WILMINGTON, Del.–(BUSINESS WIRE)–Delphi Financial Group, Inc. (NYSE: DFG) announced today operating earnings of $48.7 million or $0.86 per diluted share for the second quarter of 2011 compared to $43.8 million or $0.79 per share for the second quarter of 2010. Net income attributable to shareholders was $49.4 million or $0.87 per diluted share, compared to $34.7 million or $0.62 per share in the second quarter of 2010.
Highlights for the second quarter include the following:
- Core premium income of $366.5 million, an increase of 8.5% from the second quarter of 2010;
- Annuity sales of $149.0 million, an increase of 90.9% from the second quarter of 2010;
- Total premium and fee income of $385.0 million, an increase of 9.2% from the second quarter of 2010;
- Combined ratio of 93.8%, a decrease of 80 basis points from the second quarter of 2010;
- Net investment income of $83.2 million, an increase of 6.3% from the second quarter of 2010;
- Annualized operating return on beginning shareholders’ equity in the second quarter of 2011 of 12.2%, compared to 12.9% in the second quarter of 2010;
- Diluted book value per share of $29.28 at June 30, 2011, up 14.2% from June 30, 2010.
Robert Rosenkranz, Chairman and Chief Executive Officer, said, “Our financial results in the second quarter kept us on track to meet Delphi’s targets for the year. We are pleased with this performance, although investment results were somewhat below our expectations. Operating earnings benefited from strong underwriting margins in our insurance businesses. Reliance Standard’s modest premium growth and lower production in the quarter reflect our ongoing commitment to pricing and underwriting discipline. Safety National continued to expand our market leadership position in the excess workers’ compensation market and achieved robust growth in assumed workers’ compensation reinsurance. This positive momentum carried over into Safety National’s important July renewal period in excess workers’ compensation, which is not included in second quarter results, as we achieved high renewal ratios, strong new production and solid increases in rates and self-insured retentions.”
Mr. Rosenkranz added, “Delphi continues to maintain excellent financial flexibility to support the growth of our insurance and asset accumulation businesses, with shareholders’ equity at an all-time high, debt to total capitalization of 16.9% and holding company financial resources at a comfortable $140 million.”
Group Employee Benefit Segment
Core group employee benefit premiums for the second quarter of 2011 were $366.5 million, up 8.5% from $337.7 million in the second quarter of 2010. Core premiums at Delphi’s Safety National subsidiary rose 16.6% while core premiums at Delphi’s Reliance Standard Life subsidiary increased 5.9%. Core production in the second quarter of 2011 rose 5.3%, with core production at Safety National increasing 77.2% and core production at Reliance Standard Life decreasing 7.9%.
Delphi’s group employee benefit combined ratio in the second quarter of 2011 improved to 93.8% compared to 94.6% for the second quarter of 2010 and 95.3% for the full year 2010. Delphi’s group employee benefit loss ratio in the second quarter of 2011 improved by 200 basis points over the fourth quarter of 2010, resulting from the effect of better pricing and other actions taken to address elevated long-term disability claims incidence experienced in the second half of 2010.
Operating income for the group employee benefit segment for the second quarter of 2011 was $73.1 million, an 11.9% increase from $65.3 million in the second quarter of 2010.
Asset Accumulation Segment
Delphi’s asset accumulation segment, which is primarily focused on individual fixed annuities, achieved new annuity sales of $149.0 million in the second quarter of 2011, an increase of 90.9% from $78.0 million in the second quarter of 2010. The strong growth in annuity sales reflected continued favorable market conditions in Delphi’s wholesaler distribution channel. Funds under management at June 30, 2011 were $1.9 billion, up from $1.5 billion at June 30, 2010.
Operating income for the asset accumulation segment was $9.6 million, a decrease of 14.9% from $11.3 million the second quarter of 2010. Profitability was impacted by lower than expected investment income.
Delphi’s net investment income in the second quarter of 2011 was $83.2 million, a gain of 6.3% from $78.2 million in the second quarter of 2010. Invested assets at June 30, 2011 were $7.0 billion compared to $6.1 billion at June 30, 2010. The tax equivalent yield on the Company’s investment portfolio in the second quarter of 2011 was 5.3% compared to 5.6% in the second quarter of 2010.
Investment income was impacted in the second quarter by the challenging environment for fixed income securities, with interest rates trending lower and spreads remaining tight. In addition, returns from the Company’s alternative investments, which have historically provided enhanced investment income and reduced overall portfolio volatility, were essentially flat in the quarter.
Delphi reported after-tax net realized investment gains in the second quarter of 2011 of $0.7 million, including other-than-temporary impairments (“OTTI”) of $(3.5) million, compared with after-tax net realized investment losses of $(9.0) million, including OTTI of $(13.5) million, in the same quarter a year ago.
Capitalization and Shareholders’ Equity
Shareholders’ equity at June 30, 2011 increased 17% to a record $1.7 billion from $1.4 billion at June 30, 2010. Diluted book value per share reached a record $29.28 at June 30, 2011, up 14.2% from $25.64 at June 30, 2010.
Total capitalization at June 30, 2011 was $2.2 billion, including $375 million of corporate debt and $175 million of junior subordinated debentures.
On July 27, 2011 at 11:00 AM (Eastern time), Delphi will broadcast the Company’s second quarter 2011 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, 2011. Investors can also download Delphi’s second quarter 2011 Financial Supplement from the Company’s website at www.delphifin.com/financial/stats11.html.