##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the Quarterly Period Ended March 31, 2009
 o
    
    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.
  Delaware
    
    (302) 478-5142
    
    13-3427277(State or other jurisdiction of
    
    (Registrants telephone number,
    
    (I.R.S. Employer Identificationincorporation or organization)
    
    including area code)
    
    Number)1105 North Market Street, Suite 1230, P.O. Box 8985, Wilmington, Delaware
    
    19899(Address of principal executive offices)
    
    
    
    (Zip Code)
 þ o
 o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



DELPHI FINANCIAL GROUP, INC.
FORM 10-Q
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND OTHER INFORMATION
 PagePART I. FINANCIAL INFORMATION (UNAUDITED)Item 1. Financial StatementsConsolidated Statements of Income for the Three
Months Ended March 31, 2009 and 2008
    
    
    3Consolidated Balance Sheets at March 31, 2009 and
December 31, 2008
    
    
    4Consolidated Statements of Shareholders Equity for the
Three Months Ended March 31, 2009 and 2008
    
    
    5Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2009 and 2008
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    17Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    22Item 4. Controls and Procedures
    
    
    22PART II. OTHER INFORMATIONItem 1A. Risk Factors
    
    
    23Item 6. Exhibits
    
    
    23Signatures
    
    
    23
  -2-




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##### Table of Contents



PART
I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
 Three Months EndedMarch 31,2009
    
    
    2008Revenue:Premium and fee income
    
    $
    357,721
    
    
    $
    342,290Net investment income
    
    
    62,855
    
    
    
    32,337Net realized investment losses
    
    
    (21,999
    )
    
    
    (6,436
    )398,577
    
    
    
    368,191Benefits and expenses:Benefits, claims and interest credited to policyholders
    
    
    255,598
    
    
    
    242,912Commissions
    
    
    22,704
    
    
    
    21,267Amortization of cost of business acquired
    
    
    23,293
    
    
    
    16,423Other operating expenses
    
    
    60,137
    
    
    
    52,203361,732
    
    
    
    332,805Operating income
    
    
    36,845
    
    
    
    35,386Interest expense:Corporate debt
    
    
    3,985
    
    
    
    4,224Junior subordinated debentures
    
    
    3,240
    
    
    
    3,240Junior subordinated deferrable interest debentures underlying company-obligated
redeemable capital securities issued by unconsolidated subsidiaries
    
    
    
    
    
    
    4047,225
    
    
    
    7,868Income before income tax expense
    
    
    29,620
    
    
    
    27,518Income tax expense
    
    
    5,136
    
    
    
    6,374Net income
    
    $
    24,484
    
    
    $
    21,144Basic results per share of common stock:Net income
    
    $
    0.51
    
    
    $
    0.43Diluted results per share of common stock:Net income
    
    $
    0.51
    
    
    $
    0.42Dividends paid per share of common stock
    
    $
    0.10
    
    
    $
    0.09
  -3-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Data)
 March 31,
    
    
    December 31,2009
    
    
    2008Assets:Investments:Fixed maturity securities, available for sale
    
    $
    3,633,294
    
    
    $
    3,773,382Short-term investments
    
    
    609,588
    
    
    
    401,620Other investments
    
    
    542,029
    
    
    
    479,9214,784,911
    
    
    
    4,654,923Cash
    
    
    84,289
    
    
    
    63,837Cost of business acquired
    
    
    286,281
    
    
    
    264,777Reinsurance receivables
    
    
    379,822
    
    
    
    376,731Goodwill
    
    
    93,929
    
    
    
    93,929Other assets
    
    
    433,265
    
    
    
    409,103Assets held in separate account
    
    
    90,363
    
    
    
    90,573Total assets
    
    $
    6,152,860
    
    
    $
    5,953,873Liabilities and Equity:Future policy benefits:Life
    
    $
    319,136
    
    
    $
    300,567Disability and accident
    
    
    757,834
    
    
    
    743,690Unpaid claims and claim expenses:Life
    
    
    68,458
    
    
    
    70,076Disability and accident
    
    
    407,808
    
    
    
    398,671Casualty
    
    
    1,087,131
    
    
    
