EXHIBIT 99.1
1105 North Market Street
(DELPHI FINANCIAL GROUP LOGO) Suite 1230
Wilmington, Delaware 19801
www.delphifin.com
Press Release
Contact: Bernard J. Kilkelly FOR IMMEDIATE RELEASE
Vice President, Investor Relations 7/26/05
Phone: 212-303-4349
E-mail: bernie-kilkelly@dlfi.com
DELPHI FINANCIAL REPORTS SECOND QUARTER 2005 OPERATING EPS UP 14% TO $0.90 AND
NET INCOME PER SHARE REACHES $0.96; KEY ASSET AND EQUITY MILESTONES REACHED
Wilmington, Delaware -- July 26, 2005 -- Delphi Financial Group, Inc. (NYSE:
DFG) announced today that net income in the second quarter of 2005 was $32.0
million, or $0.96 per share, compared to $27.1 million, or $0.82 per share, in
the second quarter of 2004. Net income in the second quarter of 2005 included
after-tax realized investment gains of $2.2 million, or $0.06 per share, while
net income in the second quarter of 2004 included after-tax realized investment
gains of $1.3 million, or $0.03 per share. For the first half of 2005, net
income was $62.1 million, or $1.87 per share, compared with net income in the
first half of 2004 of $57.8 million, or $1.76 per share. Net income in the first
half of 2005 included after-tax realized investment gains of $3.3 million, or
$0.10 per share, while net income in the first half of 2004 included after-tax
realized investment gains of $4.7 million, or $0.14 per share.
Operating earnings(1) in the second quarter of 2005 increased 15% to $29.8
million from $25.9 million in the second quarter of 2004, while operating
earnings per share rose 14% to $0.90 from $0.79 a year ago. Operating earnings
for the first half of 2005 were $58.7 million, or $1.77 per share, an increase
of 11% from $53.1 million, or $1.62 per share, in the first half of 2004.
Core group employee benefit premiums in the second quarter of 2005 grew 21% from
the second quarter a year ago, reaching $230 million. This growth was driven by
a 39% increase in group disability premiums at Delphi's Reliance Standard Life
subsidiary and a 16% increase in premiums from excess workers' compensation
insurance at Delphi's Safety National subsidiary. The combined ratio for the
Company's group employee benefit products in the second quarter of 2005 was
94.2%, compared with 94.4% in the second quarter of 2004 and 94.7% for the
full-year 2004.
Robert Rosenkranz, Chairman and Chief Executive Officer, commented, "We were
very pleased with Delphi's bottom line performance in the second quarter, which
reflects both strong top line growth and improved margins in our insurance
businesses. We were also pleased that Delphi achieved two significant milestones
in the second quarter, as total assets surpassed $5 billion and shareholders'
equity surpassed $1 billion. These milestones highlight the financial strength
of our company and our successful track record in building value for
shareholders in our 15 years as a public company."
Mr. Rosenkranz added, "We continue to capitalize on favorable market trends in
our insurance businesses. Reliance Standard achieved a 22% increase in group
disability production and 17% increase in group life production as we continue
to expand our sales force focused on the attractive smaller case market. Our
DELPHI FINANCIAL REPORTS SECOND QUARTER 2005 OPERATING EPS OF $0.90 Page 2
premium growth in group disability was boosted again by a strategic alliance we
formed at the end of 2004 with several health insurers, in which Reliance
Standard provides a turnkey disability product that provides us with significant
alternative distribution to our small case niche. The market for Safety
National's core product, excess workers' compensation for self-insured
employers, remains hard and we continue to see few signs that the market will
soften any time soon. Rates are holding steady, we continue to achieve solid
increases in self-insured retentions, and Safety National achieved strong growth
in production in the second quarter, which demonstrates that an ongoing firm
market in primary workers' compensation insurance is continuing to drive
employers to self-insure or remain self-insured."
Delphi's net investment income in the second quarter of 2005 rose 13% to $55.2
million from $48.7 million in the same quarter a year ago. Invested assets at
June 30, 2005 were $3.8 billion, an increase of 13% from $3.3 billion at June
30, 2004. Delphi's total assets surpassed $5 billion for the first time,
reaching $5.1 billion at June 30, 2005. The pre-tax equivalent yield on the
Company's investment portfolio in the second quarter of 2005 was 6.2% compared
to 6.1% for the second quarter of 2004. Delphi's shareholders' equity surpassed
$1 billion at the end of the second quarter, and book value per share rose to
$30.91 at June 30, 2005 compared with $29.36 at December 31, 2004.
