Delphi Financial 8-K Delphi Financial Reports Third Quarter Results

UNITED STATES
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

Date of Report (Date of earliest event reported): October 27, 2009

DELPHI FINANCIAL GROUP, INC.

(Exact name of registrant as specified in its charter)

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

On October 27, 2009, the Registrant issued a press release, a copy of which is attached as Exhibit 99.1 to this Current Report on Form 8-K and incorporated by reference herein.

Note: The information in this report (including the exhibit) is furnished pursuant to “Item 2.02. Results of Operations and Financial Condition” and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, unless incorporated by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits

(a)	Not applicable.
(b)	Not applicable.
(c)	Not applicable.
(d)	Exhibits.

Exhibit Number	Description of Exhibits
99.1	Registrant’s October 27, 2009 press release.

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: October 27, 2009

DELPHI FINANCIAL GROUP, INC.
Non-GAAP Financial Measures
Reconciliation to GAAP
(Unaudited; in thousands, except per share data)

	Three Months Ended						Nine Months Ended
	9/30/2009			9/30/2008			9/30/2009			9/30/2008
Income Statement Data
Operating earnings (Non-GAAP measure)	$	53,621		$	12,510		$	147,268		$	77,387
Net realized investment losses, net of taxes		(32,798	)		(21,931	)		(64,954	)		(38,789	)
Loss on redemption of junior subordinated deferrable interest debentures underlying company-obligated mandatorily redeemable capital securities issued by unconsolidated subsidiaries, net of taxes		—			(389	)		—			(389	)
Net income (loss) (GAAP measure)	$	20,823		$	(9,810	)	$	82,314		$	38,209
Diluted results per share of common stock:
Operating earnings (Non-GAAP measure)	$	1.00		$	0.26		$	2.91		$	1.57
Net realized investment losses, net of taxes		(0.61	)		(0.45	)		(1.28	)		(0.78	)
Loss on redemption of junior subordinated deferrable interest debentures underlying company-obligated mandatorily redeemable capital securities issued by unconsolidated subsidiaries, net of taxes		—			(0.01	)		—			(0.01	)
Net income (loss) (GAAP measure)	$	0.39		$	(0.20	)	$	1.63		$	0.78
Annualized operating return on beginning shareholders’ equity		20.4	%		4.8	%		23.9	%		9.0	%
Annualized net income return on beginning shareholders’ equity (GAAP measure)		7.9	%		-3.8	%		13.4	%		4.5	%

	9/30/2009			12/31/2008
Balance Sheet Data
Shareholders’ equity, excluding accumulated other comprehensive loss	$	1,379,365		$	1,172,289
Add: Accumulated other comprehensive loss		(46,303	)		(351,710	)
Shareholders’ equity (GAAP measure)	$	1,333,062		$	820,579
Diluted book value per share of common stock, excluding accumulated other comprehensive loss (Non-GAAP measure)	$	24.80		$	24.27
Add: Accumulated other comprehensive loss		(0.81	)		(7.22	)
Diluted book value per share of common stock (GAAP measure)	$	23.99		$	17.05

Please see footnotes 1 and 2 of the press release to which this table is attached for important information regarding these non-GAAP financial measures.

DELPHI FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; in thousands, except per share data)

	Three Months Ended						Nine Months Ended
	9/30/2009			9/30/2008			9/30/2009			9/30/2008
Revenue:
Premium and fee income	$	342,610		$	345,028		$	1,052,776		$	1,028,092
Net investment income		88,682			19,407			243,560			112,494
Net realized investment losses:
Total other than temporary impairment losses		(73,771	)		(28,173	)		(137,007	)		(52,479	)
Less: Portion of other than temporary impairment losses recognized in other comprehensive income		21,748			—			42,467			—
Net impairment losses recognized in earnings		(52,023	)		(28,173	)		(94,540	)		(52,479	)
Other net realized investment gains (losses)		1,564			(5,567	)		(5,389	)		(7,196	)
		(50,459	)		(33,740	)		(99,929	)		(59,675	)
Loss on redemption of junior subordinated deferrable interest debentures underlying company-obligated mandatorily redeemable capital securities issued by unconsolidated subsidiaries		—			(598	)		—			(598	)
		380,833			330,097			1,196,407			1,080,313
Benefits and expenses:
Benefits, claims and interest credited to policyholders		240,956			244,042			748,361			730,709
Commissions and expenses		109,680			99,824			325,076			284,400
		350,636			343,866			1,073,437			1,015,109
Operating income (loss)		30,197			(13,769	)		122,970			65,204
Interest expense:
Corporate debt		3,806			4,427			11,667			12,940
Junior subordinated debentures		3,247			3,240			9,728			9,726
Junior subordinated deferrable interest debentures underlying company-obligated mandatorily redeemable capital securities issued by unconsolidated subsidiaries		—			177			—			934
Income tax expense (benefit)		2,321			(11,803	)		19,261			3,395
				��
Net income (loss)	$	20,823		$	(9,810	)	$	82,314		$	38,209
Basic results per share of common stock:
Net income (loss)	$	0.39		$	(0.20	)	$	1.63		$	0.79
Weighted average shares outstanding		52,947			47,936			50,376			48,379
Diluted results per share of common stock:
Net income (loss)	$	0.39		$	(0.20	)	$	1.63		$	0.78
Weighted average shares outstanding		53,385			47,936			50,617			49,259
Dividends paid per share of common stock	$	0.10		$	0.10		$	0.30		$	0.29

