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, 2006  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)  Delaware06-1045829(State or other jurisdiction of(I.R.S. Employerincorporation or organization)Identification No.) One American Row, Hartford, Connecticut
06102-5056

(860) 403-5000 (Address, including zip code, and telephone number, including area code, of principal executive offices)  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
 ̈     No þ  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.  On October 31, 2006, 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   Item No.
DescriptionPagePART IFINANCIAL INFORMATION1
Financial Statements:Unaudited
Interim Condensed Balance Sheet as of
    September 30, 2006 and December 31, 20053Unaudited
Interim Condensed Statement of Income and
    Comprehensive Income and Changes in Stockholders Equity
    for the three and nine months ended September 30, 2006 and 20054Unaudited
Interim Condensed Statement of Cash Flows for the
    three and nine months ended September 30, 2006 and 20055Notes to
Unaudited Interim
Condensed Financial Statements for the
  three and nine months ended September 30, 2006 and 200562
Managements
Discussion and Analysis of Financial Condition and
  Results of Operations123
Quantitative
and
Qualitative Disclosures About Market Risk204
Controls and Procedures20PART IIOTHER INFORMATION1
Legal
Proceedings211A
Risk
Factors222
Unregistered
Sales of
Equity Securities and Use of Proceeds223
Defaults Upon Senior
Securities224
Submission
of Matters to a
Vote of Security Holders225
Other
Information226
Exhibits23Signature24  2  PART I. FINANCIAL INFORMATION  ITEM 1.  FINANCIAL STATEMENTS  PHL VARIABLE INSURANCE
COMPANY Unaudited Interim Condensed Balance Sheet ($
in thousands) September 30, 2006 (unaudited) and December 31, 2005  Sept
30,
Dec
31,2006
2005ASSETS:Available-for-sale debt securities, at fair value$2,092,526
$2,789,491Policy loans,
at unpaid principal balances
14,570

8,171Other
invested assets1,268
1,129Total
investments
2,108,364

2,798,791Cash and cash
equivalents
36,969

25,818Accrued
investment income
23,410

30,837Receivables
49,183

25,107Deferred
policy acquisition costs
652,386

529,315Receivable
from related parties
3,240

32,340Other general
account assets
1,110

247Separate
account assets
2,747,577

2,537,685Total
assets
$
5,622,239
$
5,980,140LIABILITIES:Policyholder
deposit funds$1,563,698
$2,256,129Policy
liabilities and accruals
625,711

487,573Deferred
income taxes
91,819

73,356Payable to
related parties
22,954

72,446Other general
account liabilities
20,277

10,688Separate
account liabilities2,747,577
2,537,685Total
liabilities5,072,036
5,437,877CONTINGENT
LIABILITIES (Note 5)STOCKHOLDERS EQUITY:Common stock,
$5,000 par value: 1,000 shares authorized; 500 shares issued
2,500

2,500Additional
paid-in capital
503,234

503,234Retained
earnings
47,684

37,134Accumulated
other comprehensive loss(3,215)
(605)Total
stockholders equity550,203
542,263Total
liabilities and stockholders equity$5,622,239
$5,980,140  The accompanying notes are an integral part
of these financial statements.  3  PHL VARIABLE INSURANCE
COMPANY Unaudited Interim Condensed Statement of Income and Comprehensive Income and Changes in Stockholders Equity ($
in thousands) Three and Nine Months Ended September 30, 2006 and 2005  Three Months Ended
Nine Months EndedSeptember 30,
September 30,2006
2005
2006
2005REVENUES:Premiums$2,975
$1,595
$8,669
$4,486Insurance and
investment product fees
46,015
26,496
129,850
75,663Investment income, net
of expenses
30,404
38,323
99,370
114,244Net realized investment
losses(169)
(3,062)
(4,315)
(5,332)Total revenues79,225
63,352

233,574

189,061BENEFITS AND
EXPENSES:Policy benefits
28,548
32,439
109,036
97,882Policy acquisition cost
amortization
27,480
14,105
61,304
65,421Other operating
expenses14,781
6,376
50,556
23,094Total benefits and
expenses70,809
52,920

220,896

186,397Income before income
taxes
8,416
10,432
12,678
2,664Applicable income taxes
(benefits)
1,027
1,149
2,128
(1,754)Net income
$
7,389
$
9,283
$
10,550
$
4,418COMPREHENSIVE
INCOME:Net income$7,389
$9,283
$10,550
$4,418Net unrealized gains (losses)
6,666
(4,268)
(2,610)
(7,776)Comprehensive income
(loss)
$
14,055
$
5,015
$
7,940
$
(3,358)RETAINED EARNINGS:Net income$7,389
$9,283
$10,550
$4,418OTHER COMPREHENSIVE
INCOME:Other comprehensive
income (loss)6,666
(4,268)
(2,610)
(7,776)Change in
stockholders equity
14,055
5,015
7,940
(3,358)Stockholders
equity, beginning of period
536,148
539,988
542,263
548,361Stockholders
equity, end of period
$
550,203
$
545,003
$
550,203
$
545,003  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, 2006 and 2005  Nine
Months EndedSeptember 30,2006
2005OPERATING ACTIVITIES:Net income$10,550
$4,418Net realized investment
losses
4,315

