Sinking Like a Phoenix? It Reports Accounting Error

Financial planning firm finds a tax-related mistake that led it to overstate its Q4 loss. It also is told that State Farm intends to suspend sellin...
Stephen TaubMarch 4, 2009

Phoenix Cos. Inc., a financial planning firm, reported some problems with its own financial planning: an accounting error that is forcing it to revise the fourth-quarter and full-year results released last week.

In its original report, Phoenix reported a net loss of $424.3 million for the quarter. Now, it says the loss was overstated by $46 million, or more than 10 percent, because of an error in accounting for income taxes. The revision also will narrow its net loss for the year, from $772 million to $726 million.

This was not Phoenix’s only problem. In a separate development noted in its press release, State Farm Mutual Automobile Insurance Co. informed Phoenix that it intends to suspend the sale of Phoenix products pending a reevaluation of the relationship between the companies.

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Phoenix did not provide further details, and a spokeswoman said that she could not provide any other information beyond its filing.

As a result of its problems, Phoenix said that it needs additional time to file its annual report. It said, however, that it is confident that it will file the annual report within the 15- day grace period provided under Rule 12b-25 of the Securities Exchange Act of 1934.

Phoenix also warned that it expects the annual report to say that it has a material weakness in its internal control over financial reporting, designed to ensure proper accounting for income taxes that is related to the error in accounting for income taxes.