EXHIBIT 99.1
1105 North Market Street
Suite 1230
Wilmington, Delaware 19801
www.delphifin.com
[DELPHI FINANCIAL GROUP LOGO]
Press Release
Contact: Bernard J. Kilkelly FOR IMMEDIATE RELEASE
Vice President, Investor Relations 2/11/04
Phone: 212-303-4349
E-mail: bernie-kilkelly@dlfi.com
DELPHI FINANCIAL ANNOUNCES FOURTH QUARTER 2003 OPERATING EPS UP
14% TO $0.73 AND NET INCOME PER SHARE OF $0.83
Wilmington, Delaware - February 11, 2004 -- Delphi Financial Group, Inc. (NYSE:
DFG) today announced that net income in the fourth quarter of 2003 was $26.8
million, or $0.83 per share, compared with net income in the fourth quarter of
2002 of $8.8 million, or $0.27 per share. Net income in the 2003 fourth quarter
included after-tax net realized investment gains of $3.2 million, or $0.10 per
share, compared with after-tax realized investment losses of $11.7 million, or
$0.37 per share, in the 2002 fourth quarter. For the full year 2003, net income
was $98.9 million, or $3.09 per share, compared with net income in full-year
2002 of $60.7 million, or $1.90 per share. Net income in full-year 2003 included
after-tax net realized investment gains of $8.3 million, or $0.26 per share,
compared with after-tax realized investment losses and loss on extinguishment of
debt of $18.7 million, or $0.59 per share, in full-year 2002. All per share
amounts have been adjusted to reflect the 3-for-2 common stock split effected on
December 22, 2003.
Operating earnings (1) in the fourth quarter of 2003 rose 16% to $23.7 million
from $20.4 million in the fourth quarter of 2002, while operating earnings per
share increased 14% to $0.73 per share from $0.64 per share. Operating earnings
for full-year 2003 were $90.6 million, or $2.83 per share, an increase of 14%
from $79.4 million, or $2.49 per share, for full-year 2002.
Core group employee benefit premiums in fourth-quarter 2003 rose 18% from the
prior year's quarter, reaching $178.5 million. This growth was driven by a 42%
increase in premiums from excess workers' compensation insurance for
self-insured employers, the leading product of Delphi's Safety National
subsidiary. Production of core group employee benefit products in fourth-quarter
2003 increased 31%, driven by a 67% increase in excess workers' compensation
production and a 46% increase in group disability production.
Robert Rosenkranz, Chairman and Chief Executive Officer, commented, "We were
pleased with our strong growth in the fourth quarter and the full year 2003, as
we capitalized on favorable trends in our insurance businesses that we expect
will continue in 2004 and beyond. Safety National's excess workers' compensation
business continues to benefit from ongoing price increases for primary workers'
compensation insurance, which drives more and more companies to self-insure. In
our important year-end renewal season, we have experienced greater demand for
Safety's excess coverage and have achieved average rate increases
EXHIBIT 99.1
DELPHI REPORTS FOURTH QUARTER 2003 OPERATING EPS OF $0.73 PAGE 2
of 11% along with further improvements in contract terms. At Reliance Standard,
we achieved a 26% increase in core production in the fourth quarter, reflecting
the continued growth and increased productivity of our sales force and the
ongoing strength of our small case market. We enter 2004 with Delphi's core
premiums at a run rate 23% higher than a year ago."
Mr. Rosenkranz added, "Based on these positive trends in our businesses, we
remain very optimistic about our long-term growth prospects. We expect to
achieve operating earnings per share growth at a minimum of 12% in 2004 and
in 2005."
Delphi's book value per share at December 31, 2003 increased 17% to $25.49 from
$21.83 at December 31, 2002. Net investment income in the fourth quarter of 2003
increased 9% to $45.1 million from $41.2 million in the prior year's quarter,
reflecting higher investment balances offset by a lower portfolio yield. For the
full-year 2003, net investment income increased 15% to $186.4 million from
$162.0 million in full-year 2002.
On October 1, 2003, Delphi repaid in full $66.5 million of 10-year Senior Notes
that matured on that date. Delphi's corporate debt outstanding at December 31,
2003 was $143.8 million, and the Company's corporate debt-to-capitalization
ratio was 14%(2).
On February 12, 2004 at 11:00 AM (Eastern time), Delphi will broadcast the
Company's fourth quarter 2003 earnings teleconference live on the Internet,
hosted by Robert Rosenkranz, Chairman and Chief Executive Officer. Investors can
access the broadcast at www.delphifin.com by clicking on the "live webcast" icon
on the home page. It is advisable to register at least 15 minutes prior to the
call to download and install any necessary audio software. The online replay
will be available on Delphi's website for one week beginning at approximately
1:00 PM (Eastern time) on February 12, 2004. Investors can also download
Delphi's fourth quarter 2003 statistical supplement from the Company's website
at www.delphifin.com.
