Exhibit 99.1
NEWS
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FOR IMMEDIATE RELEASE
Contact: Bernard J. Kilkelly
Vice President, Investor Relations
Phone : 212-303-4349
E-mail: bernie-kilkelly@dlfi.com
DELPHI FINANCIAL REPORTS 16% INCREASE IN THIRD QUARTER OPERATING EPS TO $0.71;
NET INCOME PER SHARE REACHES $0.71
Wilmington, Delaware - October 24, 2006 - Delphi Financial Group, Inc. (NYSE:
DFG) announced today that net income in the third quarter of 2006 was $36.2
million or $0.71 per share, compared to $22.0 million or $0.44 per share in the
third quarter of 2005. In the third quarter of 2005, net income per share
included after-tax realized investment gains of $0.04 and losses from
discontinued operations of $(0.21). Prior period per share amounts have been
restated to reflect the 3-for-2 common stock split effected on June 1, 2006.
Operating earnings(1) in the third quarter of 2006 increased 19% to $36.4
million from $30.6 million in the third quarter of 2005. Operating earnings per
share rose 16% to $0.71 from $0.61 a year ago. Operating earnings for the first
nine months of 2006 increased 21% to $106.0 million compared to $87.5 million a
year ago, while operating earnings per share grew 19% to $2.09 per share from
$1.75 per share in the first nine months of 2005.
For the first nine months of 2006, net income was $101.9 million or $2.00 per
share, compared with $84.1 million or $1.68 per share in the first nine months
of 2005. Net income in the first nine months of 2006 included after-tax realized
investment losses of $(1.2) million or $(0.03) per share and losses from
discontinued operations of $(2.9) million or $(0.06) per share. Net income in
the first nine months of 2005 included after-tax realized investment gains of
$5.5 million or $0.11 per share and losses from discontinued operations of
$(9.0) million or $(0.18) per share.
Core group employee benefit premiums in the third quarter of 2006 grew 18% from
the third quarter a year ago, reaching $280 million. This growth was driven by a
21% increase in premiums from excess workers' compensation insurance at Delphi's
Safety National subsidiary and a 20% increase in group disability premiums at
Delphi's Reliance Standard Life (RSL) subsidiary. The combined ratio for the
Company's group employee benefit products in the third quarter of 2006 was
93.3%, which was unchanged from the third quarter of 2005 and down from 94.1%
for full-year 2005.
Robert Rosenkranz, Chairman and Chief Executive Officer, commented, "Delphi's
excellent financial results reflect continued growth and improved margins in our
insurance operations and strong investment performance in the quarter. Our
premium growth continued to benefit from strategic initiatives implemented over
the past two years to expand our distribution and strengthen our market
leadership positions. The CDS division of RSL, established in April to lead
RSL's expansion in the attractive turnkey group disability market, made a strong
contribution to our premium growth in the third quarter. Safety National's solid
growth in excess workers' compensation production was boosted by renewals of
former excess workers' compensation clients of Employers Re, for which we
purchased renewal rights in July 2005."
DELPHI FINANCIAL REPORTS 16% INCREASE IN THIRD QUARTER OPERATING
EPS TO $0.71 PAGE 2
Mr. Rosenkranz added, "We are continuing to capitalize on positive market trends
in our insurance businesses, including the ongoing hard market for excess
workers' compensation and the favorable climate for our small-case niche at
Reliance Standard. As a result, we remain confident in our outlook for strong
earnings growth in the remainder of 2006 and heading into next year."
Delphi's net investment income in the third quarter of 2006 was $66.2 million, a
gain of 23% from $53.8 million in the same quarter a year ago. Invested assets
at September 30, 2006 were $4.3 billion, an increase of 13% from $3.8 billion at
September 30, 2005. The pre-tax equivalent yield on the Company's investment
portfolio in the third quarter of 2006 was 6.6% compared to 5.9% for the third
quarter of 2005. Delphi's shareholders' equity was $1.1 billion at the end of
the third quarter, and book value per share before accumulated other
comprehensive income (2) rose to $22.52 at September 30, 2006 compared with
$20.59 at December 31, 2005.
CONFERENCE CALL
On October 25, 2006 at 11:00 AM (Eastern time), Delphi will broadcast the
Company's third quarter 2006 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 October 25, 2006. Investors can also download Delphi's third
quarter 2006 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," "outlook" 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 any obligation to update forward-looking information.