    1,061,046Policyholder account balances
    
    
    1,347,382
    
    
    
    1,356,932Corporate debt
    
    
    365,750
    
    
    
    350,750Junior subordinated debentures
    
    
    175,000
    
    
    
    175,000Other liabilities and policyholder funds
    
    
    670,651
    
    
    
    581,954Liabilities related to separate account
    
    
    90,363
    
    
    
    90,573Total liabilities
    
    
    5,289,513
    
    
    
    5,129,259Equity:Preferred Stock, $.01 par; 50,000,000 shares authorized, none issued
    
    
    
    
    
    
    Class A Common Stock, $.01 par; 150,000,000 shares authorized;
49,031,935 and 48,946,432 shares issued and outstanding, respectively
    
    
    490
    
    
    
    489Class B Common Stock, $.01 par; 20,000,000 shares authorized;
5,981,049 shares issued and outstanding
    
    
    60
    
    
    
    60Additional paid-in capital
    
    
    526,177
    
    
    
    522,596Accumulated other comprehensive loss
    
    
    (335,643
    )
    
    
    (351,710
    )Retained earnings
    
    
    865,572
    
    
    
    846,390Treasury stock, at cost; 7,761,216 shares of Class A Common Stock and
227,216 shares of Class B Common Stock
    
    
    (197,246
    )
    
    
    (197,246
    )Total shareholders equity
    
    
    859,410
    
    
    
    820,579Noncontrolling interest
    
    
    3,937
    
    
    
    4,035Total equity
    
    
    863,347
    
    
    
    824,614Total liabilities and equity
    
    $
    6,152,860
    
    
    $
    5,953,873
  -4-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(Dollars in Thousands)
(Unaudited)
 AccumulatedClass A
    
    
    Class B
    
    
    Additional
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    Non-Common
    
    
    Common
    
    
    Paid in
    
    
    Comprehensive
    
    
    Retained
    
    
    Treasury
    
    
    Shareholders'
    
    
    controlling
    
    
    TotalStock
    
    
    Stock
    
    
    Capital
    
    
    Income (Loss)
    
    
    Earnings
    
    
    Stock
    
    
    Equity
    
    
    Interest
    
    
    EquityBalance, January 1, 2008
    
    $
    487
    
    
    $
    59
    
    
    $
    509,742
    
    
    $
    (42,497
    )
    
    $
    828,116
    
    
    $
    (154,517
    )
    
    $
    1,141,390
    
    
    $
    30,181
    
    
    $
    1,171,571Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,144
    
    
    
    
    
    
    
    21,144
    
    
    
    (103
    )
    
    
    21,041Other comprehensive loss:Increase in net unrealized
depreciation on
investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (68,553
    )
    
    
    
    
    
    
    
    
    
    
    (68,553
    )
    
    
    1,605
    
    
    
    (66,948
    )Decrease in net loss on
cash flow hedge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    196
    
    
    
    
    
    
    
    
    
    
    
    196
    
    
    
    
    
    
    
    196Change in net periodic
pension cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    11Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (47,202
    )
    
    
    
    
    
    
    (45,700
    )Net distribution to
noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,115
    )
    
    
    (2,115
    )Issuance of stock and
exercise of stock options
    
    
    1
    
    
    
    
    
    
    
    4,741
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,742
    
    
    
    
    
    
    
    4,742Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    528
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    528
    
    
    
    
    
    
    
    528Acquisition of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,040
    )
    
    
    (17,040
    )
    
    
    
    
    
    
    (17,040
    )Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,343
    )
    
    
    
    
    
    
    (4,343
    )
    
    
    
    
    
    
    (4,343
    )Balance, March 31, 2008
    
    $
    488
    
    
    $
    59
    
    
    $
    515,011
    
    
    $
    (110,843
    )
    
    $
    844,917
    
    
    $
    (171,557
    )
    
    $
    1,078,075
    
    
    $
    29,568
    
    
    $
    1,107,643Balance, January 1, 2009
    
    $
    489
    
    
    $
    60
    
    
    $
    522,596
    
    
    $
    (351,710
    )
    
    $
    846,390
    
    
    $
    (197,246
    )
    
