<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the Quarterly Period Ended March 31, 2004

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period from _________ to __________

Commission File Number 001-11462

                          DELPHI FINANCIAL GROUP, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                <C>                                <C>
            Delaware                       (302) 478-5142                        13-3427277
-------------------------------    -------------------------------    -------------------------------
(State or other jurisdiction of    (Registrant's telephone number,    (I.R.S. Employer Identification
 incorporation or organization)          including area code)                      Number)
</TABLE>

<TABLE>
<S>                                                                             <C>
1105 North Market Street, Suite 1230, P.O. Box 8985, Wilmington, Delaware         19899
------------------------------------------------------------------------------------------
              (Address of principal executive offices)                          (Zip Code)
</TABLE>

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to filing requirements
for the past 90 days:

                Yes   [X]                                No [ ]

   Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).

                Yes   [X]                                No  [ ]

  As of April 30, 2004, the Registrant had 27,281,426 shares of Class A Common
        Stock and 4,177,357 shares of Class B Common Stock outstanding.

<PAGE>

                          DELPHI FINANCIAL GROUP, INC.
                                    FORM 10-Q
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                              AND OTHER INFORMATION

<TABLE>
<CAPTION>
                                                                                                        Page
                                                                                                        ----
<S>                                                                                                     <C>
PART I.        FINANCIAL INFORMATION (UNAUDITED)

               Consolidated Statements of Income for the Three
                   Months Ended March 31, 2004 and 2003................................................   3

               Consolidated Balance Sheets at March 31, 2004 and
                   December 31, 2003...................................................................   4

               Consolidated Statements of Shareholders' Equity for the
                   Three Months Ended March 31, 2004 and 2003..........................................   5

               Consolidated Statements of Cash Flows for the
                   Three Months Ended March 31, 2004 and 2003..........................................   6

               Notes to Consolidated Financial Statements..............................................   7

               Management's Discussion and Analysis of Financial
                   Condition and Results of Operations.................................................  11

PART II.       OTHER INFORMATION

               Item 6.  Exhibits and Reports on Form 8-K...............................................  19

               Signatures..............................................................................  19
</TABLE>

                                      -2-
<PAGE>

                          PART I. FINANCIAL INFORMATION
                  DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                  Three Months Ended
                                                                      March 31,
                                                                 -------------------
                                                                   2004       2003
                                                                 --------   --------
<S>                                                              <C>        <C>
Revenue:
   Premium and fee income ................................       $200,710   $171,761
   Net investment income .................................         52,543     45,705
   Net realized investment gains .........................          5,221      1,215
                                                                 --------   --------
                                                                  258,474    218,681
                                                                 --------   --------
Benefits and expenses:
   Benefits, claims and interest credited to policyholders        150,102    130,414
   Commissions ...........................................         13,423     11,989
   Amortization of cost of business acquired .............         14,651     12,337
   Other operating expenses ..............................         31,701     28,706
                                                                 --------   --------
                                                                  209,877    183,446
                                                                 --------   --------

      Operating income ...................................         48,597     35,235

Interest expense:
   Corporate debt ........................................          3,436      2,269
   Junior subordinated deferrable interest debentures ....          1,105        839
                                                                 --------   --------
                                                                    4,541      3,108
                                                                 --------   --------

      Income before income tax expense ...................         44,056     32,127

Income tax expense .......................................         13,435      9,631
                                                                 --------   --------

      Net income .........................................       $ 30,621   $ 22,496
                                                                 ========   ========

Basic results per share of common stock:
   Net income ............................................       $   0.97   $   0.72

Diluted results per share of common stock:
   Net income ............................................       $   0.94   $   0.71

Dividends paid per share of common stock .................       $   0.08   $   0.05
</TABLE>

                 See notes to consolidated financial statements.

                                      -3-
<PAGE>

                  DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                  March 31,     December 31,
                                                                                    2004           2003
                                                                                 -----------    -----------
<S>                                                                              <C>            <C>
Assets:
   Investments:
      Fixed maturity securities, available for sale ..........................   $ 2,925,126    $ 2,862,045
      Short-term investments .................................................       110,001        114,752
      Other investments ......................................................       278,996        225,957
                                                                                 -----------    -----------
                                                                                   3,314,123      3,202,754
   Cash ......................................................................        23,375         18,733
   Cost of business acquired .................................................       183,682        183,665
   Reinsurance receivables ...................................................       401,434        409,620
   Goodwill ..................................................................        93,929         93,929
   Securities lending collateral .............................................       187,820              -
   Other assets ..............................................................       203,186        176,170
   Assets held in separate account ...........................................        84,139         92,661
                                                                                 -----------    -----------
      Total assets ...........................................................   $ 4,491,688    $ 4,177,532
                                                                                 ===========    ===========

Liabilities and Shareholders' Equity:
   Future policy benefits:
      Life ...................................................................   $   252,387    $   246,634
      Disability and accident ................................................       452,579        439,158
   Unpaid claims and claim expenses:
      Life ...................................................................        44,179         47,395
      Disability and accident ................................................       196,895        189,740
      Casualty ...............................................................       569,180        572,690
   Policyholder account balances .............................................       972,845        961,356
   Corporate debt ............................................................       154,750        143,750
   Junior subordinated deferrable interest debentures underlying
      company-obligated mandatorily redeemable capital
      securities issued by unconsolidated subsidiaries .......................        59,762              -
   Securities lending payable ................................................       187,820              -
   Other liabilities and policyholder funds ..................................       662,073        642,906
   Liabilities related to separate account ...................................        84,139         79,413
                                                                                 -----------    -----------
      Total liabilities ......................................................     3,636,609      3,323,042
                                                                                 -----------    -----------

   Company-obligated mandatorily redeemable capital securities of subsidiaries             -         56,050
                                                                                 -----------    -----------

   Shareholders' equity:
      Preferred Stock, $.01 par; 10,000,000 shares authorized ................             -              -
      Class A Common Stock, $.01 par; 40,000,000 shares authorized;
         29,818,083 and 29,457,024 shares issued and outstanding, respectively           298            295
      Class B Common Stock, $.01 par; 20,000,000 shares authorized;
         4,177,357 shares issued and outstanding .............................            42             42
      Additional paid-in capital .............................................       396,141        383,573
      Accumulated other comprehensive income .................................        68,372         52,428
      Retained earnings ......................................................       449,204        421,080
      Treasury stock, at cost; 2,560,035 shares of Class A Common Stock ......       (58,978)       (58,978)
                                                                                 -----------    -----------
         Total shareholders' equity ..........................................       855,079        798,440
                                                                                 -----------    -----------
             Total liabilities and shareholders' equity ......................   $ 4,491,688    $ 4,177,532
                                                                                 ===========    ===========
</TABLE>

                 See notes to consolidated financial statements.