DELPHI FINANCIAL REPORTS 16% INCREASE IN THIRD QUARTER OPERATING
EPS TO $0.71 PAGE 3
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 income
from continuing operations excluding after-tax realized investment gains and
losses, as applicable. After-tax net realized investment (losses) gains were
$(0.2) million and $2.2 million, or $0.00 per share and $0.04 per share, for the
third quarter of 2006 and 2005, respectively, and $(1.2) million and $5.5
million, or $(0.03) per share and $0.11 per share for the first nine months of
2006 and 2005, respectively. After-tax income (loss) from discontinued
operations was $1,000 and $(10.8) million, or $0.00 per share and $(0.21) per
share, for the third quarter of 2006 and 2005, respectively, and $(2.9) million
and $(9.0) million, or $(0.06) per share and $(0.18) per share for the first
nine months of 2006 and 2005, respectively. The Company believes that because
realized investment gains and losses and discontinued operations 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. Discontinued operations occur based on management's
decision to exit or sell a particular business. Thus, realized investment gains
and losses and results from discontinued operations 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 items. 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, gains and losses of
these types, particularly as to investments, 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.
(2) Diluted book value per share before accumulated other comprehensive income,
which is a non-GAAP financial measure, is based on shareholders' equity
excluding the effect of accumulated other comprehensive income. The Company
believes that, 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, this non-GAAP measure is useful
in analyzing the Company's operating trends.
####
DELPHI FINANCIAL GROUP, INC.
Non-GAAP Financial Measures
Reconciliation to GAAP
(Unaudited; in thousands, except per share data)
Three Months Ended Nine Months Ended
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09/30/2006 09/30/2005 09/30/2006 09/30/2005
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INCOME STATEMENT DATA
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Operating earnings (Non-GAAP measure) $ 36,386 $ 30,630 $ 106,046 $ 87,528
Net realized investment (losses) gains, net of taxes (218) 2,208 (1,222) 5,547
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Income from continuing operations 36,168 32,838 104,824 93,075
Discontinued operations, net of taxes 1 (10,806) (2,932) (8,959)
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Net income (GAAP measure) $ 36,169 $ 22,032 $ 101,892 $ 84,116
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DILUTED RESULTS PER SHARE OF COMMON STOCK:
Operating earnings (Non-GAAP measure) $ 0.71 $ 0.61 $ 2.09 $ 1.75
Net realized investment (losses) gains, net of taxes - 0.04 (0.03) 0.11
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Income from continuing operations 0.71 0.65 2.06 1.86
Discontinued operations, net of taxes - (0.21) (0.06) (0.18)
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Net income (GAAP measure) $ 0.71 $ 0.44 $ 2.00 $ 1.68
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BALANCE SHEET DATA 09/30/2006 12/31/2005
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Shareholders' equity, excluding accumulated other
comprehensive income (Non-GAAP measure) $ 1,115,502 $ 1,012,775
Add: Accumulated other comprehensive income 17,001 20,264
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Shareholders' equity (GAAP measure) $ 1,132,503 $ 1,033,039
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Diluted book value per share of common stock, excluding
accumulated other comprehensive income (Non-GAAP measure) $ 22.52 $ 20.59
Add: Accumulated other comprehensive income 0.32 0.38
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Diluted book value per share of common stock (GAAP measure) $ 22.84 $ 20.97
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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.
NOTE: Prior period results have been restated for discontinued operations
attributable to assumed property reinsurance. Prior period results per share and
applicable share amounts have been restated to reflect the 3-for-2 common stock
split effected in the form of a 50% stock dividend distributed on June 1, 2006.
