##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the Fiscal Year Ended December 31, 2007
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 001-11462
 DELPHI FINANCIAL GROUP, INC.
  Delaware
    
    (302) 478-5142
    
    13-3427277(State or other jurisdiction of
    
    (Registrants telephone number,
    
    (I.R.S. Employer Identificationincorporation or organization)
    
    including area code)
    
    Number)
 1105 North Market Street, Suite 1230, P. O. Box 8985, Wilmington, Delaware
    
    19899(Address of principal executive offices)
    
    (Zip Code)
  Title of each class 
Class A Common Stock, $.01 par value
    
    Name of each exchange on which registered
New York Stock Exchange8.00% Senior Notes due May 15, 2033
    
    New York Stock Exchange7.376% Fixed-to-Floating Rate Junior Subordinated Debentures due May 1, 2067
    
    New York Stock Exchange
 None
 þ o
 o þ
 þ o
 þ
  Large accelerated filer
þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



DELPHI FINANCIAL GROUP, INC.
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 31, 2007
 TABLE OF CONTENTS
 PagePART I.Item 1.     Business
    
    3Item 1A.  Risk Factors
    
    19Item 1B.  Unresolved Staff Comments
    
    22Item 2.     Properties
    
    22Item 3.     Legal Proceedings
    
    23Item 4.     Submission of Matters to a Vote of Security Holders
    
    23PART II.Item 5.    Market for the Companys Common Stock and Related Shareholder Matters
    
    24Item 6.    Selected Financial Data
    
    27Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operation
    
    29Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    43Item 8.    Financial Statements and Supplementary Data
    
    43Item 9.    Changes in and Disagreements with Accountants on Accounting And Financial Disclosure
    
    43Item 9A.  Controls and Procedures
    
    43Item 9B.  Other Information
    
    46PART III.Item 10.  Directors, Executive Officers and Corporate Governance
    
    46Item 11.  Executive Compensation
    
    46Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    46Item 13.  Certain Relationships and Related Transactions and Director Independence
    
    46Item 14.  Principal Accountant Fees and Services
    
    46PART IV.Item 15.  Exhibits, Financial Statement Schedules
    
    47LIST OF SUBSIDIARIES OF THE COMPANYCONSENT OF ERNST & YOUNG LLPPOWER OF ATTORNEYCHAIRMAN OF THE BOARD AND CEO CERTIFICATIONVICE PRESIDENT AND TREASURER CERTIFICATIONCERTIFICATION PURSUANT TO SECTION 1350
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PART I
 
 Item 1. Business
  www.delphifin.com/financial/secfilings.html
 Operating Strategy
     -3-




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Group Employee Benefit Products
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Year Ended December 31,2007
    
    
    2006
    
    
    2005(dollars in thousands)Insurance premiums:Core Products:Disability income
    
    $
    527,500
    
    
    
    43.0
    %
    
    $
    458,130
    
    
    
    42.4
    %
    
    $
    392,959
    
    
    
    42.0
    %Life
    
    
    364,771
    
    
    
    29.7
    
    
    
    316,360
    
    
    
    29.2
    
    
    
    281,915
    
    
    
    30.1Excess workers compensation
    
    
    276,252
    
    
    
    22.5
    
    
    
    260,031
    
    
    
    24.0
    
    
    
    220,312
    
    
    
    23.5Travel accident, dental and other
    
    
    59,411
    
    
    
    4.8
    
    
    
    47,150
    
    
    
    4.4
    
    
    
    41,058
    
    
    
    4.4$
    1,227,934
    
    
    
    100.0
    %
    
    $
    1,081,671
    
    
    
    100.0
    %
    
    $
    936,244
    
    
    
    100.0
    %Non-Core Products:Loss portfolio transfers
    
    
    14,697
    
    
    
    
    
    
    
    20,911
    
    
    
    
    
    
    
    10,377Other
    
    
    24,961
    
    
    
    
    
    
    
    21,544
    
    
    
    
    
    
    
    14,54139,658
    
    
    
    
    
    
    
    42,455
    
    
    
    
    
    
    
    24,918Total insurance premiums
    
    $
    1,267,592
    
    
    
    
    
    
    $
    1,124,126
    
    
    
    
    
    
    $
    961,162Sales (new annualized gross premiums):Core Products:Disability income
    
    $
    131,818
    
    
    
    45.0
    %
    
    $
    114,622
    
    
    
    40.9
    %
    
    $
    103,515
    
    
    
    42.4
    %Life
    
    
    87,210
    
    
    
    29.8
    
    
    
    88,578
    
    
    
    31.6
    
    
    
    72,814
    
    
    
    29.8Excess workers compensation
    
    
    30,092
    
    
    
    10.3
    
    
    
    57,217
    
    
    
    20.4
    
    
    
    46,044
    
    
    
    18.9Travel accident, dental and other
    
    
    43,662
    
    
    
    14.9
    
    
    
    19,699
    
    
    
    7.1
    
    
    
    21,728
    
    
    
    8.9$
    292,782
    
    
    
    100.0
    %
    
    $
    280,116
    
    
    
    100.0
    %
    
    $
    244,101
    
    
    
    100.0
    %Non-Core Products:Loss portfolio transfers
    
    
    3,800
    
    
    
    
    
    
    
    19,758
    
    
    
    
    
    
    
    10,377Other
    
    
    14,887
    
    
    
    
    
    
    
    11,561
    
    
    
    
    
    
    
    9,44818,687
    
    
    
    
    
    
    
    31,319
    
    
    
    
    
    
    
    19,825Total sales
    
    $
    311,469
    
    
    
    
    
    
    $
    311,435
    
    
    
    
    
    
    $
    263,926
   Year Ended December 31,2007
    
    
    2006
    
    
    2005Loss ratio
    
    
    70.3
    %
    
    
    70.6
    %
    
    
    70.1
    %Expense ratio
    
    
    22.1
    
    
    
    22.6
    
    
    
    24.0Combined ratio
    
    
    92.4
    %
    
    
    93.2
    %
    
    
    94.1
    %
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th
  th
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Asset Accumulation Products
   -8-




