Wednesday, September 19, 2012

Thursday Options Recap


Stocks are holding modest gains in slow, pre-holiday market action Thursday. With no real stock news to guide the action, economic data was in focus early. A report on November durable goods showed an increase of just .2 percent; which is better than the .6 percent decline in October, but below the .5 percent average economist estimate.

However, a separate report showed weekly jobless claims falling to 452,000 in the period ended December 19, down from 480,000 two weeks ago and better than the 470,000 economists had predicted.

In the end, the data didn’t seem to matter much and the slow grind higher continues for the S&P 500. The index has traded in a narrow 6-point range and is up 4.6 heading into the final hour (markets close at 1:00 eastern time). The CBOE Volatility Index (.VIX) slumped .25 to 19.46. Trading in the options market is light, with approximately 1.6 million puts and 4.4 million calls traded so far (a ratio of .37, compared to a 22-day average of .70.)

Bullish Flow

Apple Computer (AAPL) is up $4 to $206.10 and calls are seeing early action after MacRumors reports that chatter has exploded in recent days, which hints at a possible January release of a new Apple Tablet device. 42,000 calls and 16,000 puts traded in the first 20 minutes on Apple Thursday, including 12,070 January 210 calls (28 percent mid-market/53 percent ask-side.)

Heavy volume of more than 1 million Calls in Altria (MO) is related to stock trading ex-dividend. Options market closes at 1:00 eastern time today. So, the ex-div activity is a bit earlier than usual. Kraft Foods (KFT) and Campbell’s (CPB) are dividend plays as well. The action is also distorting the total put-to-call ratio (above).

Bearish Flow

Barrick Gold (ABX) has overcome early weakness and is up 21 cents to $40.44 after gold gained $11 to $1105 an ounce. In the options market, some traders are showing interest in the Jan 36 - 41 risk-reversal. Looks like they’re collecting about $1.03 to sell calls, buy puts, more than 7000X today. Separately, one or more strategists is buying the Jan 40 straddle. For example, they bought 1000 at $3.23 (tied to a small position in shares on an 8 delta). Overall, options are very active, with 40K calls and 27K puts already traded on the gold miner.

Implied Volatility Movers

Jackson Hewitt (JTX) is down 20 percent to $4.64 after Santa Barbara Bank and Trust said it would not originate tax refund loans for JTX in 2010. Shares are reeling and about 8,000 puts traded, compared to 965 calls. Trading is brisk in Jan, Feb, and April $5 puts. April 2.5 puts are seeing interest as well and average implied vols in JTX are up roughly 12 percent to about 82.

Unusual Volume Movers

Jackson Hewitt (JTX) is seeing 5X average daily trading volume, with 15,000 contracts traded and put volume representing 84 percent of today’s activity.

EOG is seeing 4X average trading volume, with 15,000 contracts traded and calls representing 76 percent of today’s trading activity.

Safeway (SWY) is seeing 2X normal trading volume. 5,400 contracts have traded, with call options representing about 95 percent of today’s volume.

Unusual volume (two times or more than normal average volume) is also being seen in General Steel (GSI), Precision Drilling (PDS), and iShares DJ Healthcare Providers (IHF).

Tuesday, September 18, 2012

Stocks to Watch on Cancer Vaccines’ Huge Financial Potential

In a 2009 article in Time magazine, developing a vaccine against cancer was likened to creating the biological version of a stealth weapon encased in a smart bomb equipped with a guided missile. A challenge, to say the least. Yet, despite years of disappointment with efforts to get the body�s own immune system to attack tumors and fight diseases, it appears that we are on the cusp of a new era in vaccines.

Vaccines, of course, are not novel. For years they�ve been used to provide lasting protection against infection. Therapeutic vaccines are different. They�re intended to actually combat disease once it appears in the body. In April 2010, the FDA approved the first therapeutic vaccine, Dendreon�s (NASDAQ:DNDN) Provenge, which was shown to extend life about four months in men with a certain type of metastatic prostate cancer. The vaccine provokes an immune response against a particular antigen, or identifying molecule, found on most prostate cancer cells.

Cancer vaccines seem ideally suited for use in patients whose disease has already been diagnosed and treated with surgery, chemotherapy or radiation. They would then be immunized as a way to prevent the cancer from coming back and spreading. Such metastases are actually the leading cause of death from cancer.

Given the huge financial potential of therapeutic cancer vaccines, investors may want to closely follow the progress being made by the following companies currently testing such vaccines in humans:

ImmunoCellular Therapeutics (OTC BB:IMUC.OB ) is testing ICT-107 in patients with glioblastoma, a fast-moving and deadly form of brain cancer. The company recently began a Phase II trial of the vaccine candidate after an initial study in 16 newly diagnosed glioblastoma patients delivered a three-year overall survival rate of 55%, compared with 16% based on traditional methods of care.

Inovio Pharmaceuticals (NYSE:INO) has VGX-3100, a therapeutic DNA vaccine candidate now in Phase II testing for the treatment of cervical dysplasia and cancer caused by two types of �human papillomavirus (HPV). These sexually transmitted strains are thought to cause up to 70% of cervical cancer cases.

GlaxoSmithKline (NYSE:GSK) is betting it has found a mixture of proteins that can boost the body�s natural ability to battle several kinds of cancers, all of which express the MAGE-A3 antigen. The company is in the midst of Phase III trials, testing its vaccine candidate against metastatic melanoma and non-small-cell lung cancer.

Advaxis (OTC BB:ADXS.OB) is working to develop an immunotherapy against HPV, the most prevalent sexually transmitted disease in the U.S. Its therapeutic vaccine candidate, ADXS-HPV, is being evaluated in four Phase II clinical trials, including two trials in cervical cancer and one in head and neck malignancies.

Also, privately held GlobeImmune has a deal worth $40 million upfront and up to $500 million with�Celgene�(NASDAQ:CELG) for the development of cancer vaccines. GlobeImmune is developing Tarmogens — Targeted Molecular Immunogens — for cancer and infectious disease. Its lead oncology candidate is GI-4000, a vaccine that targets pancreatic cancer caused by mutated versions of specific protein.