5,332Investment income (loss)
2,623

(4,222)Deferred income taxes
19,867

6,439(Increase) decrease in
receivables
(3,190)

7,211Increase in deferred policy
acquisition costs
(124,129)

(12,726)Increase in policy
liabilities and accruals
146,520

96,980Other assets and other
liabilities net change(15,088)
1,926Cash from operating
activities
41,468

105,358INVESTING ACTIVITIES:Investment purchases
(656,568)

(868,028)Investment sales
428,489

290,851Investment maturities and
repayments
889,851

687,070Cash from investing
activities

661,772

109,893FINANCING ACTIVITIES:Policyholder deposit fund
deposits
156,231

180,052Policyholder deposit fund
withdrawals(848,320)
(413,068)Cash for financing
activities(692,089)
(233,016)Change in cash and cash
equivalents
11,151

(17,765)Cash and cash equivalents,
beginning of period
25,818

39,598Cash and cash
equivalents, end of period
$
36,969
$
21,833  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, 2006 and 2005   1.
 Organization and Operations  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., a New York Stock Exchange listed company.  Certain prior year amounts have
been reclassified to conform with the 2006 presentation.  We have prepared these financial statements in accordance
with accounting principles generally accepted in the United States of America, or GAAP.  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 reporting dates and the
reported amounts of revenues and expenses during the reporting periods.  Actual results will
differ from these estimates and assumptions.  We employ significant estimates and assumptions
in the determination of: deferred policy acquisition costs; policyholder liabilities and the
determination of accruals; the valuation of investments in debt and equity securities; the valuation
of deferred tax liabilities and accruals for contingent liabilities.  Our significant
accounting policies are presented in the notes to our financial statements in our 2005 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 2006 are not necessarily indicative of the results that may be expected for
the year 2006.  These unaudited financial statements should be read in conjunction with our
financial statements in our 2005 Annual Report on Form 10-K.  Recently issued accounting standards  Fair Value Measurements:In September 2006, the
Financial Accounting Standards Board, or FASB issued SFAS 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 applies under other existing
accounting pronouncements that require or permit fair value measurements, and does not require any
new fair value measurements.  This guidance is effective for fiscal years beginning after
November 15, 2007.  We are currently assessing the impact of SFAS 157 on our financial position
and results of operations.  Uncertain Tax Positions:  In June 2006, the
FASB issued FIN 48, Accounting for Uncertainty in Income Taxes, or FIN 48.  FIN 48
clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax
position is required to meet before being recognized in the financial statements.  FIN 48 also
provides guidance on measurement and classification of taxes and introduces new disclosure
requirements.  This guidance is effective for fiscal years beginning after December 15, 2006.
 We are currently assessing the impact of FIN 48 on our financial position and results of
operations.  Deferred Acquisition Costs:  In September 2005,
the Accounting Standards Executive Committee, or AcSEC, of the American Institute of Certified
Public Accountants, or 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 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 will
adopt SOP 05-1 on January 1, 2007.  We are currently assessing the impact of SOP 05-1 on our
financial position and results of operations.  6  Servicing of Financial Assets:  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 do not expect our adoption of SFAS 156 to have a material impact on our financial
statements.  Accounting changes  Certain Hybrid Financial Instruments:
 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.  Other-Than-Temporary Impairments:  Effective
January 1, 2006, we adopted FASB Staff Position Nos. FAS 115-1 and FAS 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, accordingly, our adoption did not have a material
effect on our financial statements.   2.  Operating
Activities  Activity in
Deferred Policy Acquisition Costs:Three
Months Ended
Nine
Months Ended($ in thousands)September 30,
September 30,2006
2005
2006
2005Policy acquisition
costs deferred$53,785
$33,975
$185,432
$78,147Recurring costs
amortized to expense
(27,615)
(15,807)
(63,550)
(67,123)Decrease (increase)
related to realized investment gains
  or losses
135
1,702
2,246
1,702(Cost) credit offsets
to net unrealized investment gains
  or losses included in other comprehensive income(22,184)
25,868
(1,057)
34,916Change in deferred
policy acquisition costs
4,121
45,738
123,071
47,642Deferred policy
acquisition costs, beginning of period
648,265
435,362
529,315
433,458Deferred policy
acquisition costs, end of period
$
652,386
$
481,100
$
652,386
$
481,100   3.  Investing
Activities  Debt securities  Fair Value and
Cost of Debt Securities:September 30, 2006
December 31, 2005($ in thousands)Fair
Value
Cost
Fair
Value
CostU.S. government and
agency$112,487
$113,869
$124,552
$125,673State and political
subdivision
17,967
18,219
28,585
28,934Foreign government
52,017
48,808
73,412
69,275Corporate
1,189,146
1,207,371
1,490,696
1,510,681Mortgage-backed
452,232
455,092
648,124
649,346Other asset-backed
268,677
267,734
424,122
425,634Debt securities
$
2,092,526
$
2,111,093
$
2,789,491
$
2,809,543  We owned no non-income producing debt securities as of
September 30, 2006 or 2005.  7   Gross and Net
Unrealized Gains and Losses fromSeptember 30, 2006
December 31, 2005Debt and Equity
Securities:Gains
Losses
Gains
Losses($ in thousands)U.S. government and
agency$252
$(1,634)
$369
$(1,490)State and political
subdivision
180
(432)
239
(588)Foreign government
3,435
(226)
4,539
(402)Corporate
5,557
(23,782)
10,796
(30,781)Mortgage-backed
3,065
(5,925)
6,141
(7,363)Other asset-backed
2,977
(2,034)
2,052
(3,564)Debt securities
gains (losses)
$
15,466
$
(34,033)
$
24,136
$
(44,188)Debt securities
net losses
$
(18,567)

