Exhibit 99.1
FOR IMMEDIATE RELEASE
Contact: Bernard J. Kilkelly
Vice President, Investor Relations
Phone : 212-303-4349
E-mail: bernie-kilkelly@dlfi.com
DELPHI FINANCIAL REPORTS 17% INCREASE IN FOURTH QUARTER OPERATING EPS TO $0.77;
2006 OPERATING EPS INCREASES 19% TO $2.86;
2006 NET INCOME PER SHARE REACHES $2.79
Wilmington, Delaware - February 13, 2007 - Delphi Financial Group, Inc. (NYSE:
DFG) announced today that net income in the fourth quarter of 2006 was $40.2
million or $0.78 per share, compared to $29.2 million or $0.58 per share in the
fourth quarter of 2005. In the fourth quarter of 2006, net income per share
included after-tax realized investment gains of $0.01. In the fourth quarter of
2005, net income per share included after-tax realized investment gains of $0.01
and losses from discontinued operations of $(0.09). 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 fourth quarter of 2006 increased 19% to $39.5
million from $33.3 million in the fourth quarter of 2005. Operating earnings per
share rose 17% to $0.77 from $0.66 a year ago. Operating earnings for full-year
2006 increased 20% to $145.6 million compared to $120.8 million a year ago,
while operating earnings per share grew 19% to $2.86 per share from $2.40 per
share for full-year 2005.
Net income for full-year 2006 was $142.1 million or $2.79 per share, compared
with $113.3 million or $2.25 per share a year ago. Net income for full-year 2006
included after-tax realized investment losses of $(0.6) million or $(0.01) per
share and losses from discontinued operations of $(2.9) million or $(0.06) per
share. Net income for full-year 2005 included after-tax realized investment
gains of $5.9 million or $0.12 per share and losses from discontinued operations
of $(13.4) million or $(0.27) per share.
Core group employee benefit premiums in the fourth quarter of 2006 grew 16% from
the fourth quarter a year ago, reaching $283 million. This growth was driven by
an 18% increase in group disability premiums at Delphi's Reliance Standard Life
subsidiary and a 15% increase in premiums from excess workers' compensation
insurance at Delphi's Safety National subsidiary. The combined ratio in group
employee benefits insurance in the fourth quarter of 2006 was 93.6%, compared
with 93.7% in the fourth quarter of 2005. For the full-year 2006, the combined
ratio in group employee benefits insurance was 93.2%, compared with 94.1% in
2005.
Robert Rosenkranz, Chairman and Chief Executive Officer, commented, "Delphi's
strong growth in the fourth quarter was above our expectations and enabled us to
exceed the earnings guidance we provided at the beginning of 2006. We
outperformed our internal targets for all key metrics, including premium growth,
combined ratio, invested asset growth and investment yield. Two notable
achievements during the year that boosted our premium growth were the formation
of our new CDS turnkey disability division at Reliance Standard and our
successful renewals at Safety National of more than half of the former excess
workers' compensation clients of Employers Re."
DELPHI FINANCIAL REPORTS 17% INCREASE IN FOURTH QUARTER 2006
OPERATING EPS TO $0.77 PAGE 2
Mr. Rosenkranz added, "We continue to be optimistic about Delphi's outlook for
strong earnings growth as we capitalize on ongoing positive trends in our
insurance businesses. We expect continued growth in Reliance Standard's
small-case niche and turnkey disability operation, and the market for excess
workers' compensation at Safety National remains firm. In Safety National's
important January renewal season, we have experienced continued strong demand
for our excess coverage along with steady rates and improvements in contract
terms."
Delphi's net investment income in the fourth quarter of 2006 was $69.9 million,
a gain of 14% from $61.3 million in the same quarter a year ago. Invested assets
at December 31, 2006 were $4.5 billion, an increase of 15% from $3.9 billion at
December 31, 2005. The pre-tax equivalent yield on the Company's investment
portfolio in the fourth quarter of 2006 was 6.6%, unchanged from the same period
a year ago. Delphi's shareholders' equity was $1.2 billion at December 31, 2006,
up 14% from a year ago. Book value per share before accumulated other
comprehensive income (2) rose 13% to $23.35 at December 31, 2006, from $20.59 at
December 31, 2005.
