<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 September 30, 2004

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

For the transition period from _________ to __________

Commission File Number 001-11462

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

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

<TABLE>
<CAPTION>
1105 North Market Street, Suite 1230, P.O. Box 8985, Wilmington, Delaware                 19899
-------------------------------------------------------------------------               ---------
<S>                                                                                     <C>
                (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 October 31, 2004, the Registrant had 27,770,771 shares of Class A Common
        Stock and 3,914,181 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 and Nine
             Months Ended September 30, 2004 and 2003............................................   3

         Consolidated Balance Sheets at September 30, 2004 and
             December 31, 2003...................................................................   4

         Consolidated Statements of Shareholders' Equity for the
             Nine Months Ended September 30, 2004 and 2003.......................................   5

         Consolidated Statements of Cash Flows for the
             Nine Months Ended September 30, 2004 and 2003.......................................   6

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

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

PART II. OTHER INFORMATION

         Item 1.  Legal Proceedings..............................................................  21

         Item 6.  Exhibits.......................................................................  21

         Signatures..............................................................................  21
</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             Nine Months Ended
                                                                     September 30,                  September 30,
                                                              --------------------------     --------------------------
                                                                 2004            2003           2004            2003
                                                              -----------    -----------     -----------    -----------
<S>                                                           <C>            <C>             <C>            <C>
Revenue:
   Premium and fee income..................................   $   210,292    $   181,211     $   618,051    $   527,892
   Net investment income...................................        48,220         46,190         149,468        141,249
   Net realized investment gains...........................         1,433          3,170           8,595          7,849
                                                              -----------    -----------     -----------    -----------
                                                                  259,945        230,571         776,114        676,990
                                                              -----------    -----------     -----------    -----------
Benefits and expenses:
   Benefits, claims and interest credited to policyholders.       152,312        133,567         455,984        394,194
   Commissions.............................................        15,607         12,625          43,598         37,895
   Amortization of cost of business acquired...............        16,721         13,790          46,121         39,739
   Other operating expenses................................        31,199         28,110          94,436         87,428
                                                              -----------    -----------     -----------    -----------
                                                                  215,839        188,092         640,139        559,256
                                                              -----------    -----------     -----------    -----------
      Operating income.....................................        44,106         42,479         135,975        117,734
Interest expense:
   Corporate debt..........................................         3,548          4,809          10,459         10,613
   Junior subordinated deferrable interest debentures......         1,124          1,111           3,335          2,927
                                                              -----------    -----------     -----------    -----------
                                                                    4,672          5,920          13,794         13,540
                                                              -----------    -----------     -----------    -----------

      Income before income tax expense....................         39,434         36,559         122,181        104,194

Income tax expense.........................................         7,255         11,667          32,248         32,114
                                                              -----------    -----------     -----------    -----------

      Net income...........................................   $    32,179    $    24,892     $    89,933    $    72,080
                                                              ===========    ===========     ===========    ===========
Basic results per share of common stock:
   Net income..............................................   $      1.00    $      0.80     $      2.82    $      2.31

Diluted results per share of common stock:
   Net income..............................................   $      0.98    $      0.78     $      2.74    $      2.26

Dividends paid per share of common stock...................   $      0.08    $      0.05     $      0.24    $      0.15
</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>
                                                                                    September 30,   December 31,
                                                                                        2004            2003
                                                                                    ------------    ------------
<S>                                                                                 <C>             <C>
Assets:
   Investments:
      Fixed maturity securities, available for sale .............................    $  3,018,289    $  2,862,045
      Short-term investments ....................................................          93,120         114,752
      Other investments .........................................................         387,712         225,957
                                                                                     ------------    ------------
                                                                                        3,499,121       3,202,754
   Cash .........................................................................          24,339          18,733
   Cost of business acquired ....................................................         214,337         183,665
   Reinsurance receivables ......................................................         415,236         409,620
   Goodwill .....................................................................          93,929          93,929
   Securities lending collateral ................................................         264,703               -
   Other assets .................................................................         223,872         176,170
   Assets held in separate account ..............................................          82,723          92,661
                                                                                     ------------    ------------
      Total assets ..............................................................    $  4,818,260    $  4,177,532
                                                                                     ============    ============

Liabilities and Shareholders' Equity:
   Future policy benefits:
      Life ......................................................................    $    261,322    $    246,634
      Disability and accident ...................................................         477,341         439,158
   Unpaid claims and claim expenses:
      Life ......................................................................          45,355          47,395
      Disability and accident ...................................................         204,932         189,740
      Casualty ..................................................................         608,513         572,690
   Policyholder account balances ................................................       1,020,379         961,356
   Corporate debt ...............................................................         170,750         143,750
   Junior subordinated deferrable interest debentures underlying
      company-obligated mandatorily redeemable capital
      securities issued by unconsolidated subsidiaries ..........................          59,762               -
   Securities lending payable ...................................................         264,703               -
   Other liabilities and policyholder funds .....................................         720,708         642,906
   Liabilities related to separate account ......................................          82,723          79,413
                                                                                     ------------    ------------
      Total liabilities .........................................................       3,916,488       3,323,042
                                                                                     ------------    ------------

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

   Shareholders' equity:
      Preferred Stock, $.01 par; 10,000,000 shares authorized ...................               -               -
      Class A Common Stock, $.01 par; 40,000,000 shares authorized;
         30,310,229 and 29,457,024 shares issued and outstanding, respectively...             303             295
      Class B Common Stock, $.01 par; 20,000,000 shares authorized;
         3,914,181 and 4,177,357 shares issued and outstanding, respectively ....              39              42
      Additional paid-in capital ................................................         404,021         383,573
      Accumulated other comprehensive income ....................................          53,253          52,428
      Retained earnings .........................................................         503,470         421,080
      Treasury stock, at cost; 2,573,211 and 2,560,035 shares of Class A
         Common Stock, respectively .............................................         (59,314)        (58,978)
                                                                                     ------------    ------------
         Total shareholders' equity .............................................         901,772         798,440
                                                                                     ------------    ------------
             Total liabilities and shareholders' equity .........................    $  4,818,260    $  4,177,532
                                                                                     ============    ============
</TABLE>

                 See notes to consolidated financial statements.

