Number of securities



274




469




743  These securities are considered to be
temporarily impaired at September 30, 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.  Unrealized losses on below investment
grade debt securities with a fair value of less than 80% of the amortized cost
of the securities totaled $3.9 million at September 30, 2007, of which $2.9
million ($0.4 million after offsets for taxes and deferred policy acquisition
cost amortization) has been in an unrealized loss for greater than 12 months.  Aging of Temporarily Impaired
As of December 31, 2006Debt Securities:
Less than 12 months
Greater than 12 months
Total($ in thousands)Fair
Unrealized
Fair
Unrealized
Fair
UnrealizedValue
Losses
Value
Losses
Value
LossesDebt SecuritiesU.S. government and agency$5,643
$(19)
$50,878
$(1,122)
$56,521
$(1,141)State and political subdivision
1,014

(3)

14,367

(395)

15,381

(398)Foreign government
4,024

(10)

9,323

(201)

13,347

(211)Corporate
152,344

(1,595)

689,660

(19,422)

842,004

(21,017)Mortgage-backed
78,465

(693)

257,905

(5,267)

336,370

(5,960)Other asset-backed
53,844

(171)

102,302

(1,568)

156,146

(1,739)Total temporarily impaired securities$
295,334
$
(2,491)
$
1,124,435
$
(27,975)
$
1,419,769
$
(30,466)Below investment grade$
20,190
$
(377)
$
90,763
$
(3,859)
$
110,953
$
(4,236)Below investment grade after offsets
  for deferred acquisition cost
  adjustment and taxes

$
(45)


$
(550)


$
(595)Number of securities



162




544




706  The securities are considered to be
temporarily impaired at December 31, 2006 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.  There were no unrealized losses of
below investment grade debt securities with a fair value less than 80% of the
securities amortized cost at December 31, 2006.  9  Net
investment income  Sources of Net Investment Income:Three Months Ended
Nine Months Ended($ in thousands)
September 30,
September 30,2007
2006
2007
2006Debt securities$26,139
$29,410
$79,538
$98,114Policy loans
701

508

891

642Other investments
18

62

136

101Other income
181



398

Cash
and cash equivalents
1,050

917

3,387

2,010Total investment income
28,089

30,897

84,350

100,867Investment expenses
(480)

(493)

(1,655)

(1,497)Net investment income$27,609
$30,404
$82,695
$99,370  Net realized investment gains
(losses)  Sources and Types of Net Realized InvestmentThree Months Ended
Nine Months EndedGains (Losses):
September 30,
September 30,($ in thousands)
2007
2006
2007
2006Debt security impairments$(421)
$
$(921)
$(411)Debt security transaction gains
256

240

1,244

2,503Debt security transaction losses
(429)

(447)

(2,317)

(7,008)Other investments transaction gains (losses)
(1,393)

38

196

601Net transaction losses
(1,566)

(169)

(877)

(3,904)Net realized investment losses$(1,987)
$(169)
$(1,798)
$(4,315)  Unrealized investment gains (losses)  Sources of Changes in Net Unrealized InvestmentThree Months Ended
Nine Months EndedGains (Losses):
September 30,
September 30,($ in thousands)
2007
2006
2007
2006Debt securities$(12,648)
$31,576
$(27,343)
$(3,594)Other investments
160



(41)

Net unrealized investment gains (losses)$(12,488)
$31,576
$(27,384)
$(3,594)Net unrealized investment gains (losses)$(12,488)
$31,576
$(27,384)
$(3,594)Applicable deferred policy acquisition costs (benefit)
(8,778)

22,184

(17,104)

1,057Applicable deferred income tax (expense) benefit
(1,299)

3,511

(3,598)

(1,404)Offsets to net unrealized investment gains (losses)
(10,077)

25,695

(20,702)

(347)Net unrealized investment gains (losses)
  included in other comprehensive income$(2,411)
$5,881
$(6,682)
$(3,247)   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 and
nine-month periods ended September 30, 2007 and 2006, there were no gains
or losses on transfers of assets from the general account to a separate account.  10  Many of our
variable contracts offer various guaranteed minimum death, accumulation,
withdrawal and income benefits. These benefits are offered in various forms as
described in the footnotes to the table 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, or 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, or 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, 500
stochastically generated scenarios were used. For annuities with GMIB, we used
1,000 stochastically generated scenarios.  Separate Account Investments of Account Balances of Contracts with
Guarantees:Sept 30,
Dec 31,($ in thousands)
2007
2006Debt securities$484,725
$456,148Equity funds
2,175,148