CONFERENCE CALL
On February 14, 2007 at 11:00 AM (Eastern time), Delphi will broadcast the
Company's fourth 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 February 14, 2007. Investors can also download Delphi's fourth
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 17% INCREASE IN FOURTH QUARTER 2006
OPERATING EPS TO $0.77 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 gains (losses) were
$0.7 million and $0.3 million, or $0.01 per share and $0.01 per share, for the
fourth quarter of 2006 and 2005, respectively, and $(0.6) million and $5.9
million, or $(0.01) per share and $0.12 per share for the full year of 2006 and
2005, respectively. After-tax losses from discontinued operations was $(3,000)
and $(4.4) million, or $0.00 per share and $(0.09) per share, for the fourth
quarter of 2006 and 2005, respectively, and $(2.9) million and $(13.4) million,
or $(0.06) per share and $(0.27) per share for the full years 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 Twelve Months Ended
------------------------------- -------------------------------
12/31/2006 12/31/2005 12/31/2006 12/31/2005
-------------- -------------- -------------- --------------
INCOME STATEMENT DATA
- ---------------------
Operating earnings (Non-GAAP measure) $ 39,515 $ 33,304 $ 145,561 $ 120,832
Net realized investment gains (losses), net of taxes 664 305 (558) 5,852
-------------- -------------- -------------- --------------
Income from continuing operations 40,179 33,609 145,003 126,684
Discontinued operations, net of taxes (3) (4,391) (2,935) (13,350)
-------------- -------------- -------------- --------------
Net income (GAAP measure) $ 40,176 $ 29,218 $ 142,068 $ 113,334
============== ============== ============== ==============
Diluted results per share of common stock:
Operating earnings (Non-GAAP measure) $ 0.77 $ 0.66 $ 2.86 $ 2.40
Net realized investment gains (losses), net of taxes 0.01 0.01 (0.01) 0.12
-------------- -------------- -------------- --------------
Income from continuing operations 0.78 0.67 2.85 2.52
Discontinued operations, net of taxes - (0.09) (0.06) (0.27)
-------------- -------------- -------------- --------------
Net income (GAAP measure) $ 0.78 $ 0.58 $ 2.79 $ 2.25
============== ============== ============== ==============
12/31/2006 12/31/2005
-------------- --------------
BALANCE SHEET DATA
- ------------------
Shareholders' equity, excluding accumulated other
comprehensive income (Non-GAAP measure) $ 1,155,675 $ 1,012,775
Add: Accumulated other comprehensive income 19,133 20,264
-------------- --------------
Shareholders' equity (GAAP measure) $ 1,174,808 $ 1,033,039
============== ==============
Diluted book value per share of common stock, excluding
accumulated other comprehensive income (Non-GAAP measure) $ 23.35 $ 20.59
Add: Accumulated other comprehensive income 0.35 0.38
-------------- --------------
Diluted book value per share of common stock (GAAP measure) $ 23.70 $ 20.97
============== ==============
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 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 Twelve Months Ended
------------------------------- -------------------------------
12/31/2006 12/31/2005 12/31/2006 12/31/2005
-------------- -------------- -------------- --------------
Revenue:
Premium and fee income $ 318,159 $ 257,608 $ 1,156,578 $ 990,211
Net investment income 69,897 61,276 255,871 223,569
Net realized investment gains (losses) 1,022 469 (858) 9,003
-------------- -------------- -------------- --------------
389,078 319,353 1,411,591 1,222,783
-------------- -------------- -------------- --------------
Benefits and expenses:
Benefits, claims and interest credited to policyholders 234,525 184,050 847,486 725,207
Commissions and expenses 90,727 81,502 330,681 293,555
-------------- -------------- -------------- --------------
325,252 265,552 1,178,167 1,018,762
-------------- -------------- -------------- --------------
Operating income 63,826 53,801 233,424 204,021
Interest expense:
Corporate debt 5,143 3,895 20,172 15,607
Junior subordinated deferrable interest debentures 1,324 1,256 5,211 4,855
Income tax expense 17,180 15,041 63,038 56,875
-------------- -------------- -------------- --------------
Income from continuing operations 40,179 33,609 145,003 126,684
Discontinued operations, net of taxes (3) (4,391) (2,935) (13,350)
-------------- -------------- -------------- --------------