                                      -4-
<PAGE>

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

<TABLE>
<CAPTION>
                                                                            Accumulated
                                        Class A     Class B    Additional       Other
                                         Common      Common     Paid-in    Comprehensive   Retained   Treasury
                                         Stock       Stock      Capital       Income       Earnings     Stock       Total
                                       ---------   ---------   ---------      ------       ---------  ---------   ---------
<S>                                    <C>         <C>         <C>         <C>             <C>        <C>         <C>
Balance, January 1, 2003.............  $     189   $      32    $ 373,356     $   30,003   $ 329,574  $ (51,499)  $ 681,655
                                                                                                                  ---------
Net income...........................          -           -            -              -      72,080          -      72,080
Other comprehensive income:
   Increase in net unrealized
     appreciation on investments.....          -           -            -         22,582           -          -      22,582
   Increase in net loss on cash
     flow hedge......................          -           -            -         (4,303)          -          -      (4,303)
                                                                                                                  ---------
Comprehensive income.................                                                                                90,359
Issuance of stock, exercise of stock
   options and share conversions.....          6          (4)       5,497              -           -          -       5,499
Stock-based compensation.............          -           -          847              -           -          -         847
Acquisition of treasury stock........          -           -            -              -           -     (7,479)     (7,479)
Cash dividends.......................          -           -            -              -      (4,934)         -      (4,934)
                                       ---------   ---------    ---------     ----------   ---------  ---------   ---------

Balance, September 30, 2003..........  $     195   $      28    $ 379,700     $   48,282   $ 396,720  $ (58,978)  $ 765,947
                                       =========   =========    =========     ==========   =========  =========   =========

Balance, January 1, 2004.............  $     295   $      42    $ 383,573     $   52,428   $ 421,080  $ (58,978)  $ 798,440
                                                                                                                  ---------
Net income...........................          -           -            -              -      89,933          -      89,933
Other comprehensive income:
   Increase in net unrealized
     appreciation on investments.....          -           -            -            236           -          -         236
   Decrease in net loss on cash
     flow hedge......................          -           -            -            589           -          -         589
                                                                                                                  ---------
Comprehensive income.................                                                                                90,758
Issuance of stock, exercise of stock
   options and share conversions.....          8          (3)      18,532              -           -          -      18,537
Stock-based compensation.............          -           -        1,916              -           -          -       1,916
Acquisition of treasury stock........          -           -            -              -           -       (336)       (336)
Cash dividends.......................          -           -            -              -      (7,543)         -      (7,543)
                                       ---------   ---------    ---------     ----------   ---------  ---------   ---------

Balance, September 30, 2004..........  $     303   $      39    $ 404,021     $   53,253   $ 503,470  $ (59,314)  $ 901,772
                                       =========   =========    =========     ==========   =========  =========   =========
</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>
                                                                                        Nine Months Ended
                                                                                          September 30,
                                                                                       2004           2003
                                                                                    -----------     -----------
<S>                                                                                 <C>            <C>
Operating activities:
   Net income ..................................................................    $    89,933    $    72,080
   Adjustments to reconcile net income to net cash provided
        by operating activities:
      Change in policy liabilities and policyholder accounts ...................        145,556        149,683
      Net change in reinsurance receivables and payables .......................         (1,422)       (11,146)
      Amortization, principally the cost of business acquired and investments...         33,087         26,165
      Deferred costs of business acquired ......................................        (66,814)       (60,032)
      Net realized gains on investments ........................................         (8,595)        (7,849)
      Net change in trading account securities .................................        (11,985)          (273)
      Net change in federal income tax liability ...............................         17,635         15,574
      Other ....................................................................        (31,022)       (14,475)
                                                                                    -----------    -----------
        Net cash provided by operating activities ..............................        166,373        169,727
                                                                                    -----------    -----------
Investing activities:
   Purchases of investments and loans made .....................................     (1,524,817)    (1,278,092)
   Sales of investments and receipts from repayment of loans ...................      1,109,869        935,868
   Maturities of investments ...................................................        167,555        114,330
   Net change in short-term investments ........................................         21,632        (17,804)
   Change in deposit in separate account .......................................         (2,440)        (2,267)
                                                                                    -----------    -----------
        Net cash used by investing activities ..................................       (228,201)      (247,965)
                                                                                    -----------    -----------
Financing activities:
   Deposits to policyholder accounts ...........................................        114,830         82,385
   Withdrawals from policyholder accounts ......................................        (66,332)       (59,618)
   Proceeds from issuance of 2033 Senior Notes .................................              -        139,222
   Borrowings under revolving credit facility ..................................         32,000         28,000
   Principal payments under revolving credit facility ..........................         (5,000)       (65,000)
   Repayments or repurchase of other corporate debt ............................              -        (14,650)
   Proceeds from issuance of 2003 Capital Securities ...........................              -         19,399
   Change in liability for Federal Home Loan Bank advances .....................        (15,000)       (47,000)
   Other financing activities ..................................................          6,936        (18,998)
                                                                                    -----------    -----------
        Net cash provided by financing activities ..............................         67,434         63,740
                                                                                    -----------    -----------

Increase (decrease) in cash ....................................................          5,606        (14,498)
Cash at beginning of period ....................................................         18,733         27,669
                                                                                    -----------    -----------
      Cash at end of period ....................................................    $    24,339    $    13,171
                                                                                    ===========    ===========
</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 nine months ended
September 30, 2004 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2004. For further information refer to
the consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K/A for the year ended December 31, 2003.
Capitalized terms used herein without definition have the meanings ascribed to
them in the Company's annual report on Form 10-K/A for the year ended December
31, 2003.