                                      -4-
<PAGE>

                  DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                       Accumulated
                                     Class A     Class B   Additional     Other
                                     Common      Common      Paid-in  Comprehensive   Retained    Treasury
                                      Stock       Stock      Capital     Income       Earnings      Stock        Total
                                    ---------   ---------   ---------    ------      ---------    ---------    ---------
<S>                                 <C>         <C>        <C>        <C>            <C>          <C>          <C>
Balance, January 1, 2003 ........   $     189   $      32   $ 373,356   $  30,003    $ 329,574    $ (51,499)   $ 681,655
                                                                                                               ---------

Net income ......................           -           -           -           -       22,496            -       22,496
Other comprehensive income:
   Decrease in net unrealized
     appreciation on investments            -           -           -      (3,024)           -            -       (3,024)
   Increase in net unrealized
     loss on cash flow hedge ....           -           -           -        (774)           -            -         (774)
                                                                                                               ---------
Comprehensive income ............           -           -           -           -            -            -       18,698
Issuance of stock and exercise of
   stock options ................           -           -         533           -            -            -          533
Acquisition of treasury stock ...           -           -           -           -            -       (7,479)      (7,479)
Cash dividends ..................           -           -           -           -       (1,651)           -       (1,651)
                                    ---------   ---------   ---------   ---------    ---------    ---------    ---------

Balance, March 31, 2003 .........   $     189   $      32   $ 373,889   $  26,205    $ 350,419    $ (58,978)   $ 691,756
                                    =========   =========   =========   =========    =========    =========    =========

Balance, January 1, 2004 ........   $     295   $      42   $ 383,573   $  52,428    $ 421,080    $ (58,978)   $ 798,440
                                                                                                               ---------

Net income ......................           -           -           -           -       30,621            -       30,621
Other comprehensive income:
   Increase in net unrealized
     appreciation on investments            -           -           -      15,748            -            -       15,748
   Decrease in net loss
     on cash flow hedge .........           -           -           -         196            -            -          196
                                                                                                               ---------
Comprehensive income ............                                                                                 46,565
Issuance of stock and exercise of
   stock options ................           3           -      12,022           -            -            -       12,025
Stock based compensation ........           -           -         546           -            -            -          546
Cash dividends ..................           -           -           -           -       (2,497)           -       (2,497)
                                    ---------   ---------   ---------   ---------    ---------    ---------    ---------

Balance, March 31, 2004 .........   $     298   $      42   $ 396,141   $  68,372    $ 449,204    $ (58,978)   $ 855,079
                                    =========   =========   =========   =========    =========    =========    =========
</TABLE>

                 See notes to consolidated financial statements.

                                      -5-
<PAGE>

                  DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                  Three Months Ended
                                                                                       March 31,
                                                                                ----------------------
                                                                                   2004        2003
                                                                                ---------    ---------
<S>                                                                             <C>          <C>
Operating activities:
   Net income ...............................................................   $  30,621    $  22,496
   Adjustments to reconcile net income to net cash provided
        by operating activities:
      Change in policy liabilities and policyholder accounts ................      53,665       60,689
      Net change in reinsurance receivables and payables ....................      13,330        1,865
      Amortization, principally the cost of business acquired and investments       6,094        5,353
      Deferred costs of business acquired ...................................     (25,331)     (22,860)
      Net realized gains on investments .....................................      (5,221)      (1,215)
      Net change in trading account securities ..............................       3,852       (3,422)
      Net change in federal income tax liability ............................      15,374        9,605
      Other .................................................................     (29,030)     (31,191)
                                                                                ---------    ---------
        Net cash provided by operating activities ...........................      63,354       41,320
                                                                                ---------    ---------

Investing activities:
   Purchases of investments and loans made ..................................    (612,501)    (337,577)
   Sales of investments and receipts from repayment of loans ................     509,625      286,852
   Maturities of investments ................................................      38,976       38,793
   Net change in short-term investments .....................................       4,751      (10,519)
   Change in deposit in separate account ....................................        (762)        (324)
                                                                                ---------    ---------
        Net cash used by investing activities ...............................     (59,911)     (22,775)
                                                                                ---------    ---------

Financing activities:
   Deposits to policyholder accounts ........................................      30,704       24,788
   Withdrawals from policyholder accounts ...................................     (21,618)     (19,245)
   Borrowings under revolving credit facility ...............................      11,000       14,000
   Principal payments under revolving credit facility .......................           -       (4,000)
   Change in liability for Federal Home Loan Bank advances ..................     (25,000)           -
   Other financing activities ...............................................       6,113       (8,597)
                                                                                ---------    ---------
        Net cash provided by financing activities ...........................       1,199        6,946
                                                                                ---------    ---------

Increase in cash ............................................................       4,642       25,491
Cash at beginning of period .................................................      18,733       27,669
                                                                                ---------    ---------
        Cash at end of period ...............................................   $  23,375    $  53,160
                                                                                =========    =========
</TABLE>

                 See notes to consolidated financial statements.

                                      -6-
<PAGE>

                  DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE A - SIGNIFICANT ACCOUNTING POLICIES

The financial statements of Delphi Financial Group, Inc. (the "Company," which
term includes the Company and its consolidated subsidiaries unless the context
indicates otherwise) included herein were prepared in conformity with accounting
principles generally accepted in the United States ("GAAP") for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements. The information
furnished includes all adjustments and accruals of a normal recurring nature
which are, in the opinion of management, necessary for a fair presentation of
results for the interim periods. Operating results for the three months ended
March 31, 2004 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2004. For further information refer to
the consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 2003.
Capitalized terms used herein without definition have the meanings ascribed to
them in the Company's annual report on Form 10-K for the year ended December 31,
2003.

Stock Options

Prior to the second quarter of 2003, the Company accounted for its granted stock
options according to Accounting Principles Board Opinion ("APB") No. 25,
"Accounting for Stock Issued to Employees" and related interpretations. All
options granted prior to 2003 had an intrinsic value of zero on the date of
grant under APB No. 25, and, therefore, no stock-based employee compensation
expense is recognized in the Company's financial statements for these options.
During the second quarter of 2003, the Company adopted, effective January 1,
2003, the fair value recognition provisions of Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation." Under the
prospective method provisions of SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure," the recognition provisions of SFAS
No. 123 will be applied to all option awards granted, modified, or settled after
January 1, 2003. The amount of the expense related to stock-based compensation
included in the determination of the Company's net income for the first three
months of 2004 and 2003 is lower than if these provisions had been applied to
all awards granted since the original January 1, 1995 effective date of SFAS No.
123. The following table illustrates the effect on net income and earnings per
share as if the Company had begun to apply the fair value recognition provisions
of SFAS No. 123 as of its original effective date:

<TABLE>
<CAPTION>
                                                                                                   Three Months Ended
                                                                                                        March 31,
                                                                                                  ---------------------
                                                                                                     2004        2003
                                                                                                     ----        ----
<S>                                                                                               <C>         <C>
Net income, as reported.......................................................................    $  30,621   $  22,496
Add: Stock-based employee compensation expense included
   in reported net income, net of related tax effects.........................................          644           -
Deduct:  Stock-based employee compensation expense
    determined under the fair value based method for all awards,
    net of related tax effects................................................................         (705)       (459)
                                                                                                  ---------   ---------
Pro forma net income..........................................................................    $  30,560   $  22,037
                                                                                                  =========   =========

Earnings per share:

  Basic, as reported..........................................................................    $    0.97   $    0.72
  Basic, pro forma............................................................................         0.96        0.71

  Diluted, as reported........................................................................    $    0.94   $    0.71
  Diluted, pro forma..........................................................................         0.93        0.69
</TABLE>