As of this writing, Barry Cohen was long GSK.

Top Stocks For 6/6/2012-10

Diana Shipping Inc. (NYSE:DSX) reported net income of $33.1 million for the first quarter of 2011, compared to net income of $28.8 million reported in the first quarter of 2010. Time charter revenues were $69.4 million for the first quarter of 2011, compared to $62.2 million for the same period of 2010, mainly due to the addition to the Company’s fleet of the vessels m/v Melite, m/v New York and m/v Alcmene, delivered in January, March and November 2010, respectively.

Diana Shipping Inc. provides shipping transportation services worldwide. The company transports dry bulk cargoes that include commodities, such as iron ore, coal, grain, and other materials along worldwide shipping routes.

National Health Partners, Inc. (NHPR)

National Health Partners, Inc. is a national healthcare savings organization that provides discount healthcare membership programs to uninsured and underinsured people through a national healthcare savings network called “CARExpress.” CARExpress is one of the largest networks of hospitals, doctors, dentists, pharmacists and other healthcare providers in the country and is comprised of over 1,000,000 medical professionals that belong to such PPOs as CareMark and Aetna. The company’s primary target customer group is the 47 million Americans who have no health insurance of any kind.

According to the National Health Partners, Inc. more and more people are looking for vision services. By joining the CARExpress program, one would have access to 11,500 vision providers nationwide including: JCPenney, Target, LensCrafters, For Eyes, Sears and thousand of independents. He would be able to save an average of 10% - 50% on most frames, prescription lenses and non-prescription sunglasses. And for those of one are who like to shop by mail, they can use their mail order program and save an average of 5% - 50% on most contact lenses. Not only do they receive significant savings on eyewear, but Laser Vision Correction (LASIK) is also included in this program. Special discounts on eye examinations at participating locations where approved.

People buy vision insurance for a variety of reasons. Sometimes it is to pay for costly Optometrist visits, and to help cover the costs of eye glasses or contacts. Whatever the case maybe having the right vision plan can you save hundreds of dollars a year and more importantly help you take care of your eyes? Vision insurance generally pays all or a percentage of the charges related to your vision care (i.e. routine eye exams, preventative eye care).

For more information about National Health Partners, Inc. visit its website at

Buckeye Partners, L.P. (NYSE:BPL) reported net income attributable to Buckeye’s unitholders for the first quarter of 2011 of $66.5 million, or $0.79 per unit, compared to net income attributable to Buckeye’s unitholders for the first quarter of 2010 of $11.3 million, or $0.56 per unit. The diluted weighted average number of units outstanding in the first quarter of 2011 was 84.0 million compared to 20.0 million in the first quarter of 2010. The increase in the number of units reported for the first quarter of this year versus the first quarter of 2010 was significantly impacted by Buckeye’s merger with Buckeye GP Holdings L.P. in the fourth quarter of 2010, and the issuance of units in connection with the acquisition of Bahamas Oil Refining Company International (”BORCO”) in the first quarter of 2011.

Buckeye Partners, L.P. primarily operates refined petroleum products pipeline systems in the United States.

Calgon Carbon Corporation (NYSE:CCC) announced results for the first quarter ended March 31, 2011. The company reported net income of $8.5 million for the first quarter of 2011, as compared to net income of $9.5 million for the first quarter of 2010. Net income for the first quarter of 2010 was retrospectively adjusted to increase the gain on acquisitions to $2.7 million. As a result, earnings per diluted share for the first quarter of 2010 as previously reported increased by $0.01.

Calgon Carbon Corporation provides services, products, and solutions for purifying water, air, food, beverage, and industrial process streams in the United States and internationally.

Nvidia Chops Revenue Guidance For FY Q2; Stock Tumbles

Nvidia (NVDA) shares are trading lower after the company cut its revenue guidance for FY Q2 ending August 1.

For the quarter, the company now sees revenue of $800 million to $820 million, down from a previous projection of $950 million to $970 million.

“The revenue shortfall occurred primarily in the consumer GPU business, resulting from increased memory costs and economic weakness in Europe and China,” the company said in a statement. “The increased solution cost of discrete GPUs led to a greater-than-expected shift to lower-priced GPUs and PCs with integrated graphics.”

In late trading, NVDA is down 70 cents, or 6.9%, to $9.43.

The Complete List of Canadian Stocks Traded on the Nasdaq

Among the foreign stocks listed in the U.S. markets, Canada tops the list with the highest number of listings. Hence US investors have the option to invest directly in many Canadian companies individually as opposed to investing in a bunch of companies via the iShares Canada ETF (EWC).

The following is a list of Canadian companies listed on the NASDAQ market:

S.No. Name Ticker
1 AEterna Zentaris Inc. AEZS
2 Altair Nanotechnologies Inc. ALTI
3 Angiotech Pharmaceuticals Inc. ANPI
4 Ballard Power Systems Inc. BLDP
5 Canadian Solar Inc. CSIQ
6 Cardiome Pharma Corporation CRME
7 CE Franklin Ltd. CFK
8 Copernic Inc. CNIC
9 Corel Corporation CREL
10 Descartes Systems Group Inc DSGX
11 Dragonwave Inc DRWI
12 Envoy Capital Group Inc. ECGI
13 EXFO Electro-Optical Engineering EXFO
14 FirstService Corporation FSRV
15 Forbes Medi-Tech Inc. FMTI
16 GLG Life Tech Corp GLGL
17 GSI Group Inc. GSIG
18 Hydrogenics Corporation HYGS
19 Imax Corporation IMAX
20 Intellipharmaceutics International Inc. IPCI
21 Ivanhoe Energy Inc. IVAN
22 Jewett-Cameron Trading Company JCTCF
23 Labopharm Inc. DDSS
24 Leading Brands Inc LBIX
25 LML Payment Systems Inc. LMLP
26 MDC Partners Inc. MDCA
27 Methanex Corporation MEOH
28 Neptune Technologies & Bioresources Inc NEPT
29 NGAS Resources Inc. NGAS
30 Nicholas Financial Inc. NICK
31 NUCRYST Pharmaceuticals Corp. NCST
32 Nymox Pharmaceutical Corporation NYMX
33 Oncolytics Biotech Inc. ONCY
34 Open Text Corporation OTEX
35 Optimal Group Inc. OPMR
36 Pan American Silver Corp. PAAS
37 QLT Inc. QLTI
38 QSound Labs Inc. QSND
39 Research in Motion Limited RIMM
40 Sierra Wireless Inc. SWIR
41 Silver Standard Resources Inc SSRI
42 SunOpta Inc. STKL
43 SXC Health Solutions Corp. SXCI
44 Tesco Corporation TESO
45 TLC Vision Corporation TLCV
46 Transglobe Energy Corp TGA
47 Transition Therapeutics Inc. TTHI
48 Vitran Corporation, Inc. VTNC
49 Westport Innovations Inc WPRT
50 Workstream Inc. WSTM
51 World Heart Corporation WHRT
52 Zi Corporation ZICA

