<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, 2005

[ ] 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, 2005, the Registrant had 27,982,373 shares of Class A Common
        Stock and 3,904,481 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, 2005 and 2004............................   3

            Consolidated Balance Sheets at March 31, 2005 and
                December 31, 2004...............................................   4

            Consolidated Statements of Shareholders' Equity for the
                Three Months Ended March 31, 2005 and 2004......................   5

            Consolidated Statements of Cash Flows for the
                Three Months Ended March 31, 2005 and 2004......................   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 1.  Legal Proceedings..........................................  19

            Item 6.  Exhibits...................................................  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,
                                                             ---------------------
                                                               2005         2004
                                                             --------     --------
<S>                                                          <C>          <C>
Revenue:
  Premium and fee income ................................    $239,600     $200,710
  Net investment income .................................      53,437       52,543
  Net realized investment gains .........................       1,817        5,221
                                                             --------     --------
                                                              294,854      258,474
                                                             --------     --------
Benefits and expenses:
  Benefits, claims and interest credited to
    policyholders .......................................     178,573      150,102
  Commissions ...........................................      15,002       13,423
  Amortization of cost of business acquired .............      15,615       14,651
  Other operating expenses ..............................      36,977       31,701
                                                             --------     --------
                                                              246,167      209,877
                                                             --------     --------

      Operating income ..................................      48,687       48,597

Interest expense:
  Corporate debt ........................................       3,670        3,436
  Junior subordinated deferrable interest debentures ....       1,171        1,105
                                                             --------     --------
                                                                4,841        4,541
                                                             --------     --------
      Income before income tax expense ..................      43,846       44,056

Income tax expense ......................................      13,739       13,435
                                                             --------     --------

      Net income ........................................    $ 30,107     $ 30,621
                                                             ========     ========

Basic results per share of common stock:
  Net income ............................................    $   0.93     $   0.97

Diluted results per share of common stock:
  Net income ............................................    $   0.91     $   0.94

Dividends paid per share of common stock ................    $   0.09     $   0.08
</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,
                                                                                        2005             2004
                                                                                   ------------      ------------
<S>                                                                                <C>               <C>
Assets:
   Investments:
      Fixed maturity securities, available for sale ............................   $  3,067,546      $  3,049,013
      Short-term investments ...................................................        138,126            95,761
      Other investments ........................................................        437,863           396,302
                                                                                   ------------      ------------
                                                                                      3,643,535         3,541,076
   Cash ........................................................................         25,768            24,324
   Cost of business acquired ...................................................        225,030           212,549
   Reinsurance receivables .....................................................        416,709           428,707
   Goodwill ....................................................................         93,929            93,929
   Securities lending collateral ...............................................        239,919           236,900
   Other assets ................................................................        237,537           203,777
   Assets held in separate account .............................................         90,683            88,205
                                                                                   ------------      ------------
      Total assets .............................................................   $  4,973,110      $  4,829,467
                                                                                   ============      ============

Liabilities and Shareholders' Equity:
   Future policy benefits:
      Life .....................................................................   $    269,652      $    261,289
      Disability and accident ..................................................        506,803           488,909
   Unpaid claims and claim expenses:
      Life .....................................................................         50,834            49,441
      Disability and accident ..................................................        227,285           218,316
      Casualty .................................................................        652,532           645,948
   Policyholder account balances ...............................................      1,027,930         1,024,577
   Corporate debt ..............................................................        178,750           157,750
   Junior subordinated deferrable interest debentures underlying
      company-obligated mandatorily redeemable capital
      securities issued by unconsolidated subsidiaries .........................         59,762            59,762
   Securities lending payable ..................................................        239,919           236,900
   Other liabilities and policyholder funds ....................................        727,015           658,522
   Liabilities related to separate account .....................................         90,683            88,205
                                                                                   ------------      ------------
      Total liabilities ........................................................      4,031,165         3,889,619
                                                                                   ------------      ------------

   Shareholders' equity:
      Preferred Stock, $.01 par; 10,000,000 shares authorized ..................              -                 -
      Class A Common Stock, $.01 par; 40,000,000 shares authorized;
         30,550,650 and 30,418,291 shares issued and outstanding, respectively..            306               304
      Class B Common Stock, $.01 par; 20,000,000 shares authorized;
         3,904,481 shares issued and outstanding ...............................             39                39
      Additional paid-in capital ...............................................        414,569           406,908
      Accumulated other comprehensive income ...................................         24,558            57,371
      Retained earnings ........................................................        561,787           534,540
      Treasury stock, at cost; 2,573,211 shares of Class A Common Stock ........        (59,314)          (59,314)
                                                                                   ------------      ------------
         Total shareholders' equity ............................................        941,945           939,848
                                                                                   ------------      ------------
             Total liabilities and shareholders' equity ........................   $  4,973,110      $  4,829,467
                                                                                   ============      ============
</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, 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
                                       =========   =========   =========     ==========    =========   =========   =========