Stock Options

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

<TABLE>
<CAPTION>
                                                                           Three Months Ended      Nine Months Ended
                                                                              September 30,           September 30,
                                                                         ---------------------    --------------------
                                                                           2004        2003          2004        2003
                                                                         ---------   ---------    ---------   --------
                                                                          (dollars in thousands, except per share data)
<S>                                                                      <C>         <C>          <C>         <C>
Net income, as reported..............................................    $  32,179   $  24,892    $  89,933   $  72,080
Add:  Stock-based employee compensation expense included
   in reported net income, net of related tax effects................          581         439        1,657         791
Deduct:  Stock-based employee compensation expense
    determined under the fair value based method for all awards,
    net of related tax effects.......................................         (764)       (680)      (2,221)     (1,640)
                                                                         ---------   ---------    ---------   ---------
Pro forma net income.................................................    $  31,996   $  24,651    $  89,369   $  71,231
                                                                         =========   =========    =========   =========
Earnings per share:
Basic, as reported...................................................    $    1.00   $    0.80    $    2.82   $    2.31
Basic,   pro forma...................................................         1.00        0.79         2.80        2.29

Diluted, as reported.................................................    $    0.98   $    0.78    $    2.74   $    2.26
Diluted, pro forma...................................................         0.96        0.76         2.70        2.22
</TABLE>

                                      -7-
<PAGE>

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

NOTE A - SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

Accounting Changes

Effective January 1, 2004, the Company adopted the American Institute of
Certified Public Accountants' Statement of Position ("SOP") No. 03-1,
"Accounting and Reporting by Insurance Enterprises for Certain Nontraditional
Long-Duration Contracts and for Separate Accounts." Prior to adoption of SOP No.
03-1, the Company was required to report the aggregate of all separate account
assets as a single caption on its balance sheet, which was titled "Assets held
in separate account." Under the provisions of SOP No. 03-1, the Company is
required to allocate its proportionate interest in the separate account's assets
to the corresponding captions in the Company's balance sheet. At September 30,
2004, the Company's proportionate interest in the separate account's assets was
$15.7 million. SOP No. 03-1 also provides specific guidance for accounting for
certain nontraditional long-duration insurance contracts. Nontraditional
long-duration insurance contracts are annuity and life products which combine
fixed and variable features and that are not covered by specific accounting
guidance in SFAS No. 60, "Accounting and Reporting by Insurance Enterprises," or
SFAS No. 97, "Accounting and Reporting by Insurance Enterprises for Certain
Long-Duration Contracts and for Realized Gains and Losses from the Sale of
Investments." The Company offers nontraditional long-duration insurance
contracts such as annuity products with a market value adjustment feature and
first year bonus interest rates. The adoption of SOP No. 03-1 did not have a
material effect on the financial position or results of operations of the
Company.

The Company adopted revised Financial Accounting Standards Board Interpretation
("FIN") No. 46, "Consolidation of Variable Interest Entities," as of March 31,
2004. The revised interpretation changed the conceptual framework for
determining if an entity holds a controlling interest in a variable interest
entity and required the Company to deconsolidate its subsidiaries that hold
junior subordinated deferrable interest debentures of the Company which underlie
the Company-obligated mandatorily redeemable capital securities of these
subsidiaries. Therefore, at September 30, 2004, the Company presented in its
consolidated financial statements the junior subordinated deferrable interest
debentures of $59.8 million as a liability and its interest of $3.7 million in
the subsidiaries that hold these debentures as a component of other assets. The
adoption of revised FIN 46 did not have a material effect on the Company's
financial position, results of operations or ability to comply with its debt
covenants.

Recently Issued Accounting Standards

In March 2004, the Emerging Issues Task Force ("EITF") reached a consensus on
the guidance provided in EITF Issue 03-1, "The Meaning of Other-Than-Temporary
Impairments and Its Application to Certain Investments," as applicable to debt
and equity securities that are within the scope of SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," and equity securities that
are accounted for using the cost method specified in APB No. 18, "The Equity
Method of Accounting for Investments in Common Stock." The new guidance for
determining whether an impairment in value of a security is other-than-temporary
was scheduled to become effective for reporting periods beginning after June 15,
2004. In September 2004, however, the FASB issued FASB Staff Position EITF Issue
03-1-1, "Effective Date of Paragraphs 10-20 of EITF Issue 03-1, The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments,"
which delayed the effective date for the impairment recognition and measurement
guidance of EITF Issue 03-1 until certain implementation issues are addressed.
The FASB is expected to issue finalized guidance in December 2004. Pending a
final resolution by the FASB, the Company, as required, will continue to apply
existing authoritative literature with respect to the recognition of losses
related to the other-than-temporary impairment of securities. In the absence of
such final resolution, the Company is unable to determine the impact, if any,
that the impairment provisions of EITF Issue 03-1 will have on the Company's
consolidated financial statements.

                                      -8-
<PAGE>

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

NOTE B - INVESTMENTS

At September 30, 2004, the Company had fixed maturity securities available for
sale with a carrying value and a fair value of $3,018.3 million and an amortized
cost of $2,917.8 million. At December 31, 2003, the Company had fixed maturity
securities available for sale with a carrying value and a fair value of $2,862.0
million and an amortized cost of $2,750.9 million.

The summarized aggregate unaudited net income for the entities in which the
Company's balances with independent investment managers have been invested was
$632.4 million and $1,411.9 million for the first nine months of 2004 and 2003,
respectively, and $(0.3) million and $249.3 million for the third quarters of
2004 and 2003, respectively.

NOTE C - SECURITIES LENDING

The Company maintains a securities lending program under which certain
securities from its portfolio are loaned to other institutions for short periods
of time. The Company maintains full ownership rights to the securities loaned
and continues to earn interest and dividends on them. Accordingly, such
securities are included in invested assets. The Company obtains collateral for
such loans at approximately 102% of the market value of a loaned security. The
Company's institutional lending agent monitors the market value of the
securities loaned and obtains additional collateral as necessary. The collateral
is deposited by the borrower with, and held by, such agent. Cash collateral is
invested by such agent to generate additional income according to specified
guidelines. The securities lending collateral is reported as an asset with a
corresponding liability reflected for the obligation to return the collateral.
At September 30, 2004, the Company had securities on loan with a market value of
$259.5 million and cash collateral of $264.7 million.