                                      -7-

<PAGE>

                  DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)

NOTE A - SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

Accounting Changes

Effective January 1, 2004, the Company adopted the American Institute of
Certified Public Accountants' Statement of Position ("SOP") No. 03-1,
"Accounting and Reporting by Insurance Enterprises for Certain Nontraditional
Long-Duration Contracts and for Separate Accounts." Prior to adoption of SOP No.
03-1, the Company was required to report the aggregate of all separate account
assets as a single caption on its balance sheet, which was titled "Assets held
in separate account." Under the provisions of SOP No. 03-1, the Company is
required to allocate its proportionate interest in the separate account's assets
to the corresponding captions in the Company's balance sheet. At March 31, 2004,
the Company's proportionate interest in the separate account's assets was $14.0
million. SOP No. 03-1 also provides specific guidance for accounting for certain
nontraditional long-duration insurance contracts. Nontraditional long-duration
insurance contracts are annuity and life products which combine fixed and
variable features and that are not covered by specific accounting guidance in
SFAS No. 60, "Accounting and Reporting by Insurance Enterprises," or SFAS No.
97, "Accounting and Reporting by Insurance Enterprises for Certain Long-Duration
Contracts and for Realized Gains and Losses from the Sale of Investments." The
Company offers nontraditional long-duration insurance contracts such as annuity
products with a market value adjustment feature and first year bonus interest
rates. The adoption of SOP No. 03-1 did not have a material effect on the
financial position or results of operations of the Company.

The Company adopted revised Financial Accounting Standards Board Interpretation
("FIN") No. 46, "Consolidation of Variable Interest Entities," as of March 31,
2004. The revised interpretation changed the conceptual framework for
determining if an entity holds a controlling interest in a variable interest
entity and required the Company to deconsolidate its subsidiaries that hold
junior subordinated deferrable interest debentures of the Company which underlie
the Company-obligated mandatorily redeemable capital securities of these
subsidiaries. Therefore, at March 31, 2004, the Company presented in its
consolidated financial statements the junior subordinated deferrable interest
debentures of $59.8 million as a liability and its interest of $3.7 million in
the subsidiaries that hold these debentures as a component of other assets. The
adoption of revised FIN 46 did not have a material effect on the Company's
financial position, results of operations or ability to comply with its debt
covenants.

NOTE B - INVESTMENTS

At March 31, 2004, the Company had fixed maturity securities available for sale
with a carrying value and a fair value of $2,925.1 million and an amortized cost
of $2,780.9 million. At December 31, 2003, the Company had fixed maturity
securities available for sale with a carrying value and a fair value of $2,862.0
million and an amortized cost of $2,750.9 million.

The summarized aggregate unaudited net income for the entities in which the
balances with independent investment managers have been invested was $452.9
million and $262.3 million for the first three months of 2004 and 2003,
respectively.

NOTE C - SECURITIES LENDING

The Company maintains a securities lending program under which certain
securities from its portfolio are loaned to other institutions for short periods
of time. The Company maintains full ownership rights to the securities loaned
and continues to earn interest and dividends on them. Accordingly, such
securities are included in invested assets. The Company obtains collateral for
such loans at 102% of the market value of a loaned security. The Company's
institutional lending agent monitors the market value of the securities loaned
and obtains additional collateral as necessary. The collateral is deposited by
the borrower with, and held by, such agent. Cash collateral is invested by such
agent to generate additional income according to specified guidelines. The
securities lending collateral is reported as an asset with a corresponding
liability reflected for the obligation to return the collateral. At March 31,
2004, the Company had securities on loan with a market value of $183.9 million
and cash collateral of $187.8 million.

                                      -8-
<PAGE>

                  DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)

NOTE D - SEGMENT INFORMATION

<TABLE>
<CAPTION>
                                       Three Months Ended
                                            March 31,
                                     ----------------------
                                       2004         2003
                                       ----         ----
                                     (dollars in thousands)
<S>                                  <C>          <C>
Revenues:
   Group employee benefit products   $ 225,035    $ 192,014
   Asset accumulation products ...      20,560       20,384
   Other (1) .....................       7,658        5,068
                                     ---------    ---------
                                       253,253      217,466
   Net realized investment gains         5,221        1,215
                                     ---------    ---------
                                     $ 258,474    $ 218,681
                                     =========    =========
Operating income:
   Group employee benefit products   $  39,487    $  33,476
   Asset accumulation products ...       5,137        3,665
   Other (1) .....................      (1,248)      (3,121)
                                     ---------    ---------
                                        43,376       34,020
   Net realized investment gains .       5,221        1,215
                                     ---------    ---------
                                     $  48,597    $  35,235
                                     =========    =========
</TABLE>

(1)   Consists of operations that do not meet the quantitative thresholds for
      determining reportable segments and includes integrated disability and
      absence management services and certain corporate activities.

NOTE E - COMPREHENSIVE INCOME

Total comprehensive income is comprised of net income and other comprehensive
income, which includes the change in unrealized gains and losses on securities
available for sale and the change in the loss on the cash flow hedge described
in the Company's annual report on Form 10-K for the year ended December 31,
2003. Total comprehensive income was $46.6 million and $18.7 million for the
first three months of 2004 and 2003, respectively.

                                      -9-

<PAGE>

                  DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)

NOTE F - COMPUTATION OF RESULTS PER SHARE

Prior period results per share and applicable share amounts have been restated
to reflect the 3-for-2 common stock split distributed in the form of a 50% stock
dividend on December 22, 2003. The following table sets forth the calculation of
basic and diluted results per share (dollars in thousands, except per share
data):

<TABLE>
<CAPTION>
                                                                  Three Months Ended
                                                                       March 31,
                                                                  ------------------
                                                                    2004      2003
                                                                    ----      ----
<S>                                                               <C>        <C>
Numerator:
   Net income ..................................................   $30,621   $22,496
                                                                   =======   =======

Denominator:
   Weighted average common shares outstanding ..................    31,691    31,235
     Effect of dilutive securities .............................     1,015       586
                                                                   -------   -------
   Weighted average common shares outstanding, assuming dilution    32,706    31,821
                                                                   =======   =======

Basic results per share of common stock:
   Net income ..................................................   $  0.97   $  0.72

Diluted results per share of common stock:
   Net income ..................................................   $  0.94   $  0.71
</TABLE>

NOTE G - CONTINGENCIES

In the course of its business, the Company is a party to litigation and other
proceedings, primarily involving its insurance operations. In some cases, these
proceedings entail claims against the Company for punitive damages and similar
types of relief. The ultimate disposition of such pending litigation and
proceedings is not expected to have a material adverse effect on the Company's
consolidated financial position. In addition, incident to its discontinued
products, the Company is currently a party to two separate arbitrations arising
out of two accident and health reinsurance arrangements in which it and other
companies formerly were participating reinsurers. At issue in both arbitrations,
among other things, is whether certain reinsurance risks were validly ceded to
the Company. The hearings in these arbitrations are scheduled to be held in the
current year. While management believes that in both cases the Company has
substantial legal grounds for avoiding the reinsurance risks at issue or
obtaining other relief, it is not at this time possible to predict the ultimate
outcome of these arbitrations, nor is it feasible to provide reasonable ranges
of potential losses. In the opinion of management, such arbitrations, when
ultimately resolved, will not individually or collectively have a material
adverse effect on the Company's consolidated financial position.