$
(20,052)Equity securities
gains$14
$Equity securities
net gains$14
$   Aging of
Temporarily ImpairedAs of
September 30, 2006Debt Securities:Less
than 12 months
Greater than 12 months
Total($ in thousands)Fair
Unrealized
Fair
Unrealized
Fair
UnrealizedValue
Losses
Value
Losses
Value
LossesDebt securitiesU.S. government and
agency$13,838
$(60)
$69,256
$(1,574)
$83,094
$(1,634)State and political
subdivision
1,019

(3)

14,386

(429)

15,405

(432)Foreign government
4,038

(18)

9,320

(208)

13,358

(226)Corporate
256,298

(3,203)

677,368

(20,579)

933,666

(23,782)Mortgage-backed
75,630

(721)

243,810

(5,204)

319,440

(5,925)Other asset-backed35,579
(202)
115,864
(1,832)
151,443
(2,034)Total temporarily
impaired securities$386,402
$(4,207)
$1,130,004
$(29,826)
$1,516,406
$(34,033)Below investment
grade$34,903
$(513)
$72,614
$(3,499)
$107,517
$(4,012)Below investment
grade after offsets
  for deferred policy acquisition cost
  adjustment and taxes

$(61)


$
(516)


$
(577)  These securities are considered to be temporarily impaired
at September 30, 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 are no unrealized losses of below investment grade
debt securities with a fair value less than 80% of the securities amortized cost at September 30,
2006.  Aging of
Temporarily ImpairedAs of
December 31, 2005Debt 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$62,372
$(714)
$33,369
$(776)
$95,741
$(1,490)State and political
subdivision
7,854

(15)

16,067

(573)

23,921

(588)Foreign government
14,877

(269)

4,834

(133)

19,711

(402)Corporate
651,536

(18,520)

340,112

(12,261)

991,648

(30,781)Mortgage-backed
245,240

(3,751)

165,412

(3,612)

410,652

(7,363)Other asset-backed140,801
(1,797)
101,004
(1,767)
241,805
(3,564)Total temporarily
impaired securities$1,122,680
$(25,066)
$660,798
$(19,122)
$1,783,478
$(44,188)Below investment
grade$72,000
$(2,888)
$40,186
$(2,667)
$112,186
$(5,555)Below investment
grade after offsets
  for deferred acquisition cost
  adjustment and taxes

$
(469)


$
(305)


$
(774)   8  These securities were considered
to be temporarily impaired at December 31, 2005 as each of these securities had performed, and was
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.  Net investment income  Sources of Net
Investment Income:Three
Months Ended
Nine
Months Ended($ in thousands)September 30,
September 30,2006
2005
2006
2005Debt securities$29,410
$37,721
$98,114
$114,301Equity securities

1

2Other investments
62
12
101
48Policy loans
508
325
642
557Cash and cash equivalents917
176
2,010
604Total investment
income
30,897
38,235
100,867
115,512Less:
investment expenses493
(88)
1,497
1,268Net investment
income$30,404
$38,323
$99,370
$114,244  Net realized investment gains (losses)  Sources and Types of Net Realized InvestmentThree
Months Ended
Nine
Months EndedGains (Losses):September 30,
September 30,($ in thousands)2006
2005
2006
2005Debt security
impairments$
$(1,638)
$(411)
$(1,638)Debt security
transaction gains
240
685
2,503
1,539Debt security
transaction losses
(447)
(1,717)
(7,008)
(4,970)Equity security
transaction gains