    $
    820,579
    
    
    $
    4,035
    
    
    $
    824,614Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,484
    
    
    
    
    
    
    
    24,484
    
    
    
    (5
    )
    
    
    24,479Other comprehensive income:Decrease in net unrealized
depreciation on
investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,580
    
    
    
    
    
    
    
    
    
    
    
    15,580
    
    
    
    
    
    
    
    15,580Decrease in net loss on
cash flow hedge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    196
    
    
    
    
    
    
    
    
    
    
    
    196
    
    
    
    
    
    
    
    196Change in net periodic
pension cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    291
    
    
    
    
    
    
    
    
    
    
    
    291
    
    
    
    
    
    
    
    291Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,551
    
    
    
    
    
    
    
    40,546Net distribution to
noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (93
    )
    
    
    (93
    )Issuance of stock and
exercise of stock options
    
    
    1
    
    
    
    
    
    
    
    1,450
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,451
    
    
    
    
    
    
    
    1,451Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    2,131
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,131
    
    
    
    
    
    
    
    2,131Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,302
    )
    
    
    
    
    
    
    (5,302
    )
    
    
    
    
    
    
    (5,302
    )Balance, March 31, 2009
    
    $
    490
    
    
    $
    60
    
    
    $
    526,177
    
    
    $
    (335,643
    )
    
    $
    865,572
    
    
    $
    (197,246
    )
    
    $
    859,410
    
    
    $
    3,937
    
    
    $
    863,347
  -5-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
 Three Months EndedMarch 31,2009
    
    
    2008Operating activities:Net income
    
    $
    24,484
    
    
    $
    21,144Adjustments to reconcile net income to net cash provided
by operating activities:Change in policy liabilities and policyholder accounts
    
    
    99,523
    
    
    
    92,314Net change in reinsurance receivables and payables
    
    
    (7,086
    )
    
    
    10,184Amortization, principally the cost of business acquired and investments
    
    
    13,543
    
    
    
    15,238Deferred costs of business acquired
    
    
    (34,392
    )
    
    
    (33,115
    )Net realized losses on investments
    
    
    21,999
    
    
    
    6,437Net change in federal income tax liability
    
    
    4,114
    
    
    
    (16,573
    )Other
    
    
    (30,969
    )
    
    
    1,899Net cash provided by operating activities
    
    
    91,216
    
    
    
    97,528Investing activities:Purchases of investments and loans made
    
    
    (207,901
    )
    
    
    (298,167
    )Sales of investments and receipts from repayment of loans
    
    
    77,696
    
    
    
    254,129Maturities of investments
    
    
    261,307
    
    
    
    54,442Net change in short-term investments
    
    
    (207,968
    )
    
    
    (150,914
    )Change in deposit in separate account
    
    
    4,845
    
    
    
    790Net cash used by investing activities
    
    
    (72,021
    )
    
    
    (139,720
    )Financing activities:Deposits to policyholder accounts
    
    
    61,681
    
    
    
    53,843Withdrawals from policyholder accounts
    
    
    (70,938
    )
    
    
    (27,698
    )Borrowings under revolving credit facility
    
    
    17,000
    
    
    
    29,000Principal payments under revolving credit facility
    
    
    (2,000
    )
    
    
    (3,000
    )Acquisition of treasury stock
    
    
    
    
    
    
    (17,040
    )Other financing activities
    
    
    (4,486
    )
    
    
    (2,724
    )Net cash provided by financing activities
    
    
    1,257
    
    
    
    32,381Increase (decrease) in cash
    
    
    20,452
    
    
    
    (9,811
    )Cash at beginning of period
    
    
    63,837
    
    
    
    51,240Cash at end of period
    
    $
    84,289
    
    
    $
    41,429
  -6-




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##### Table of Contents



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

(Unaudited)
 Note A  Significant Accounting Policies
  Accounting Changes
 Business Combinations.
 Noncontrolling Interests.
 Derivative Instruments.
 -7-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Note A  Significant Accounting Policies  (Continued)
   Earnings Per Share.
 Recently Issued Accounting Standards
   -8-




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DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Note A  Significant Accounting Policies  (Continued)
  Note B Investments
   March 31, 2009Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value(dollars in thousands)Mortgage-backed securities
    
