UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):April 23, 2009
DELPHI FINANCIAL GROUP, INC.
| Delaware | 001-11462 | 13-3427277 | ||
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
| 1105 North Market Street, Suite 1230, P.O. Box 8985, Wilmington, DE | 19899 | |
| (Address of principal executive offices) | (ZIP Code) | |
Registrant’s telephone number, including area code 302-478-5142
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition
The information contained in this Current Report on Form 8-K is being filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
DELPHI FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; in thousands, except per share data)
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; in thousands, except per share data)
| Three Months Ended | ||||||||
| 03/31/2009 | 03/31/2008 | |||||||
| Revenue: | ||||||||
| Premium and fee income | $ | 357,721 | $ | 342,290 | ||||
| Net investment income | 62,855 | 32,337 | ||||||
| Net realized investment losses | (21,999 | ) | (6,436 | ) | ||||
| 398,577 | 368,191 | |||||||
| Benefits and expenses: | ||||||||
| Benefits, claims and interest credited to policyholders | 255,598 | 242,912 | ||||||
| Commissions and expenses | 106,134 | 89,893 | ||||||
| 361,732 | 332,805 | |||||||
| Operating income | 36,845 | 35,386 | ||||||
| Interest expense: | ||||||||
| Corporate debt | 3,985 | 4,224 | ||||||
| Junior subordinated debentures | 3,240 | 3,240 | ||||||
| Junior subordinated deferrable interest debentures underlying company-obligated mandatorily redeemable capital securities issued by unconsolidated subsidiaries | — | 404 | ||||||
| Income tax expense | 5,136 | 6,374 | ||||||
| Net income | $ | 24,484 | $ | 21,144 | ||||
| Basic results per share of common stock: | ||||||||
| Net income | $ | 0.51 | $ | 0.43 | ||||
| Weighted average shares outstanding | 48,034 | 49,055 | ||||||
| Diluted results per share of common stock: | ||||||||
| Net income | $ | 0.51 | $ | 0.42 | ||||
| Weighted average shares outstanding | 48,123 | 50,153 | ||||||
| Dividends paid per share of common stock | $ | 0.10 | $ | 0.09 | ||||
DELPHI FINANCIAL GROUP, INC.
SUMMARIZED CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands)
SUMMARIZED CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands)
| 03/31/2009 | 12/31/2008 | |||||||
| Assets: | ||||||||
| Investments: | ||||||||
| Fixed maturity securities, available for sale | $ | 3,633,294 | $ | 3,773,382 | ||||
| Short-term investments | 609,588 | 401,620 | ||||||
| Other investments | 542,029 | 479,921 | ||||||
| 4,784,911 | 4,654,923 | |||||||
| Cash | 84,289 | 63,837 | ||||||
| Cost of business acquired | 286,281 | 264,777 | ||||||
| Reinsurance receivables | 379,822 | 376,731 | ||||||
| Goodwill | 93,929 | 93,929 | ||||||
| Other assets | 433,265 | 409,103 | ||||||
| Assets held in separate account | 90,363 | 90,573 | ||||||
| Total assets | $ | 6,152,860 | $ | 5,953,873 | ||||
| Liabilities and Equity: | ||||||||
| Policy liabilities and accruals | $ | 2,640,367 | $ | 2,574,050 | ||||
| Policyholder account balances | 1,347,382 | 1,356,932 | ||||||
| Corporate debt | 365,750 | 350,750 | ||||||
| Junior subordinated debentures | 175,000 | 175,000 | ||||||
| Other liabilities and policyholder funds | 670,651 | 581,954 | ||||||
| Liabilities related to separate account | 90,363 | 90,573 | ||||||
| Total liabilities | 5,289,513 | 5,129,259 | ||||||
| Equity: | ||||||||
| Class A Common Stock | 490 | 489 | ||||||
| Class B Common Stock | 60 | 60 | ||||||
| Additional paid-in capital | 526,177 | 522,596 | ||||||
| Accumulated other comprehensive loss | (335,643 | ) | (351,710 | ) | ||||
| Retained earnings | 865,572 | 846,390 | ||||||
| Treasury stock, at cost | (197,246 | ) | (197,246 | ) | ||||
| Total shareholders’ equity | 859,410 | 820,579 | ||||||
| Noncontrolling interest | 3,937 | 4,035 | ||||||
| Total equity | 863,347 | 824,614 | ||||||
| Total liabilities and equity | $ | 6,152,860 | $ | 5,953,873 | ||||
DELPHI FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
| Three Months Ended | ||||||||
| 03/31/2009 | 03/31/2008 | |||||||
| Operating activities: | ||||||||