                                      -10-

<PAGE>

                          DELPHI FINANCIAL GROUP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

The Company, through its subsidiaries, underwrites a diverse portfolio of group
employee benefit products, primarily group life, disability, and excess workers'
compensation insurance. Revenues from this group of products are primarily
comprised of earned premiums and investment income. The profitability of group
employee benefit products is affected by, among other things, differences
between actual and projected claims experience, the retention of existing
customers and the Company's ability to attract new customers, change premium
rates and contract terms and control administrative expenses. The Company
transfers its exposure to some group employee benefit risks through reinsurance
ceded arrangements with other insurance and reinsurance companies. Therefore,
the profitability of group employee benefit products is affected by the amount,
cost and terms of reinsurance obtained by the Company. Profitability of certain
group employee benefit products is also affected by the difference between the
yield achieved on invested assets and the discount rate used to calculate the
related reserves. The Company is currently experiencing particularly favorable
market conditions for its excess workers' compensation products, and believes
that this trend will continue for some time, due to the growing shift among
employers toward self-insuring their workers' compensation risks in light of
higher primary workers' compensation rates. For its other group employee benefit
products, the Company is maintaining its underwriting discipline under
competitive market conditions, and is seeking to increase the size of its sales
force in order to enhance its focus on the small case niche (insured groups of
10 to 500 individuals), including employers which are first-time providers of
these employee benefits, which it believes to offer opportunities for superior
profitability.

The Company also operates an asset accumulation business that focuses primarily
on offering fixed annuities to individuals. Deposits from the Company's asset
accumulation business consist of new annuity sales, which are recorded as
liabilities rather than as premiums. Revenues from the Company's asset
accumulation business are primarily comprised of investment income earned on the
funds under management. The profitability of asset accumulation products is
primarily dependent on the spread achieved between the return on investments and
the interest credited to annuity holders. The Company is disciplined in setting
the crediting rates offered on its asset accumulation products in order to
achieve its targeted interest rate spreads on these products, and is willing to
accept lower levels of sales on these products when market conditions make these
targeted spreads more difficult to achieve.

The following discussion and analysis of the results of operations and financial
condition of the Company should be read in conjunction with the Consolidated
Financial Statements and related notes included in this document, as well as the
Company's annual report on Form 10-K for the year ended December 31, 2003.
Capitalized terms used herein without definition have the meanings ascribed to
them in the Company's annual report on Form 10-K for the year ended December 31,
2003. The preparation of financial statements in conformity with GAAP requires
management, in some instances, to make judgments about the application of these
principles. The amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period could differ materially from the amounts reported if different
conditions existed or different judgments were utilized. A discussion of how
management applies certain critical accounting policies is presented in "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" of the Company's annual report on Form 10-K for the year ended
December 31, 2003 under the caption "Critical Accounting Policies" and should be
read in conjunction with the following discussion and analysis of results of
operations and financial condition of the Company. In addition, a discussion of
uncertainties and contingencies which can affect actual results and could cause
actual results to ultimately differ materially from those described below can be
found below under the caption "Forward-Looking Statements And Cautionary
Statements Regarding Certain Factors That May Affect Future Results."

RESULTS OF OPERATIONS

Summary of Results. Net income was $30.6 million, or $0.94 per diluted share,
for the first quarter of 2004 as compared to $22.5 million, or $0.71 per diluted
share, for the first quarter of 2003. Net income in the first quarters of 2004
and 2003 included realized investment gains (net of the related income tax
expense) of $3.4 million, or $0.11 per diluted share, and $0.8 million, or $0.03
per diluted share, respectively. The increase in net income in the first quarter
of 2004 is also attributable to growth in income from group employee benefit and
asset accumulation products and net investment income partially offset by an
increase in interest expense. Premiums from the Company's core group employee
benefit products increased 17% in the first quarter of 2004 and the combined
ratio (loss ratio plus expense ratio) remained in the same range as the first
quarter of 2003. The weighted average annualized crediting rate on the Company's
asset accumulation products, which reflects the effects of the first year bonus
crediting rate on certain newly issued products, decreased from 5.5% in the
first quarter of 2003 to 4.8% in the first quarter of 2004. Net investment
income increased 15% in the first quarter of 2004 primarily due to a 14%
increase in

                                      -11-

<PAGE>

average invested assets. The increase in interest expense resulted from the
Company's issuance of $143.8 million of 8.00% Senior Notes due 2033 (the "2033
Senior Notes") and $20.6 million principal amount of floating rate junior
subordinated deferrable interest debentures due 2033 (the "2003 Junior
Debentures") in May 2003. The 2003 Junior Debentures were issued in connection
with the issuance of $20.0 million liquidation amount of Floating Rate Capital
Securities (the "2003 Capital Securities") by Delphi Financial Statutory Trust I
(the "Trust") and the related purchase by the Company of all of the common
securities of the Trust.

Management believes the non-GAAP financial measure of "operating earnings" is
informative when analyzing the trends relating to the Company's insurance
operations. Operating earnings exclude realized investment gains and losses
because these items arise from events that, to a significant extent, are within
management's discretion and can fluctuate significantly, thus distorting
comparisons between periods. Investment gains and losses may be realized based
on management's decision to dispose of an investment or 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
decisions, and the Company understands that analysts and investors typically
utilize measures of this type when evaluating the financial performance of
insurers. However, realized investment gains and losses are likely to occur
periodically and should not be considered as nonrecurring items. Further,
operating earnings should not be considered a substitute for net income as an
indication of the Company's overall performance and may not be calculated in the
same manner as similarly titled captions in other companies' financial
statements.

Operating earnings for the Company, consisting of net income adjusted to exclude
realized investment gains (net of the related income tax expense), were $27.2
million, or $0.83 per diluted share for the first quarter of 2004 as compared to
$21.7 million, or $0.68 per diluted share for the first quarter of 2003. The
increase in operating earnings in the current period is primarily attributable
to the growth in income from group employee benefit and asset accumulation
products and net investment income partially offset by the increase in interest
expense.

Premium and Fee Income. Premium and fee income for the first quarter of 2004 was
$200.7 million as compared to $171.8 million for the first quarter of 2003, an
increase of 17%. Premiums from core group employee benefit products increased
17% to $189.1 million for the first quarter of 2004 from $162.2 million for the
first quarter of 2003. This increase reflects normal growth in employment and
salary levels for the Company's existing customer base, price increases, new
business production and a decrease in premiums ceded by the Company to
reinsurers for these products. Within core group employee benefit products,
premiums from excess workers' compensation insurance for self-insured employers
increased 30% to $44.8 million for the first quarter of 2004 from $34.4 million
for the first quarter of 2003. This increase was primarily due to the favorable
pricing environment and strong demand for this product driven by a growing shift
among employers toward self-insuring their workers' compensation risks due to
higher primary workers' compensation rates. SNCC obtained average price
increases of 15% in connection with its renewals of insurance coverage during
the first quarter of 2004, and has continued to obtain significant improvements
in contract terms, in particular higher SIR levels, in these renewals. On
average, SIRs increased 9% in the first three months of 2004. Excess workers'
compensation new business production, which represents the amount of new
annualized premium sold, for the important January renewal season (which spans
the period from December through March) was $11.8 million for 2004 and $12.0
million for 2003. In addition, retention of existing customers for excess
workers' compensation products for the first quarter of 2004 was higher than the
first quarter of 2003. Premiums from the Company's other core group employee
benefit products increased 13% to $144.3 million for the first quarter of 2004
from $127.8 million for the first quarter of 2003, reflecting new business
production and a decrease in premiums ceded by the Company to reinsurers for
these products. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources - Reinsurance." New
business production for the Company's other core group employee benefit products
was $43.2 million for the first quarter of 2004 as compared with the
particularly strong production for the first quarter of 2003 of $47.0 million.
The level of production achieved in 2004 reflects the Company's focus on the
small case niche (insured groups of 10 to 500 individuals) which resulted in a
13% increase in production based on the number of cases sold as compared to the
first quarter of 2003. The Company continues to maintain its underwriting
discipline under competitive market conditions for these products and to
implement price increases for certain existing disability and group life
customers.