    $
    1,417,501
    
    
    $
    54,876
    
    
    $
    (238,180
    )
    
    $
    1,234,197Corporate securities
    
    
    1,398,651
    
    
    
    8,518
    
    
    
    (331,637
    )
    
    
    1,075,532U.S. Treasury and other U.S. Government
guaranteed securities
    
    
    50,844
    
    
    
    4,760
    
    
    
    
    
    
    
    55,604U.S. Government-sponsored enterprise securities
    
    
    7,255
    
    
    
    624
    
    
    
    
    
    
    
    7,879Obligations of U.S. states, municipalities and
political subdivisions
    
    
    1,296,287
    
    
    
    30,077
    
    
    
    (66,282
    )
    
    
    1,260,082Total fixed maturity securities
    
    $
    4,170,538
    
    
    $
    98,855
    
    
    $
    (636,099
    )
    
    $
    3,633,294
 December 31, 2008Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value(dollars in thousands)Mortgage-backed securities
    
    $
    1,411,231
    
    
    $
    40,489
    
    
    $
    (226,796
    )
    
    $
    1,224,924Corporate securities
    
    
    1,566,748
    
    
    
    9,688
    
    
    
    (300,263
    )
    
    
    1,276,173U.S. Treasury and other U.S. Government
guaranteed securities
    
    
    51,826
    
    
    
    5,905
    
    
    
    
    
    
    
    57,731U.S. Government-sponsored enterprise securities
    
    
    22,031
    
    
    
    3,147
    
    
    
    
    
    
    
    25,178Obligations of U.S. states, municipalities and
political subdivisions
    
    
    1,270,166
    
    
    
    19,230
    
    
    
    (100,020
    )
    
    
    1,189,376Total fixed maturity securities
    
    $
    4,322,002
    
    
    $
    78,459
    
    
    $
    (627,079
    )
    
    $
    3,773,382
 -9-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Note B Investments  (Continued)
  March 31, 2009Less Than 12 Months
    
    
    12 Months or More
    
    
    TotalGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses(dollars in thousands)Mortgage-backed securities
    
    $
    318,608
    
    
    $
    (118,043
    )
    
    $
    204,779
    
    
    $
    (120,137
    )
    
    $
    523,387
    
    
    $
    (238,180
    )Corporate securities
    
    
    425,443
    
    
    
    (94,806
    )
    
    
    370,708
    
    
    
    (236,831
    )
    
    
    796,151
    
    
    
    (331,637
    )U.S. Treasury and other U.S. Government
guaranteed securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    U.S. Government-sponsored enterprise
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Obligations of U.S. states, municipalities
& political subdivisions
    
    
    314,976
    
    
    
    (21,635
    )
    
    
    339,325
    
    
    
    (44,647
    )
    
    
    654,301
    
    
    
    (66,282
    )Total fixed maturity securities
    
    $
    1,059,027
    
    
    $
    (234,484
    )
    
    $
    914,812
    
    
    $
    (401,615
    )
    
    $
    1,973,839
    
    
    $
    (636,099
    )
 December 31, 2008Less Than 12 Months
    
    
    12 Months or More
    
    
    TotalGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses(dollars in thousands)Mortgage-backed securities
    
    $
    437,827
    
    
    $
    (150,361
    )
    
    $
    155,182
    
    
    $
    (76,435
    )
    
    $
    593,009
    
    
    $
    (226,796
    )Corporate securities
    
    
    581,598
    
    
    
    (130,059
    )
    
    
    291,938
    
    
    
    (170,204
    )
    
    
    873,536
    
    
    
    (300,263
    )U.S. Treasury and other U.S. Government
guaranteed securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    U.S. Government-sponsored enterprise
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Obligations of U.S. states, municipalities
& political subdivisions
    
    
    520,492
    
    
    
    (61,106
    )
    
    
    164,817
    
    
    
    (38,914
    )
    
    
    685,309
    
    
    
    (100,020
    )aaaaaaaTotal fixed maturity securities
    
    $
    1,539,917
    
    
    $
    (341,526
    )
    