Many more top Canadian companies like Bank of Montreal (BMO), Encana (ECA), TD Bank (TD), and Canadian Pacific (CP) trade on the NYSE. The list of Canadian stocks traded on the NYSE can be found here.

Monday, September 17, 2012

Oracle: Earnings Preview

Oracle Corp. (ORCL) is set to release its first quarter 2012 results on Sept 20, 2011, after the closing bell. In the run up to the earnings results, we do not notice any substantial movement in analysts’ estimates for the quarter.

Looking Back at 4Q11

Oracle reported robust top-line growth in the fourth quarter of 2011 that helped the company earn 71 cents per share in the quarter, which beat the Zacks Consensus Estimate by two cents.

Total revenue in the fourth quarter increased 12.2% year over year to $10.81 billion, driven by better-than-expected new software license revenues (up 19.2% year over year), fully offsetting a decline in hardware sales (down 4.0% year over year). The decline in hardware sales were primarily attributed to Oracle’s policy of selling Sun products at a profit, thereby cutting down on volume.

Expectations in 1Q12

For the first quarter of 2012, Oracle expects non-GAAP earnings in the range of 45 cents to 48 cents per share. The first quarter 2012 earnings guidance is significantly higher than year-ago quarter's 39 cents, as well as the Zacks Consensus Estimate of 44 cents.

Total revenue growth on a non-GAAP basis is expected to be in the $8.27 billion to $8.50 billion range. The Zacks Consensus Estimate for the first quarter 2012 is projected at $8.34 billion.

New software license revenue growth is expected to grow in the 10.0% to 20.0% range. Hardware product revenue growth is expected to range between (5.0%) and 5.0% for the first quarter.

Estimates Trend Revision

For the quarter, none of the 15 analysts covering the stock revised their estimates in the last thirty days. However, for fiscal 2012, out of the 16 analysts covering the stock, 6 analysts lowered estimates, resulting in the Zacks Consensus Estimate dropping two cents to $2.31.

Analysts expect Oracle to report another strong quarter on the back of strengthening demand for both its hardware and software businesses.

Moreover, Oracle’s industry-specific application strategy, engineered systems (Exadata, Exalogic) strategy, combined with the upcoming release of Fusion, will likely help Oracle gain a larger market share than its rivals, namely International Business Machines Corp. (IBM), Hewlett-Packard Co. (HPQ), and SAP AG (SAP).

Our Take

Oracle Corp. has consistently exceeded estimates over the preceding four quarters. The average surprise in the preceding four quarters is a positive 9.28%, and another positive earnings surprise is expected from the company.

Oracle will continue to report strong results based on its innovative product pipeline, improving margins, high recurring revenues, growth in hardware sales and increasing adoption of cloud computing over the long term.

We believe Oracle will benefit from its positioning with Sun hardware and Oracle software. The fact that both the Sun hardware and Oracle software enjoy a relatively higher-margin domain is an added bonus, indicating sustained profitability improvement in the ensuing quarters.

In another case, Oracle and Google Inc. (GOOG) have agreed to attend a settlement discussion over the copyright- and patent-infringement lawsuit filed by Oracle last year.

As per the order of the U.S magistrate, both the companies will be represented by their respective Chief Operating Officers (CEO). The settlement meeting is scheduled on September 19, 2011 and will be mediated by the U.S. Magistrate Judge.

We believe an amicable settlement between the two giants will benefit both the companies going forward. We expect Oracle to settle for a licensing fee, while the settlement will ensure Google’s uninterrupted growth of the Android operating system over the long term.

Moreover, Oracle has provided a robust storage outlook based on the integration of its storage products with its entire software portfolio to deliver strong performance in a mixed storage environment. Oracle showcased a number of products targeting enterprise customers. The products include Exadata Storage, ZFS Storage Appliance, Pillar Axiom storage and StorageTek Tape.

We believe that the increasing adoption of cloud technologies is an essential facet of Oracle’s growth story over the long term. Oracle is aiming to provide the required infrastructure for companies to move toward cloud computing, where data is handled remotely in datacenters rather than on premises.

We maintain an Outperform rating (6-12 months) over the long term. Currently, Oracle has a Zacks #3 Rank, which implies a Hold rating on a short-term basis.

Google to Take on Cable TV Stocks: Short-Sellers Smell Blood

Google (Nasdaq: GOOG  ) could be making moves to break into the telecommunications triple-play: cable television, telephone, and high-speed Internet.

The $150 billion a year pay-television market has an understandable lure for Google. A venture into the television market offers a way to expand into pay video and telephone services and has the potential to turn advertising and distribution on its head.

"This would put Google in a position where it could not only sell subscriptions to the pay TV channels, but sell ads on those channels as well. It would also put its video-on-demand services in a sweet spot, perhaps moving many of its video capabilities over to the streaming-video Internet side, rather than the conventional cable TV business model," writes Charlie White of

The company has already announced plans to build a fiber-optic high-speed Internet service in Kansas City, Missouri and Kansas City, Kansas. Could this be the first step?