1,861,762Other
82,899

68,810Total
$
2,742,772
$
2,386,720   Changes in Guaranteed Liability Balances:Nine Months Ended($ in thousands)
September 30, 2007Annuity
AnnuityGMDB(1)
GMIBLiability balance as of January 1, 2007$26,979
$3,568Incurred
(822)

474Paid
(1,605)

Liability balance as of September 30, 2007
$
24,552
$
4,042   Changes in Guaranteed Liability Balances:Year Ended($ in thousands)
December 31, 2006Annuity
AnnuityGMDB(1)
GMIBLiability balance as of January 1, 2006$27,749
$2,474Incurred
601

1,094Paid
(1,371)

Liability balance as of December 31, 2006
$
26,979
$
3,568 _______ (1)The reinsurance recoverable asset related to the GMDB was $15,159 thousand and
$17,139 thousand as of September 30, 2007 and December 31, 2006,
respectively.  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.  11  We also offer
certain variable products with a guaranteed minimum withdrawal benefit, or GMWB,
guaranteed minimum accumulation benefit, or GMAB, and a guaranteed pay-out
annuity floor, or 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.  As of September 30, 2007 and
December 31, 2006, the embedded derivative for GMWB, GMAB and GPAF was
immaterial. There were no benefit payments made for the GMWB or GMAB during the
nine months ended September 30, 2007 or during 2006. An immaterial amount
of GPAF benefits have been paid through September 30, 2007 and during 2006.  In order to minimize the volatility
associated with the GMWB and GMAB 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. The assets on deposit
with Phoenix Life were $2,206 thousand and $220 thousand at September 30,
2007 and December 31, 2006, respectively. These amounts are included in our
balance sheet in other assets.  For those guarantees of benefits that
are payable in the event of death, the net amount at risk is generally defined
as the current guaranteed minimum death benefit in excess of the current account
balance at the balance sheet date. For guarantees of benefits that are payable
upon annuitization, the net amount at risk is generally defined as the present
value of the minimum guaranteed annuity payments available to the policy holder
determined in accordance with the terms of the contract in excess of the current
account balance. For guarantees of accumulation balances, the net amount at risk
is generally defined as the guaranteed minimum accumulation balance minus the
current account balance.  Additional Insurance Benefits:
Net Amount
Average($ in thousands)Account
At Risk After
Attained AgeValue
Reinsurance
of AnnuitantGMDB return of premium(1)$1,399,308
$4,492