CONFERENCE CALL
On July 27, 2005 at 11:00 AM (Eastern time), Delphi will broadcast the Company's
second quarter 2005 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 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 July 27, 2005. Investors can also download Delphi's second
quarter 2005 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 statements 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 "expects," "believes,"
"anticipates," "intends," "judgment" 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, employee benefit 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, persistency 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 organizations of
Delphi and 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
DELPHI FINANCIAL REPORTS SECOND QUARTER 2005 OPERATING EPS OF $0.90 Page 3
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, long-term and short-term disability, excess workers' compensation for
self-insured employers, 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 net
income excluding after-tax realized investment gains and losses, as applicable.
After-tax net realized investment gains were $2.2 million and $1.3 million, or
$0.06 per share and $0.03 per share, for the second quarter of 2005 and 2004,
respectively, and $3.3 million and $4.7 million, or $0.10 per share and $0.14
per share for the first half of 2005 and 2004, respectively. The Company
believes that because realized investment gains and losses 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 or losses may be realized based on management's decision to
dispose of an investment, and investment losses may be realized based on
management's judgment that a decline in the market value of an investment is
other than temporary. Thus, realized investment gains and losses 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 plans and decisions, and analysts and investors typically utilize
measures of this type when evaluating the financial performance of insurers.
However, realized investment gains and losses occur frequently 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 financial performance and may
not be calculated in the same manner as similarly titled captions in other
companies' financial statements. All per share amounts are on a diluted basis.
-tables attached-
DELPHI FINANCIAL GROUP, INC.
Non-GAAP Financial Measures
Reconciliation to GAAP
(Unaudited; in thousands, except per share data)
Three Months Ended Six Months Ended
---------------------------- -----------------------------
06/30/05 06/30/04 06/30/05 06/30/04
---------- ---------- ------------- ----------
INCOME STATEMENT DATA
OPERATING EARNINGS (NON-GAAP MEASURE) $ 29,819 $ 25,872 $ 58,745 $ 53,099
Net realized investment gains, net of taxes 2,158 1,261 3,339 4,655
---------- ---------- ------------- ----------
NET INCOME (GAAP MEASURE) $ 31,977 $ 27,133 $ 62,084 $ 57,754
========== ========== ============= ==========
DILUTED RESULTS PER SHARE OF COMMON STOCK:
OPERATING EARNINGS (NON-GAAP MEASURE) $ 0.90 $ 0.79 $ 1.77 $ 1.62
Net realized investment gains, net of taxes 0.06 0.03 0.10 0.14
---------- ---------- ------------- ----------
NET INCOME (GAAP MEASURE) $ 0.96 $ 0.82 $ 1.87 $ 1.76
========== ========== ============= ==========
06/30/05 12/31/04
------------- ----------
BALANCE SHEET DATA
SHAREHOLDERS' EQUITY, EXCLUDING ACCUMULATED OTHER
COMPREHENSIVE INCOME $ 952,865 $ 882,477
Add: Accumulated other comprehensive income 53,266 57,371
------------- ----------
SHAREHOLDERS' EQUITY (GAAP MEASURE) $ 1,006,131 $ 939,848
============= ==========
DILUTED BOOK VALUE PER SHARE OF COMMON STOCK, EXCLUDING
ACCUMULATED OTHER COMPREHENSIVE INCOME (NON-GAAP MEASURE) $ 29.42 $ 27.73
Add: Accumulated other comprehensive income 1.49 1.63
------------- ----------
DILUTED BOOK VALUE PER SHARE OF COMMON STOCK (GAAP MEASURE) $ 30.91 $ 29.36
============= ==========
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.