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Year Ended December 31,2007
    
    2006
    
    2005(dollars in thousands)Asset accumulation product deposits (sales):Fixed annuities
    
    $
    107,145
    
    
    $
    90,741
    
    
    $
    95,021Funding agreements
    
    
    
    
    
    
    100,000
    
    
    
    Funds under management (at period end)
    
    
    1,053,221
    
    
    
    1,089,051
    
    
    
    1,008,787
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Other Products and Services
   Underwriting Procedures
   Investments
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Year Ended December 31,2007
    
    2006
    
    2005(dollars in thousands)Average invested assets (1)
    
    
    $4,555,225
    
    
    
    $4,038,658
    
    
    
    $3,621,608Net investment income (2)
    
    
    270,547
    
    
    
    255,871
    
    
    
    223,569Tax equivalent weighted average annual yield (3)
    
    
    6.2%
    
    
    
    6.6%
    
    
    
    6.4%
 
 (1)
    
    Average invested assets are computed by dividing the total of invested assets as reported
on the balance sheet at the beginning of each year plus the individual quarter-end balances
by five and deducting one-half of net investment income.(2)
    
    Consists principally of interest and dividend income less investment expenses.(3)
    
    The tax equivalent weighted average annual yield on the Companys investment portfolio
for each period is computed by dividing net investment income, increased, in the case of tax
exempt interest income, to reflect the level of the tax benefit associated with such income,
by average invested assets for the period. See Results of Operations in Part II, Item 7 -
Managements Discussion and Analysis of Financial Condition and Results of Operations. Reinsurance
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Life, Annuity, Disability and Accident Reserves
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Property and Casualty Insurance Reserves
    Year Ended December 31,2007
    
    
    2006
    
    
    2005(dollars in thousands)Unpaid claims and claim expenses, net of reinsurance,
beginning of period
    
    $
    752,375
    
    
    $
    643,465
    
    
    $
    541,682Add provision for claims and claim expenses incurred, net
of reinsurance, occurring during:Current year
    
    
    155,052
    
    
    
    136,134
    
    
    
    141,785Prior years
    
    
    37,443
    
    
    
    70,060
    
    
    
    56,698Incurred claims and claim expenses, net of reinsurance,
during the current year
    
    
    192,495
    
    
    
    206,194
    
    
    
    198,483Deduct claims and claim expense payments, net of reinsurance,
occurring during:Current year
    
    
    2,950
    
    
    
    4,524
    
    
    
    14,853Prior years
    
    
    90,964
    
    
    
    92,760
    
    
    
    81,847Total paid
    
    
    93,914
    
    
    
    97,284
    
    
    
    96,700Unpaid claims and claim expenses, net of reinsurance, end of period
    
    
    850,956
    
    
    
    752,375
    
    
    
    643,465Reinsurance receivables, end of period
    
    
    113,018
    
    
    
    105,287
    
    
    
    103,014Unpaid claims and claim expenses, gross of reinsurance,
end of period (1)
    
    $
    963,974
    
    
    $
    857,662
    
    
    $
    746,479
 
 (1)
    
    All years include the results from the Companys discontinued non-core property
catastrophe reinsurance business. See Other Transactions and Note R to the Consolidated
Financial Statements.  -13-




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December 31,1997
    
    1998
    
    1999
    
    2000
    
    2001
    
    2002
    
    2003
    
    2004
    
    2005
    
    2006
    
    2007(dollars in thousands)Reserve for unpaid
claims and claim
expenses, net of
reinsurance
    
    $
    541,280
    
    
    $
    422,159
    
    
    $
    434,512
    
    
    $
    444,061
    
    
    $
    638,189
    
    
    $
    680,835
    
    
    $
    744,760
    
    
    $
    853,515
    
    
    $
    1,011,699
    
    
    $
    1,175,979
    
    
    $
    1,341,764Cumulative amount of
liability paid:One year later
    
    
    98,365
    
    
    
    40,815
    
    
    
    40,660
    
    
    
    (29,990
    )
    
    
    61,954
    
    
    
    57,235
    
    
    
    64,170
    
    
    
    81,847
    
    
    
    92,760
    
    
    
    90,963Two years later
    
    
    127,481
    
    
    
    74,571
    
    
    
    4,020
    
    
    
    26,398
    
    
    
    112,639
    
    
    
    118,685
    
    
    
    134,981
    
    
    
    149,983
    
    
    
    175,852Three years later
    
    
    156,119
    
    
    
    33,429
    
    
    
    54,846
    
    
    
    71,938
    
    
    
    169,890
    
    
    
    187,303
    
    
    
    198,133
    
    
    
    220,440Four years later
    
    
    111,253
    
    
    
    78,981
    
    
    
    94,899
    
    
    
    123,330
    
    
    
    231,870
    
    
    
    247,487
    
    
    
    266,834Five years later
    
    
    150,772
    
    
    
    114,295
    
    
    
    139,949
    
    
    
    178,852
    
    
    
    283,783
    
    
    
    311,350Six years later
    
    
    182,281
    
    
    
    154,101
    
    
    
    187,952
    
    
    
    221,817
    
    
    
    341,035Seven years later
    
    
    217,649
    
    
    
    196,599
    
    
    
    223,920
    
    
    
    270,792Eight years later
    
    
    256,444
    
    
    
    230,025
    
    
    
    266,415Nine years later
    
    
    285,715
    
    
    
    269,892Ten years later
    
    
    323,295Liability reestimated as of:One year later
    
    
    523,430
    
    
    
    410,875
    
    
    
    424,187
    
    
    
    442,624
    
    
    
    636,123
    
    
    
    678,535
    
    
    
    766,886
    
    
    
    908,162
    
    
    
    1,072,990
    
    
    
    1,198,719Two years later
    
    
    511,602
    
    
    
    404,559
    
    
    
    420,419
    
    
    
    442,807
    
    
    
    634,576
    
    
    
    714,303
    
    
    
    838,458
    
    
    
    1,007,198
    
    
    
    1,122,567Three years later
    
    
    503,906
    
    
    
    401,475
    
    
    
    417,868
    
    
    
    446,948
    
    
    
    678,009
    
    
    
    790,941
    
    
    
    939,254
    
    
    