NOTE D - INCOME TAXES

The Company files a "life/non-life" consolidated federal tax return, pursuant to
an election made with the Company's 2001 tax return. RSLIC-Texas and RSLIC are
taxed as life insurance companies and comprise the life subgroup. The non-life
subgroup includes DFG, SNCC, FRSLIC, SFIC and the non-insurance subsidiaries of
the Company. The Company computes a balance sheet amount for deferred income
taxes, which is included in other assets or other liabilities, at the rates
expected to be in effect when the underlying differences will be reported in the
Company's income tax returns. The Company's federal tax returns are routinely
audited by the Internal Revenue Service ("IRS"). During the third quarter of
2004, the Company's income taxes payable was reduced by $4.6 million from the
favorable resolution of IRS audits of the 1998 through 2002 tax years. This
accrual reduction represents the release of previous accruals for potential
audit adjustments which were subsequently settled or eliminated.

NOTE E - SEGMENT INFORMATION

<TABLE>
<CAPTION>
                                            Three Months Ended        Nine Months Ended
                                              September 30,             September 30,
                                          ----------------------    ----------------------
                                            2004         2003         2004         2003
                                          ---------    ---------    ---------    ---------
                                                       (dollars in thousands)
<S>                                       <C>          <C>          <C>          <C>
Revenues:
   Group employee benefit products...     $ 230,856    $ 201,015    $ 684,186    $ 587,848
   Asset accumulation products.......        20,170       19,569       60,292       62,029
   Other (1).........................         7,486        6,817       23,041       19,264
                                          ---------    ---------    ---------    ---------
                                            258,512      227,401      767,519      669,141

   Net realized investment gains.....         1,433        3,170        8,595        7,849
                                          ---------    ---------    ---------    ---------
                                          $ 259,945    $ 230,571    $ 776,114    $ 676,990
                                          =========    =========    =========    =========
Operating income:
   Group employee benefit products...     $  39,768    $  35,668    $ 118,651    $ 102,621
   Asset accumulation products.......         5,047        3,667       13,950       12,854
   Other (1).........................        (2,142)         (26)      (5,221)      (5,590)
                                          ---------    ---------    ---------    ---------
                                             42,673       39,309      127,380      109,885

   Net realized investment gains.....         1,433        3,170        8,595        7,849
                                          ---------    ---------    ---------    ---------
                                          $  44,106    $  42,479    $ 135,975    $ 117,734
                                          =========    =========    =========    =========
</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.

                                      -9-
<PAGE>

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

NOTE F - COMPREHENSIVE INCOME

Total comprehensive income is comprised of net income and other comprehensive
income, which includes the change in unrealized gains and losses on securities
available for sale and the change in the loss on the cash flow hedge described
in the Company's annual report on Form 10-K/A for the year ended December 31,
2003. Total comprehensive income was $90.8 million and $90.4 million for the
first nine months of 2004 and 2003, respectively, and $65.7 million and $15.7
million for the third quarters of 2004 and 2003, respectively.

NOTE G - COMPUTATION OF RESULTS PER SHARE

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

<TABLE>
<CAPTION>
                                                                          Three Months Ended         Nine Months Ended
                                                                              September 30,             September 30,
                                                                        -----------------------   -----------------------
                                                                           2004         2003         2004         2003
                                                                        ----------   ----------   ----------   ----------
                                                                          (dollars in thousands, except per share data)
<S>                                                                     <C>          <C>          <C>          <C>
Numerator:
   Net income .....................................................     $   32,179   $   24,892   $   89,933   $   72,080
                                                                        ==========   ==========   ==========   ==========

Denominator:
   Weighted average common shares outstanding .....................         32,028       31,181       31,883       31,157
     Effect of dilutive securities ................................            971          924          995          774
                                                                        ----------   ----------   ----------   ----------
   Weighted average common shares outstanding, assuming dilution...         32,999       32,105       32,878       31,931
                                                                        ==========   ==========   ==========   ==========

Basic results per share of common stock:
Net income ........................................................     $     1.00   $     0.80   $     2.82   $     2.31

Diluted results per share of common stock:
Net income ........................................................     $     0.98   $     0.78   $     2.74   $     2.26
</TABLE>

NOTE H - CONTINGENCIES

In the course of its business, the Company is a party to litigation and other
proceedings, primarily involving its insurance operations. In some cases, these
proceedings entail claims against the Company for punitive damages and similar
types of relief. The ultimate disposition of such pending litigation and
proceedings is not expected to have a material adverse effect on the Company's
consolidated financial position. Incident to its discontinued products, the
Company has been a party to two separate arbitrations arising out of two
separate accident and health reinsurance arrangements in which it and other
companies formerly were participating reinsurers. During the second quarter of
2004, the Company, along with other former participants, reached a settlement
resolving the matters in dispute in one of these arbitrations. The Company
increased its reserves relating to the reinsurance business in dispute in the
settled arbitration by a total of $5.5 million during the first nine months of
2004. At issue in the remaining arbitration, among other things, is whether
certain reinsurance risks were validly ceded to the Company. The hearing in such
arbitration is scheduled to be held in the second quarter of 2005. While
management believes that the Company has substantial legal grounds for avoiding
the reinsurance risks at issue or obtaining other relief, it is not at this time
possible to predict the ultimate outcome of this arbitration, nor is it feasible
to provide reasonable ranges of potential losses. In the opinion of management,
the arbitration, when ultimately resolved, will not have a material adverse
effect on the Company's consolidated financial position.

