Exhibit 12
DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Year Ended December 31,
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2001 (1) 2000 (1) 1999 1998 1997
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Earnings:
(Loss) income from continuing operations before
provision for income taxes ($6,049) ($11,444) $91,786 $106,340 $110,701
Adjustment for (income) loss of equity investees (763) (3,514) 9,191) 8,872 (28,933)
Distributed income of equity investees 2,240 8,904 4,165 9,968 26,467
Interest expense:
Corporate debt 11,604 21,457 18,178 17,369 15,030
Dividends on Capital Securities of Delphi
Funding L.L.C. 5,808 9,311 9,311 9,311 7,163
Interest component of rental expense 2,085 1,812 1,273 703 635
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Total earnings $14,925 $26,526 $115,522 $152,563 $131,063
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Fixed Charges:
Interest expense: Corporate debt $11,604 $21,457 $18,178 $17,369 $15,030
Dividends on Capital Securities of
Delphi Funding L.L.C. 5,808 9,311 9,311 9,311 7,163
Interest component of rental expense 2,085 1,812 1,273 703 635
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Total fixed charges $19,497 $32,580 $28,762 $27,383 $22,828
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Ratio of earnings to fixed charges 0.77 0.81 4.02 5.57 5.74
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(1) The deficiency of $4.6 million and $6.1 million in 2001 and 2000,
respectively, is primarily attributable to net realized investment losses which
resulted from the other than temporary decline in the market value of certain
fixed maturity securities in 2001 and the liquidation of a substantial majority
of the investments of Delphi's investment subsidiaries in 2000. These net
realized investment losses, which totaled $70.3 million and $138.0 million in
2001 and 2000, respectively, are non-recurring charges which are included in the
losses from continuing operations. In addition, the deficiency for 2001 reflects
the impact of a charge of $44.3 million for reserve strengthening primarily
related to an unusually high number of large losses in our excess workers'
compensation business.
For the purpose of computing the ratios of earnings to fixed charges, earnings
consist of pre-tax (loss) income from continuing operations adjusted to include
distributed earnings of equity investees plus fixed charges. Fixed charges
consist of interest expense, including amortization of debt discount, and such
portion of rental expense as is estimated to be representative of the interest
factor, all on a pre-tax basis.