DELPHI FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; in thousands, except per share data)
Three Months Ended Six Months Ended
------------------------ ----------------------
06/30/05 06/30/04 06/30/05 06/30/04
-------- ---------- ---------- ----------
Revenue:
Premium and fee income $249,851 $207,049 $489,451 $407,759
Net investment income 55,192 48,705 108,629 101,248
Net realized investment gains 3,320 1,941 5,137 7,162
-------- -------- -------- --------
308,363 257,695 603,217 516,169
-------- -------- -------- --------
Benefits and expenses:
Benefits, claims and interest credited to policyholders 185,690 153,570 364,263 303,672
Commissions and expenses 70,753 60,853 138,347 120,628
-------- -------- -------- --------
256,443 214,423 502,610 424,300
-------- -------- -------- --------
Operating income 51,920 43,272 100,607 91,869
Interest expense:
Corporate debt 4,261 3,475 7,931 6,911
Junior subordinated deferrable interest debentures 1,199 1,106 2,370 2,211
Income tax expense 14,483 11,558 28,222 24,993
-------- -------- -------- --------
Net income $ 31,977 $ 27,133 $ 62,084 $ 57,754
======== ======== ======== ========
Basic results per share of common stock:
Net income $ 0.99 $ 0.85 $ 1.92 $ 1.82
Weighted average shares outstanding 32,426 31,931 32,368 31,811
Diluted results per share of common stock:
Net income $ 0.96 $ 0.82 $ 1.87 $ 1.76
Weighted average shares outstanding 33,302 32,930 33,282 32,818
Dividends paid per share of common stock $ 0.09 $ 0.08 $ 0.18 $ 0.16
DELPHI FINANCIAL GROUP, INC.
SUMMARIZED CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands)
6/30/05 12/31/04
----------- -----------
Assets:
Investments:
Fixed maturity securities, available for sale $ 3,104,115 $ 3,049,013
Short-term investments 141,638 95,761
Other investments 521,447 396,302
----------- -----------
3,767,200 3,541,076
Cash 33,029 24,324
Cost of business acquired 222,059 212,549
Reinsurance receivables 416,149 428,707
Goodwill 93,929 93,929
Securities lending collateral 251,238 236,900
Other assets 225,660 203,777
Assets held in separate account 91,451 88,205
----------- -----------
Total assets $ 5,100,715 $ 4,829,467
=========== ===========
Liabilities and Shareholders' Equity:
Policy liabilities and accruals $ 1,757,221 $ 1,663,903
Policyholder account balances 1,037,072 1,024,577
Corporate debt 184,750 157,750
Junior subordinated deferrable interest debentures underlying
company-obligated mandatorily redeemable capital securities
issued by unconsolidated subsidiaries 59,762 59,762
Securities lending payable 251,238 236,900
Other liabilities and policyholder funds 713,090 658,522
Liabilities related to separate account 91,451 88,205
----------- -----------
Total liabilities 4,094,584 3,889,619
Shareholders' equity:
Class A Common Stock 308 304
Class B Common Stock 39 39
Additional paid-in capital 420,942 406,908
Accumulated other comprehensive income 53,266 57,371
Retained earnings 590,890 534,540
Treasury stock, at cost (59,314) (59,314)
----------- -----------
1,006,131 939,848
----------- -----------
Total liabilities and shareholders' equity $ 5,100,715 $ 4,829,467
=========== ===========
DELPHI FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
06/30/05 06/30/04
----------- -----------
Operating activities:
Net income $ 62,084 $ 57,754
Adjustments to reconcile net income to net cash provided
by operating activities:
Change in policy liabilities and policyholder accounts 105,025 82,345
Net change in reinsurance receivables and payables 8,593 424
Amortization, principally the cost of business acquired and investments 30,522 19,689
Deferred costs of business acquired (44,481) (42,861)
Net realized gains on investments (5,137) (7,162)
Net change in trading account securities (22,631) 4,049
Net change in federal income tax liability 13,171 14,447
Other (12,265) (16,200)
----------- -----------
Net cash provided by operating activities 134,881 112,485
----------- -----------
Investing activities:
Purchases of investments and loans made (1,018,057) (1,079,209)
Sales of investments and receipts from repayment of loans 793,179 846,283
Maturities of investments 115,663 83,530
Net change in short-term investments (45,873) 11,039
Change in deposit in separate account (4,325) (2,432)
----------- -----------
Net cash used by investing activities (159,413) (140,789)
----------- -----------
Financing activities:
Deposits to policyholder accounts 52,148 73,316
Withdrawals from policyholder accounts (49,151) (43,304)
Borrowings under revolving credit facility 32,000 27,000
Principal payments under revolving credit facility (5,000) (5,000)
Change in liability for Federal Home Loan Bank advances -- (20,000)
Other financing activities 3,240 6,491
----------- -----------
Net cash provided by financing activities 33,237 38,503
----------- -----------
Increase in cash 8,705 10,199
Cash at beginning of period 24,324 18,733
----------- -----------
Cash at end of period $ 33,029 $ 28,932
=========== ===========