                                      -10-
<PAGE>

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

INTRODUCTION

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

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

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

Nine Months Ended September 30, 2004 Compared to
Nine Months Ended September 30, 2003

Summary of Results. Net income was $89.9 million, or $2.74 per diluted share,
for the first nine months of 2004 as compared to $72.1 million, or $2.26 per
diluted share, for the first nine months of 2003. Net income in the first nine
months of 2004 and 2003 included realized investment gains (net of the related
income tax expense) of $5.6 million, or $0.17 per diluted share, and $5.1
million, or $0.16 per diluted share, respectively. The increase in net income in
the first nine months of 2004 is attributable to growth in income from group
employee benefit products and in net investment income. Premiums from the
Company's core group employee benefit products increased 17% in the first nine
months of 2004 and the combined ratio (loss ratio plus expense ratio) decreased
to 94.5% for the first nine months of 2004 from 94.8% for the first nine months
of 2003. The weighted average annualized crediting rate on the Company's asset
accumulation products, which reflects the effects of the first year bonus
crediting rate on certain newly issued products, decreased from 5.5% in the
first nine months of 2003 to 4.7% in the first nine

                                      -11-
<PAGE>

months of 2004. Net investment income in the first nine months of 2004, which
increased 6% from the first nine months of 2003, reflects an 11% increase in
average invested assets. In addition, income tax expense was reduced by $4.6
million during 2004 resulting from the favorable resolution of IRS audits of the
1998 through 2002 tax years.

Premium and Fee Income. Premium and fee income for the first nine months of 2004
was $618.1 million as compared to $527.9 million for the first nine months of
2003, an increase of 17%. Premiums from core group employee benefit products
increased 17% to $578.4 million for the first nine months of 2004 from $495.1
million for the first nine months of 2003. This increase reflects normal growth
in employment and salary levels for the Company's existing customer base, price
increases, new business production and a decrease in premiums ceded by the
Company to reinsurers for these products. Within core group employee benefit
products, premiums from excess workers' compensation insurance for self-insured
employers increased 29% to $140.0 million for the first nine months of 2004 from
$108.3 million for the first nine months of 2003. This increase was primarily
due to the favorable pricing environment and demand for this product as a result
of higher primary workers' compensation rates. SNCC obtained average price
increases of 10% in connection with its renewals of insurance coverage during
the first nine months of 2004, and has continued to obtain significant
improvements in contract terms, in particular higher self-insured retention
levels, in these renewals. On average, self-insured retention levels increased
approximately 9% in the first nine months of 2004. In addition, retention of
existing customers for excess workers' compensation products for the first nine
months of 2004 was significantly higher than for the first nine months of 2003.
Excess workers' compensation new business production, which represents the
amount of new annualized premium sold, was $21.3 million for the first nine
months of 2004 as compared with exceptionally strong production for the first
nine months of 2003 of $35.7 million. The significantly higher renewal ratio and
rate increases offset the decline in new business production as the Company
focused on achieving rate increases on its existing business and maintained
pricing and underwriting discipline as to new sales. Premiums for the Company's
other core group employee benefit products increased 13% to $438.4 million for
the first nine months of 2004 from $386.8 million for the first nine months of
2003, reflecting new business production and a decrease in premiums ceded by the
Company to reinsurers for these products. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources - Reinsurance." New business production for the Company's
other core group employee benefit products was $112.6 million for the first nine
months of 2004 as compared with $116.1 million for the first nine months of
2003. The level of production achieved in 2004 reflects the Company's focus on
the small case niche (insured groups of 10 to 500 individuals) which resulted in
a 22% increase in production based on the number of cases sold as compared to
the first nine months of 2003. The Company continues to maintain its
underwriting discipline under competitive market conditions for these products
and to implement price increases for certain existing disability and group life
customers.

Deposits from the Company's asset accumulation products were $110.7 million for
the first nine months of 2004 as compared to $78.4 million for the first nine
months of 2003. These deposits consist of new annuity sales, which are recorded
as liabilities rather than as premiums. The increase in deposits from the
Company's asset accumulation products in 2004 was primarily due to an increase
in the number of independent agents and marketing companies distributing the
Company's annuity products. The interest rate spreads available on these
products remained below average throughout 2003 and the first nine months of
2004. The Company continues to maintain its discipline in setting the crediting
rates offered on its asset accumulation products.

Net Investment Income. Net investment income for the first nine months of 2004
was $149.5 million as compared to $141.2 million for the first nine months of
2003, an increase of 6%. The level of net investment income in the 2004 period
reflects an increase in average invested assets from the 2003 period, partially
offset by a decrease in the tax equivalent weighted average annualized yield.
The tax equivalent weighted average annualized yield on invested assets was 6.3%
on average invested assets of $3,259.5 million for the first nine months of 2004
and 6.6% on average invested assets of $2,932.0 million for the first nine
months of 2003.

Net Realized Investment Gains. Net realized investment gains were $8.6 million
for the first nine months of 2004 as compared to $7.8 million for the first nine
months of 2003. The Company's investment strategy results in periodic sales of
securities and, therefore, the recognition of realized investment gains and
losses. During the first nine months of 2004 and 2003, the Company recognized
$11.7 million and $20.2 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 nine
months of 2004 and 2003, the Company recognized $3.1 million and $12.4 million,
respectively, of losses due to the other than temporary declines in the market
values of certain fixed maturity securities.

The losses of this type in the first nine months of 2004 ($2.0 million on an
after-tax basis) resulted primarily from credit quality-related deterioration in
certain municipal and asset-backed securities, and the Company may recognize
additional losses of this type in the future. The Company anticipates that if
certain other existing declines in security values are determined to be other
than temporary, it may recognize additional investment losses in the range of $2
million to $5 million, on an after-tax basis, with respect to the relevant
securities. However, the extent of any such losses will depend on future market
developments and changes in security values, and such losses may be outside this
range. The Company continuously monitors the affected

                                      -12-
<PAGE>

securities pursuant to its procedures for evaluation for the other than
temporary impairment in valuation. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Forward-Looking Statements and
Cautionary Statements Regarding Certain Factors That May Affect Future Results"
for a description of these procedures, which take into account a number of
factors. It is not possible to predict the extent of any future changes in
value, positive or negative, or the results of the future application of these
procedures, with respect to these securities. There can be no assurance that the
Company will realize investment gains in the future in an amount sufficient to
offset any such losses.