In connection with, and because it desires to take advantage of, the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995,
Delphi cautions readers regarding certain forward-looking statements in the
foregoing discussion and in any other statement made by, or on behalf of,
Delphi, whether in future filings with the Securities and Exchange Commission or
otherwise. Forward-looking statements are statements not based on historical
information and which relate to future operations, strategies, financial
results, prospects, outlooks or other developments. Some forward-looking
statements may be identified by the use of terms such as "expect," "believe,"
"plan," "outlook," "goal" or other similar expressions. Forward-looking
statements are necessarily based upon estimates and assumptions that are
inherently subject to significant business, economic, competitive and other
uncertainties and contingencies, many of which are beyond Delphi's control and
many of which, with respect to future business decisions, are subject to change.
Examples of such uncertainties and contingencies include, among other important
factors, those affecting the insurance industry generally, such as the economic
and interest rate environment, federal and state legislative and regulatory
developments, including but not limited to changes in financial services and tax
laws and regulations, market pricing and competitive trends relating to
insurance products and services, acts of terrorism or war, and the availability
and cost of reinsurance, and those relating specifically to Delphi's business,
such as the level of its insurance premiums and fee income, the claims
experience and other factors affecting the profitability of its insurance
products, the performance of its investment portfolio and changes in Delphi's
investment strategy, acquisitions of companies or blocks of business, and
ratings by major rating
EXHIBIT 99.1
DELPHI REPORTS FOURTH QUARTER 2003 OPERATING EPS OF $0.73 PAGE 3
organizations of its insurance subsidiaries. These uncertainties and
contingencies can affect actual results and could cause actual results to differ
materially from those expressed in any forward-looking statements made by, or on
behalf of, Delphi. Delphi disclaims any obligation to update forward-looking
information.
Delphi Financial Group, Inc. is an integrated employee benefit services company.
Delphi is a leader in managing all aspects of employee absence to enhance the
productivity of its clients and provides the related insurance coverages: group
life, excess workers' compensation for self-insured employers, long-term and
short-term disability, travel accident and dental. Delphi's asset accumulation
business emphasizes individual fixed annuity products. Delphi's common stock is
listed on the New York Stock Exchange under the symbol DFG and its corporate
website address is www.delphifin.com.
(1) Operating earnings, which is a non-GAAP financial measure, consist of income
from operations excluding after-tax realized investment gains and losses and an
after-tax loss from extinguishment of debt, as applicable. After-tax net
realized investment gains (losses) were $3.2 million and $(11.7) million, or
$0.10 per share and $(0.37) per share, for the fourth quarter of 2003 and 2002,
respectively, and $8.3 million and $(18.5) million, or $0.26 per share and
$(0.58) per share, for the years ended 2003 and 2002, respectively. The
after-tax loss from extinguishment of debt was $0.2 million, or $0.01 per share,
for the year ended 2002. The Company believes that because realized investment
gains and losses and gains and losses on extinguishment of debt arise from
events that, to a significant extent, are within management's discretion and can
fluctuate significantly, thus distorting comparisons between periods, a measure
excluding their impact is useful in analyzing the Company's operating trends.
Investment gains and losses may be realized based on management's decision to
dispose of an investment or management's judgment that a decline in the market
value of an investment is other than temporary. Gains and losses on
extinguishment of debt may be realized based on management's decision to repay
or repurchase debt. Thus, realized investment gains and losses and gains and
losses on extinguishment of debt are not reflective of the Company's ongoing
earnings capacity, and trends in the earnings of the Company's underlying
insurance operations can be more clearly identified without the effects of these
gains and losses. For these reasons, management uses the measure of operating
earnings to assess performance and make operating decisions, and analysts and
investors typically utilize measures of this type when evaluating the financial
performance of insurers. However, gains and losses of these types, particularly
as to investments, are likely to occur periodically and should not be considered
as nonrecurring items. Further, operating earnings should not be considered a
substitute for net income, the most directly comparable GAAP measure, as an
indication of the Company's overall performance and may not be calculated in the
same manner as similarly titled captions in other companies' financial
statements. As to forward-looking statements contained in this press release
regarding operating earnings, net income is unavailable for the referenced
future periods, since the amounts of any future realized investment gains and
losses and gains and losses on extinguishment of debt are subject to future
market and other conditions that cannot presently be predicted. All per share
amounts are on a diluted basis.
(2) The corporate debt-to-capitalization ratio is calculated by dividing
corporate debt by the sum of corporate debt, company-obligated mandatorily
redeemable capital securities of subsidiaries and shareholders' equity.
DELPHI FINANCIAL GROUP, INC.