Deposits from the Company's asset accumulation products were $29.3 million for
the first quarter of 2004 as compared to $23.8 million for the first quarter of
2003. These deposits consist of new annuity sales, which are recorded as
liabilities rather than as premiums. The increase in deposits from the Company's
asset accumulation products in 2004 was primarily due to an increase in the
number of independent agents distributing the Company's annuity products. The
interest rate spreads available on these products remained below average
throughout 2003 and the first quarter of 2004. The Company continues to maintain
its discipline in setting the crediting rates offered on its asset accumulation
products.

                                      -12-

<PAGE>

Net Investment Income. Net investment income for the first quarter of 2004 was
$52.5 million as compared to $45.7 million for the first quarter of 2003, an
increase of 15%. This increase reflects an increase in average invested assets
to $3,231.3 million for the first quarter of 2004 from $2,834.9 million for the
first quarter of 2003. The tax equivalent weighted average annual yield on
invested assets was 6.7% for the first quarter of 2004 and 2003.

Net Realized Investment Gains. Net realized investment gains were $5.2 million
for the first quarter of 2004 as compared to $1.2 million for the first quarter
of 2003. The Company's investment strategy results in periodic sales of
securities and, therefore, the recognition of realized investment gains and
losses. During the first quarters of 2004 and 2003, the Company recognized $7.6
million and $6.3 million, respectively, of net gains on the sales of securities.
The Company monitors its investments on an ongoing basis. When the market value
of a security declines below its cost, and management judges the decline to be
other than temporary, the security is written down to fair value, and the
decline is reported as a realized investment loss. In the first quarters of 2004
and 2003, the Company recognized $2.4 million and $5.1 million, respectively, of
losses due to the other than temporary declines in the market values of certain
fixed maturity securities.

The losses of this type in the first quarter of 2004 ($1.5 million on an
after-tax basis) resulted primarily from credit quality-related deterioration in
certain municipal and asset-backed securities, and the Company may recognize
additional losses of this type in the future. The Company anticipates that if
certain other existing declines in security values are determined to be other
than temporary, it may recognize additional investment losses in the range of $2
million to $5 million, on an after-tax basis, with respect to the relevant
securities. However, the extent of any such losses will depend on future market
developments and changes in security values, and such losses may be outside this
range. The Company continuously monitors the affected securities pursuant to its
procedures for evaluation for other than temporary impairment in valuation. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Forward-Looking Statements and Cautionary Statements Regarding
Certain Factors That May Affect Future Results" for a description of these
procedures, which take into account a number of factors. It is not possible to
predict the extent of any future changes in value, positive or negative, or the
results of the future application of these procedures, with respect to these
securities. There can be no assurance that the Company will realize investment
gains in the future in an amount sufficient to offset any such losses.

Benefits and Expenses. Policyholder benefits and expenses were $209.9 million
for the first quarter of 2004 as compared to $183.4 million for the first
quarter of 2003, an increase of 14%. This increase primarily reflects the
increase in premiums from the Company's group employee benefit products
discussed above. The combined ratio (loss ratio plus expense ratio) for the
Company's group employee benefits segment was 95.5% for the first quarter of
2004 and 95.0% for the first quarter of 2003. Benefits and expenses related to
the Company's asset accumulation products decreased $1.3 million primarily due
to a decrease in the weighted average annualized crediting rate on these
products, which reflects the effects of the first year bonus crediting rate on
certain newly issued products, from 5.5% in the first quarter of 2003 to 4.8% in
the first quarter of 2004.

Interest Expense. Interest expense was $4.5 million for the first quarter of
2004 as compared to $3.1 million for the first quarter of 2003, an increase of
$1.4 million. This increase primarily resulted from the Company's issuance of
the 2033 Senior Notes and the 2003 Junior Debentures underlying the 2003 Capital
Securities in May 2003.

Income Tax Expense. Income tax expense was $13.4 million for the first quarter
of 2004 as compared to $9.6 million for the first quarter of 2003. The increase
in income tax expense is primarily related to the increase in pre-tax income.
The Company's effective tax rate was 30.5% for the first quarter of 2004 and
30.0% for the first quarter of 2003.

LIQUIDITY AND CAPITAL RESOURCES

General. The Company had approximately $88.9 million of financial resources
available at the holding company level at March 31, 2004, which was primarily
comprised of investments in the common stock of its investment subsidiaries,
fixed maturity securities, balances with independent investment managers, and
short-term investments. The assets of the investment subsidiaries are primarily
invested in balances with independent investment managers. Other sources of
liquidity at the holding company level include dividends paid from subsidiaries,
primarily generated from operating cash flows and investments. The Company's
insurance subsidiaries are permitted, without prior regulatory approval, to make
dividends payments totaling $54.0 million during 2004, of which $1.0 million has
been paid during the first quarter of 2004. In general, dividends from the
company's non-insurance subsidiaries are not subject to regulatory or other
restrictions. The Company had $89.0 million of borrowings available to it under
its revolving credit facility as of March 31, 2004. A shelf registration
statement is also in effect under which securities yielding proceeds of up to
$106.2 million may be issued by the Company.

The Company's current liquidity needs, in addition to funding its operating
expenses, include principal and interest payments on outstanding borrowings
under its revolving credit facility, interest payments on the 2033 Senior Notes,
and distributions on the Capital Securities and the 2003 Capital Securities. The
maximum amount of borrowings available under the Company's revolving credit
facility, which expires in December 2006, is $100.0 million. The 2033 Senior
Notes mature in their entirety in

                                      -13-

<PAGE>

May 2033 and are not subject to any sinking fund requirements but are redeemable
by the Company at par at any time on or after May 15, 2008. The junior
subordinated debentures underlying the Capital Securities are not redeemable
prior to March 25, 2007. The junior subordinated debentures underlying the 2003
Capital Securities are redeemable, in whole or in part, beginning May 15, 2008.

The Company and its subsidiaries expect available resources of liquidity to
exceed their current and long-term cash requirements.