Benefits and Expenses. Policyholder benefits and expenses were $640.1 million
for the first nine months of 2004 as compared to $559.3 million for the first
nine months of 2003, an increase of 14%. This increase primarily reflects the
increase in premiums from the Company's group employee benefit products
discussed above. The combined ratio (loss ratio plus expense ratio) for the
Company's group employee benefits segment was 94.5% for the first nine months of
2004 and 94.8% for the first nine months of 2003. Benefits and expenses related
to the Company's asset accumulation products decreased $2.8 million primarily
due to a decrease in the weighted average annualized crediting rate on these
products, which reflects the effects of the first year bonus crediting rate on
certain newly issued products, from 5.5% in the first nine months of 2003 to
4.7% in the first nine months of 2004.

Income Tax Expense. Income tax expense was $32.2 million for the first nine
months of 2004 as compared to $32.1 million for the first nine months of 2003.
The Company's effective tax rate was 26.4% and 30.8% for the first nine months
of 2004 and 2003, respectively. The decrease in the Company's effective tax rate
during 2004 primarily reflects a $4.6 million reduction in federal income tax
expense resulting from the favorable resolution of IRS audits of the 1998
through 2002 tax years. This accrual reduction represents the release of
previous accruals for potential audit adjustments which were subsequently
settled or eliminated.

Three Months Ended September 30, 2004 Compared to
Three Months Ended September 30, 2003

Summary of Results. Net income was $32.2 million, or $0.98 per diluted share,
for the third quarter of 2004 as compared to $24.9 million, or $0.78 per diluted
share, for the third quarter of 2003. Net income in the third quarters of 2004
and 2003 included realized investment gains (net of the related income tax
expense) of $0.9 million, or $0.03 per diluted share, and $2.1 million, or $0.07
per diluted share, respectively. The increase in net income in the third quarter
of 2004 is attributable to growth in income from group employee benefit products
and in net investment income and the decrease in interest expense. Premiums from
the Company's core group employee benefit products increased 17% in the third
quarter of 2004 and the combined ratio (loss ratio plus expense ratio) decreased
to 93.8% in the third quarter of 2004 from 94.2% in the third quarter of 2003.
The weighted average annualized crediting rate on the Company's asset
accumulation products, which reflects the effects of the first year bonus
crediting rate on certain newly issued products, decreased from 5.4% in the
third quarter of 2003 to 4.6% in the third quarter of 2004. Net investment
income in the third quarter of 2004, which increased 4% from the third quarter
of 2003, reflects an 8% increase in average invested assets. In addition, income
tax expense was reduced by $4.6 million during the third quarter of 2004
resulting from the favorable resolution of IRS audits of the 1998 through 2002
tax years.

Premium and Fee Income. Premium and fee income in the third quarter of 2004 was
$210.3 million as compared to $181.2 million in the third quarter of 2003, an
increase of 16%. Premiums from core group employee benefit products increased
17% to $199.4 million for the third quarter of 2004 from $170.1 million for the
third quarter of 2003. This increase reflects normal growth in employment and
salary levels for the Company's existing customer base, price increases, and new
business production and a decrease in premiums ceded by the Company to
reinsurers for these products. Within core group employee benefit products,
premiums from excess workers' compensation insurance for self-insured employers
increased 26% to $49.7 million for the third quarter of 2004 from $39.5 million
for the third quarter of 2003. This increase was primarily due to the favorable
pricing environment and demand as a result of higher primary workers'
compensation rates. SNCC obtained average price increases of 8% in connection
with its renewals of insurance coverage during the third quarter of 2004, and
has continued to obtain significant improvements in contract terms, in
particular higher self-insured retention levels, in these renewals. In addition,
retention of existing customers for excess workers' compensation products for
the third quarter of 2004 was significantly higher than for the third quarter of
2003. Excess workers' compensation new business production, which represents the
amount of new annualized premium sold, was $11.4 million in the third quarter of
2004 as compared with exceptionally strong production for the third quarter of
2003 of $16.8 million. The significantly higher renewal ratio and rate increases
offset the decline in new business production as the Company focused on
achieving rate increases on its existing business and maintained pricing and
underwriting discipline as to new sales. Premiums from the Company's other core
group employee benefit products increased 15% to $149.6 million for the third
quarter of 2004 from $130.6 million for the third quarter of 2003, reflecting
new business production and a decrease in premiums ceded by the Company to
reinsurers for these products. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resources
- Reinsurance." New business production for the Company's other core group
employee benefit products

                                      -13-
<PAGE>

was $30.0 million for the third quarter of 2004 and $36.2 million in the third
quarter of 2003. The level of production achieved in 2004 reflects the Company's
focus on the small case niche (insured groups of 10 to 500 individuals) which
resulted in a 27% increase in production based on the number of cases sold as
compared to the third quarter of 2003. The Company continues to maintain its
underwriting discipline under competitive market conditions for these products
and to implement price increases for certain existing disability and group life
customers.

Deposits from the Company's asset accumulation products were $40.8 million for
the third quarter of 2004 as compared to $25.3 million for the third quarter of
2003. These deposits consist of new annuity sales, which are recorded as
liabilities rather than as premiums. The increase in deposits from the Company's
asset accumulation products in 2004 was primarily due to an increase in the
number of agents and marketing companies distributing the Company's annuity
products. The interest rate spreads available on these products remained below
average throughout 2003 and the first nine months of 2004. The Company continues
to maintain its discipline in setting the crediting rates offered on its asset
accumulation products.

Net Investment Income. Net investment income in the third quarter of 2004 was
$48.2 million as compared to $46.2 million in the third quarter of 2003, an
increase of 4%. The level of net investment income in the 2004 period reflects
an increase in average invested assets from the 2003 period, partially offset by
a decrease in the tax equivalent weighted average annualized yield. The tax
equivalent weighted average annualized yield on invested assets was 5.9% on
average invested assets of $3,389.9 million in the third quarter of 2004 and
6.1% on average invested assets of $3,127.4 million in the third quarter of
2003.