    1,057,913Four years later
    
    
    500,514
    
    
    
    396,403
    
    
    
    423,425
    
    
    
    502,140
    
    
    
    754,717
    
    
    
    881,073
    
    
    
    991,103Five years later
    
    
    492,280
    
    
    
    399,311
    
    
    
    466,975
    
    
    
    568,993
    
    
    
    832,968
    
    
    
    933,259Six years later
    
    
    493,586
    
    
    
    437,913
    
    
    
    522,592
    
    
    
    636,007
    
    
    
    878,948Seven years later
    
    
    531,603
    
    
    
    488,849
    
    
    
    582,364
    
    
    
    670,762Eight years later
    
    
    580,714
    
    
    
    546,607
    
    
    
    611,869Nine years later
    
    
    636,451
    
    
    
    576,623Ten years later
    
    
    662,493Cumulative
deficiency(1)
    
    $
    (121,213
    )
    
    $
    (154,464
    )
    
    $
    (177,357
    )
    
    $
    (226,701
    )
    
    $
    (240,759
    )
    
    $
    (252,424
    )
    
    $
    (246,343
    )
    
    $
    (204,398
    )
    
    $
    (110,868
    )
    
    $
    (22,740
    )
 
 (1)
    
    Full years 2000 through 2007 include the results from the Companys discontinued
non-core property catastrophe reinsurance business. See Other Transactions and Note R to
the Consolidated Financial Statements.  -14-




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December 31,1997
    
    
    1998
    
    
    1999
    
    
    2000
    
    
    2001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007(dollars in thousands)Reserve for unpaid claims and
claim expenses before
discount:Net of reinsurance
    
    $
    541,280
    
    
    $
    422,159
    
    
    $
    434,512
    
    
    $
    444,061
    
    
    $
    638,189
    
    
    $
    680,835
    
    
    $
    744,760
    
    
    $
    853,515
    
    
    $
    1,011,699
    
    
    $
    1,175,979
    
    
    $
    1,341,764Add reinsurance
recoverable
    
    
    23,454
    
    
    
    164,825
    
    
    
    179,180
    
    
    
    206,704
    
    
    
    92,828
    
    
    
    95,709
    
    
    
    93,030
    
    
    
    104,266
    
    
    
    103,014
    
    
    
    105,287
    
    
    
    113,018Deduct discount for
time value of
money
    
    
    176,683
    
    
    
    180,770
    
    
    
    192,220
    
    
    
    203,710
    
    
    
    224,241
    
    
    
    241,688
    
    
    
    265,100
    
    
    
    311,833
    
    
    
    368,234
    
    
    
    423,604
    
    
    
    490,808Unpaid claims and claim
expenses as reported
on balance sheets
    
    
    388,051
    
    
    
    406,214
    
    
    
    421,472
    
    
    
    447,055
    
    
    
    506,776
    
    
    
    534,856
    
    
    
    572,690
    
    
    
    645,948
    
    
    
    746,479
    
    
    
    857,662
    
    
    
    963,974Reestimated unpaid claims
and claim expenses, gross
of reinsurance, net of
discount, as of December
31, 2007
    
    
    624,753
    
    
    
    661,213
    
    
    
    713,745
    
    
    
    793,029
    
    
    
    867,882
    
    
    
    885,122
    
    
    
    881,316
    
    
    
    888,928
    
    
    
    899,322
    
    
    
    912,538Discounted cumulative
deficiency, gross of
reinsurance
    
    
    (236,702
    )
    
    
    (254,999
    )
    
    
    (292,273
    )
    
    
    (345,974
    )
    
    
    (361,106
    )
    
    
    (350,266
    )
    
    
    (308,626
    )
    
    
    (242,980
    )
    
    
    (152,843
    )
    
    
    (54,876
    )Add accretion of
discount and change
in reinsurance
recoverable
    
    
    115,489
    
    
    
    100,535
    
    
    
    114,916
    
    
    
    119,273
    
    
    
    120,347
    
    
    
    97,842
    
    
    
    62,283
    
    
    
    38,582
    
    
    
    41,975
    
    
    
    32,136Cumulative deficiency,
before discount, net
of reinsurance (1)
    
    $
    (121,213
    )
    
    $
    (154,464
    )
    
    $
    (177,357
    )
    
    $
    (226,701
    )
    
    $
    (240,759
    )
    
    $
    (252,424
    )
    
    $
    (246,343
    )
    
    $
    (204,398
    )
    
    $
    (110,868
    )
    
    $
    (22,740
    )
 
 (1)
    
    Full years 2000 through 2007 include the results from the Companys discontinued
non-core property catastrophe reinsurance business. See Other Transactions and Note R to
the Consolidated Financial Statements.  Competition
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Regulation
       -16-




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Employees
  Other Subsidiaries
  Other Transactions
    -17-




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-18-




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Item 1A. Risk Factors.
  Reserves established for future policy benefits and claims may prove inadequate.
  The market values of the Companys investments fluctuate.
   The Companys investment strategy exposes the Company to default and other risks.
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The Companys financial position exposes the Company to interest rate risks.
  The Companys ability to reduce its exposure to risks depends on the availability and cost of
reinsurance.
   The insurance business is a heavily regulated industry.
  -20-




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The Companys financial position and results of operations may be adversely impacted by
changes in accounting rules and in the interpretations of such rules.
  The financial services industry is highly competitive.
  The Company may be adversely impacted by a decline in the ratings of its insurance
subsidiaries or its own credit ratings.
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Almost half of the voting power of Delphi is controlled by Robert Rosenkranz, whose interests
may differ from those of other securityholders .
  
 Item 1B. Unresolved Staff Comments.
  
 Item 2. Properties
 rd th
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Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  Executive Officers of the Company
  Name
    
    Age
    
    PositionRobert Rosenkranz
    
    
    65
    
    
    Director of the Company; Chairman of the Board and Chief Executive Officer of the Company;
Chairman of the Board of RSLICDonald A. Sherman
    
    
    57
    
    
    Director and President and Chief Operating Officer of the CompanyRobert M. Smith, Jr.
    