Investments. The Company's overall investment strategy emphasizes safety and
liquidity, while seeking the best available return, by focusing on, among other
things, managing the Company's interest-sensitive assets and liabilities and
seeking to minimize the Company's exposure to fluctuations in interest rates.
The Company's investment portfolio, which totaled $3.3 billion at March 31,
2004, primarily consists of investments in fixed maturity securities and
short-term investments. The weighted average credit rating of the Company's
fixed maturity portfolio as rated by Standard & Poor's Corporation was "AA" at
March 31, 2004. While the investment grade rating of the Company's fixed
maturity portfolio addresses credit risk, it does not address other risks, such
as prepayment and extension risks. The Company also invests in balances with
independent investment managers, consisting primarily of investments in limited
partnerships which invest in various financial instruments. These investments
are reflected in the Company's financial statements under the equity method;
accordingly, positive or negative changes in the values of the partnerships'
investments are included in net investment income. For this purpose, the Company
estimates the values of its balances with independent investment managers based
on values provided by the managers, as adjusted based on available information
concerning the underlying investment portfolios. Such adjustments resulted in
reductions in value of $6.7 million as of each of March 31, 2004 and December
31, 2003. The Company believes that its estimates reasonably reflect the values
of its balances with independent investment managers; however, there can be no
assurance that such values will ultimately be realized upon liquidation of such
balances. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Forward-Looking Statements and Cautionary Statements
Regarding Certain Factors That May Affect Future Results" for a discussion of
various risks relating to the Company's investment portfolio.

Reinsurance. The Company cedes portions of the risks relating to its group
employee benefit products under indemnity reinsurance agreements with various
unaffiliated reinsurers. The Company pays reinsurance premiums generally based
upon percentages of the Company's premiums on the business reinsured. These
agreements expire at various intervals as to new risks, and replacement
agreements are negotiated on terms believed appropriate in light of current
market conditions. During 2003, the Company replaced certain of its existing
reinsurance arrangements for its excess workers' compensation and long-term
disability products. Under the replacement arrangements for excess workers'
compensation products, the Company reinsures excess workers' compensation risks
between $5.0 million (compared to $3.0 million previously) and $50.0 million,
and a majority in proportionate amount of the risks between $50.0 million and
$100.0 million, per policy per occurrence. For long-term disability products,
effective October 1, 2003 for new policies and, for existing policies, the
earlier of the next policy anniversary date or October 1, 2004, the Company will
reinsure risks in excess of $7,500 (compared to $2,500 previously) in benefits
per individual per month. These changes reduced the reinsurance premiums paid by
the Company for these products. However, in the case of long-term disability
products, management does not believe that this reduction is sufficient to
compensate for the anticipated level of losses in the $2,500 to $7,500 layer of
monthly benefits for which the Company retains the risk under the new
reinsurance arrangement. The Company is implementing a variety of initiatives,
including pricing and underwriting initiatives, for these products; however,
there can be no assurance that such initiatives will be successful. If such
initiatives are not successful, the Company's results of operations could be
adversely affected. See "Forward-Looking Statements And Cautionary Statements
Regarding Certain Factors That May Affect Future Results."

RSLIC Performance-Contingent Options. In April 2004, the Company granted
performance-contingent incentive options to purchase 150,000 shares of the
Company's Class A Common Stock to each of the seven members of executive
management of RSLIC, for a total of 1,050,000 options, subject to approval by
the Company's stockholders at the 2004 annual meeting of the proposed increase
in the number of shares reserved for issuance under the Company's option plan
under which the options were granted by 1,000,000 shares. The shareholders
approved the amendment to this option plan at the annual meeting on May 5, 2004.
The options, which have a ten-year term and whose exercise price equals the fair
market value of a share of such stock on the grant date (as determined in
accordance with the Company's option plan under which the options were granted),
will become exercisable only to the extent that RSLIC-Texas, RSLIC's parent
company, meets specified cumulative financial performance targets for the three
or five fiscal year periods beginning with the current year; otherwise, such
options will be forfeited. These targets, as described below, generally require
that RSLIC-Texas's aggregate consolidated Pre-Tax Operating Income, as defined
and computed under each of the related option agreements ("PTOI"), increases
during these periods at an annual average rate of over 11% for any of the
options to become exercisable, and at an annual average rate of at least 16% for
the options to become fully exercisable.

75,000 of each executive's options will become exercisable if RSLIC-Texas's PTOI
for the three year performance period is at

                                      -14-

<PAGE>

least $329.4 million; otherwise, a reduced number of such options will become
exercisable to the extent that PTOI for such period exceeds $300.5 million,
determined by interpolating between zero and 75,000 according to where the PTOI
amount falls in the range between $300.5 million and $329.4 million.

150,000 of each executive's options (minus the number of any options that become
exercisable for the three year performance period) will become exercisable if
RSLIC-Texas's aggregate PTOI for the five year performance period is at least
$646.2 million; otherwise, a reduced number of such options will become
exercisable to the extent that PTOI for such period exceeds $559.9 million,
determined by interpolating between zero and 150,000 according to where the PTOI
amount falls in the range between $559.9 million and $646.2 million.

Under the option agreements, the formula for determining PTOI incorporates
certain adjustments in order to focus on the performance of RSLIC-Texas's
insurance operations; in particular, the formula excludes realized investment
gains and losses. Accordingly, the PTOI amounts that would result in the
applicable financial performance targets being met will not be the same as
RSLIC-Texas's income before income tax expense, calculated in accordance with
GAAP, for the relevant periods.

The Company believes that these options will provide substantial incentives for
these executives to contribute toward RSLIC-Texas's attaining the specified
targets, thereby enhancing the Company's financial performance; however, no
assurance can be given that such results will be achieved. The Company will
recognize compensation expense for these options under the fair value
recognition provisions of SFAS No. 123 over the performance period. The
compensation expense associated with these options will not have a material
effect on the Company's financial position or results of operations.

MARKET RISK

There have been no material changes in the Company's exposure to market risk or
its management of such risk since December 31, 2003.

CONTROLS AND PROCEDURES

As of the end of the period covered by this report, an evaluation was performed
under the supervision and with the participation of the Company's management,
including the Company's Chief Executive Officer ("CEO") and Vice President and
Treasurer (the individual who acts in the capacity of chief financial officer),
of the effectiveness of the design and operation of the Company's disclosure
controls and procedures (as defined in the rules and regulations of the
Securities and Exchange Commission). Based on that evaluation, the Company's
management, including the CEO and Vice President and Treasurer, concluded that
the Company's disclosure controls and procedures were effective. There were no
changes in the Company's internal control over financial reporting during the
fiscal quarter to which this report relates that have materially affected, or
are reasonably likely to materially affect, the Company's internal control over
financial reporting.

FORWARD-LOOKING STATEMENTS AND CAUTIONARY STATEMENTS REGARDING CERTAIN FACTORS
THAT MAY AFFECT FUTURE RESULTS

In connection with, and because it desires to take advantage of, the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995, the
Company cautions readers regarding certain forward-looking statements in the
above "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and elsewhere in this Form 10-Q and in any other statement made
by, or on behalf of, the Company, 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
the Company'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 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 the Company'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 the
Company's investment strategy, acquisitions of companies or blocks of business,
and ratings by major rating organizations of 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, the Company. Certain of these uncertainties
and contingencies are described in more detail in the remainder of this section.
The Company disclaims any obligation to update forward-looking information.