White adds, "Google might even be able to turn YouTube into a sort of 'virtual cable TV,' where customers could pick and choose the programs they want, and it might be available on a national, or even international scale."

Investing ideas
So, which cable TV stocks could be in trouble?

For ideas, we collected data on short floats, and identified a list of cable TV stocks being targeted by short-sellers. In other words, short-sellers think these companies are in trouble.

Do you agree with the bearish opinion on these stocks? Use this list as a starting point for your own analysis.

List sorted by short float. (Click here to access free, interactive tools to analyze these ideas.)

List compiled by Eben Esterhuizen, CFA:

1. Crown Media Holdings (Nasdaq: CRWN  ) : CRWN owns and operates pay television channels in the United States and Puerto Rico. The company primarily operates the Hallmark Channel and the Hallmark Movie Channel that provide entertainment programming for adults and families. The company's short float stands at 15.20%, which is equivalent to 37.45 days of average volume.

2. TiVo (Nasdaq: TIVO  ) : TiVo provides technology and services for television solutions, including digital video recorders (DVRs) and connected televisions in the United States and internationally. The company's short float stands at 11.70%, which is equivalent to 4.24 days of average volume.

3. Virgin Media (Nasdaq: VMED  ) : Virgin Media provides entertainment and communications services in the United Kingdom. The company's short float stands at 8.82%, which is equivalent to 4.97 days of average volume.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.

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Kapitall's Eben Esterhuizen and Rebecca Lipman do not own any of the shares mentioned above.

Income expert eyes Nuveen Floating Rate

Nuveen Floating Rate Income Fund (JFR), a closed-end fund, invests nearly 90% of its $700 million portfolio in adjustable-rate senior, secured loans to mostly private companies.

JFR holds some 220 positions. The bulk of these loans are sub-investment grade, with 31% rated BB and nearly 51% rated B, for an average credit rating of B+.

About a third of the portfolio value is leveraged to juice returns. The fund makes money by borrowing at low short-term rates and using the borrowed money to invest in higher-yielding, floating-rate loans.

These loans reset every 60 to 90 days and are pegged a couple of percentage points above a short-term benchmark.

The Fed's announcement in January that it was prepared to keep its short-term target interest rate at "exceptionally" low levels until late 2014 would be expected to adversely affect profit margins on the fund's floating rate investments.

However, the fund's borrowing costs for the 13 weeks ending January 31, 2012 averaged 0.06%. Meanwhile, the loan portfolio carries an average coupon rate of 4.0%, according to Morningstar data.
Distributions are made entirely from investment income and not supplemented by return of capital or capital gains. The current rate equates to $0.82 annually, for a forward yield of around 7%.

Management fees, interest and other expenses of 1.21% of the annualized net asset value take a thin slice off total returns. Distributions are taxable at your marginal income tax rate, so this fund is best held in a tax-sheltered account.

With a portfolio of sub-investment grade loans, the fund's returns can be volatile. In the credit crisis of 2008, when risk-averse investors lost interest in subprime corporate lenders, the portfolio value plunged. The fund lost 42.1%, versus a loss of 37.0% for the S&P 500.

But the rebound was sharper, as the fund gained 84.0% in 2009, more than threefold the benchmark index's 26.5%.

A strong rebound in the speculative debt market -- as the economy has improved and default rates declined -- has led to JFR's robust returns of better than 12% over the past three months.

Looking ahead, management is forecasting that the default rate for its loans over the next year will stay below the long-term average of 3.78%.

Currently trading at a discount of 2.1% to its net asset value, near its 52-week average discount of 2.5%, the fund is attractively priced for new money.

Action to Take --> JFR has continued to raise its distribution, and the recovering U.S. economy provides a favorable outlook for its speculative loan portfolio.

If you can withstand the volatility, Nuveen Floating Rate Income Fund offers a nice monthly 7% yield, even if no distribution increases were to take place this year.

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Top Stocks For 2012-2-9-8

The Western Union Company (NYSE:WU) a leader in global payments, and The Pantry, Inc., the leading independently-operated convenience store chain in the southeastern U.S., announced an agreement to offer the Western Union goCASH service, an in-lane money-transfer service from Western Union.

The Western Union Company is a leader in global payment services. Together with its Vigo, Orlandi Valuta, Pago Facil and Western Union Business Solutions branded payment services, Western Union provides consumers and businesses with fast, reliable and convenient ways to send and receive money around the world, to send payments and to purchase money orders.

Biomass is one of the most abundant and well-utilized sources of renewable energy in the world. Broadly speaking, it is organic material produced by the photosynthesis of light. The chemical materials (organic compounds of carbons) are stored and can then be used to generate energy. The most common biomass used for energy is wood from trees. Wood has been used by humans for producing energy for heating and cooking for a very long time.

Cleantech Transit Inc. (�Cleantech�) (OTC.BB:CLNO) was founded to capitalize on technology advances and manufacturing opportunities in the growing clean energy public transportation sector. Cleantech Transit Inc has expanded its focus to invest directly in specific green projects that could maximize shareholder value. Recognizing the many economic and operational advances of converting wood waste into renewable sources of energy, Cleantech Transit Inc. has selected to invest in Phoenix Energy ( This project could benefit the Company�s manufacturing clients worldwide.

With parallel operation, your business seamlessly integrates with the grid. Producing more power than you need? Spin your meter backwards and have the power company pay you! Need more power than you are generating, supplement by taking part of the power from your Phoenix Energy power plant, and part from the local utility.

Cleantech Transit, Inc. is pleased to announce it has met its funding requirement to secure the Company�s ability to earn in 25% of the 500KW Merced Project.

The Company is in the final stages of closing its initial interest in the Merced Project and is currently working on completing the necessary documentation and expects closing the transaction soon. As previously announced Cleantech has the option to earn up to 40% of the Merced Project and the Company plans to continue to work towards increasing its interest in the Merced Project as they move ahead.