DELPHI FINANCIAL GROUP, INC.
SUMMARIZED CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands)

	9/30/2009			12/31/2008
Assets:
Investments:
Fixed maturity securities, available for sale	$	4,608,184		$	3,773,382
Short-term investments		572,802			401,620
Other investments		542,047			479,921
		5,723,033			4,654,923
Cash		82,269			63,837
Cost of business acquired		244,930			264,777
Reinsurance receivables		378,277			376,731
Goodwill		93,929			93,929
Other assets		320,428			409,103
Assets held in separate account		109,016			90,573
Total assets	$	6,951,882		$	5,953,873
Liabilities and Shareholders’ Equity:
Policy liabilities and accruals	$	2,771,885		$	2,574,050
Policyholder account balances		1,452,332			1,356,932
Corporate debt		365,750			350,750
Junior subordinated debentures		175,000			175,000
Other liabilities and policyholder funds		740,539			581,954
Liabilities related to separate account		109,016			90,573
Total liabilities		5,614,522			5,129,259
Shareholders’ equity:
Class A Common Stock		559			489
Class B Common Stock		60			60
Additional paid-in capital		659,683			522,596
Accumulated other comprehensive loss		(46,303	)		(351,710	)
Retained earnings		916,309			846,390
Treasury stock, at cost		(197,246	)		(197,246	)
Total shareholders’ equity		1,333,062			820,579
Noncontrolling interest		4,298			4,035
Total equity		1,337,360			824,614
Total liabilities and equity	$	6,951,882		$	5,953,873

DELPHI FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)

	Nine Months Ended
	9/30/2009			9/30/2008
Operating activities:
Net income	$	82,314		$	38,209
Adjustments to reconcile net income to net cash provided by operating activities:
Change in policy liabilities and policyholder accounts		225,538			194,967
Net change in reinsurance receivables and payables		(4,613	)		18,901
Amortization, principally the cost of business acquired and investments		38,295			46,601
Deferred costs of business acquired		(97,936	)		(94,043	)
Net realized losses on investments		99,929			59,675
Net change in federal income tax liability		6,632			(53,654	)
Other		(14,101	)		56,828
Net cash provided by operating activities		336,058			267,484
Investing activities:
Purchases of investments and loans made		(1,206,214	)		(1,012,307	)
Sales of investments and receipts from repayment of loans		177,957			348,569
Maturities of investments		637,166			311,840
Net change in short-term investments		(171,162	)		(158,961	)
Change in deposit in separate account		4,845			10,547
Net cash used by investing activities		(557,408	)		(500,312	)
Financing activities:
Deposits to policyholder accounts		242,614			335,082
Withdrawals from policyholder accounts		(131,337	)		(83,382	)
Borrowings under revolving credit facility		17,000			79,000
Principal payments under revolving credit facility		(2,000	)		(6,000	)
Redemption of junior subordinated deferrable interest debentures underlying company-obligated mandatorily redeemable capital securities issued by unconsolidated subsidiaries		—			(20,619	)
Proceeds from issuance of common stock		121,121			—
Acquisition of treasury stock		—			(42,729	)
Cash dividends paid on Common Stock		(14,767	)		(13,715	)
Other financing activities		7,151			3,200
Net cash provided by financing activities		239,782			250,837
Increase in cash		18,432			18,009
Cash at beginning of period		63,837			51,240
Cash at end of period	$	82,269		$	69,249