                                      -15-

<PAGE>

      RESERVES ESTABLISHED FOR FUTURE POLICY BENEFITS AND CLAIMS MAY PROVE
INADEQUATE.

The Company establishes reserves for future policy benefits and unpaid claims
and claim expenses relating to its insurance products. These reserves are
calculated using various generally recognized actuarial methodologies and are
based upon assumptions that management believes are appropriate and which vary
by type of product. Annually, external actuarial experts also review the
Company's methodologies, assumptions and the resulting reserves. The estimation
process is complex and involves information obtained from company-specific and
industry-wide data, as well as general economic information. The most
significant assumptions made in the estimation process for future policy
benefits relate to mortality, morbidity, claim termination and discount rates.
The reserves for unpaid claims and claim expenses are determined on an
individual basis for reported claims and estimates of incurred but not reported
losses are developed on the basis of past experience. The most significant
assumptions made in the estimation process for unpaid claims and claim expenses
are the trend in loss costs, the expected frequency and severity of claims,
changes in the timing of the reporting of losses from the loss date to the
notification date, and expected costs to settle unpaid claims. The assumptions
vary based on the year the claim is incurred. Disability reserves for unpaid
claims and claim expenses are discounted using interest rate assumptions based
upon projected portfolio yield rates for the assets supporting the liabilities.
The assets selected to support these liabilities produce cash flows that are
intended to match the timing and amount of anticipated claim and claim expense
payments. Excess workers' compensation claim reserves are discounted using
interest rate assumptions based on the risk-free rate of return for U.S.
Government securities with a duration comparable to the expected duration and
payment pattern of the claims at the time the claims are settled. The rates used
to discount reserves are determined annually. The methods and assumptions used
to establish reserves for future policy benefits and unpaid claims and claim
expenses are continually reviewed and updated based on current circumstances,
and any resulting adjustments are reflected in earnings currently.

The Company's projected ultimate insurance liabilities and associated reserves
are estimates, which are subject to variability. This variability arises because
the factors and events affecting the ultimate liability have not all taken
place, and thus cannot be evaluated with certainty. Moreover, under the
actuarial methodologies discussed above, these estimates are subject to
reevaluation based on developing trends with respect to the Company's loss
experience. Such trends may emerge over longer periods of time, and changes in
such trends cannot necessarily be identified or predicted at any given time by
reference to current claims experience, whether favorable or unfavorable. If the
Company's actual loss experience from its current or discontinued products is
different from the Company's assumptions or estimates, the Company's reserves
could be inadequate. In such event, the Company's results of operations,
liquidity or financial condition could be materially adversely affected.

      THE MARKET VALUES OF THE COMPANY'S INVESTMENTS FLUCTUATE.

The market values of the Company's investments vary depending on economic and
market conditions, including interest rates, and such values can decline as a
result of changes in such conditions. Increasing interest rates or a widening in
the spread between interest rates available on U.S. Treasury securities and
corporate debt, for example, will typically have an adverse impact on the market
values of the fixed maturity securities in the Company's investment portfolio.
If interest rates decline, the Company generally achieves a lower overall rate
of return on investments of cash generated from the Company's operations. In
addition, in the event that investments are called or mature in a declining
interest rate environment, the Company may be unable to reinvest the proceeds in
securities with comparable interest rates. The Company may also in the future be
required or determine to sell certain investments at a price and a time when the
market value of such investments is less than the book value of such
investments.

Declines in the fair value of investments that are considered in the judgment of
management to be other than temporary are reported as realized investment
losses. The Company evaluates, among other things, the financial position and
prospects of the issuer, conditions in the issuer's industry and geographic
area, liquidity of the investment, changes in the amount or timing of expected
future cash flows from the investment, and recent downgrades of the issuer by a
rating agency to determine if and when a decline in the fair value of an
investment below amortized cost is other than temporary. The length of time and
extent to which the fair value of the investment is lower than its amortized
cost and the Company's ability and intent to retain the investment to allow for
any anticipated recovery in the investment's fair value are also considered. The
Company has experienced and may in the future experience losses from other than
temporary declines in security values. Such losses are recorded as realized
investment losses in the income statement. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Results of
Operations."

      THE COMPANY'S INVESTMENT STRATEGY EXPOSES THE COMPANY TO DEFAULT AND OTHER
RISKS.

The management of the Company's investment portfolio is an important component
of the Company's profitability since a substantial portion of the Company's
operating income is generated from the difference between the yield achieved on
invested

                                      -16-

<PAGE>

assets and, in the case of asset accumulation products, the interest credited on
policyholder funds and, in the case of the Company's other products for which
reserves are discounted, the discount rate used to calculate the related
reserves.

The Company is subject to the risk, among others, that the issuers of the fixed
maturity securities the Company owns will default on principal and interest
payments. A major economic downturn or any of the various other factors that
affect issuers' ability to pay could result in issuer defaults. Because the
Company's investments consist primarily of fixed maturity securities and
short-term investments, such defaults could materially adversely affect the
Company's results of operations, liquidity or financial condition. The Company
continually monitors its investment portfolio and attempts to ensure that the
risks associated with concentrations of investments in either a particular
sector of the market or a single entity are limited.

At March 31, 2004, mortgage-backed securities comprised 22% of the Company's
total invested assets. Mortgage-backed securities subject the Company to a
degree of interest rate risk, including prepayment and extension risk, which is
generally a function of the sensitivity of each security's underlying collateral
to prepayments under varying interest rate environments and the repayment
priority of the securities in the particular securitization structure. The
Company seeks to limit the extent of this risk by emphasizing the more
predictable payment classes and securities with stable collateral.

The Company, through its insurance subsidiaries, maintains a program in which
investments are financed using advances from various Federal Home Loan Banks. At
March 31, 2004, the Company had outstanding advances of $125.0 million. These
advances, which were obtained at a fixed rate, have a weighted average term to
maturity of 7.4 years. A total of $70.0 million of these advances will mature
during the remainder of 2004. In addition, the Company has utilized reverse
repurchase agreements, futures and option contracts and interest rate swap
contracts from time to time in connection with the Company's investment
strategy. These transactions require the Company to maintain securities or cash
on deposit with the applicable counterparty as collateral. As the market value
of the collateral or contracts changes, the Company may be required to deposit
additional collateral or be entitled to have a portion of the collateral
returned to it.

The types and amounts of investments made by the Company's insurance
subsidiaries are subject to the insurance laws and regulations of their
respective states of domicile. Each of these states has comprehensive investment
regulations. In addition, the Company's revolving credit facility also contains
limitations, with which the Company is currently in compliance in all material
aspects, on the composition of the Company's investment portfolio.

      THE COMPANY'S FINANCIAL POSITION EXPOSES THE COMPANY TO INTEREST RATE
RISKS.

Because the Company's primary assets and liabilities are financial in nature,
the Company's consolidated financial position and earnings are subject to risks
resulting from changes in interest rates. The Company manages this risk by
active portfolio management focusing on minimizing its exposure to fluctuations
in interest rates by matching its invested assets and related liabilities and by
periodically adjusting the crediting rates on its annuity products.
Profitability of certain group employee benefit products is also affected by the
difference between the yield achieved on invested assets and the discount rate
used to calculate the related reserves. The Company manages this risk by
adjusting the prices charged for these products.