To discover more about CLNO, Please visit:

UDR, Inc. (NYSE:UDR) a leading multifamily real estate investment trust, announced that it has entered into a definitive agreement to acquire Dwell95, a 507-home apartment community in New York City�s Financial District, for $325.0 million. It is anticipated that the purchase price will be funded through the issuance of approximately $50 million of operating partnership units (with a floor price of $25 per unit) and $275 million in cash, partially funded through the proceeds from the disposition of communities that no longer fit the long term growth profile of the Company.

UDR, Inc. an S&P 400 company, is a leading multifamily real estate investment trust with a demonstrated performance history of delivering superior and dependable returns by successfully managing, buying, selling, developing and redeveloping attractive real estate properties in targeted U.S. markets.

EnergySolutions, Inc. (NYSE:ES) a leading provider of specialized, technology-based nuclear services to government and commercial customers, announced financial results for the Company’s second quarter ended June 30, 2011. Revenue for the second quarter of 2011 totaled $403.7 million, compared with $398.3 million in the second quarter of 2010. Gross profit for the second quarter of 2011 was $32.7 million, compared with $44.9 million for the second quarter of 2010. Selling, general, & administrative expenses decreased to $27.9 million, from $31.2 million in the second quarter of 2010 as a result of ongoing cost reduction efforts.

EnergySolutions offers customers a full range of integrated services and solutions, including nuclear operations, characterization, decommissioning, decontamination, site closure, transportation, nuclear materials management, the safe, secure disposition of nuclear waste, and research and engineering services across the fuel cycle.

Top Stocks For 2011-12-14-4


HARTFORD, Conn.–(CRWENEWSWIRE)– The Phoenix Companies, Inc. (NYSE:PNX) today reported net income of $31.8 million, or $0.27 per diluted share, and operating income of $29.0 million, or $0.25 per diluted share, for the third quarter of 2011. These results compare with a net loss of $25.0 million, or $0.22 per share, and an operating loss of $7.1 million, or $0.06 per share, for the third quarter of 2010.

Excluding a $9.0 million tax benefit and a net $1.4 million deferred acquisition cost (DAC) unlocking charge, third quarter 2011 operating income was $21.4 million, or $0.18 per diluted share. Third quarter 2010 operating income was $17.9 million, or $0.15 per diluted share net of taxes and DAC unlocking charges. Given the significant volatility in the company�s GAAP tax provision, certain operating comparisons are given on a pre-tax basis.

�Our results this quarter demonstrate the strong fundamentals of our business, including mortality, persistency, investment performance and expense management. Mortality in particular was favorable this quarter and more than offset the negative effects of the equity markets and low interest rates,� said James D. Wehr, president and chief executive officer. �We continue to generate capital, adding to the strength of our balance sheet, and sustain risk-based capital above 300 percent,� he added.

�Importantly, our two principal growth initiatives � middle market annuities and Saybrus Partners � maintained their positive momentum. Annuity deposits are increasing meaningfully, and Saybrus Partners posted a profit for the first time since it was established almost two years ago,� Mr. Wehr said.


Earnings Summary

($ in millions)









Benefits & Reserves1268.2271.1264.4
Policyholder Dividends53.070.465.4
Policy Acquisition Cost Amortization56.951.799.9
Interest on Company Debt7.97.97.9
Operating Expenses57.358.964.0
Operating Income (Loss) Before Taxes20.015.1(18.4)
Income Tax Expense (Benefit)(9.0)18.0(11.3)
Operating Income (Loss)229.0(2.9)(7.1)
Realized Gains (Losses)7.58.0(18.0)
Discontinued Operations 3(4.7)(0.7)0.1
Net Income (Loss)$31.8$4.4$(25.0)
Earnings Per Share Summary
Net Gain (Loss) Per Share
Operating Income (Loss) Per Share
Weighted Average Shares Outstanding

(in millions)

1Prior period amounts have been revised to reflect the correction of an error related to the historical presentation of ceded premiums related to certain reinsurance contracts within the closed block. The adjustments reflect the reclassification of ceded premiums from benefits and reserves to revenue. The adjustment reduced revenues and benefits and reserves by $24.3 million for the three months ended September 30, 2010. There was no impact to net income (loss), stockholders� equity or earnings per share.

2Operating income, as well as components of and financial measures derived from operating income, are non-GAAP financial measures. Please see the �Income Statement Summary� table below for more information.

3Net of taxes.


To help investors understand the company�s results, unusual items included in operating income are detailed in the following table.

Unusual Items

($ in millions)



Second Quarter 2011Third



DAC Unlocking$1.4$ –$36.3
Total Tax Expense/(Benefit)(9.0)18.0(11.3)
Total Positive (Negative) Impact to Operating Income$7.6$(18.0)$(25.0)
Earnings Per Share Impact
Weighted Average Shares Outstanding

(in millions)