Net Realized Investment Gains. Net realized investment gains were $1.4 million
in the third quarter of 2004 as compared to $3.2 million in the third quarter of
2003. The Company's investment strategy results in periodic sales of securities
and, therefore, the recognition of realized investment gains and losses. During
the third quarters of 2004 and 2003, the Company recognized $2.0 million and
$3.2 million, respectively, of net gains on 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 third quarters of 2004 and 2003,
the Company recognized $0.6 million and $0, 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 the other than
temporary impairment in valuation. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Forward-Looking Statements and
Cautionary Statements Regarding Certain Factors That May Affect Future Results"
for a description of these procedures, which take into account a number of
factors. It is not possible to predict the extent of any future changes in
value, positive or negative, or the results of the future application of these
procedures, with respect to these securities. There can be no assurance that the
Company will realize investment gains in the future in an amount sufficient to
offset any such losses.

Benefits and Expenses. Policyholder benefits and expenses were $215.8 million
for the third quarter of 2004 as compared to $188.1 million for the third
quarter of 2003, an increase of 15%. This increase primarily reflects the
increase in premiums from the Company's group employee benefit products
discussed above. The combined ratio (loss ratio plus expense ratio) for the
Company's group employee benefits segment was 93.8% for the third quarter of
2004 and 94.2% for the third quarter of 2003. Benefits and expenses related to
the Company's asset accumulation products decreased $0.8 million primarily due
to a decrease in the weighted average annualized crediting rate on these
products, which reflects the effects of the first year bonus crediting rate on
certain newly issued products, from 5.4% in the third quarter of 2003 to 4.6% in
the third quarter of 2004.

Interest Expense. Interest expense was $4.7 million for the third quarter of
2004 as compared to $5.9 million for the third quarter of 2003, a decrease of
$1.2 million. This decrease primarily resulted from the interest expense in the
2003 period relating to the $66.5 million of 8.00% senior notes which matured on
October 1, 2003.

Income Tax Expense. Income tax expense was $7.3 million for the third quarter of
2004 as compared to $11.7 million for the third quarter of 2003. The Company's
effective tax rate was 18.4% for the third quarter of 2004 and 31.9% for the
third quarter of 2003. The decrease in the Company's effective tax rate during
2004 primarily reflects a $4.6 million reduction in federal income tax expense
resulting from the favorable resolution of IRS audits of the 1998 through 2002
tax years. This accrual reduction represents the release of previous accruals
for potential audit adjustments which were subsequently settled or eliminated.

                                      -14-
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

General. The Company had approximately $93.3 million of financial resources
available at the holding company level at September 30, 2004, which was
primarily comprised of investments in the common stock of its investment
subsidiaries, fixed maturity securities, balances with independent investment
managers, and short-term investments. The assets of the investment subsidiaries
are primarily invested in balances with independent investment managers. Other
sources of liquidity at the holding company level include dividends paid from
subsidiaries, primarily generated from operating cash flows and investments. The
Company's insurance subsidiaries are permitted, without prior regulatory
approval, to make dividends payments totaling $56.5 million during 2004, of
which $2.0 million has been paid during the first nine months of 2004. In
general, dividends from the company's non-insurance subsidiaries are not subject
to regulatory or other restrictions. The Company had $73.0 million of borrowings
available to it under its revolving credit facility as of September 30, 2004. A
shelf registration statement is also in effect under which securities yielding
proceeds of up to $106.2 million may be issued by the Company.

The Company's current liquidity needs, in addition to funding its operating
expenses, include principal and interest payments on outstanding borrowings
under its revolving credit facility, interest payments on the 2033 Senior Notes,
and distributions on the Capital Securities and the 2003 Capital Securities. The
maximum amount of borrowings available under the Company's revolving credit
facility, which expires in December 2006, is $100.0 million. The 2033 Senior
Notes mature in their entirety in May 2033 and are not subject to any sinking
fund requirements but are redeemable by the Company at par at any time on or
after May 15, 2008. The junior subordinated debentures underlying the Capital
Securities are not redeemable prior to March 25, 2007. The junior subordinated
debentures underlying the 2003 Capital Securities are redeemable, in whole or in
part, beginning May 15, 2008.

On November 4, 2004, the Company's Board of Directors declared a cash dividend
of $0.08 per share, which will be paid on the Company's Class A Common Stock and
Class B Common Stock on December 2, 2004.

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 $3.5 billion at September 30,
2004, primarily consists of investments in fixed maturity securities and
short-term investments. The weighted average credit rating of the Company's
fixed maturity portfolio as rated by Standard & Poor's Corporation was "AA" at
September 30, 2004. While ratings of this type address credit risk, they do 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 September 30, 2004 and June 30, 2004, there were no
adjustments in such values, as compared with reductions in value of $6.7 million
at each of March 31, 2004 and December 31, 2003. The Company believes that its
estimates reasonably reflect the values of its balances with independent
investment managers; however, there can be no assurance that such values will
ultimately be realized upon liquidation of such balances. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Forward-Looking Statements and Cautionary Statements Regarding Certain Factors
That May Affect Future Results" for a discussion of various risks relating to
the Company's investment portfolio.

Reinsurance. The Company cedes portions of the risks relating to its group
employee benefit products under indemnity reinsurance agreements with various
unaffiliated reinsurers. The Company pays reinsurance premiums generally based
upon percentages of the Company's premiums on the business reinsured. These
agreements expire at various intervals as to new risks, and replacement
agreements are negotiated on terms believed appropriate in light of current
market conditions. During 2003, the Company replaced certain of its existing
reinsurance arrangements for its excess workers' compensation and long-term
disability products. Under the replacement arrangements for excess workers'
compensation products, the Company reinsures excess workers' compensation risks
between $5.0 million (compared to $3.0 million previously) and $50.0 million,
and a majority in proportionate amount of the risks between $50.0 million and
$100.0 million, per 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 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."

                                      -15-
<PAGE>

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

75,000 of each executive's options will become exercisable if RSLIC-Texas's PTOI
for the three year performance period is at least $329.4 million; otherwise, a
reduced number of such options will become exercisable to the extent that PTOI
for such period exceeds $300.5 million, determined by interpolating between zero
and 75,000 according to where the PTOI amount falls in the range between $300.5
million and $329.4 million.