    
    56
    
    
    Director and Executive Vice President of the CompanyChad W. Coulter
    
    
    45
    
    
    Senior Vice President, Secretary and General Counsel of the Company; Vice President, General
Counsel and Assistant Secretary of RSLICThomas W. Burghart
    
    
    49
    
    
    Vice President and Treasurer of the Company and Senior Vice President and Treasurer of RSLICLawrence E. Daurelle
    
    
    56
    
    
    Director of the Company and President and Chief Executive Officer of RSLICHarold F. Ilg
    
    
    60
    
    
    Director of the Company and Chairman of the Board of SNCC
     -23-




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PART II
 
 Item 5. Market for the Companys Common Stock and Related Shareholder Matters and Issuer Purchases
of Equity Securities.
   High
    
    Low
    
    Dividends2006:
    
    First Quarter
    
    $
    35.43
    
    
    $
    30.41
    
    
    $
    0.07Second Quarter
    
    
    36.48
    
    
    
    33.29
    
    
    
    0.08Third Quarter
    
    
    41.67
    
    
    
    33.78
    
    
    
    0.08Fourth Quarter
    
    
    41.98
    
    
    
    38.42
    
    
    
    0.082007:
    
    First Quarter
    
    $
    42.00
    
    
    $
    38.07
    
    
    $
    0.08Second Quarter
    
    
    45.08
    
    
    
    39.97
    
    
    
    0.09Third Quarter
    
    
    47.79
    
    
    
    36.60
    
    
    
    0.09Fourth Quarter
    
    
    43.66
    
    
    
    34.70
    
    
    
    0.09
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Total Numberof Shares
    
    
    MaximumPurchased
    
    
    Number ofas Part
    
    
    Shares thatTotal
    
    
    
    
    
    
    of Publicly
    
    
    May Yet BeNumber of
    
    
    Average
    
    
    Announced
    
    
    Purchased UnderShares
    
    
    Price Paid
    
    
    Plans
    
    
    the PlansPurchased
    
    
    per Share
    
    
    or Programs(1)
    
    
    or Programs(2)October 1  31, 2007
    
    
    299,400
    
    
    $
    37.86
    
    
    
    299,400
    
    
    
    588,776November 1  30, 2007
    
    
    1,196,800
    
    
    $
    37.60
    
    
    
    1,196,800
    
    
    
    653,800
    (3)December 1  31, 2007
    
    
    120,000
    
    
    $
    35.68
    
    
    
    120,000
    
    
    
    533,800
    (3)Total
    
    
    1,616,200
    
    
    $
    37.51
    
    
    
    1,616,200
    
    
    
    533,800
    (3)
 
 (1)
    
    As of December 31, 2007, the Company had purchased 6,207,652 shares, at a total cost of
$145.1 million in the open market. In addition, during 2004, the Company received 19,764
shares of the Companys Class A Common Stock with an aggregate value of $0.3 million in
liquidation of a partnership interest, which increased the total number of shares of
treasury stock outstanding to 6,227,416, as of December 31, 2007.(2)
    
    Under the former share repurchase program, the Companys Board of Directors had
authorized the purchase of 5,479,628 outstanding shares of the Companys Class A Common
Stock from time to time. On November 7, 2007, the Companys Board of Directors authorized a
new share repurchase program, which replaced the former share repurchase program. Under the
new share repurchase program, the Companys Board of Directors authorized the purchase of
1,500,000 outstanding shares of the Companys Class A Common Stock from time to time. On
February 22, 2008, the Companys Board of Directors authorized a 1,000,000 share increase in
such new share repurchase program. The program has no expiration date.(3)
    
    Represents the maximum remaining number of shares that may be purchased under the
Companys new share repurchase program at December 31, 2007. On February 22, 2008, the
Companys Board of Directors authorized a 1,000,000 share increase in such new share
repurchase program. See Liquidity and Capital Resources  Share Repurchase Program in
Part II, Item 7  Managements Discussion and Analysis of Financial Condition and Results of
Operation. -25-




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##### Table of Contents



Performance Graph
  
 2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007Delphi
    
    
    
    100
    
    
    
    
    143
    
    
    
    
    185
    
    
    
    
    186
    
    
    
    
    248
    
    
    
    
    218S&P 500 Index
    
    
    
    100
    
    
    
    
    129
    
    
    
    
    143
    
    
    
    
    150
    
    
    
    
    173
    
    
    
    
    183S&P Insurance Index
    
    
    
    100
    
    
    
    
    121
    
    
    
    
    130
    
    
    
    
    148
    
    
    
    
    164
    
    
    
    
    154
 -26-




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##### Table of Contents



Item 6. Selected Financial Data
  Year Ended December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003(dollars and shares in thousands, except per share data)Income Statement Data(1):Insurance premiums and fee income:Core group employee benefit products
    
    $
    1,227,934
    
    
    $
    1,081,671
    
    
    $
    936,244
    
    
    $
    784,990
    
    
    $
    673,653Non-core group employee benefit
products(2)
    
    
    39,658
    
    
    
    42,455
    
    
    
    24,918
    
    
    
    16,066
    
    
    
    14,908Asset accumulation products
    
    
    2,666
    
    
    
    3,438
    
    
    
    3,220
    
    
    
    3,335
    
    
    
    4,158Other
    
    
    33,903
    
    
    
    29,014
    
    
    
    25,829
    
    
    
    23,686
    
    
    
    18,8931,304,161
    
    
    
    1,156,578
    
    
    
    990,211
    
    
    
    828,077
    
    
    
    711,612Net investment income
    
    
    270,547
    
    
    
    255,871
    
    
    
    223,569
    
    
    
    202,444
    
    
    
    186,337Net realized investment (losses)gains(3)
    
    
    (1,897
    )
    
    
    (858
    )
    
    
    9,003
    
    
    
    15,460
    
    
    
    12,724Loss on redemption of junior subordinated
deferrable interest debentures (4)
    
    
    (2,192
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total revenue
    
    
    1,570,619
    
    
    
    1,411,591
    
    
    
    1,222,783
    
    
    
    1,045,981
    
    
    
    910,673Income from continuing operations (5)
    
    
    164,512
    
    
    
    145,003
    
    
    
    126,684
    
    
    
    121,400
    
    
    