Third quarter 2011 pre-tax operating income of $20.0 million, compared with a pre-tax operating loss of $18.4 million for the third quarter of 2010, was driven by very favorable mortality experience, particularly in the universal life product line, solid investment performance and lower expenses that helped offset the effect of negative markets in the quarter.
Third quarter 2011 revenues decreased 4 percent from the third quarter of 2010, due to lower premiums and fee income, partially offset by higher net investment income. The change in premium revenue relates almost exclusively to closed block policies (sold before the 2001 demutualization) and is consistent with the expected gradual decline of this block.
Net investment income was $198.3 million for the third quarter of 2011, compared with $211.2 million for the second quarter of 2011 and $195.5 million for the third quarter of 2010. The decrease from the prior quarter was driven primarily by lower alternative asset returns. The increase from the prior year period was driven primarily by higher income from long term debt securities.
Total individual life surrenders were at an annualized rate of 7.0 percent for the third quarter, compared with 6.1 percent for the second quarter of 2011 and 8.2 percent for the third quarter of 2010. The change from the prior quarter was primarily the result of scheduled surrenders in a large corporate-owned life insurance case in Phoenix�s closed block. The closed block�s annualized surrender rate was 7.0 percent for the third quarter of 2011, compared with 5.6 percent for the second quarter of 2011 and 7.7 percent for the third quarter of 2010.
Annuity surrenders for the third quarter of 2011 were at an annualized rate of 11.3 percent, improved from 11.6 percent for the second quarter of 2011 and 11.8 percent for the third quarter of 2010.
Overall mortality experience for the third quarter of 2011 was favorable compared with expectations, with open block results very favorable, particularly in the universal life product line, and closed block unfavorable compared with expectations. Overall mortality experience has been favorable in four of the last five quarters.
Phoenix conducted a comprehensive annual review of DAC and certain reserves and made a number of unlocking adjustments. These adjustments resulted in a net charge of $1.4 million in the third quarter of 2011. Phoenix�s annual review in the third quarter of 2010 resulted in a net $36.3 million DAC unlocking charge.
Total operating expenses improved for the third quarter of 2011 to $57.3 million from $64.0 million for the third quarter of 2010. Core operating expenses before deferrals were $48.3 million for the third quarter of 2011 compared with $55.8 million for the third quarter of 2010. The improvement primarily reflects lower professional fees and other outside services, which more than offset $3 million in additional expenses associated with a previously announced policy administration system conversion. Core operating expenses before deferrals represent total operating expenses excluding premium taxes, reinsurance allowances, commissions, sales incentives and unusual expenses. The company will take actions with a target of reducing annual expenses by an additional $20 million by 2013.
The company recorded a $9.0 million tax benefit in third quarter 2011 operating income primarily related to the recognition of operating loss carryforwards that reversed estimated alternative minimum tax payments made earlier in the year.
Strong sales continued in Phoenix�s repositioned annuity product line, which is distributed through independent marketing organizations that focus on the middle market. Annuity deposits were $279.0 million for the third quarter of 2011, improved from $191.3 million for the second quarter of 2011 and $38.7 million for the third quarter of 2010. New sales were primarily fixed indexed annuities. The company is targeting $1 billion to $1.4 billion in annuity sales for 2012.
Net annuity flows remained positive for the fourth consecutive quarter at $158.6 million, compared with negative net flows of $71.9 million for the third quarter of 2010, contributing to an 8 percent year-over-year increase in annuity funds under management to $4.2 billion at September 30, 2011.
Life insurance annualized premium was $0.4 million for the third quarter of 2011, compared with $0.7 million for the second quarter of 2011 and $0.6 million for the third quarter of 2010. Gross life insurance in-force at September 30, 2011 was $127.4 billion, a 9 percent decrease from September 30, 2010.
Phoenix�s distribution company, Saybrus Partners, turned profitable in the third quarter of 2011 with $0.2 million of EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization, including inter-company revenues) compared with an EBITDA loss of $0.3 million for the second quarter of 2011 and an EBITDA loss of $4.7 million for the third quarter of 2010. Saybrus revenues more than tripled from a year ago to $5.4 million for the third quarter of 2011 through deeper penetration within its third-party distribution relationships and continued strong sales of Phoenix products.


Net unrealized gains on fixed income securities increased to $512.7 million at September 30, 2011 from net unrealized gains of $415.9 million at June 30, 2011. The improvement was due primarily to lower treasury rates.

Net realized gains for the third quarter of 2011 were $6.1 million, compared with net realized losses of $14.1 million for the third quarter of 2010. The change was due primarily to fluctuations in the non-performance risk factor. Other-than-temporary impairments were $8.4 million for the third quarter of 2011, compared with $11.9 million for the third quarter of 2010, reflecting the improved credit environment.


Realized Gains and Losses

($ in millions)










Other-than-temporary Impairments (OTTI)$(8.4)$(3.0)$(11.9)
Transaction Gains (Losses)
Results of Variable Annuity Hedge Program
– GMWB/GMAB Derivatives(9.4)(1.2)6.7
– Non-performance Risk Factor126.92.6(5.8)
Other Embedded Derivative Liabilities, Net(11.8)(0.2)(3.3)
Surplus Hedge8.8(0.9)(7.1)
Fair Value Option Securities(2.7)1.41.5
Total Realized Gains (Losses)$6.1$3.1$(14.1)
Credit-related impairments net of offsets for taxes, deferred acquisition costs and policyholder dividend obligation




Non-credit portion of impairment loss recognized in other comprehensive income (OCI)$(22.6)$(3.6)$(13.1)

1Fair value adjustment to reflect the risk that the GMWB/GMAB obligation will not be fulfilled based on the company�s own credit risk.


The company recognized a loss of $4.1 million in its discontinued group accident and health reinsurance business during the quarter as a result of an increase in reserves reported to it by certain ceding companies.


Phoenix retains its focus on maintaining appropriate levels of capital and liquidity. As of September 30, 2011, the proportion of the most highly liquid assets in its fixed income portfolio was 7.8 percent. In addition, a significant portion of the portfolio is invested in highly liquid public bonds that have market values in excess of their book values.

The quality of the portfolio improved significantly in the third quarter of 2011 primarily as a result of upgrades and repayments of lower-rated debt. The proportion of below investment grade bonds was 7.6 percent at September 30, 2011 compared with 8.5 percent at June 30, 2011.

Debt-to-total-capital at September 30, 2011 remains relatively low at 24.5 percent. Phoenix has no debt maturities until 2032.

As of September 30, 2011, cash and securities at the holding company were $66.7 million. The annual run rate for 2011 holding company interest and operating expenses is estimated to be $26 million.