| Net income | $ | 24,484 | $ | 21,144 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Change in policy liabilities and policyholder accounts | 99,523 | 92,314 | ||||||
| Net change in reinsurance receivables and payables | (7,086 | ) | 10,184 | |||||
| Amortization, principally the cost of business acquired and investments | 13,543 | 15,238 | ||||||
| Deferred costs of business acquired | (34,392 | ) | (33,115 | ) | ||||
| Net realized losses on investments | 21,999 | 6,437 | ||||||
| Net change in federal income tax liability | 4,114 | (16,573 | ) | |||||
| Other | (30,969 | ) | 1,899 | |||||
| Net cash provided by operating activities | 91,216 | 97,528 | ||||||
| Investing activities: | ||||||||
| Purchases of investments and loans made | (207,901 | ) | (298,167 | ) | ||||
| Sales of investments and receipts from repayment of loans | 77,696 | 254,129 | ||||||
| Maturities of investments | 261,307 | 54,442 | ||||||
| Net change in short-term investments | (207,968 | ) | (150,914 | ) | ||||
| Change in deposit in separate account | 4,845 | 790 | ||||||
| Net cash used by investing activities | (72,021 | ) | (139,720 | ) | ||||
| Financing activities: | ||||||||
| Deposits to policyholder accounts | 61,681 | 53,843 | ||||||
| Withdrawals from policyholder accounts | (70,938 | ) | (27,698 | ) | ||||
| Borrowings under revolving credit facility | 17,000 | 29,000 | ||||||
| Principal payments under revolving credit facility | (2,000 | ) | (3,000 | ) | ||||
| Acquisition of treasury stock | — | (17,040 | ) | |||||
| Other financing activities | (4,486 | ) | (2,724 | ) | ||||
| Net cash provided by financing activities | 1,257 | 32,381 | ||||||
| Increase (decrease) in cash | 20,452 | (9,811 | ) | |||||
| Cash at beginning of period | 63,837 | 51,240 | ||||||
| Cash at end of period | $ | 84,289 | $ | 41,429 | ||||
Delphi Financial Group, Inc. (the “Company”) had net income in the first quarter of 2009 of $24.5 million or $0.51 per share, compared to $21.1 million or $0.42 per share in the first quarter of 2008. Net income in the first quarter of 2009 included after-tax realized investment losses of $(14.3) million or $(0.30) per share, including other-than-temporary impairments of $(11.4) million or ($0.24) per share. Net income in the first quarter of 2008 included after-tax realized investment losses of $(4.2) million or $(0.09) per share, including other-than-temporary impairments of $(4.0) million or $(0.08) per share.
Premiums from the Company’s core group employee benefit products in the first quarter of 2009 increased 4% from the first quarter of 2008, reaching $338.0 million. Excess workers’ compensation premiums increased 2%, and premiums from the Company’s other core group employee benefit products increased 5%, as
compared with the first quarter of 2008. The combined ratio (loss ratio plus expense ratio) for the Company’s group employee benefits products in the first quarter of 2009 was 93.2% compared to 91.3% in the first quarter of 2008, reflecting stable loss ratios and higher expense ratios for the first quarter of 2009 resulting in part from increased spending on new product development at SNCC.
Deposits from the Company’s asset accumulation products, consisting of annuity sales, totaled $59.7 million in the first quarter of 2009, an increase of 14% from the first quarter of 2008. Funds under management for the Company’s asset accumulation products were $1.3 billion at March 31, 2009, which was unchanged from December 31, 2008, as growth in annuity deposits was offset by the scheduled repayment of $35.0 million of institutional funding agreements at maturity.
The Company’s net investment income increased 95% to $62.9 million in the first quarter of 2009 from $32.3 million in the first quarter of 2008. This increase reflects an increase in the tax equivalent weighted average annualized yield on invested assets to 5.8% in the first quarter of 2009 from 2.9% in the first quarter of 2008.
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 hereunto duly authorized.
| DELPHI FINANCIAL GROUP, INC. | ||||
| /s/ ROBERT ROSENKRANZ | ||||
| Robert Rosenkranz | ||||
| Chairman of the Board and Chief Executive Officer (Principal Executive Officer) | ||||
Date: April 24, 2009