26Other invested asset
transaction gains (losses)38
(392)
601
(289)Net transaction
gains (losses)(169)
(1,424)
(3,904)
(3,694)Net realized
investment gains (losses)$(169)
$(3,062)
$
(4,315)
$
(5,332)Net realized
investment gains (losses)$(169)
$(3,062)
$(4,315)
$(5,332)Applicable deferred
policy acquisition costs
(135)
(1,702)
(2,246)
(1,702)Applicable deferred
income tax benefit(11)
(476)
(724)
(1,271)Offsets to realized
investment gains
(146)
(2,178)
(2,970)
(2,973)Net realized
investment gains (losses)
  included in net income
$
(23)
$
(884)
$
(1,345)
$
(2,359)  Unrealized investment gains (losses)  Sources of Changes
in Net Unrealized InvestmentThree
Months Ended
Nine
Months EndedGains (Losses):September 30,
September 30,($ in thousands)2006
2005
2006
2005Debt securities$31,562
$(32,470)
$(3,608)
$(46,623)Equity securities
14
28
14
(5)Net unrealized
investment gains (losses)
$
31,576
$
(32,442)
$
(3,594)
$
(46,628)Net unrealized
investment gains (losses)$31,576
$(32,442)
$(3,594)
$(46,628)Applicable deferred
policy acquisition costs (benefit)
22,184
(25,868)
1,057
(34,916)Applicable deferred
income tax benefit3,511
(2,390)
(1,404)
(4,187)Offsets to net
unrealized investment losses
25,695
(28,258)
(347)
(39,103)Net unrealized
investment gains (losses)
  included in other comprehensive income
$
5,881
$
(4,184)
$
(3,247)
$
(7,525)  9  4.  Income Taxes  For the nine months ended September 30, 2006 and 2005, the
effective income tax rates applicable to operating income 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 30,2006
2005
2006
2005Income taxes at
statutory rate35.0%
35.0%
35.0%
(35.0%)Investment income not
subject to tax(22.8%)
(24.0%)
(18.2%)
(30.8%)Effective income
tax benefit rates applicable to
  operating income
12.2%
11.0%
16.8%
(65.8%)  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.  The current periods being audited by the IRS are the 2002 and
2003 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 reserves, as recorded
on the balance sheet, are adequate for all open 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.   5.
 Contingent Liabilities  We are regularly involved in litigation, both as a
defendant and as a plaintiff.  The litigation naming us as a defendant ordinarily involves our
activities as an insurer, investor or taxpayer.  Several current proceedings are discussed
below.  In addition, 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.  For example, during 2003 and 2004, the SEC conducted
examinations of certain Company variable products and certain affiliated investment advisors 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 February 2005,
the NASD notified an affiliate of the Company that it was asserting violations of trade reporting
rules by the affiliate of the Company.  The affiliated company responded to the NASD
allegations in May 2005 but has not received any further inquiries to date.  Federal and state regulatory authorities from time to time
make inquiries and conduct examinations regarding compliance by the Company with securities and
other laws and regulations affecting its registered products.  The Company endeavors to respond
to such inquiries in an appropriate way and to take corrective action if warranted.  Recently,
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 2004 and 2005, the Boston District Office of the SEC
conducted a compliance examination of certain of the Company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 the Company 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 the Company
believes reimbursement is necessary or appropriate under the circumstances.  A third party was
retained to assist the Company in preparing the analysis. Based on this analysis, the Company
advised the SEC that it does not believe that reimburse
ment is appropriate.  10  Over the past two 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, we 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.  We cooperated fully and have had no
further inquiry since filing our 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
investigations and legal proceedings 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, or consideration of available insurance and reinsurance
and the provision made in our financial statements.  However, given the large or indeterminate
amounts sought in certain of these matters and litigations inherent unpredictability, 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.   11  ITEM
2. MANAGEMENTS
DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  FORWARD-LOOKING STATEMENTS  The following discussion may contain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995.  The
Company intends 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, the Companys future
strategies, operations and financial results, as well as other statements including 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
the Company.  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 economic
conditions, including changes in interest and currency exchange rates and the performance of
financial markets; (ii) heightened competition, including with respect to pricing, entry of new
competitors and the development of new products and services by new and existing competitors; (iii)
regulatory, accounting or tax developments that may affect the Company or the cost of, or demand
for, its products or services; (iv) downgrades in the financial strength ratings of the Company; (v)
discrepancies between actual claims experience and assumptions used in setting prices for the
Companys products and establishing the Companys liabilities for future policy benefits
and claims relating to such products; (vi) movements in the equity markets that affect our
investment results, the fees we earn from funds on deposit an
d the demand for our variable products; (vii) the relative success and timing of implementation of