    95,295Net income (5)
    
    
    164,512
    
    
    
    142,068
    
    
    
    113,334
    
    
    
    123,543
    
    
    
    98,916Basic Results Per Share(1) (5):Income from continuing operations
    
    $
    3.27
    
    
    $
    2.92
    
    
    $
    2.58
    
    
    $
    2.53
    
    
    $
    2.04Net income
    
    
    3.27
    
    
    
    2.86
    
    
    
    2.31
    
    
    
    2.58
    
    
    
    2.11Weighted average shares outstanding
    
    
    50,269
    
    
    
    49,631
    
    
    
    49,008
    
    
    
    47,928
    
    
    
    46,812Diluted Results Per Share(1) (5):Income from continuing operations
    
    $
    3.19
    
    
    $
    2.85
    
    
    $
    2.52
    
    
    $
    2.46
    
    
    $
    1.98Net income
    
    
    3.19
    
    
    
    2.79
    
    
    
    2.25
    
    
    
    2.50
    
    
    
    2.06Weighted average shares outstanding
    
    
    51,579
    
    
    
    50,939
    
    
    
    50,267
    
    
    
    49,412
    
    
    
    48,035Other Data:Cash dividends paid per share(6)
    
    $
    0.35
    
    
    $
    0.31
    
    
    $
    0.24
    
    
    $
    0.20
    
    
    $
    0.14Diluted book value per share(7)
    
    
    23.57
    
    
    
    23.70
    
    
    
    20.97
    
    
    
    19.57
    
    
    
    16.99
 December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003(dollars in thousands)Balance Sheet Data:Total investments
    
    
    $4,987,868
    
    
    
    $4,483,380
    
    
    
    $3,912,604
    
    
    
    $3,541,076
    
    
    
    $3,202,754Total assets
    
    
    6,094,810
    
    
    
    5,670,475
    
    
    
    5,276,170
    
    
    
    4,829,467
    
    
    
    4,177,532Corporate debt (8)
    
    
    217,750
    
    
    
    263,750
    
    
    
    234,750
    
    
    
    157,750
    
    
    
    143,750Junior subordinated debentures(9)
    
    
    175,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Junior subordinated deferrable interest
debentures underlying company-obligated
mandatorily redeemable capital securities
issued by unconsolidated subsidiaries (10)
    
    
    20,619
    
    
    
    59,762
    
    
    
    59,762
    
    
    
    59,762
    
    
    
    Company-obligated mandatorily redeemable
capital securities of subsidiaries (10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56,050Shareholders equity (11)
    
    
    1,141,390
    
    
    
    1,174,808
    
    
    
    1,033,039
    
    
    
    939,848
    
    
    
    798,440Corporate debt to total capitalization ratio (12)
    
    
    14.0%
    
    
    
    17.6%
    
    
    
    17.7%
    
    
    
    13.6%
    
    
    
    14.4%
 
 (1)
    
    During the fourth quarter of 2005, the Company decided to exit its non-core property
catastrophe reinsurance business, due to the volatility associated with such business and
other strategic considerations, and has not thereafter entered into or renewed any assumed
property reinsurance contracts. A substantial majority of these reinsurance contracts expired
on or before December 31, 2005 and all of the remaining contracts expired prior to the end of
the third quarter of 2006; however, the Company remains liable for certain risks assumed under
such contracts prior to their expiration. The Company has classified the operating results
of this business as discontinued operations. See Other Transactions in Part I, Item 1 -
Business and Note R to the Consolidated Financial Statements. -27-




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##### Table of Contents



Net income includes (loss) income from discontinued operations, net of federal income tax
(benefit) expense, as follows: Year Ended December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003(dollars in thousands, except per share data)(Loss) income from discontinued operations, net of
income tax (benefit) expense
    
    $
    
    
    
    $
    (2,935
    )
    
    $
    (13,350
    )
    
    $
    2,143
    
    
    $
    3,621Basic per share amount
    
    
    
    
    
    
    (0.06
    )
    
    
    (0.27
    )
    
    
    0.05
    
    
    
    0.07Diluted per share amount
    
    
    
    
    
    
    (0.06
    )
    
    
    (0.27
    )
    
    
    0.04
    
    
    
    0.08
 (2)
    
    Non-core group employee benefit products include LPTs, primary workers compensation
insurance, bail bond insurance, workers compensation reinsurance and reinsurance facilities.
Premiums from non-core group employee benefit products include premiums from LPTs, which are
episodic in nature, of $14.7 million, $20.9 million, $10.4 million, $5.3 million and $0 in
2007, 2006, 2005, 2004 and 2003, respectively. See Group Employee Benefit Products and
Reinsurance in Part I, Item 1- Business.
 (3)
    
    In 2007, 2006, 2005, 2004 and 2003, the Company recognized pre-tax losses of $4.1 million,
$4.2 million, $4.2 million, $3.9 million and $13.0 million, respectively, due to the other
than temporary declines in the market values of certain securities, which are reported as net
realized investment losses.
 (4)
    
    In the first quarter of 2007, the Company redeemed the remaining $36.0 million of junior
subordinated deferrable interest debentures and recognized a pre-tax loss of $2.2 million in
connection with this redemption.
 (5)
    
    During the second half of 2004, the Companys income taxes payable was reduced by $6.6
million primarily from the favorable resolution of Internal Revenue Service (IRS) audits of
the 1998 through 2002 tax years. This reduction represented the release of previous accruals
for potential audit adjustments which were subsequently settled or eliminated and the further
refinement of existing tax exposures.
 Income from continuing operations and net income include realized investment (losses) gains, net
of federal income tax (benefit) expense and the loss on redemption of junior subordinated
deferrable interest debentures, net of federal income tax benefit, as follows:
 Year Ended December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003(dollars in thousands, except per share data)Net realized investment (losses) gains, net of income tax
(benefit) expense
    
    $
    (1,233
    )
    
    $
    (558
    )
    
    $
    5,852
    
    
    $
    10,049
    
    
    $
    8,271Basic per share amount
    
    
    (0.03
    )
    
    
    (0.01
    )
    
    
    0.11
    
    
    
    0.21
    
    
    