DELPHI FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; in thousands, except per share data)
Three Months Ended Nine Months Ended
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09/30/2006 09/30/2005 09/30/2006 09/30/2005
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Revenue:
Premium and fee income $ 295,190 $ 250,649 $ 838,419 $ 732,603
Net investment income 66,159 53,843 185,974 162,293
Net realized investment (losses) gains (335) 3,397 (1,880) 8,534
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361,014 307,889 1,022,513 903,430
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Benefits and expenses:
Benefits, claims and interest credited to policyholders 217,322 180,644 612,961 541,157
Commissions and expenses 85,314 74,790 239,954 212,053
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302,636 255,434 852,915 753,210
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Operating income 58,378 52,455 169,598 150,220
Interest expense:
Corporate debt 5,250 3,781 15,029 11,712
Junior subordinated deferrable interest debentures 1,319 1,229 3,887 3,599
Income tax expense 15,641 14,607 45,858 41,834
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Income from continuing operations 36,168 32,838 104,824 93,075
Discontinued operations, net of taxes 1 (10,806) (2,932) (8,959)
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Net income $ 36,169 $ 22,032 $ 101,892 $ 84,116
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Basic results per share of common stock:
Income from continuing operations $ 0.73 $ 0.67 $ 2.12 $ 1.91
Discontinued operations - (0.22) (0.06) (0.19)
Net income 0.73 0.45 2.06 1.72
Weighted average shares outstanding 49,652 49,350 49,531 48,818
Diluted results per share of common stock:
Income from continuing operations $ 0.71 $ 0.65 $ 2.06 $ 1.86
Discontinued operations - (0.21) (0.06) (0.18)
Net income 0.71 0.44 2.00 1.68
Weighted average shares outstanding 50,926 50,564 50,824 50,138
Dividends paid per share of common stock $ 0.08 $ 0.06 $ 0.23 $ 0.18
NOTE: Prior period results have been restated for discontinued operations
attributable to assumed property reinsurance. Prior period results per share and
applicable share amounts have been restated to reflect the 3-for-2 common stock
split effected in the form of a 50% stock dividend distributed on June 1, 2006.
DELPHI FINANCIAL GROUP, INC.
SUMMARIZED CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands)
09/30/2006 12/31/2005
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Assets:
Investments:
Fixed maturity securities, available for sale $ 3,329,065 $ 3,244,764
Short-term investments 297,276 94,308
Other investments 695,147 573,532
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4,321,488 3,912,604
Cash 45,496 28,493
Cost of business acquired 269,179 248,138
Reinsurance receivables 404,970 413,113
Goodwill 93,929 93,929
Securities lending collateral 250,379 244,821
Other assets 263,778 235,644
Assets held in separate account 107,334 99,428
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Total assets $ 5,756,553 $ 5,276,170
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Liabilities and Shareholders' Equity:
Policy liabilities and accruals $ 2,021,813 $ 1,862,872
Policyholder account balances 1,126,273 1,039,610
Corporate debt 263,750 234,750
Junior subordinated deferrable interest debentures underlying
company-obligated mandatorily redeemable capital securities
issued by unconsolidated subsidiaries 59,762 59,762
Securities lending payable 250,379 244,821
Other liabilities and policyholder funds 794,739 701,888
Liabilities related to separate account 107,334 99,428
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Total liabilities 4,624,050 4,243,131
Shareholders' equity:
Class A Common Stock 479 313
Class B Common Stock 57 39
Additional paid-in capital 470,797 442,531
Accumulated other comprehensive income 17,001 20,264
Retained earnings 727,139 636,285
Treasury stock, at cost (82,970) (66,393)
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1,132,503 1,033,039
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Total liabilities and shareholders' equity $ 5,756,553 $ 5,276,170
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DELPHI FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
Nine Months Ended
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09/30/2006 09/30/2005
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Operating activities:
Net income $ 101,892 $ 84,116
Adjustments to reconcile net income to net cash provided
by operating activities:
Change in policy liabilities and policyholder accounts 197,987 196,872
Net change in reinsurance receivables and payables 3,523 10,608
Amortization, principally the cost of business acquired
and investments 50,397 46,571
Deferred costs of business acquired (77,473) (69,739)
Net realized losses (gains) on investments 1,880 (8,534)
Net change in federal income tax liability 12,193 8,614
Other (38,463) (59,614)
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Net cash provided by operating activities 251,936 208,894
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Investing activities:
Purchases of investments and loans made (898,282) (1,460,493)
Sales of investments and receipts from repayment of loans 597,301 1,142,110
Maturities of investments 168,327 134,023
Net change in short-term investments (202,886) (44,566)
Change in deposit in separate account (2,234) (3,033)
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Net cash used by investing activities (337,774) (231,959)
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Financing activities:
Deposits to policyholder accounts 178,231 80,229
Withdrawals from policyholder accounts (98,778) (76,031)
Borrowings under revolving credit facility 31,000 32,000
Principal payments under revolving credit facility (2,000) (11,000)
Change in liability for Federal Home Loan Bank advances - (15,000)
Other financing activities (5,612) 14,499
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Net cash provided by financing activities 102,841 24,697
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Increase in cash 17,003 1,632
Cash at beginning of period 28,493 24,324
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Cash at end of period $ 45,496 $ 25,956
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