the Companys strategies; (viii) the effects of closing the Companys retail brokerage
operations; and (ix) other risks and uncertainties described in Part II, Item IA. Risk
Factors below or in any of the Companys other filings with the SEC.  The Company
undertakes 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, 2006 and 2005.  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, 2005
in our 2005 Annual Report on Form 10-K.  Overview  We are a manufacturer of life insurance, annuity and
investment products.  We provide products and services through a wide variety of third-party
professionals and institutional consultants.  We derive our revenues principally from:  ·premiums on life insurance;·insurance and investment product fees on
variable life and annuity products and universal life products; and·net investment income and net realized
investment gains.  Under accounting principles generally accepted in the
United States of America, or GAAP, premium and deposit collections for variable life, universal life
and annuity products are not recorded as revenues.  For certain investment options of variable
products, collections are reflected on our balance sheet as an increase in separate account
liabilities.  Collections for universal life, fixed annuities and certain investment options of
variable annuities are reflected on our balance sheet as an increase in policyholder deposit funds.
 Collections for other products are reflected on our balance sheet as an increase in policy
liabilities and accruals.   12  Our expenses consist principally
of:  ·insurance policy benefits provided to
policyholders, including interest credited on policies;·deferred policy acquisition costs
amortization;·other operating expenses; and·income taxes.  Our profitability depends principally upon:  ·
the
adequacy of our product pricing, which is primarily a function of our:ability to select underwriting risks;mortality experience;ability to generate investment earnings;ability to maintain expenses in accordance with our pricing
assumptions; andpersistency on policies issued (the percentage of policies
remaining in force from year to year as measured by premiums);·
the
amount and composition of funds on deposit;·
the
maintenance of our target spreads between the rate of earnings on our investments and interest rates
credited to customers; and·
our
ability to manage expenses.  Our sales and financial results over the last several years
have been affected by demographic, industry and market trends. The baby boom generation has
begun to enter its prime savings years. Americans generally have begun to rely less on defined
benefit retirement plans, social security and other government programs to meet their postretirement
financial needs. Product preferences have shifted between fixed and variable options depending
on market and economic conditions. Our balanced product portfolio, including universal life,
variable life and variable annuity products, is well positioned to meet this shifting demand.  Recently Issued Accounting Standards  Fair Value Measurements:In September 2006, the
Financial Accounting Standards Board, or FASB issued SFAS 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 applies under other existing
accounting pronouncements that require or permit fair value measurements, and does not require any
new fair value measurements.  This guidance is effective for fiscal years beginning after
November 15, 2007.  We are currently assessing the impact of SFAS 157 on our financial position
and results of operations.  Uncertain Tax Positions:  In June 2006, the
FASB issued FIN 48, Accounting for Uncertainty in Income Taxes, or FIN 48.  FIN 48
clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax
position is required to meet before being recognized in the financial statements.  FIN 48 also
provides guidance on measurement and classification of taxes and introduces new disclosure
requirements.  This guidance is effective for fiscal years beginning after December 15, 2006.
 We are currently assessing the impact of FIN 48 on our financial position and results of
operations.  Deferred Acquisition Costs:  In September 2005,
the Accounting Standards Executive Committee, or AcSEC, of the American Institute of Certified
Public Accountants, or 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 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 will
adopt SOP 05-1 on January 1, 2007.  We are currently assessing the impact of SOP 05-1 on our
financial position and results of operations.   13  Servicing of Financial Assets:  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 do not expect our adoption of SFAS 156 to have a material impact on our financial
statements.  Accounting changes  Certain Hybrid Financial Instruments:
 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.  Other-Than-Temporary Impairments:  Effective
January 1, 2006, we adopted FASB Staff Position Nos. FAS 115-1 and FAS 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, accordingly, our adoption did not have a material
effect on our financial statements.  Critical Accounting Estimates  The discussion and analysis of our results of operations
are based upon our financial statements, which have been prepared in accordance with 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.  Deferred Policy Acquisition Costs (DAC)  The costs of acquiring new business, principally
commissions, underwriting, distribution and policy issue expenses, all of which vary with and are
primarily related to production of new business, are deferred.  We amortize DAC based on the related policys
classification.  For individual life insurance policies, DAC is amortized in proportion to
estimated gross margins.  For universal life, variable universal life and accumulation