Balance, January 1, 2005.............  $     304   $      39   $ 406,908     $   57,371    $ 534,540   $ (59,314)  $ 939,848
                                                                                                                   ---------

Net income...........................          -           -           -              -       30,107           -      30,107
Other comprehensive income:
   Decrease in net unrealized
     appreciation on investments.....          -           -           -        (33,009)           -           -     (33,009)
Decrease in net loss
     on cash flow hedge..............          -           -           -            196            -           -         196
                                                                                                                   ---------
Comprehensive loss...................                                                                                 (2,706)
Issuance of stock and exercise of
   stock options.....................          2           -       6,940              -            -           -       6,942
Stock based compensation.............          -           -         721              -            -           -         721
Cash dividends.......................          -           -           -              -       (2,860)          -      (2,860)
                                       ---------   ---------   ---------     ----------    ---------   ---------   ---------

Balance, March 31, 2005..............  $     306   $      39   $ 414,569     $   24,558    $ 561,787   $ (59,314)  $ 941,945
                                       =========   =========   =========     ==========    =========   =========   =========
</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,
                                                                                     --------------------------
                                                                                        2005            2004
                                                                                     ----------      ----------
<S>                                                                                  <C>             <C>
Operating activities:
   Net income ..................................................................     $   30,107      $   30,621
   Adjustments to reconcile net income to net cash provided
        by operating activities:
      Change in policy liabilities and policyholder accounts ...................         75,043          53,665
      Net change in reinsurance receivables and payables .......................         11,141          13,330
      Amortization, principally the cost of business acquired and investments ..         14,328           6,094
      Deferred costs of business acquired ......................................        (25,280)        (25,331)
      Net realized gains on investments ........................................         (1,817)         (5,221)
      Net change in federal income tax liability ...............................         10,640          15,374
      Other ....................................................................        (35,870)        (25,178)
                                                                                     ----------      ----------
        Net cash provided by operating activities ..............................         78,292          63,354
                                                                                     ----------      ----------

Investing activities:
   Purchases of investments and loans made .....................................       (505,340)       (612,501)
   Sales of investments and receipts from repayment of loans ...................        383,525         509,625
   Maturities of investments ...................................................         68,474          38,976
   Net change in short-term investments ........................................        (42,365)          4,751
   Change in deposit in separate account .......................................         (2,925)           (762)
                                                                                     ----------      ----------
        Net cash used by investing activities ..................................        (98,631)        (59,911)
                                                                                     ----------      ----------

Financing activities:
   Deposits to policyholder accounts ...........................................         23,351          30,704
   Withdrawals from policyholder accounts ......................................        (23,545)        (21,618)
   Borrowings under revolving credit facility ..................................         26,000          11,000
   Principal payments under revolving credit facility ..........................         (5,000)              -
   Change in liability for Federal Home Loan Bank advances .....................              -         (25,000)
   Other financing activities ..................................................            977           6,113
                                                                                     ----------      ----------
        Net cash provided by financing activities ..............................         21,783           1,199
                                                                                     ----------      ----------

Increase in cash ...............................................................          1,444           4,642
Cash at beginning of period ....................................................         24,324          18,733
                                                                                     ----------      ----------
        Cash at end of period ..................................................     $   25,768      $   23,375
                                                                                     ==========      ==========
</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, 2005 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2005. 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, 2004.
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,
2004.