    0.18Diluted per share amount
    
    
    (0.02
    )
    
    
    (0.01
    )
    
    
    0.12
    
    
    
    0.21
    
    
    
    0.17Loss on redemption of junior subordinated deferrable
interest debentures, net of income tax benefit
    
    $
    (1,425
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Basic per share amount
    
    
    (0.03
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Diluted per share amount
    
    
    (0.03
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 (6)
    
    In 2001, the Companys Board of Directors approved the initiation of a quarterly cash
dividend payable on the Companys outstanding Class A and Class B Common Stock. The quarterly
cash dividend was $0.03 per share during the first three quarters of 2003. In the fourth
quarter of 2003, the Companys Board of Directors increased the cash dividend to $0.05 per
share. In the first quarter of 2005, the Companys Board of Directors increased the cash
dividend to $0.06 per share. In the first quarter of 2006, the Companys Board of Directors
increased the cash dividend to $0.07 per share and subsequently increased it to $0.08 per
share in the second quarter of 2006. During the second quarter of 2007, the Companys Board of
Directors increased the cash dividend to $0.09 per share. During 2007, 2006, 2005, 2004 and
2003, the Company paid cash dividends on its capital stock in the amount of $17.2 million,
$15.0 million, $11.6 million, $10.1 million and $7.4 million, respectively. See Note J to the
Consolidated Financial Statements.
 (7)
    
    Diluted book value per share is calculated by dividing shareholders equity (as determined in
accordance with GAAP), as increased by the proceeds and tax benefit from the assumed exercise
of outstanding in-the-money stock options, by total shares outstanding, also increased by shares issued upon the assumed exercise of the options and deferred shares.
 (8)
    
    In May 2003, the Company issued $143.8 million of the 2033 Senior Notes. See Other
Transactions in Part I, Item 1  Business and Note D to the Consolidated Financial
Statements.
 (9)
    
    In May 2007, the Company issued $175.0 million of 2007 Junior Debentures. See Other
Transactions in Part I, Item 1  Business and Note I to the Consolidated Financial
Statements.
 (10)
    
    In May 2003, the Trust issued $20.0 million liquidation amount of 2003 Capital Securities in
a private placement. See Other Transactions in Part I, Item 1  Business and Note H to the
Consolidated Financial Statements.
 As of March 31, 2004, the Company adopted revised Financial Accounting Standards Board
Interpretation (FIN) No. 46, Consolidation of Variable Interest Entities. 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, 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
during the years 2006, 2005 and 2004. In the first quarter of 2007, the Company redeemed $36.0
million liquidation amount of junior subordinated deferrable interest debentures underlying
capital securities. This transaction decreased the Companys interest in the subsidiaries by
$3.1 million. The remaining balance of $20.6 million is presented as a liability and interest
of $0.6 million is presented as a component of other assets in its consolidated financial
statements at December 31, 2007.
 -28-




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##### Table of Contents



(11)
    
    As of January 1, 2007 the Company adopted American Institute of Certified Public Accountants
Statement of Position (SOP) 05-1, Accounting by Insurance Enterprises for Deferred
Acquisition Costs in Connection With Modifications or Exchanges of Insurance Contracts, which
provides accounting guidance for deferred policy acquisition costs associated with internal
replacements of insurance and investment contracts not addressed by previous guidance,
including group insurance contracts. Internal replacement transactions that are determined to
result in substantial changes to the replaced contracts are accounted for as extinguishments
of the replaced contracts, and any unamortized deferred acquisition costs and other balances
related to the replaced contracts are immediately recognized as expense in the income
statement. The Company made a reduction to its retained earnings at January 1, 2007, the date
of adoption of SOP 05-1, in the amount of $82.6 million, net of an income tax benefit of $44.5
million, which represents the net reduction in the deferred policy acquisition cost from
internal replacements included in cost of business acquired on the consolidated balance sheet.
See Note A to the Consolidated Financial Statements under the caption Cost of Business
Acquired.
 (12)
    
    The corporate debt to total capitalization ratio is calculated by dividing long-term
corporate debt by the sum of the Companys long-term corporate debt, junior subordinated
debentures, junior subordinated deferrable interest debentures underlying company-obligated
mandatorily redeemable capital securities issued by unconsolidated
subsidiaries/Company-obligated mandatorily redeemable capital securities of subsidiaries and
shareholders equity.
 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Introduction
   -29-




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##### Table of Contents



Results of Operations
 2007 Compared to 2006
 Summary of Results.
 Premium and Fee Income.
 -30-




---



##### Table of Contents



Net Investment Income.
 Net Realized Investment Losses.
  Loss on Redemption of Junior Subordinated Deferrable Interest Debentures.
 -31-




---



##### Table of Contents



Benefits and Expenses.
 Interest Expense
 Income Tax Expense.
 2006 Compared to 2005
 Summary of Results.
 Premium and Fee Income.
  -32-




---



##### Table of Contents



Net Investment Income.
 Net Realized Investment (Losses) Gains.
 Benefits and Expenses.
 Interest Expense
 Income Tax Expense.
 Loss from Discontinued Operations.
 -33-




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##### Table of Contents



Liquidity and Capital Resources
 General.
     -34-




---



##### Table of Contents



Contractual Obligations
 Payments Due by PeriodLess than
    
    
    1 -3
    
    
    3 - 5
    
    
    More thanTotal
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    5 Years(dollars in thousands)Other long-term liabilities (1)Life
    
    $
    1,267,020
    
    
    $
    304,557
    
    
    $
    250,313
    
    
    $
    168,230
    
    
    $
    543,920Casualty
    
    
    1,454,782
    
    
    
    119,223
    
    
    
    197,702
    
    
    
    181,899
    
    
    
    955,958Annuity
    
    
    1,551,873
    
    
    
    161,185
    
    
    
    318,224
    
    
    
    310,225
    
    
    
    762,239Corporate debt (Note D)
    
    
    217,750
    
    
    
    74,000
    
    
    
    
    
    
    
    
    
    
    
    143,750Interest on corporate debt (Note D) (2)
    
    
    295,035
    
    
    
    12,100
    
    
    
    23,444
    
    
    
    23,805
    
    
    