annuities, DAC is amortized in proportion to estimated gross profits, or EGPs.  Policies may be
surrendered for value or exchanged for a different one of our products (internal replacement).
 The DAC balance associated with the replaced or surrendered policies is amortized to reflect
these surrenders.  Each year, we develop future EGPs for the products sold
during that year.  The EGPs for products sold in a particular year are aggregated into cohorts.
 Future EGPs are projected for the estimated lives of the contracts.  The amortization of
DAC requires the use of various assumptions, estimates and judgments about the future.  The
assumptions, in the aggregate, are considered important in the projections of EGPs.  The
assumptions developed as part of our annual process are based on our current best estimates of
future events, which are likely to be different for each years cohort.  Assumptions
considered to be significant in the development of EGPs include separate account fund performance,
surrender and lapse rates, interest margin, mortality, premium persistency and expenses.  These
assumptions are reviewed on a regular basis and are generally based on our past experience, industry
studies, regulatory requirements and estimates about the future.  To determine the reasonableness of the prior assumptions used and their impact on
previously projected account values and the related EGPs, we evaluate, on a quarterly basis, our previously
projected EGPs.  Our process to assess the reasonableness of our EGPs involves the use of internally
developed models, together with studies and actual experience. Incorporated in each scenario are our
current best estimate assumptions with respect to separate account returns, surrender and lapse rates, interest
margin, mortality, premium persistency and expenses.   14  Underlying assumptions for future periods of EGPs are not altered unless experience deviates significantly from original assumptions.  For example, when lapses of our insurance products meaningfully exceed levels assumed in determining the amortization of DAC, we adjust amortization to reflect the change in future premiums or EGPs resulting from the unexpected lapses.  In the event that we were to revise assumptions used for prior year cohorts, our estimate of projected account values would change and the related EGPs in the DAC amortization model would be adjusted to reflect such change.  This process is known as unlocking.  Continued favorable experience on key assumptions, which could include increasing separate account fund return performance, decreasing lapses or decreasing mortality could result in an unlocking which would result in a decrease to DAC amortization and an increase in the DAC asset.  Finally, an analysis is performed periodically to assess whether there are sufficient gross margins or gross profits to amortize the remaining DAC balances.  The separate account fund performance assumption is critical to the development of the EGPs related to our variable annuity and variable life insurance businesses.  As equity markets do not move in a systematic manner, we use a mean reversion method (reversion to the mean assumption), a common industry practice to determine the future equity market growth rate assumption used for the amortization of DAC.  This practice assumes that the expectation for long-term appreciation is not changed by minor short-term market fluctuations.  The average long-term rate of assumed separate account fund performance used in estimating gross profits was 6.0% (after fund fees and mortality and expense charges) for the variable annuity business and 6.9% (after fund fees and mortality and expense charges) for the variable life business at September 30, 2006.  We perform analysis with respect to the sensitivity of a change in the separate account performance assumption as it is critical to the development of the EGPs related to our variable annuity and variable life insurance business.  Equity market movements have a significant impact on the account value of variable life and annuity products and the fees earned on these. EGPs could increase or decrease with these movements in the equity market.  Sustained and significant changes in the equity markets could therefore have an impact on DAC amortization.  To illustrate the effects of this analysis, assume we had concluded that a revision to previously projected account returns and related EGPs was required as of September 30, 2006.  For example, if we had used a 100 basis points lower separate account return assumption (after fund fees and mortality and expense charges) for both the variable annuity and the variable life businesses and used our current best estimate assumptions for all other assumptions to project account values forward from the current value to reproject EGPs, the estimated increase to amortization and decrease to net income would be approximately $2,045 thousand, after-tax, for the nine months ended September 30, 2006.  If instead we had used a 100 basis points higher separate account return assumption (after fund fees and mortality and expense charges) for both the variable annuity and variable life businesses and used our current best estimate assumptions for all other assumptions to project account values forward from the current value to reproject EGPs, the estimated decrease to amortization and increase to net income would be approximately $2,364 thousand, after-tax, for the nine months ended September 30, 2006.  Although such hypothetical revisions are not currently required or anticipated, we believe they could reasonably occur based on past variances in experience.  See our 2005 Annual Report on Form 10-K for a further description of our critical accounting estimates.   15  Results of Operations  Summary Financial
Data:Three
Months Ended