59GMDB step up(2)
1,736,680

25,900

61GMDB earnings enhancement benefit (EEB)(3)
80,246



59GMDB greater of annual step up and roll up(4)
41,381

3,236

63Total GMDB at September 30, 2007
$
3,257,615
$
33,628GMIB$702,493



59GMAB
342,170



55GMWB
116,995



62GPAF
31,922




74Total at September 30, 2007$
1,193,580  12   (1)Return of premium: The death benefit is the greater of current account
value or premiums paid (less any adjusted partial withdrawals).(2)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 to 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.(3)EEB: The death benefit is the greater of the premiums paid (less any
adjusted partial withdrawals) or the current account value plus the EEB.(4)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 September 30, 2007, we held additional universal
life benefit reserves of $19,952 thousand.   6.   Income Taxes  For the three and nine months ended
September 30, 2007 and 2006, 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 Ended
Nine Months EndedSeptember 30,
September 30,2007
2006
2007
2006Income taxes at statutory rate35.0%
35.0%
35.0%
35.0%Investment income not subject to tax(28.7%)
(22.8%)
(11.6%)
(18.2%)Effective income tax rates applicable to
  continuing operations
6.3%
12.2%
23.4%
16.8%  Our federal income tax returns are
routinely audited by the IRS. The current periods being audited by the IRS are
the 2002 through 2005 tax years. While it is often difficult to predict the
outcome of these audits, including the timing of any resolution of any
particular tax matter, we believe that our liabilities as recorded on the
balance sheet pursuant to FIN 48 are adequate for all open tax years.
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.  Based upon a revenue ruling issued by
the IRS during the quarter ended September 30, 2007, we determined that it
was appropriate to release $1,100 thousand of reserves for uncertain tax
positions. See Note 2 to these financial statements for additional
information regarding the implementation of FIN 48.   7.   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  13  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, or SEC, the National Association of Securities Dealers,
Inc., or NASD, 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.  For example, during 2003 and 2004, the
SEC conducted examinations of certain Phoenix Life variable products and certain
Phoenix Life affiliated investment advisers and mutual funds. In 2004, the NASD
also commenced examinations of two affiliated broker-dealers; the examinations
were closed in April 2005 and November 2004, respectively.  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 and 2004, the Boston District
Office of the SEC conducted 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. In this regard, in 2004, PNX
received a subpoena from the Connecticut Attorney Generals office
requesting information regarding certain distribution practices since 1998. Over
40 companies received such a subpoena. PNX cooperated fully and has had no
further inquiry since filing its response.  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.  14   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) movements in the
equity markets and interest rates that affect our investment results, the fees
we earn from our assets under management and the demand for our variable
products; (ii) the possibility that mortality rates or persistency may
differ significantly from our pricing expectations; (iii) the availability,
pricing and adequacy 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 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) heightened competition, including with respect to
pricing, entry
of new competitors and the development of new products and services by new and
existing competitors; (ix) legislative, regulatory, accounting or tax
developments that may affect us directly, or indirectly through the cost of, or
demand for, our products or services; (x) legal or regulatory actions; and
(xi) 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 and nine months ended September 30, 2007 and 2006.
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,
2006 in our 2006 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 Overview discussion in Item 7,
Managements Discussion and Analysis of Financial Condition and Results of
Operations, in our 2006 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, or 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 2006 Annual Report on Form 10-K
for a description of our critical accounting estimates.  15   Results of
Operations  Summary Financial Data:Three Months Ended
Increase (decrease) and($ in thousands)
September 30,
percentage change2007
2006
2007 vs. 2006REVENUES:Premiums$4,199
$2,975
$1,224

41%Insurance and investment product fees
67,510

46,015

21,495

47%Net investment income
27,609

30,404

(2,795)

(9%)Net realized investment losses
(1,987)

(169)

(1,818)

(1,076%)Total revenues
97,331

79,225

18,106

23%BENEFITS AND EXPENSES:Policy benefits
39,107

28,548

10,559

37%Policy acquisition cost amortization
29,251

27,480

1,771

6%Other operating expenses
20,641

14,781

5,860

40%Total benefits and expenses
88,999

70,809

18,190

26%Income before income taxes
8,332

8,416

(84)

(1%)Applicable income tax expense
(524)

(1,027)

503

49%Net income$7,808
$7,389
$419

6%  Three months ended
September 30, 2007 compared to three months ended September 30, 2006  Premiums increased primarily due to
higher renewals on term policies.  Insurance and investment product fees
increased primarily due to higher cost of insurance, or COI, revenues driven by
the larger in-force block. In addition, asset-based separate account fees
increased due to higher account values.  Net realized investment losses
increased primarily due to losses on our GMAB liabilities. See Note 5 to
our financial statements in this Form 10-Q for more information.  Policy benefits increased due to
unfavorable mortality in our universal and term life insurance blocks and to
higher interest credited on the growing block of universal life policies. These
increases were partially offset by lower interest credited on decreased annuity
funds in our general account.  Policy
acquisition cost amortization increased due to gross profits on our universal
life business primarily driven by the higher COI revenues described above.  Other
operating expenses increased primarily as a result of higher non-deferrable
expenses allocated to the growing universal line of business.  Summary Financial Data:Nine Months Ended
Increase (decrease) and($ in thousands)
September 30,
percentage change2007
2006
2007 vs. 2006REVENUES:Premiums$10,260
$8,669
$1,591

18%Insurance and investment product fees
181,373

129,850

51,523

40%Net investment income
82,695

99,370

(16,675)

(17%)Net realized investment losses
(1,798)

(4,315)

2,517

58%Total revenues
272,530

233,574

38,956

17%BENEFITS AND EXPENSES:Policy benefits
107,338

109,036

(1,698)

(2%)Policy acquisition cost amortization
82,757

61,304

21,453

35%Other operating expenses
58,150

50,556

7,594

15%Total benefits and expenses
248,245

220,896

27,349

12%Income before income taxes
24,285

12,678

11,607

92%Applicable income tax expense
(5,693)

(2,128)

(3,565)