NON-GAAP FINANCIAL MEASURES
RECONCILIATION TO GAAP
(UNAUDITED; IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended Twelve Months Ended
-------------------------- --------------------------
12/31/03 12/31/02 12/31/03 12/31/02
---------- ---------- ---------- ----------
INCOME STATEMENT DATA
OPERATING EARNINGS (NON-GAAP MEASURE) $ 23,667 $ 20,445 $ 90,645 $ 79,373
Net realized investment gains (losses),
net of taxes 3,169 (11,672) 8,271 (18,505)
Loss on extinguishment of debt, net of taxes -- -- -- (216)
---------- ---------- ---------- ----------
NET INCOME (GAAP MEASURE) $ 26,836 $ 8,773 $ 98,916 $ 60,652
========== ========== ========== ==========
DILUTED RESULTS PER SHARE OF COMMON STOCK:
OPERATING EARNINGS (NON-GAAP MEASURE) $ 0.73 $ 0.64 $ 2.83 $ 2.49
Net realized investment gains (losses),
net of taxes 0.10 (0.37) 0.26 (0.58)
Loss on extinguishment of debt,
net of taxes -- -- -- (0.01)
---------- ---------- ---------- ----------
NET INCOME (GAAP MEASURE) $ 0.83 $ 0.27 $ 3.09 $ 1.90
========== ========== ========== ==========
BALANCE SHEET DATA 12/31/03 12/31/02
----------- -----------
Shareholders' equity, excluding accumulated other
comprehensive income $ 746,012 $ 651,652
Add: Accumulated other comprehensive income 52,428 30,003
----------- -----------
Shareholders' equity, (GAAP measure) $ 798,440 $ 681,655
=========== ===========
DILUTED BOOK VALUE PER SHARE OF COMMON
STOCK, EXCLUDING ACCUMULATED OTHER
COMPREHENSIVE INCOME (NON-GAAP MEASURE) $ 24.00 $ 20.98
Add: Accumulated other comprehensive income 1.49 0.85
----------- -----------
DILUTED BOOK VALUE PER SHARE OF COMMON STOCK
(GAAP MEASURE) $ 25.49 $ 21.83
=========== ===========
Please see note 1 of the press release for a discussion regarding the usefulness
of the non-GAAP financial measure "operating earnings." The Company believes
that the non-GAAP financial measure "diluted book value per share excluding
accumulated other comprehensive income" provides useful supplemental information
because accumulated other comprehensive income fluctuates from period to period
primarily due to changes in the value of its assets resulting from variations in
market interest rates, while the values of its liabilities are not similarly
marked to market under GAAP.
All per share amounts have been adjusted to reflect the 3-for-2 stock split
effected on December 22, 2003.
DELPHI FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED; IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended Twelve Months Ended
----------------------- -----------------------
12/31/03 12/31/02 12/31/03 12/31/02
-------- --------- -------- ---------
Revenue:
Premium and fee income $191,195 $ 161,902 $719,087 $ 627,857
Net investment income 45,117 41,240 186,366 162,036
Net realized investment gains (losses) 4,875 (17,957) 12,724 (28,469)
Loss on extinguishment of debt -- -- -- (332)
-------- --------- -------- ---------
241,187 185,185 918,177 761,092
-------- --------- -------- ---------
Benefits and expenses:
Benefits, claims and interest credited to policyholders 136,431 119,398 530,625 471,984
Commissions and expenses 60,891 50,940 225,953 190,444
-------- --------- -------- ---------
197,322 170,338 756,578 662,428
-------- --------- -------- ---------
Operating income 43,865 14,847 161,599 98,664
Interest expense:
Corporate debt 3,439 2,152 14,052 9,025
Dividends on capital securities 1,108 839 4,035 3,356
Income tax expense 12,482 3,083 44,596 25,631
-------- --------- -------- ---------
Net income $ 26,836 $ 8,773 $ 98,916 $ 60,652
======== ========= ======== =========
Basic results per share of common stock:
Net income $ 0.86 $ 0.28 $ 3.17 $ 1.95
======== ========= ======== =========
Weighted average shares outstanding 31,364 31,281 31,208 31,139
Diluted results per share of common stock:
Net income $ 0.83 $ 0.27 $ 3.09 $ 1.90
======== ========= ======== =========
Weighted average shares outstanding 32,299 31,916 32,023 31,887
Dividends paid per share of common stock $ 0.08 $ 0.05 $ 0.23 $ 0.20
All per share amounts have been adjusted to reflect the 3-for-2 stock split
effected on December 22, 2003.
DELPHI FINANCIAL GROUP, INC.
SUMMARIZED CONSOLIDATED BALANCE SHEETS
(UNAUDITED; IN THOUSANDS, EXCEPT PER SHARE DATA)
12/31/03 12/31/02
---------- ----------
Assets:
Investments:
Fixed maturity securities, available for sale $2,862,045 $2,495,629
Short-term investments 114,752 204,890
Other investments 225,957 115,532
---------- ----------
3,202,754 2,816,051
Cash 18,733 27,669
Cost of business acquired 183,665 168,110
Reinsurance receivables 409,620 392,659
Goodwill 93,929 93,929
Other assets 176,170 163,371
Assets held in separate account 92,661 73,153
---------- ----------
Total assets $4,177,532 $3,734,942
========== ==========
Liabilities and Shareholders' Equity:
Policy liabilities and accruals $1,495,617 $1,371,214
Policyholder account balances 961,356 909,961
Corporate debt 143,750 118,139
Other liabilities and policyholder funds 642,906 554,890
Liabilities related to separate account 79,413 63,033
---------- ----------
Total liabilities 3,323,042 3,017,237
Company-obligated mandatorily redeemable securities
of subsidiaries 56,050 36,050
Shareholders' equity 798,440 681,655
---------- ----------
Total liabilities and shareholders' equity $4,177,532 $3,734,942
========== ==========