Nine
Months Ended($ in thousands)September 30,


September 30,2006
2005
Change
2006
2005
ChangeREVENUES:Premiums$2,975
$1,595
$1,380
$8,669
$4,486
$4,183Insurance and
investment
  product fees
46,015
26,496
19,519
129,850
75,663
54,187Investment income,

  net of expenses
30,404
38,323
(7,919)
99,370
114,244
(14,874)Net realized
investment
  losses(169)
(3,062)
2,893
(4,315)
(5,332)
1,017Total revenues79,225
63,352
15,873

233,574

189,061

44,513BENEFITS AND
EXPENSES:Policy benefits
28,548
32,439
(3,891)
109,036
97,882
11,154Policy acquisition
cost
  amortization
27,480
14,105
13,375
61,304
65,421
(4,117)Other operating
expenses14,781
6,376
8,405
50,556
23,094
27,462Total benefits and

  expenses70,809
52,920
17,889

220,896

186,397

34,499Income before income
taxes
8,416
10,432
(2,016)
12,678
2,664
10,014Applicable income
taxes
  (benefit)1,027
1,149
(122)
2,128
(1,754)
3,882Net income$7,389
$9,283
$(1,894)
$10,550
$4,418
$6,132  Three and nine months ended
September 30, 2006 vs. September 30, 2005  Premium revenues for the three and nine months ended
September 30, 2006 increased $1,380 thousand, or 87%, and $4,183 thousand, or 93%, over the
comparable periods in 2005 due to higher sales of our term life insurance products.  Insurance and investment product fees for the three and
nine months ended September 30, 2006 increased $19,519 thousand, or 74%, and $54,187 thousand, or
72%, respectively, over the comparable periods in 2005 due principally to higher universal life fees
resulting from higher sales and growth of policies in force.  Net investment income for the three and nine months ended
September 30, 2006 decreased 21% and 13%, respectively, from the comparable periods in 2005.
 These decreases are due primarily to lower incidence of makewhole premiums on called bonds and
lower invested asset amounts related to a decrease in annuity funds on deposit, primarily related to
discontinued products.  Net realized investment losses for the three and nine-month
periods ended September 30, 2006 decreased 97% and 43%, respectively, from the comparable periods in
2005 due to an improving credit cycle that resulted in fewer impairment losses in 2006 over the
comparable 2005 period.  Policy benefits for the three months ended September 30,
2006 decreased 12% from the comparable period in 2005 as a result of lower interest credited for
annuities which resulted from the decline in general account funds on deposit, primarily related to
discontinued products.  These decreases were partially offset by higher benefit costs for
universal life, which resulted from growth of policies in force.  Policy benefits for the nine
months ended September 30, 2006 increased 12% over the comparable period in 2005 primarily due to
higher universal life benefit costs resulting from higher claims and growth of policies in force,
partially
offset by lower interest credited on annuities.  Policy acquisition cost amortization for the three months
ended September 30, 2006 increased $13,375 thousand, or 95%, over the comparable period in 2005 due
primarily to higher insurance and other margins for universal life.  Policy amortization for
the nine months ended September 30, 2006 decreased $4,117 thousand, or 6%, from the comparable
period in 2005 due primarily to the effects of unlocking which increased annuity amortization in
2005
partially offset by unlocking effects in 2005 which reduced universal life amortization.  16  Other operating expenses for the three and nine months
ended September 30, 2006 increased 132% and 119%, respectively, over the comparable periods in 2005
as a result of higher non-deferred expenses, such as maintenance and indirect costs associated with
business growth and premium taxes driven primarily by the increase in universal life new business.  General Account  The invested assets in our general account are generally of
high quality and broadly diversified across asset classes, sectors 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, 2006, our general account held debt securities with a carrying value of
$2,092.5 million, representing 99.2% of total general account investments.  Public debt
securities represented 80.3% of total debt securities, with the remaining 19.7% represented by
private debt securities.  Debt Securities by
Type and Credit Quality:As of
September 30, 2006($ in thousands)Investment Grade
Below
Investment GradeFair
Value
Cost
Fair
Value
CostUnited States
government and agency$112,487
$113,869
$
$State and political
subdivision
17,967
18,219

Foreign government
23,288
23,029
28,729
25,779Corporate
1,058,567
1,073,699
130,579
133,672Mortgage-backed
452,232
455,092

Other asset-backed
257,849
256,957
10,828
10,777Total debt
securities
$
1,922,390
$
1,940,865
$
170,136
$
170,228Percentage of
total debt securities91.9%
91.9%
8.1%
8.1%  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, 2006 in our
debt securities portfolio are diversified financial services (6.2%), banking (5.6%), insurance
(3.5%), telecommunications equipment (2.6%) and real estate investment trusts (2.5%).  Total net unrealized losses on debt securities were $18.6
million (unrealized losses of $34.1 million less unrealized gains of $15.5 million).  At the end of each reporting period, we review our security
holdings 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.   17  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 LossesAs of
September 30, 2006on General Account
Securities:

0
 6
6
 12
Over
12($ in thousands)Total
Months
Months
MonthsDebt securitiesTotal fair value$1,516,406
$86,049
$300,353
$1,130,004Total amortized cost
1,550,439
86,723
303,886
1,159,830Unrealized losses
$
(34,033)
$(674)
$(3,533)
$(29,826)Unrealized losses
after offsets$(4,426)
$(78)
$(424)
$(3,924)Unrealized losses
over 20% of cost$
$
$
$Unrealized losses
over 20% of cost after offsets$
$
$
$Investment grade:Unrealized losses$(30,021)
$(315)
$(3,379)
$(26,327)Unrealized losses
after offsets$(3,849)
$(38)
$(403)
$(3,408)Unrealized losses
over 20% of cost$
$
$
$Unrealized losses
over 20% of cost after offsets$
$
$
$Below investment
grade:Unrealized losses$(4,012)
$(359)
$(154)
$(3,499)Unrealized losses
after offsets$(577)
$(40)
$(21)
$(516)Unrealized losses
over 20% of cost$
$
$
$Unrealized losses
over 20% of cost after offsets$
$
$
$  For debt securities with gross unrealized losses, 87.0% of
the unrealized losses after offsets pertain to investment grade securities and 13.0% of the
unrealized losses after offsets pertain to below investment grade securities at September 30, 2006.  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.   18  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  Ratings are an important factor in establishing our
competitive position in the insurance and financial services marketplace. There can be no
assurance that our ratings will continue for any given period of time or that they will not be
changed.  In the event our ratings are downgraded, our ability to borrow, the level of our
revenues and the persistency of our business may be adversely affected.  Please see Section II,
Item 1A. Risk Factors below.  Our current financial strength and debt ratings are set
forth in the chart below.  Financial Strength
Ratings ofRating Agency
Phoenix Life and
PHL Variable LifeA.M. Best Company,
Inc.A
(Excellent)FitchA+
(Strong)Standard &
PoorsA
(Strong)MoodysA3 (Good)  On July 27, 2006, Standard & Poors affirmed our
rating, as well as Phoenix Lifes A (Strong) financial strength rating.  In
addition, Standard & Poors revised its outlook for these ratings from stable to negative.
 On July 28, 2006, Fitch affirmed our rating, as well as Phoenix Lifes A+
(Strong) financial strength rating, and maintained its stable outlook.  These ratings are not a recommendation to buy or hold any
of our securities.  See our 2005 Annual Report on Form 10-K for additional
information as to liquidity and capital resources.  Contractual Obligations and Commercial Commitments  As of September 30, 2006, there were no significant changes
to our outstanding contractual obligations and commercial commitments as disclosed in our 2005
Annual Report on Form 10-K.  Off-Balance Sheet Arrangements  As of September 30, 2006 and December 31, 2005, 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 and reputations in the reinsurance marketplace, we believe that these
third-party reinsurers are financially sound and, therefore, that we have no material exposure to
uncollectible life reinsurance.  Statutory Capital and Surplus  Our statutory basis capital and surplus (including AVR) was
$256.0 million at September 30, 2006.    19  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, 2006, 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 on September 30, 2006, 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.  20  PART II.
 OTHER INFORMATION   ITEM 1.  LEGAL PROCEEDINGS  We are regularly involved in litigation, both as a
defendant and as a plaintiff.  The litigation naming us as a defendant ordinarily involves our
activities as an insurer, investor or taxpayer.  Several current proceedings are discussed
below.  In addition, 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.  For example, during 2003 and 2004, the SEC conducted
examinations of certain Company variable products and certain affiliated investment advisors 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 February 2005,
the NASD notified an affiliate of the Company that it was asserting violations of trade reporting
rules by the affiliate of the Company.  The affiliated company responded to the NASD
allegations in May 2005 but has not received any further inquiries to date.  Federal and state regulatory authorities from time to time
make inquiries and conduct examinations regarding compliance by the Company with securities and
other laws and regulations affecting its registered products.  The Company endeavors to respond
to such inquiries in an appropriate way and to take corrective action if warranted.  Recently,
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 2004 and 2005, the Boston District Office of the SEC
conducted a compliance examination of certain of the Company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 the Company 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 the Company
believes reimbursement is necessary or appropriate under the circumstances.  A third party was
retained to assist the Company in preparing the analysis. Based on this analysis, the Company
advised the SEC that it does not believe that reimbursement is appropriate.  Over the past two 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, we 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.  We cooperated fully and have had no
further inquiry since filing our 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
investigations and legal proceedings 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, or consideration of available insurance and reinsurance
and the provision made in our financial statements.  However, given the large or indeterminate
amounts sought in certain of these matters and litigations inherent unpredictability, 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.  21    ITEM 1A.  RISK FACTORS  We face significant risks, any of which could have a
significant or material adverse effect on our business, financial condition, operating results or
liquidity.  The risks described below updates the risk factors described in our 2005 Form 10-K
and should be read in addition to those risk factors.  The risk factors described in this Form
10-Q and our 2005 Form 10-K may not be the only risks we face.  This information should be
considered carefully together with the other information contained in this Form 10-Q and the other
reports and materials we file with the Securities and Exchange Commission.  Downgrades to Phoenix Lifes and PHL Variable
Insurance Companys financial strength ratings could increase policy surrenders and
withdrawals, adversely affect relationships with distributors, reduce new sales and earnings from
certain of our life insurance products and increase our future borrowing costs.  Rating agencies assign financial strength ratings based on
their opinions of the relevant companys ability to meet its financial obligations.
 Financial strength ratings reflect a rating agencys view of an insurance companys
ability to meet its obligations to its insureds.  These ratings are therefore key factors
underlying the competitive position of life insurers.  Downgrades could adversely affect our
reputation and, hence, our relationships with existing distributors and our ability to establish
additional distributor relationships.  If this were to occur, we might experience a decline in
sales of certain products and the persistency of existing customers.  At this time, we cannot
estimate the impact on sales or persistency.  A significant decline in our sales or persistency
could have a material adverse effect on our financial results.   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.    22  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.    23   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
14, 2006By:/s/
Michael E. HaylonMichael E. Haylon, Executive Vice Presidentand Chief Financial Officer   24