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

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

The Company believes that these options will provide substantial incentives for
these executives to contribute toward RSLIC-Texas's attaining the specified
targets, thereby enhancing the Company's financial performance; however, no
assurance can be given that such results will be achieved. During the second
quarter of 2004, the Company began recognizing compensation expense for these
options under the fair value recognition provisions of SFAS No. 123 over the
performance period. The compensation expense associated with these options did
not have a material effect on the Company's financial position or results of
operations.

MARKET RISK

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

CONTROLS AND PROCEDURES

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

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

In connection with, and because it desires to take advantage of, the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995, the
Company cautions readers regarding certain forward-looking statements in the
above "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and elsewhere in this Form 10-Q and in any other statement made
by, or on behalf of, the Company, whether in future filings with the Securities
and Exchange Commission or otherwise. Forward-looking statements are statements
not based on historical information and which relate to future operations,
strategies, financial results, prospects, outlooks or other developments. Some
forward-looking statements may be identified by

                                      -16-
<PAGE>

the use of terms such as "expects," "believes," "anticipates," "intends,"
"judgment" or other similar expressions. Forward-looking statements are
necessarily based upon estimates and assumptions that are inherently subject to
significant business, economic, competitive and other uncertainties and
contingencies, many of which are beyond the Company's control and many of which,
with respect to future business decisions, are subject to change. Examples of
such uncertainties and contingencies include, among other important factors,
those affecting the insurance industry generally, such as the economic and
interest rate environment, federal and state legislative and regulatory
developments, including but not limited to changes in financial services and tax
laws and regulations, market pricing and competitive trends relating to
insurance products and services, acts of terrorism or war, and the availability
and cost of reinsurance, and those relating specifically to the Company's
business, such as the level of its insurance premiums and fee income, the claims
experience, persistency and other factors affecting the profitability of its
insurance products, the performance of its investment portfolio and changes in
the Company's investment strategy, acquisitions of companies or blocks of
business, and ratings by major rating organizations of its insurance
subsidiaries. These uncertainties and contingencies can affect actual results
and could cause actual results to differ materially from those expressed in any
forward-looking statements made by, or on behalf of, the Company. Certain of
these uncertainties and contingencies are described in more detail in the
remainder of this section. The Company disclaims any obligation to update
forward-looking information.

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

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

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

   THE MARKET VALUES OF THE COMPANY'S INVESTMENTS FLUCTUATE.

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

                                      -17-
<PAGE>

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

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

The management of the Company's investment portfolio is an important component
of the Company's profitability since a substantial portion of the Company's
operating income is generated from the difference between the yield achieved on
invested assets and, in the case of asset accumulation products, the interest
credited on policyholder funds and, in the case of the Company's other products
for which reserves are discounted, the discount rate used to calculate the
related reserves.

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

At September 30, 2004, mortgage-backed securities comprised 22% of the Company's
total invested assets. Mortgage-backed securities subject the Company to a
degree of interest rate risk, including prepayment and extension risk, which is
generally a function of the sensitivity of each security's underlying collateral
to prepayments under varying interest rate environments and the repayment
priority of the securities in the particular securitization structure. The
Company seeks to limit the extent of this risk by emphasizing the more
predictable payment classes and securities with stable collateral.

The Company, through its insurance subsidiaries, maintains a program in which
investments are financed using advances from various Federal Home Loan Banks. At
September 30, 2004, the Company had outstanding advances of $135.0 million, of
which $30.0 million were obtained by the Company during the first nine months of
2004. These advances, which were obtained at a fixed rate, have a weighted
average term to maturity of 6.7 years. A total of $50.0 million of these
advances will mature during the remainder of 2004. In addition, the Company has
utilized reverse repurchase agreements, futures and option contracts and
interest rate swap contracts from time to time in connection with the Company's
investment strategy. These transactions require the Company to maintain
securities or cash on deposit with the applicable counterparty as collateral. As
the market value of the collateral or contracts changes, the Company may be
required to deposit additional collateral or be entitled to have a portion of
the collateral returned to it.

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

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

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

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

The Company transfers its exposure to some risks through reinsurance
arrangements with other insurance and reinsurance companies. Under the Company's
reinsurance arrangements, another insurer assumes a specified portion of the
Company's

                                      -18-
<PAGE>

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

Some reinsurers experienced significant losses related to the terrorist events
of September 11, 2001. As a result of this and other market factors, higher
prices and less favorable terms and conditions continue to be offered in the
reinsurance market. These market conditions are reflected in the terms of the
replacement reinsurance arrangements entered into during 2003 for the Company's
excess workers' compensation and long-term disability products. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources - Reinsurance." It is likely that,
in the future, the Company's reinsurers will continue to seek price increases,
although the extent of such increases cannot currently be predicted. Also, there
has been significantly reduced availability of reinsurance covering risks such
as terrorist and catastrophic events. Accordingly, substantially all of the
Company's coverages of this nature were discontinued in 2002, which would result
in the Company retaining a higher portion of losses from such events if they
occur. The Company has not been able to replace such coverages on acceptable
terms due to present market conditions, and there can be no assurance that the
Company will be able to do so in the future. However, under the Terrorism Act,
the federal government will pay 90% of the Company's covered losses relating to
acts of international terrorism from property and casualty products directly
written by SNCC above the Company's annual deductible. The Terrorism Act expires
at the end of 2005 and, while efforts have been pending in Congress to pass a
bill extending the Terrorism Act for an additional two-year term, no assurance
can be given that such an extension will occur, or as to the duration of any
such extension. 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. The New York State
Attorney General recently 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 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.
It is not possible to predict the future impact 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.

                                      -19-
<PAGE>

THE FINANCIAL SERVICES INDUSTRY IS HIGHLY COMPETITIVE.

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

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

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

                                      -20-
<PAGE>

                           PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

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, 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: November 8, 2004

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