Balance Sheet ($ in millions)September 30, 2011December 31, 2010Change
Total Assets$21,035.7$21,082.3$(46.6)
Total Liabilities$19,794.7$19,926.8$(132.1)
Total Stockholders� Equity$1,241.0$1,155.5$85.5
Total Stockholders� Equity excluding Accumulated OCI$1,321.2$1,289.3$31.9
Debt to Total Capital 124.5%24.9%(0.4)%

1 Based on Total Stockholders� Equity, excluding Accumulated OCI.


Statutory net gain from operations for Phoenix Life Insurance Company was $26.5 million for the third quarter of 2011, compared with $21.3 million for the third quarter of 2010. Statutory net income was $7.5 million for the third quarter of 2011, compared with $12.7 million for the third quarter of 2010.
Phoenix Life reported further growth in statutory capital, with statutory surplus and asset valuation reserve increasing by 13 percent to $864.0 million at September 30, 2011 from $763.2 million at December 31, 2010.
At September 30, 2011, Phoenix Life�s estimated risk-based capital ratio was 309 percent, rising from 282 percent at December 31, 2010. The primary driver of the improvement was higher surplus.


In September, Phoenix entered into a multiyear investment management agreement with Conning, Inc., a leading global provider of asset management solutions, services and research to the insurance industry, under which Conning will manage Phoenix�s publicly traded fixed income assets. The companies also reached a definitive agreement for Conning Holdings Corp. to acquire Goodwin Capital Advisers, Inc., a total return fixed income investment manager that is a wholly-owned subsidiary of Phoenix. The Goodwin acquisition is expected to close in the fourth quarter, subject to customary closing conditions, after which the investment management agreement will become effective.


The Phoenix Companies, Inc. will host a conference call today (November 2) at 11 a.m., EDT, to discuss with the investment community Phoenix�s third quarter 2011 financial results and other matters. The conference call will be broadcast live over the Internet at in the Investor Relations section. The call also can be accessed by telephone at 773-799-3641 (Passcode: PHOENIX). A replay of the call will be available through November 16, 2011 by telephone at 203-369-1008 and on Phoenix�s Web site.


Dating to 1851, The Phoenix Companies, Inc. provides financial solutions using life insurance and annuities. Phoenix is headquartered in Hartford, Connecticut. In 2010, Phoenix had annual revenues of $2.0 billion. More detailed financial information can be found in Phoenix�s financial supplement for the third quarter of 2011, which is available on Phoenix�s Web site,, in the Investor Relations section.


This press release 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 forward-looking statements include statements relating to trends in, or representing management’s beliefs about our future transactions, strategies, operations and financial results, and often contain words such as “will,” “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” �is targeting,� “may,” “should” and other similar words or 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. Our actual business, financial condition or results of operations may differ materially from those suggested by forward-looking statements as a result of risks and uncertainties which include, among others: (i) unfavorable general economic developments including, but not limited to, specific related factors such as the performance of the debt and equity markets and changes in interest rates; (ii) the potential adverse affect of interest rate fluctuations on our business and results of operations; (iii) the effect of adverse capital and credit market conditions on our ability to meet our liquidity needs, our access to capital and our cost of capital; (iv) the effect of guaranteed benefits within our products; (v) potential exposure to unidentified or unanticipated risk that could adversely affect our businesses or result in losses; (vi) the consequences related to variations in the amount of our statutory capital due to factors beyond our control; (vii) the possibility that we not be successful in our efforts to implement a new business plan; (viii) the impact on our results of operations and financial condition of any required increase in our reserves for future policyholder benefits and claims if such reserves prove to be inadequate; (ix) changes in our investment valuations based on changes in our valuation methodologies, estimations and assumptions; (x) further downgrades in our debt or financial strength ratings; (xi) the possibility that mortality rates, persistency rates, funding levels or other factors may differ significantly from our assumptions used in pricing products; (xii) the availability, pricing and terms of reinsurance coverage generally and the inability or unwillingness of our reinsurers to meet their obligations to us specifically; (xiii) our ability to attract and retain key personnel in a competitive environment; (xiv) our dependence on third parties to maintain critical business and administrative functions; (xv) the strong competition we face in our business from banks, insurance companies and other financial services firms; (xvi) our reliance, as a holding company, on dividends and other payments from our subsidiaries to meet our financial obligations and pay future dividends, particularly since our insurance subsidiaries’ ability to pay dividends is subject to regulatory restrictions; (xvii) the potential need to fund deficiencies in our closed block; (xviii) tax developments that may affect us directly, or indirectly through the cost of, the demand for or profitability of our products or services; (xix) the possibility that the actions and initiatives of the U.S. Government, including those that we elect to participate in, may not improve adverse economic and market conditions generally or our business, financial condition and results of operations specifically; (xx) legislative or regulatory developments; (xxi) regulatory or legal actions; (xxii) potential future material losses from our discontinued reinsurance business; (xxiii) changes in accounting standards; (xxiv) the potential effect of a material weakness in our internal control over financial reporting on the accuracy of our reported financial results; and (xxv) other risks and uncertainties described herein or in any of our filings with the SEC. Certain other factors which may impact our business, financial condition or results of operations or which may cause actual results to differ from such forward-looking statements are discussed or included in our periodic reports filed with the SEC and are available on our website at under “Investor Relations.” You are urged to carefully consider all such factors. We do not undertake or plan to update or revise forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections, or other circumstances occurring after the date of this press release, even if such results changes or circumstances make it clear that any forward-looking information will not be realized. If we make any future public statements or disclosures which modify or impact any of the forward-looking statements contained in or accompanying this press release, such statements or disclosures will be deemed to modify or supersede such statements in this press release.

Source: Phoenix Companies, Inc.