    235,686Advances from Federal Home Loan Bank (Note E)
    
    
    55,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55,000Interest on advances from FederalHome Loan Bank (Note E)
    
    
    51,059
    
    
    
    4,106
    
    
    
    8,211
    
    
    
    8,211
    
    
    
    30,531Junior subordinated debentures (Note I)
    
    
    175,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    175,000Interest on junior subordinated debentures (Note I) (3)
    
    
    367,663
    
    
    
    12,908
    
    
    
    25,816
    
    
    
    25,816
    
    
    
    303,123Junior subordinated deferrable interest debentures
underlying company-obligated mandatorily
redeemable capital securities issued
by unconsolidated subsidiaries (Note H)
    
    
    20,619
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,619Interest on junior subordinated deferrable interest
debentures underlying company-obligated
mandatorily redeemable capital securities
issued by unconsolidated subsidiaries (Note H) (4)
    
    
    49,015
    
    
    
    1,926
    
    
    
    3,842
    
    
    
    3,847
    
    
    
    39,400Operating lease obligations (Note L)
    
    
    84,637
    
    
    
    13,036
    
    
    
    20,418
    
    
    
    21,036
    
    
    
    30,147Total contractual obligations
    
    $
    5,589,453
    
    
    $
    703,041
    
    
    $
    847,970
    
    
    $
    743,069
    
    
    $
    3,295,373
 
 (1)
    
    Other long-term liabilities consist of future policy benefits and unpaid claims and claim
expenses relating to the Companys insurance products, as well as policyholder account
balances. Substantially all of the amounts reflected in this table with respect to such
liabilities consist of estimates by the Companys management based on various actuarial and
other assumptions relating to the Companys insurance products and, as to policyholder account
balances, the periods for which the related annuity and other contracts will remain in force
and the crediting rates to be applied thereto in the future. In accordance with GAAP, a
substantial portion of such liabilities, as they relate to the Companys insurance products,
are carried on a discounted basis on its consolidated balance sheet; however, the amounts
contained in this table are presented on an undiscounted basis. The actual payments relating
to these liabilities will differ, both in amount and timing, from those indicated in this
table and such differences are likely to be significant. See Critical Accounting Policies
and Estimates  Future Policy Benefits and Unpaid Claims and Claim Expenses.(2)
    
    Primarily includes interest on the 2033 Senior Notes.(3)
    
    Interest on the 2007 Junior Debentures is fixed at 7.376% until May 15, 2017.(4)
    
    Consists of interest on the outstanding 2003 Junior Subordinated Debentures underlying the
2003 Capital Securities. Interest on the 2003 Junior Subordinated Debentures was computed
using the indexed rate in effect at December 31, 2007 of 8.97%. -35-




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##### Table of Contents



Cash Flows
 Share Repurchase Program.
 Investments.
  -36-




---



##### Table of Contents



Asset/Liability Management and Market Risk.
   -37-




---



##### Table of Contents



Reinsurance.
 Off-Balance Sheet Arrangements
  Critical Accounting Policies and Estimates
  Future Policy Benefits and Unpaid Claims and Claim Expenses.
 -38-




---



##### Table of Contents



Balance, net of reinsurance:Case reservesDisability and accident
    
    $
    672.7Property and casualty
    
    
    270.4IBNR reservesDisability and accident
    
    
    225.4Property and casualty
    
    
    580.6Total reserves
    
    
    1,749.1Reinsurance receivables
    
    
    244.3Balance, gross of reinsurance
    
    $
    1,993.4Balance Sheets:Future policy benefits:Disability and accident
    
    $
    688.0Unpaid claims and claim expenses:Disability and accident
    
    
    341.4Property and casualty
    
    
    964.0$
    1,993.4
  -39-




---



##### Table of Contents



Deferred Acquisition Costs.
 -40-




---



##### Table of Contents



Investments.
   -41-




---



##### Table of Contents



Forward-Looking Statements And Cautionary Statements Regarding Certain Factors That May Affect
Future Results
  -42-




---



##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 8. Financial Statements and Supplementary Data
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
   -43-




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##### Table of Contents



MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
    -44-




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
        /s/ ERNST & YOUNG LLP 
 -45-




---



##### Table of Contents



Item 9B. Other Information
  
 PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
   
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accountant Fees and Services
  -46-




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##### Table of Contents



Part IV
 
 Item 15. Exhibits, Financial Statement Schedules
 (a)
    
    The financial statements and financial statement schedules filed as part of this report are
listed in the Index to Consolidated Financial Statements and Financial Statement Schedules on
page 52 of this Form 10-K.(b)
    
    The following Exhibits are numbered in accordance with the Exhibit Table of Item 601 of
Regulation S-K:
 2.1
    
    Agreement and Plan of Merger, dated October 5, 1995, among the Company, SIG Holdings
Acquisition Corp., and SIG Holdings, Inc. (5)2.2
    
    Agreement and Plan of Merger, dated June 11, 1998, by and among Delphi Financial Group,
Inc., Matrix Absence Management, Inc. and the Shareholders named therein (7)3.1
    
    Amendment to Restated Certificate of Incorporation of Delphi Financial Group, Inc. (Exhibit
3.2)(2)3.2
    
    Certificate of Amendment of Restated Certificate of Incorporation of Delphi Financial
Group, Inc. (Exhibit 3.1)(6)3.3
    
    Certificate of Amendment of Restated Certificate of Incorporation of Delphi Financial
Group, Inc. (Exhibit 3.1)(16)3.4
    
    Amended and Restated By-laws of
Delphi Financial Group, Inc., as amended (Exhibit 3.1)(18)4.1
    
    Indenture, dated as of May 20, 2003, between Delphi Financial Group, Inc. and Wilmington
Trust Company, as Trustee (Exhibit 4(a)) (11)4.2
    
    First Supplemental Indenture, dated as of May 20, 2003, between Delphi Financial Group,
Inc. and Wilmington Trust Company, as Trustee (Exhibit 4(b)) (11)4.3
    
    Amended and Restated Declaration of Delphi Financial Statutory Trust I, dated as of May 15,
2003, by and among U.S. Bank National Association, as Institutional Trustee, Delphi Financial
Group, Inc., as Sponsor, and the Administrators named therein (Exhibit 4.1) (12)4.4
    