Stock Options

Prior to 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. Effective January 1, 2003, the
Company adopted the fair value recognition provisions of Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation." Under the prospective transition method provisions of SFAS No.
148, "Accounting for Stock-Based Compensation - Transition and Disclosure," the
recognition provisions of SFAS No. 123 are 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 2005 and 2004 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,
                                                                                  ----------------------
                                                                                     2005        2004
                                                                                  ---------   ----------
                                                                                  (dollars in thousands,
                                                                                  except per share data)
<S>                                                                               <C>         <C>
Net income, as reported.........................................................  $  30,107   $  30,621
Add: Stock-based employee compensation expense included
   in reported net income, net of related tax effects...........................        655         644
Deduct: Stock-based employee compensation expense
    determined under the fair value based method for all awards,
    net of related tax effects..................................................       (739)       (705)
                                                                                  ---------   ---------
Pro forma net income............................................................  $  30,023   $  30,560
                                                                                  =========   =========

Earnings per share:
Basic, as reported..............................................................  $    0.93   $    0.97
Basic, pro forma................................................................       0.93        0.96

Diluted, as reported............................................................  $    0.91   $    0.94
Diluted, pro forma..............................................................       0.90        0.93
</TABLE>

                                       -7-
<PAGE>

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

NOTE A - SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

Recently Issued Accounting Standards

In December 2004, the Financial Accounting Standards Board issued SFAS No. 123
(Revised) ("123R"), "Share-Based Payment," a revision of SFAS No. 123, which
requires all share-based payments to employees, including grants of employee
stock options, to be recognized as expense in the income statement based on
their fair values and prohibits pro forma disclosure as an alternative. SFAS No.
123R was scheduled to become effective no later than the first interim or annual
period beginning after June 15, 2005 with early adoption also permitted.
However, in April 2005 the United States Securities and Exchange Commission
announced that it would delay the effective date for registrants that are not
small business issuers to adopt SFAS No. 123R no later than the beginning of the
first fiscal year beginning after June 15, 2005. Upon its adoption of SFAS No.
123R, the Company will be required to select a transition method between two
permitted alternatives, a "modified prospective" method or a "modified
retrospective" method. Under the "modified prospective" method, compensation
cost is recognized for all new awards granted after the date of adoption and any
previously granted awards that are not fully vested. Under the "modified
retrospective" method, compensation cost is recognized based on the requirements
of the modified prospective method described above, but this method also permits
the restatement of financial statements, either for all prior periods presented
or prior interim periods in the year of adoption, based on the amounts
previously recognized under SFAS No. 123 for purposes of pro forma disclosures.

Since SFAS No. 123R must be applied not only to new awards but to previously
granted awards that are not fully vested on the effective date, and the Company
has already adopted SFAS No. 123 using the prospective transition method,
compensation cost for some previously granted awards that were not recognized
under SFAS No. 123 will be recognized under the revised statement. However, had
the Company adopted SFAS No. 123R in prior periods, the impact of that standard
would have approximated the impact of SFAS No. 123 as described in the
disclosure of pro forma net income and earnings per share above in the "Stock
Options" paragraph of this Note A. In addition, SFAS No. 123R requires the
benefits of tax deductions in excess of recognized compensation cost to be
reported as a financing cash flow, rather than as an operating cash flow as
required under current accounting literature. The Company's benefits of tax
deductions in excess of recognized compensation cost were not material in the
first quarter of 2005. The Company has not yet determined which method of
adoption it will use or what the effects of SFAS No. 123R will be on the future
earnings and financial position of the Company.

NOTE B - INVESTMENTS

At March 31, 2005, the Company had fixed maturity securities available for sale
with a carrying value and a fair value of $3,067.5 million and an amortized cost
of $3,011.2 million. At December 31, 2004, the Company had fixed maturity
securities available for sale with a carrying value and a fair value of $3,049.0
million and an amortized cost of $2,938.5 million.

The summarized aggregate unaudited net income for the various unaffiliated
entities in which the balances with independent investment managers have been
invested was $349.7 million and $452.9 million for the first three months of
2005 and 2004, respectively.

                                       -8-
<PAGE>

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

NOTE C - SEGMENT INFORMATION

<TABLE>
<CAPTION>
                                                           Three Months Ended
                                                                March 31,
                                                       --------------------------
                                                          2005            2004
                                                       ----------      ----------
                                                         (dollars in thousands)
<S>                                                    <C>             <C>
Revenues:
   Group employee benefit products ...............     $  262,133      $  225,035
   Asset accumulation products ...................         22,690          20,560
   Other (1) .....................................          8,214           7,658
                                                       ----------      ----------
                                                          293,037         253,253

   Net realized investment gains .................          1,817           5,221
                                                       ----------      ----------

                                                       $  294,854      $  258,474
                                                       ==========      ==========
Operating income:
   Group employee benefit products ...............     $   42,648      $   39,487
   Asset accumulation products ...................          6,333           5,137
   Other (1) .....................................         (2,111)         (1,248)
                                                       ----------      ----------
                                                           46,870          43,376

   Net realized investment gains .................          1,817           5,221
                                                       ----------      ----------
                                                       $   48,687      $   48,597
                                                       ==========      ==========
</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 D - COMPREHENSIVE (LOSS) 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,
2004. Total comprehensive (loss) income was $(2.7) million and $46.6 million for
the first three months of 2005 and 2004, respectively.