    $
    611,937
    
    
    $
    (285,553
    )
    
    $
    2,151,854
    
    
    $
    (627,079
    )
  -10-




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DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Note B
 Investments  (Continued)
   Three Months EndedMarch 31,2009
    
    
    2008(dollars in thousands)Gross investment income:Fixed maturity securities, available for sale
    
    $
    70,484
    
    
    $
    44,344Mortgage loans
    
    
    1,199
    
    
    
    3,973Short-term investments
    
    
    248
    
    
    
    3,143Other
    
    
    (799
    )
    
    
    (10,897
    )71,132
    
    
    
    40,563Less: Investment expenses
    
    
    (8,277
    )
    
    
    (8,226
    )Total
    
    $
    62,855
    
    
    $
    32,337
 Note C
 Fair Value Measurements
     -11-




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DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Note C
 Fair Value Measurements  (Continued)
         -12-




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DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Note C
 Fair Value Measurements  (Continued)
       March 31, 2009Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3(dollars in thousands)Assets:Fixed maturity securities, available for sale:Mortgage-backed securities
    
    $
    1,234,197
    
    
    $
    
    
    
    $
    1,071,074
    
    
    $
    163,123Corporate securities
    
    
    1,075,532
    
    
    
    
    
    
    
    818,704
    
    
    
    256,828U.S. Treasury and other U.S. Government
guaranteed securities
    
    
    55,604
    
    
    
    25,721
    
    
    
    27,592
    
    
    
    2,291U.S. Government-sponsored enterprise
securities
    
    
    7,879
    
    
    
    
    
    
    
    7,879
    
    
    
    Obligations of U.S. states, municipalities
and political subdivisions
    
    
    1,260,082
    
    
    
    
    
    
    
    1,260,082
    
    
    
    Other investments
    
    
    124,322
    
    
    
    107,086
    
    
    
    
    
    
    
    17,236Assets held in separate account
    
    
    90,363
    
    
    
    
    
    
    
    
    
    
    
    90,363Total
    
    $
    3,847,979
    
    
    $
    132,807
    
    
    $
    3,185,331
    
    
    $
    529,841Liabilities:Other liabilities
    
    $
    51,275
    
    
    $
    51,275
    
    
    $
    
    
    
    $
    
 -13-




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DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Note C
 Fair Value Measurements  (Continued)
  Period Ended March 31, 2009U.S.Treasury andOther U.S.
    
    
    
    
    
    
    AssetsMortgage-
    
    
    
    
    
    
    Government
    
    
    
    
    
    
    held inbacked
    
    
    Corporate
    
    
    Guaranteed
    
    
    Other
    
    
    SeparateTotal
    
    
    Securities
    
    
    Securities
    
    
    Securities
    
    
    Investments
    
    
    Account(dollars in thousands)Balance at beginning of period
    
    $
    735,379
    
    
    $
    188,303
    
    
    $
    432,401
    
    
    $
    2,608
    
    
    $
    21,494
    
    
    $
    90,573Total (losses) gainsIncluded in earnings
    
    
    (15,890
    )
    
    
    (6,296
    )
    
    
    (11,044
    )
    
    
    
    
    
    
    1,450
    
    
    
    Included in other comprehensive loss
    
    
    (28,057
    )
    
    
    (6,777
    )
    
    
    (19,681
    )
    
    
    19
    
    
    
    (1,618
    )
    
    
    Purchases, issuances and settlements
    
    
    (155,692
    )
    
    
    (6,208
    )
    
    
    (144,848
    )
    
    
    (336
    )
    
    
    (4,090
    )
    
    
    (210
    )Net transfer out of Level 3
    
    
    (5,899
    )
    
    
    (5,899
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at end of the period
    
    $
    529,841
    
    
    $
    163,123
    
    
    $
    256,828
    
    
    $
    2,291
    
    
    $
    17,236
    
    
    $
    90,363Net losses for the period included in earnings
attributable to the net change in unrealized
gains and losses of assets measured at fair
value using unobservable inputs and held
at March 31, 2009 (1)
    
    $
    (13,757
    )
    
    $
    (10,590
    )
    
    $
    (1,597
    )
    