(168%)Net income$18,592
$10,550
$8,042

76%  16  Nine
months ended September 30, 2007 compared to nine months ended
September 30, 2006  Premiums increased due to higher
renewals on term policies, partially offset by lower new term premiums.  Insurance and investment product fees
increased primarily due to higher COI revenues driven by the larger in-force
block. In addition, asset-based separate account fees increased due to higher
account values.  Net investment
income decreased due to lower general account funds related to lower annuity
fund balances.  Net realized
investment losses decreased due to lower transaction losses on debt securities.
The higher losses in 2006 were driven by higher interest rates in 2006 as well
as increased sales to fund certain scheduled annuity withdrawals.  Policy
acquisition cost amortization increased due to gross profits on our universal
life business primarily driven by the higher COI revenues described above.  Other
operating expenses increased primarily as a result of higher non-deferrable
expenses allocated to the growing universal line of business.  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.  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 September 30,
2007, our general account held debt securities with a carrying value of $1,814.0
million, representing 98.8% of total general account investments. Public debt
securities represented 80.5% of total debt securities, with the remaining 19.5%
represented by private debt securities.  Debt Securities by Type and Credit Quality:
As of September 30, 2007($ in thousands)
Investment Grade
Below Investment GradeFair Value
Cost
Fair Value
CostUnited States government and agency$75,507
$75,227
$
$State and political subdivision
11,948

12,147



Foreign government
11,348

11,033

18,895

16,724Corporate
880,405

894,828

133,934

141,469Mortgage-backed
390,634

400,181



Other asset-backed
282,543

293,600

8,803

9,473Total debt securities$1,652,385
$1,687,016
$161,632
$167,666Percentage of total debt securities
91%

91%

9%

9%  17  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 September 30, 2007 in
our debt securities portfolio are diversified financial services (6.5%), banking
(6.3%), insurance (3.0%), broker-dealers (2.8%) and real estate investment
trusts (2.6%).    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 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 September 30, 2007, over 91% of
the total residential portfolio was rated AAA or AA. We have $96,123 thousand of
sub-prime exposure, which represents 5.1% of our general account. Substantially
all of our sub-prime exposure is investment grade, and 96.4% is AAA rated, with
another 1.8% in AA securities. We have employed a disciplined approach in the
analysis and monitoring of our mortgage-backed securities. Our approach involves
a monthly review of each security. Underlying mortgage data is obtained from the
deals trustee and analyzed for performance trends. A security specific
stress analysis is performed using the most recent trustee information. This
analysis forms the basis for our determination of whether the security will pay
in accordance with the contractual cash flows. Our exposure to sub-prime
mortgages originated after 2005 is less than 3% of our general account, with 97%
of those securities rated AAA.  Residential Mortgage-Backed Securities(Market Value):
September 30, 2007($ in thousands)Market
% General








BB andValue
Account
AAA
AA
A
BBB
BelowAgency$64,552
3.4%
100.0%
0.0%
0.0%
0.0%
0.0%Prime
181,180
9.6%
86.3%
0.7%
2.9%
10.1%
0.0%Alt-A
58,406
3.1%
87.3%
0.7%
7.1%
4.9%
0.0%Sub-prime
96,123
5.1%
96.4%
1.8%
0.9%
0.0%
0.9%Total$
400,261
21.2%
91.0%
0.9%
2.6%
5.3%
0.2%   Residential Mortgage-Backed Securities(Book Value):
As of September 30, 2007($ in thousands)Book
% General








BB andValue
Account
AAA
AA
A
BBB
BelowAgency$65,769
N/A
100.0%
0.0%
0.0%
0.0%
0.0%Prime
188,352
N/A
85.6%
0.7%
3.7%
10.0%
0.0%Alt-A
59,684
N/A
86.5%
0.7%
7.3%
5.5%
0.0%Sub-prime
98,369
N/A
95.6%
1.9%
1.1%
0.0%
1.4%Total$412,174
N/A
90.4%
0.9%
3.0%
5.4%
0.3%  18  The following
table presents certain information with respect to our gross unrealized losses
related to our investments in general account debt securities. Applicable
deferred acquisition costs and deferred income taxes reduce the effect of these
losses on our comprehensive income.  Duration of Gross Unrealized Losses
As of September 30, 2007on General Account Securities:
0  6
6  12
Over 12($ in thousands)
Total
Months
Months
MonthsDebt securitiesTotal fair value$1,330,021
$352,094
$107,060
$870,867Total amortized cost
1,382,660