NOTE E - COMPUTATION OF RESULTS PER SHARE

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,
                                                                      --------------------
                                                                        2005         2004
                                                                      -------      -------
<S>                                                                   <C>          <C>
Numerator:
  Net income .....................................................    $30,107      $30,621
                                                                      =======      =======

Denominator:
  Weighted average common shares outstanding .....................     32,309       31,691
    Effect of dilutive securities ................................        953        1,015
                                                                      -------      -------
  Weighted average common shares outstanding, assuming dilution ..     33,262       32,706
                                                                      -------      -------

Basic results per share of common stock:
  Net income .....................................................    $  0.93      $  0.97

Diluted results per share of common stock:
  Net income .....................................................    $  0.91      $  0.94
</TABLE>

                                       -9-
<PAGE>

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

NOTE F - 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
financial position. In addition, incident to its discontinued products, the
Company has been and is currently a party to various arbitrations arising out of
accident and health reinsurance arrangements in which it and other companies
formerly were participating reinsurers. A hearing in one of such arbitrations is
scheduled to be held in the second quarter of 2005. The Company believes that it
has substantial defenses upon which to contest the claims made in these
arbitrations, although it is not possible to predict their ultimate outcome. In
the opinion of management, such arbitrations, when ultimately resolved, will
not, individually or collectively, have an adverse effect on the Company's
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 disability, group life 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, product mix 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.
Accordingly, the profitability of the Company's group employee benefit products
is affected by the amount, cost and terms of reinsurance it obtains. The
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 continuing to experience
favorable market conditions for its excess workers' compensation products due to
high primary workers' compensation rates. For its other group employee benefit
products, the Company is maintaining its underwriting discipline under
competitive market conditions, and is continuing 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, 2004.
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,
2004. 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, 2004 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 $30.1 million, or $0.91 per diluted share,
for the first quarter of 2005 as compared to $30.6 million, or $0.94 per diluted
share, for the first quarter of 2004. Net income for the first quarters of 2005
and 2004 included realized investment gains (net of the related income tax
expense) of $1.2 million, or $0.04 per diluted share, and $3.4 million, or $0.11
per diluted share, respectively. The level of net income in the first quarter of
2005 is attributable to growth in income from group employee benefit products
and increased product spreads on the Company's asset accumulation products.
Premiums from the Company's core group employee benefit products increased 19%
in the first quarter of 2005 and the combined ratio (loss ratio plus expense
ratio) decreased to 94.4% in the first quarter of 2005 from 95.5% in first
quarter of 2004.

                                      -11-
<PAGE>

Premium and Fee Income. Premium and fee income for the first quarter of 2005 was
$239.6 million as compared to $200.7 million for the first quarter of 2004, an
increase of 19%. Premiums from core group employee benefit products increased
19% to $225.7 million for the first quarter of 2005 from $189.1 million for the
first quarter of 2004. 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. The increase also reflects premium income related
to an indemnity reinsurance arrangement which the Company entered into in the
fourth quarter of 2004. Under this arrangement, the Company assumes certain
newly issued group disability insurance policies on an ongoing basis and is
responsible for underwriting, pricing and claims management with respect to the
reinsured business. Within core group employee benefit products, premiums from
excess workers' compensation insurance for self-insured employers increased 15%
to $51.7 million for the first quarter of 2005 from $44.8 million for the first
quarter of 2004. This increase was primarily due to the favorable pricing
environment and demand for this product as a result of high primary workers'
compensation rates. SNCC obtained modest average price increases in connection
with its renewals of insurance coverage during the first quarter of 2005, and
has continued to obtain significant improvements in contract terms, in
particular higher SIR levels, in these renewals. On average, SIRs increased 8%
in the first quarter of 2005 compared to the first quarter of 2004. Excess
workers' compensation new business production, which represents the amount of
new annualized premium sold, increased 47% to $12.0 million for the first
quarter of 2005 from $8.1 million for the first quarter of 2004 and the
retention of existing customers for the first quarter of 2005 was in line with
the first quarter of 2004. Premiums from the Company's other core group employee
benefit products increased 21% to $174.0 million for the first quarter of 2005
from $144.3 million for the first quarter of 2004, reflecting new business
production and a decrease in premiums ceded by the Company to reinsurers for
these products. See "Liquidity and Capital Resources - Reinsurance." New
business production for the Company's other core group employee benefit products
was $45.9 million for the first quarter of 2005 and $43.2 million for the first
quarter of 2004. The level of production achieved in the first quarter of 2005
reflects the Company's focus on the small case niche (insured groups of 10 to
500 individuals) which resulted in a 4% increase in production based on the
number of cases sold as compared with the first quarter of 2004. 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 $21.5 million for
the first quarter of 2005 as compared to $29.3 million for the first quarter of
2004. These deposits consist of new annuity sales, which are recorded as
liabilities rather than as premiums. The Company continues to maintain its
discipline in setting the crediting rates offered on its asset accumulation
products. The decrease in deposits from the Company's asset accumulation
products was also due to increased market performance of equity indexed
annuities during the first quarter of 2005, which reduced demand for fixed
annuity products.