The Phoenix Companies, Inc.
Media Relations
Alice S. Ericson, 860-403-5946
Investor Relations
Naomi Baline Kleinman, 860-403-7100


Financial Highlights

Three and Nine Months Ended September 30, 2011 and 2010 (Unaudited)


Income Statement Summary (1)Three MonthsNine Months
($ in millions)2011201020112010
Revenues (2)$472.1$467.9$1,399.3$1,498.7
Operating Income (Loss) (1)29.0(7.1)40.8(17.4)
Net Income (Loss)$31.8$(25.0)$30.1$(1.0)
Earnings Per Share
Weighted Average Shares Outstanding (in millions)
Operating Income (Loss) Per Share (1)
Net Income (Loss) Per Share
Balance Sheet SummarySeptemberDecember
($ in millions, except per share data)20112010
Invested Assets (3)$15,095.0$14,288.7
Separate Account Assets3,666.94,416.8
Total Assets21,035.721,082.3
Total Stockholders� Equity$1,241.0$1,155.5
Common Shares Outstanding (in millions)116.3116.1
Book Value Per Share$10.67$9.95
Book Value Per Share, excluding Accumulated OCI11.3611.10

(1) In addition to financial measures presented in accordance with Generally Accepted Accounting Principles (GAAP), we use non-GAAP financial measures such as operating income, as well as components of and financial measures derived from operating income, in evaluating our financial performance. Net income and net income per share are the most directly comparable GAAP measures. Our non-GAAP financial measures should not be considered as substitutes for net income and net income per share. Therefore, investors should evaluate both GAAP and non-GAAP financial measures when reviewing our performance. A reconciliation of net income to our non-GAAP financial measures is set forth in the financial highlights table earlier in this release. Investors should note that our calculation of these measures may differ from similar measures used by other companies. For additional information, please see our financial supplement in the Investor Relations section at

Operating income, and components of and measures derived from operating income, are internal performance measures we use in the management of our operations, including our compensation plans and planning processes. In addition, management believes that these measures provide investors with additional insight into the underlying trends in our operations.

Operating income represents income from continuing operations, which is a GAAP measure, before realized investment gains and losses, and certain unusual items.

  • Net realized investment gains and losses are excluded from operating income because their size and timing are frequently subject to management�s discretion.
  • Unusual items may be excluded from operating income because we believe they are not indicative of overall operating trends and are items that management believes are non-recurring and material, and which result from a business restructuring, a change in regulatory environment, or other unusual circumstances. For the third quarters of 2011 and 2010, unusual items excluded from operating income at the beginning of this release were:
($ in millions)Third Quarter

Third Quarter

Operating Income (Loss)$29.0$(7.1)
Unusual Items:
Net DAC/Reserve Unlocking Charges1.436.3
Total Tax Benefit(9.0)(11.3)
Subtotal Unusual Items(7.6)25.0
Operating Income, Excluding Unusual Items$21.4$17.9

(2) Prior period amounts have been revised to reflect the correction of an error related to the historical presentation of ceded premiums as described in Footnote 1 of the Consolidated Statement of Income. There was no impact to net income(loss), stockholders� equity or earnings per share.

(3) Invested assets equal total investments plus cash and equivalents.

Consolidated Balance Sheet

September 30, 2011 (Unaudited and Preliminary) and December 31, 2010

($ in millions)

September 30,December 31,
Available-for-sale debt securities, at fair value (amortized cost of $11,163.6 and $10,627.7)$11,676.3$10,893.8
Available-for-sale equity securities, at fair value (cost of $33.4 and $28.7)47.847.5
Venture capital partnerships, at equity in net assets231.8220.0
Policy loans, at unpaid principal balances2,352.42,386.5
Other investments549.7516.9
Fair value option investments88.2102.1
Total investments14,946.214,166.8
Cash and cash equivalents148.8121.9
Accrued investment income203.8169.5
Deferred policy acquisition costs1,330.31,444.3
Deferred income taxes121.0116.4
Other assets150.6180.5
Discontinued operations assets54.960.4
Separate account assets3,666.94,416.8
Total assets$21,035.7$21,082.3
Policy liabilities and accruals$12,978.8$12,992.5
Policyholder deposit funds2,156.51,494.1
Other liabilities517.7546.3
Discontinued operations liabilities47.149.4
Separate account liabilities3,666.94,416.8
Total liabilities19,794.719,926.8
Common stock, $0.01 par value: 116.3 million and 116.1 million shares outstanding1.31.3
Additional paid-in capital2,632.82,631.0
Accumulated deficit(1,133.4)(1,163.5)
Accumulated other comprehensive loss(80.2)(133.8)
Treasury stock, at cost: 11.3 million and 11.3 million shares(179.5)(179.5)
Total stockholders� equity1,241.01,155.5
Total liabilities and stockholders� equity$21,035.7$21,082.3

Consolidated Statement of Income (Unaudited and Preliminary)

Three and Nine Months Ended September 30, 2011 and 2010

($ in millions)

Three MonthsNine Months
Premiums (1)$117.4$129.8$337.7$387.5
Fee income147.6157.9456.0476.1
Net investment income201.0194.3612.6615.7
Net realized investment gains (losses):
Total OTTI losses(31.0)(25.0)(45.0)(80.2)
Portion of OTTI losses recognized in other comprehensive income22.613.127.941.4
Net OTTI losses recognized in earnings(8.4)(11.9)(17.1)(38.8)
Net realized investment gains (losses), excluding OTTI losses14.5(2.2)10.158.2
Net realized investment gains (losses)6.1(14.1)(7.0)19.4
Total revenues472.1467.91,399.31,498.7
Policy benefits, excluding policyholder dividends (1)268.2264.4800.0820.7
Policyholder dividends51.564.7188.7224.9
Policy acquisition cost amortization57.599.7172.0233.8
Interest expense on indebtedness7.97.923.823.9
Other operating expenses57.264.0175.4219.1
Total benefits and expenses442.3500.71,359.91,522.4
Income (loss) from continuing operations before income taxes29.8(32.8)39.4(23.7)
Income tax expense (benefit)(6.7)(7.7)2.4(7.8)
Income (loss) from continuing operations36.5(25.1)37.0(15.9)
Income (loss) from discontinued operations, net of income taxes(4.7)0.1(6.9)14.9
Net income (loss)$31.8$(25.0)$30.1$(1.0)

(1) Prior period amounts have been revised to reflect the correction of an error related to the historical presentation of ceded premiums related to certain reinsurance contracts within the closed block. The adjustments reflect the reclassification of ceded premiums from policy benefits to premiums. The adjustment reduced premiums and policy benefits, excluding policyholder dividends, by $24.3 million and $73.8 million for the three and nine months ended September 30, 2010. There was no impact to net income(loss), stockholders� equity, or earnings per share.