Net income $ 40,176 $ 29,218 $ 142,068 $ 113,334
============== ============== ============== ==============
Basic results per share of common stock:
Income from continuing operations $ 0.80 $ 0.68 $ 2.92 $ 2.58
Discontinued operations - (0.09) (0.06) (0.27)
Net income 0.80 0.59 2.86 2.31
Weighted average shares outstanding 49,932 49,577 49,631 49,008
Diluted results per share of common stock:
Income from continuing operations $ 0.78 $ 0.67 $ 2.85 $ 2.52
Discontinued operations - (0.09) (0.06) (0.27)
Net income 0.78 0.58 2.79 2.25
Weighted average shares outstanding 51,285 50,658 50,939 50,267
Dividends paid per share of common stock $ 0.08 $ 0.06 $ 0.31 $ 0.24
NOTE: 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)
12/31/2006 12/31/2005
--------------- ---------------
Assets:
Investments:
Fixed maturity securities, available for sale $ 3,377,578 $ 3,244,764
Short-term investments 400,239 94,308
Other investments 705,563 573,532
--------------- ---------------
4,483,380 3,912,604
Cash 48,204 28,493
Cost of business acquired 267,920 248,138
Reinsurance receivables 410,593 413,113
Goodwill 93,929 93,929
Securities lending collateral - 244,821
Other assets 251,975 235,644
Assets held in separate account 114,474 99,428
--------------- ---------------
Total assets $ 5,670,475 $ 5,276,170
=============== ===============
Liabilities and Shareholders' Equity:
Policy liabilities and accruals $ 2,107,644 $ 1,862,872
Policyholder account balances 1,119,218 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 - 244,821
Other liabilities and policyholder funds 830,819 701,888
Liabilities related to separate account 114,474 99,428
--------------- ---------------
Total liabilities 4,495,667 4,243,131
Shareholders' equity:
Class A Common Stock 480 313
Class B Common Stock 57 39
Additional paid-in capital 474,722 442,531
Accumulated other comprehensive income 19,133 20,264
Retained earnings 763,386 636,285
Treasury stock, at cost (82,970) (66,393)
--------------- ---------------
1,174,808 1,033,039
--------------- ---------------
Total liabilities and shareholders' equity $ 5,670,475 $ 5,276,170
=============== ===============
DELPHI FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
12/31/2006 12/31/2005 12/31/2004
--------------- --------------- ---------------
Operating activities:
Net income $ 142,068 $ 113,334 $ 123,543
Adjustments to reconcile net income to net cash provided
by operating activities:
Change in policy liabilities and policyholder accounts 270,620 227,188 201,571
Net change in reinsurance receivables and payables 5,160 13,818 (16,568)
Amortization, principally the cost of business acquired
and investments 70,935 62,014 49,325
Deferred costs of business acquired (100,260) (89,601) (84,627)
Net realized losses (gains) on investments 858 (9,003) (15,460)
Net change in federal income tax liability 28,590 16,924 24,057
Other (15,046) (25,274) (17,746)
--------------- --------------- ---------------
Net cash provided by operating activities 402,925 309,400 264,095
--------------- --------------- ---------------
Investing activities:
Purchases of investments and loans made (1,119,894) (1,946,034) (1,881,235)
Sales of investments and receipts from repayment of loans 747,841 1,408,018 1,390,290
Maturities of investments 206,223 180,292 211,483
Net change in short-term investments (305,849) 1,484 18,991
Change in deposit in separate account (2,008) (5,876) (5,090)
--------------- --------------- ---------------
Net cash used by investing activities (473,687) (362,116) (265,561)
--------------- --------------- ---------------
Financing activities:
Deposits to policyholder accounts 200,820 102,708 140,173
Withdrawals from policyholder accounts (131,229) (101,701) (88,251)
Borrowings under revolving credit facility 31,000 88,000 38,000
Principal payments under revolving credit facility (2,000) (11,000) (24,000)
Change in liability for Federal Home Loan Bank advances - (30,000) (65,000)
Other financing activities (8,118) 8,878 6,135
--------------- --------------- ---------------
Net cash provided by financing activities 90,473 56,885 7,057
--------------- --------------- ---------------
Increase in cash 19,711 4,169 5,591
Cash at beginning of period 28,493 24,324 18,733
--------------- --------------- ---------------
Cash at end of period $ 48,204 $ 28,493 $ 24,324
=============== =============== ===============