Net Investment Income. Net investment income for the first quarter of 2005 was
$53.4 million as compared to $52.5 million for the first quarter of 2004. The
level of net investment income in the 2005 period reflects an increase in
average invested assets in 2005 partially offset by a decrease in the tax
equivalent weighted average annualized yield. The tax equivalent weighted
average annualized yield on invested assets was 6.2% on average invested assets
of $3,564.7 million for the first quarter of 2005 and 6.7% on average invested
assets of $3,231.3 million for the first quarter of 2004.

Net Realized Investment Gains. Net realized investment gains were $1.8 million
for the first quarter of 2005 as compared to $5.2 million for the first quarter
of 2004. 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 2005 and 2004, the Company recognized $2.3
million and $7.6 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 2005
and 2004, the Company recognized $0.5 million and $2.4 million, respectively, of
losses due to the other than temporary declines in the market values of certain
fixed maturity securities.

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 "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.

                                      -12-
<PAGE>

Benefits and Expenses. Policyholder benefits and expenses were $246.2 million
for the first quarter 2005 as compared to $209.9 million for the first quarter
of 2004, an increase of 17%. 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 decreased to 94.4% for the first quarter of 2005 from 95.5% for
the first quarter of 2004. 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, was 4.6% and 4.8%
for the first quarter of 2005 and 2004, respectively.

LIQUIDITY AND CAPITAL RESOURCES

General. The Company had approximately $102.0 million of financial resources
available at the holding company level at March 31, 2005, which was primarily
comprised of short-term investments, investments in the common stock of its
investment subsidiaries, fixed maturity securities and balances with independent
investment managers. 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 $61.4 million during 2005, of which $0.8 million has
been paid to the holding company during the first quarter of 2005. In general,
dividends from the company's non-insurance subsidiaries are not subject to
regulatory or other restrictions. The Company had $65.0 million of borrowings
available to it under its revolving credit facility as of March 31, 2005. 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 Company intends
to obtain an extension of, or replace, this revolving credit facility prior to
its maturity. The 2033 Senior Notes mature in their entirety in 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 deferrable
interest debentures underlying the Capital Securities are not redeemable prior
to March 25, 2007. The junior subordinated deferrable interest debentures
underlying the 2003 Capital Securities are redeemable, in whole or in part,
beginning May 15, 2008.

The Company and its subsidiaries expect available sources 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 $3.6 billion at March 31,
2005, 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, 2005. 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. As of March 31, 2005 and
December 31, 2004, there were no adjustments in such values, as compared with
reductions in value of $6.7 million at March 31, 2004. 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 "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 which are
generally based upon specified 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

                                      -13-
<PAGE>

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 reinsures risks in excess of $7,500 (compared to
$2,500 previously) in benefits per individual per month. These changes have
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 has
implemented 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."

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, 2004.

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, employee benefit and
tax laws and regulations, market pricing and competitive trends relating to
insurance products and services, acts of terrorism or war, and the availability
and cost of reinsurance, and those relating specifically to 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 the Company and its
insurance subsidiaries. These uncertainties and contingencies can affect actual
results and could cause actual results to differ materially from those expressed
in any forward-looking statements made by, or on behalf of, 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.