369,522

110,786

902,352Unrealized losses$(52,639)
$(17,428)
$(3,726)
$(31,485)Unrealized losses after offsets$(8,650)
$(2,728)
$(568)
$(5,354)Unrealized losses over 20% of cost$(8,804)
$(3,932)
$(1,596)
$(3,276)Unrealized losses over 20% of cost after offsets$(1,341)
$(599)
$(243)
$(499)Investment grade:Unrealized losses$(43,303)
$(14,539)
$(3,656)
$(25,108)Unrealized losses after offsets$(7,117)
$(2,283)
$(557)
$(4,277)Unrealized losses over 20% of cost$(4,950)
$(2,974)
$(1,596)
$(380)Unrealized losses over 20% of cost after offsets$(754)
$(453)
$(243)
$(58)Below investment grade:Unrealized losses$(9,336)
$(2,889)
$(70)
$(6,377)Unrealized losses after offsets$(1,533)
$(445)
$(11)
$(1,077)Unrealized losses over 20% of cost$(3,854)
$(958)
$
$(2,896)Unrealized losses over 20% of cost after offsets$(587)
$(146)
$
$(441)  Total net unrealized losses on debt
securities were $40,665 thousand (unrealized losses of $52,639 thousand less
unrealized gains of $11,974 thousand).  For debt securities with gross
unrealized losses, 82.3% of the unrealized losses after offsets pertain to
investment grade securities and 17.7% of the unrealized losses after offsets
pertain to below investment grade securities at September 30, 2007.  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. This analysis is provided for investment grade and
non-investment grade securities and closed block and outside of closed block
securities. Using this analysis, coupled with our watch list, we review all
securities whose fair value is less than 80% of amortized cost (significant
unrealized loss) with emphasis on below investment grade securities with a
continuous significant unrealized loss in excess of six months. In addition, we
review securities that had experienced lesser percentage declines in value on a more selective basis to determine
if a security is other-than-temporarily impaired.  19  Our
assessment of whether an investment by us 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.  In determining that the securities
giving rise to unrealized losses were not other-than-temporarily impaired, we
considered many factors, including those cited previously. 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.  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.  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
September 30, 2007 were as follows:  Financial Strength Ratings ofRating Agency
Phoenix Life and PHL Variable LifeA.M. Best Company, Inc.
A
(Excellent)Fitch
A+ (Strong)Standard & Poors
A- (Strong)Moodys
A3 (Good)  20  On
March 15, 2007, Standard & Poors lowered its financial strength
ratings on The Phoenix Companies, Inc.s life insurance subsidiaries,
including Phoenix Life and the Company, to A- from A, while assigning a stable
outlook to all of these companies.  These ratings are not a recommendation
to buy or hold any of our securities.  See our 2006 Annual Report on Form 10-K
for additional information as to liquidity and capital resources.  Contractual Obligations and
Commercial Commitments  As of September 30, 2007, there
were no significant changes to our outstanding contractual obligations and
commercial commitments as disclosed in our 2006 Annual Report on Form 10-K.  Off-Balance Sheet Arrangements  As of September 30, 2007 and
December 31, 2006, 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 we have
no material exposure to uncollectible life reinsurance.  Risk Based Capital  At September 30, 2007, our
estimated Total Adjusted Capital level was in excess of 400% of Company Action
Level.  Statutory Capital and Surplus  Our statutory basis capital and surplus
(including AVR) was $215,469 thousand and $234,662 thousand at
September 30, 2007 and December 31, 2006, respectively. The decrease
resulted from net losses on a statutory basis, partially offset by a capital
contribution from PM Holdings.   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 September 30, 2007, 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, with
in the time periods specified in the SECs rules and forms.  21  Changes in
Internal Control over Financial Reporting  During the three months ended on
September 30, 2007, 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.   22  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 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 and Note 7 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 2006 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.   23  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 Michael E. Haylon, Chief Financial Officer, pursuant to Section
302 of the Sarbanes-Oxley Act of 2002*32
Certification by Philip K. Polkinghorn, Chief Executive Officer and Michael E.
Haylon, 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.    24   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:November 8, 2007By:/s/ Michael E. HaylonMichael E. Haylon,
Executive Vice Presidentand Chief
Financial Officer    25