    $
    
    
    
    $
    (1,570
    )
    
    $
    
 
 (1)
    
    In the first quarter of 2009, net losses of $0.6 million and $13.2 million were
reported in the consolidated statements of income under the captions net investment
income and net realized investment losses, respectively. Note D  Segment Information
 Three Months EndedMarch 31,2009
    
    
    2008(dollars in thousands)Revenues:Group employee benefit products
    
    $
    381,521
    
    
    $
    348,081Asset accumulation products
    
    
    27,501
    
    
    
    16,516Other(1)
    
    
    11,554
    
    
    
    10,030420,576
    
    
    
    374,627Net realized investment losses
    
    
    (21,999
    )
    
    
    (6,436
    )$
    398,577
    
    
    $
    368,191Operating income:Group employee benefit products
    
    $
    58,835
    
    
    $
    44,450Asset accumulation products
    
    
    8,038
    
    
    
    4,051Other(1)
    
    
    (8,029
    )
    
    
    (6,679
    )58,844
    
    
    
    41,822Net realized investment losses
    
    
    (21,999
    )
    
    
    (6,436
    )$
    36,845
    
    
    $
    35,386
 
 (1)
    
    Primarily consists of operations from integrated disability and absence management services
and certain corporate activities. -14-




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DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Note E
 Comprehensive Income (Loss)
  Note F
 Stock-Based Compensation
     WeightedWeighted
    
    Average
    
    AggregateNumber
    
    Average
    
    Remaining
    
    Intrinsicof
    
    Exercise
    
    Contractual
    
    ValueOptions
    
    Options
    
    Price
    
    Term
    
    ($000)Outstanding at January 1, 2009
    
    
    4,092,954
    
    
    $
    28.71Granted
    
    
    189,148
    
    
    
    12.40Exercised
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Outstanding at March 31, 2009
    
    
    4,282,102
    
    
    
    27.99
    
    
    
    6.8
    
    
    $
    373Exercisable at March 31, 2009
    
    
    1,873,342
    
    
    $
    24.24
    
    
    
    4.5
    
    
    $
    173
   -15-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Note G Computation of Results per Share
  Three Months EndedMarch 31,2009
    
    
    2008Numerator:Net income
    
    $
    24,484
    
    
    $
    21,144Denominator:Weighted average common shares outstanding
    
    
    48,034
    
    
    
    49,055Effect of dilutive securities
    
    
    89
    
    
    
    1,098Weighted average common shares outstanding, assuming dilution
    
    
    48,123
    
    
    
    50,153Basic results per share of common stock:Net income
    
    $
    0.51
    
    
    $
    0.43Diluted results per share of common stock:Net income
    
    $
    0.51
    
    
    $
    0.42
 -16-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC.
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Introduction
    -17-




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Results of Operations
 Summary of Results.
 -18-




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##### Table of Contents



Premium and Fee Income. .
    Net Investment Income.
 Net Realized Investment Losses.
  -19-




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##### Table of Contents



Benefits and Expenses.
 Interest Expense
 Income Tax Expense.
 Liquidity and Capital Resources
 General.
  -20-




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Investments.
  -21-




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##### Table of Contents



Reinsurance.
 Cash Flows
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
  Forward-Looking Statements And Cautionary Statements Regarding Certain Factors That May Affect
Future Results
  -22-




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PART II. OTHER INFORMATION
 
 Item 1A. Risk Factors
  
 Item 6. Exhibits
 11.1
    
    
    Computation of Results per Share of Common Stock (incorporated by reference to
Note G to the Consolidated
Financial Statements included elsewhere herein)31.1
    
    
    Certification by the Chairman of the Board and Chief Executive Officer of
Periodic Report Pursuant to Rule 13a-14(a) or 15d-14(a)31.2
    
    
    Certification by the Senior 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
  DELPHI FINANCIAL GROUP, INC. (Registrant)/s/ ROBERT ROSENKRANZRobert RosenkranzChairman of the Board and Chief Executive Officer
(Principal Executive Officer)/s/ THOMAS W. BURGHARTThomas W. BurghartSenior Vice President and Treasurer
(Principal Accounting and Financial Officer)  -23-