   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

                                      -14-
<PAGE>

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. Primary and 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 Company's 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 "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 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

                                      -15-
<PAGE>

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, 2005, mortgage-backed securities comprised 21% 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.
The Company has utilized this program to manage the duration of its liabilities
and to earn spread income, which is the difference between the financing cost
and the earnings from the investments purchased with those funds. At March 31,
2005, the Company had outstanding advances of $85.0 million. These advances,
which were obtained at a fixed rate, have a weighted average term to maturity of
10 years. A total of $30.0 million of these advances will mature at various
times during 2005. In addition, the Company has from time to time utilized
reverse repurchase agreements, futures and option contracts and interest rate
and credit default swaps in connection with the Company's investment strategy.
These transactions may 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 Company also 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. The
collateral received for securities loaned is recorded at the fair value of the
collateral, which is generally in an amount in excess of the market value of the
securities loaned. The Company's institutional lending agent monitors the market
value of the securities loaned and obtains additional collateral as necessary.

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. In addition,
the profitability of the Company's products for which reserves are discounted is
affected by the difference between the yield achieved on invested assets and the
discount rate used to calculate such 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. Also, 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 "Liquidity
and Capital Resources - Reinsurance." In the future, the Company's reinsurers
may continue to seek price increases, although the extent of any such increases
cannot currently be predicted. Also,

                                      -16-
<PAGE>

there has been significantly reduced availability of reinsurance covering risks
such as terrorist and catastrophic 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. 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; however, the Terrorism Act is
scheduled to terminate on December 31, 2005. 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.

In April 2004, the New York Attorney General ("NYAG") initiated an investigation
into certain insurance broker compensation arrangements and other aspects of
dealings between insurance brokers and insurance companies, and, in connection
therewith, filed a civil complaint in October 2004 against a major insurance
brokerage firm based on certain of such firm's compensation arrangements with
insurers and alleged misconduct in connection with the placement of insurance
business. Other state regulators subsequently announced the commencement of
similar investigations and reviews. The Company has received administrative
subpoenas or similar requests for information from the Illinois Division of
Insurance, the Missouri Department of Insurance, the NYAG's office and the North
Carolina Department of Insurance in connection with their investigations. The
Company anticipates that additional regulatory inquiries may be received by its
insurance subsidiaries as the various investigations continue. The Company will
fully cooperate with inquiries it has received to date, as well as any future
inquiries of this type.

As previously disclosed, based on an internal review relating to the Company's
insurance subsidiaries, the Company has identified certain potential issues
concerning past insurance solicitation practices involving SNCC and Marsh &
McLennan. The instances that the Company has been able to specifically identify
in this regard are limited in number and involved modest amounts of premium. The
Company has reported on these issues to the NYAG's office and to the Missouri
Department of Insurance, and will fully cooperate with these and any other
regulatory agencies relating to these issues. It is not possible to predict the
future impact of this matter on the Company or of the various investigations, or
any regulatory changes or litigation resulting from such investigations, on the
insurance industry or on the Company and its insurance subsidiaries.

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.

                                      -17-
<PAGE>

   THE COMPANY MAY BE ADVERSELY IMPACTED BY A DECLINE IN THE RATINGS OF ITS
INSURANCE SUBSIDIARIES OR ITS OWN CREDIT RATINGS.

Ratings with respect to claims-paying ability and financial strength have become
an increasingly important factor impacting the competitive position of insurance
companies. The financial strength ratings of RSLIC as of May 1, 2005 as assigned
by A.M. Best, Fitch, Moody's and Standard & Poor's were A- (Excellent), A
(Strong), A3 (Good) and A (Strong), respectively. The financial strength ratings
of SNCC as of May 1, 2005 as assigned by A.M. Best, Fitch and Standard & Poor's
were A (Excellent), A (Strong) and A (Strong), respectively. 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. In addition, downgrades in the Company's credit ratings
could materially adversely affect its ability to access the capital markets. The
Company's senior unsecured debt ratings as of March 2005 from A.M. Best, Fitch,
Moody's and Standard & Poor's were bbb-, BBB, Baa3 and BBB, respectively.

                                     -18-
<PAGE>

                           PART II. OTHER INFORMATION

Item 1. Legal Proceedings

        Incorporated by reference to Note F to the Consolidated Financial
        Statements included elsewhere herein.

Item 6. Exhibits

        10.1  Amendment to Delphi Financial Group, Inc. Amended and Restated
              Long-Term Performance-Based Incentive Plan

        11.1  Computation of Results per Share of Common Stock (incorporated by
              reference to Note E 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

                                   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 10, 2005

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