      THE COMPANY'S ABILITY TO REDUCE ITS EXPOSURE TO RISKS DEPENDS ON THE
AVAILABILITY AND COST OF REINSURANCE.

The Company transfers its exposure to some risks through reinsurance
arrangements with other insurance and reinsurance companies. Under the Company's
reinsurance arrangements, another insurer assumes a specified portion of the
Company's losses and loss adjustment expenses in exchange for a specified
portion of policy premiums. The availability, amount, cost and terms of
reinsurance may vary significantly based on market conditions. Any decrease in
the amount of the Company's reinsurance will increase the Company's risk of loss
and any increase in the cost of such reinsurance will, absent a decrease in the
reinsurance amount, reduce the Company's premium income. In either case, the
Company's operating results could be adversely affected unless it is able to
accordingly adjust the prices or other terms of its insurance policies or
successfully implement other operational initiatives, as to which no assurance
can be given. Furthermore, the Company is subject to credit risk with respect to
reinsurance. The Company obtains reinsurance primarily through indemnity
reinsurance transactions in which the Company is still liable for the
transferred risks if the reinsurers fail to meet their financial obligations.
Such failures could materially affect the Company's results of operations,
liquidity or financial condition.

Some reinsurers experienced significant losses related to the terrorist events
of September 11, 2001. As a result of this and other market factors, higher
prices and less favorable terms and conditions continue to be offered in the
reinsurance market. These market conditions are reflected in the terms of the
replacement reinsurance arrangements entered into during 2003 for the Company's
excess workers' compensation and long-term disability products. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources - Reinsurance." It is likely that,
in the future, the Company's reinsurers will continue to seek price increases,
although the extent of such increases cannot currently be predicted. Also, there
has been significantly reduced availability of reinsurance covering risks such
as terrorist and catastrophic

                                      -17-

<PAGE>

events. Accordingly, substantially all of the Company's coverages of this nature
were discontinued in 2002, which would result in the Company retaining a higher
portion of losses from such events if they occur. The Company has not been able
to replace such coverages on acceptable terms due to present market conditions,
and there can be no assurance that the Company will be able to do so in the
future. However, under the Terrorism Act, the federal government will pay 90% of
the Company's covered losses relating to acts of international terrorism from
property and casualty products directly written by SNCC above the Company's
annual deductible. The occurrence of a significant catastrophic event could have
a material adverse effect on the Company's results of operations, liquidity or
financial condition.

      THE INSURANCE BUSINESS IS A HEAVILY REGULATED INDUSTRY.

The Company's insurance subsidiaries, like other insurance companies, are highly
regulated by state insurance authorities in the states in which they are
domiciled and the states in which they conduct business. Such regulations, among
other things, limit the amount of dividends and other payments that can be made
by such subsidiaries without prior regulatory approval and impose restrictions
on the amount and type of investments such subsidiaries may have. These
regulations also affect many other aspects of the Company's insurance
subsidiaries' businesses, including, for example, risk-based capital
requirements, various reserve requirements, the terms, conditions and manner of
sale and marketing of insurance products, claims-handling practices and the form
and content of required financial statements. These regulations are intended to
protect policyholders rather than investors. The ability of the Company's
insurance subsidiaries to continue to conduct their businesses is dependent upon
the maintenance of their licenses in these various states.

From time to time, increased scrutiny has been placed upon the insurance
regulatory framework, and a number of state legislatures have considered or
enacted legislative measures that alter, and in many cases increase, state
authority to regulate insurance companies. In addition to legislative
initiatives of this type, the National Association of Insurance Commissioners
and insurance regulators are continuously involved in a process of reexamining
existing laws and regulations and their application to insurance companies.
Furthermore, while the federal government currently does not directly regulate
the insurance business, federal legislation and administrative policies (and
court interpretations thereof) in a number of areas, such as employee benefits
regulation, age, sex and disability-based discrimination, financial services
regulation and federal taxation, can significantly affect the insurance
business. It is not possible to predict the future impact of changing regulation
on the operations of the Company and those of its insurance subsidiaries.

The Company's insurance subsidiaries can also be required, under solvency or
guaranty laws of most states in which they do business, to pay assessments to
fund policyholder losses or liabilities of insurance companies that become
insolvent.

      THE FINANCIAL SERVICES INDUSTRY IS HIGHLY COMPETITIVE.

The Company competes with numerous other insurance and financial services
companies. Many of these organizations have substantially greater assets, higher
ratings from rating agencies, larger and more diversified portfolios of
insurance products and larger agency sales operations than the Company.
Competition in asset accumulation product markets is also encountered from the
expanding number of banks, securities brokerage firms and other financial
intermediaries marketing alternative savings products, such as mutual funds,
traditional bank investments and retirement funding alternatives.

      THE COMPANY MAY BE ADVERSELY IMPACTED BY A DECLINE IN THE RATINGS OF THE
COMPANY'S INSURANCE SUBSIDIARIES.

Ratings with respect to claims-paying ability and financial strength have become
an increasingly important factor impacting the competitive position of insurance
companies. Each of the rating agencies reviews its ratings of companies
periodically and there can be no assurance that current ratings will be
maintained or improved in the future. Claims-paying and financial strength
ratings are based upon factors relevant to policyowners and are not directed
toward protection of investors. Downgrades in the ratings of the Company's
insurance subsidiaries could adversely affect sales of their products and could
have a material adverse effect on the results of the Company's operations.

                                      -18-

<PAGE>

                           PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

      (a)   Exhibits

            10.1  Delphi Financial Group, Inc. 2003 Employee Long-Term Incentive
                  and Share Award Plan, as amended

            10.2  Delphi Financial Group, Inc. Annual Incentive Compensation
                  Plan

            11.1  Computation of Results per Share of Common Stock (incorporated
                  by reference to Note F to the Consolidated Financial
                  Statements included elsewhere herein)

            31.1  Certification by the Chairman of the Board, President and
                  Chief Executive Officer of Periodic Report Pursuant to Rule
                  13a-14(a) or 15d-14(a)

            31.2  Certification by the Vice President and Treasurer of Periodic
                  Report Pursuant to Rule 13a-14(a) or 15d-14(a)

            32.1  Certification of Periodic Report Pursuant to 18 U.S.C. Section
                  1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002

     (b)    Reports on Form 8-K

            The Company filed a report on Form 8-K on February 12, 2004, under
            Item 12, containing a press release announcing fourth quarter 2003
            earnings. The information in such report was furnished pursuant to
            Item 12 of Form 8-K and shall not be deemed to have been "filed" for
            purposes of Section 18 of the Securities Exchange Act of 1934 or
            otherwise subject to the liabilities of that section.

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                       DELPHI FINANCIAL GROUP, INC. (Registrant)

                                       /s/ ROBERT ROSENKRANZ
                                       -----------------------------------------
                                       Robert Rosenkranz
                                       Chairman of the Board, President and
                                       Chief Executive Officer
                                       (Principal Executive Officer)

                                       /s/ THOMAS W. BURGHART
                                       -----------------------------------------
                                       Thomas W. Burghart
                                       Vice President and Treasurer
                                       (Principal Accounting and Financial
                                       Officer)

Date:  May 7, 2004

                                      -19-