    Indenture, dated as of May 15, 2003, between Delphi Financial Group, Inc. and U.S. Bank
National Association, as Trustee (Exhibit 4.2) (12)4.5
    
    Guarantee Agreement, dated as of May 15, 2003, by and between Delphi Financial Group, Inc.,
as Guarantor, and U.S. Bank National Association, as Trustee (Exhibit 4.3)(12)4.6
    
    Junior Subordinated Indenture, dated as of May 23, 2007, between the Registrant and U.S.
Bank National Association, as trustee (Exhibit 4.1)(23)4.7
    
    First Supplemental Indenture, dated as of May 23, 2007, between the Registrant and U.S.
Bank National Association, as trustee (Exhibit 4.2)(23)4.8
    
    Form of Junior Subordinated Debentures (Exhibit 4.3)(23)10.1
    
    Amended and Restated Credit Agreement, dated as of October 25, 2006, among Delphi Financial
Group, Inc. as the Borrower, Bank of America, N.A., as Administrative Agent, and the other
lenders party thereto (20)10.2
    
    Delphi Financial Group, Inc. Second Amended and Restated Nonqualified Employee Stock Option
Plan, as amended May 23, 2001 (Exhibit 10.1)(8)10.3
    
    Delphi Financial Group, Inc. 2003 Employee Long-Term Incentive and Share Award Plan, as
amended (Exhibit 10.1) (22)10.4
    
    The Delphi Capital Management, Inc. Pension Plan for Robert Rosenkranz(1)10.5
    
    Second Amendment to the Delphi Capital Management, Inc. Pension Plan for Robert Rosenkranz
(Exhibit 10.2) (9)10.6
    
    Investment Consulting Agreement, dated as of November 10, 1988, between Rosenkranz Asset
Managers, LLC (as assignee of Rosenkranz, Inc.) and the Company (Exhibit 10.8)(2)10.7
    
    Investment Consulting Agreement, dated as of November 6, 1988, between Rosenkranz Asset
Managers, LLC (as assignee of Rosenkranz, Inc.) and Reliance Standard Life Insurance Company
(Exhibit 10.9)(2)10.8
    
    2003 Bonus Criteria for Chairman, President and Chief Executive Officer of Delphi Financial
Group, Inc. (Exhibit 10.1) (10)10.9
    
    SIG Holdings, Inc. 1992 Long-Term Incentive Plan (Exhibit 10.12)(4)10.10
    
    Stockholders Agreement, dated as of October 5, 1995, among the Company and the affiliate
stockholders named therein (Exhibit 10.30)(5)10.11
    
    Reliance Standard Life Insurance Company Nonqualified Deferred Compensation Plan (Exhibit
10.14)(5)10.12
    
    Reliance Standard Life Insurance Company Supplemental Executive Retirement Plan (Exhibit
10.15)(5)10.13
    
    Reliance Standard Life Insurance Company Amended and Restated Management Incentive
Compensation Plan (Exhibit 10.2) (21)10.14
    
    2007 Exhibits to the Reliance Standard Life Insurance Company Amended and Restated
Management Incentive Compensation Plan (Exhibit 10.3) (21)
 -47-




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##### Table of Contents



10.15
    
    Stock Option Award Agreement, dated July 8, 2003, for Harold F. Ilg (Exhibit 10.5) (12)10.16
    
    Amendment of Stock Option Award
Agreement, dated January 4, 2006, for Harold F. Ilg (Exhibit 10.17) (17)10.17
    
    Stock Option Award Agreement, dated May 19, 2004, for Lawrence E. Daurelle (Exhibit 10.1) (14)10.18
    
    Stock Option Award Agreement, dated
January 4, 2006, for Lawrence E. Daurelle (Exhibit 10.19) (17)10.19
    
    Delphi Financial Group, Inc. Second Amended and Restated Directors Stock Plan (Exhibit 10.1)(21)10.20
    
    Delphi Financial Group, Inc. Annual Incentive Compensation Plan (Exhibit 10.2) (13)10.21
    
    Employment Agreement, dated March 18, 1994, for Robert M. Smith, Jr. (Exhibit 10.31)(3)10.22
    
    Employment Agreement, dated July 8, 2003, between Safety National Casualty Corporation and
Harold F. Ilg (Exhibit 10.6) (12)10.23
    
    Employment letter, dated April 19, 2006, for Donald A. Sherman (Exhibit 10.1)
(19)10.24
    
    Form of Restricted Share Unit Award Agreement (Exhibit 99.1) (15)10.25
    
    SIG Holdings, Inc. Note Agreement, dated as of May 20, 1994 (8.5% Senior Secured Notes due
2003) (Exhibit 10.25)(4)10.26
    
    Borrower Pledge Agreement, dated as of May 20, 1994, between SIG Holdings, Inc. and the
Chase Manhattan Bank, N.A., as collateral agent (Exhibit 10.26) (4)10.27
    
    Restricted Share Unit Amendment and Consolidation Agreement for Robert M. Smith, Jr.
(Exhibit 10.1) (25)10.28
    
    Delphi Financial Group, Inc. Second Amended and Restated Long-Term Performance Based
Incentive Plan (Exhibit 10.1)(24)10.29
    
    Supplement to Credit Agreement dated November 8, 2007, among Delphi Financial Group, Inc. as
the Borrower, Bank of America, N.A., as Administrative Agent, and the other lenders party
thereto (Exhibit 10.1) (26)11.1
    
    Computation of Results per Share of Common Stock(27)21.1
    
    List of Subsidiaries of the Company(28)23.1
    
    Consent of Sidley Austin LLP (Exhibit 23.1)(23)23.2
    
    Consent of Ernst & Young LLP(28)24.1
    
    Powers of Attorney (28)31.1
    
    Certification by the Chairman of the Board and Chief Executive Officer of Periodic Report
Pursuant to Rule 13a-14(a) or 
15d-14(a) (28)31.2
    
    Certification by the Vice President and Treasurer of Periodic Report Pursuant to Rule
13a-14(a) or 15d-14(a) (28)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 (28)
 
 (1)
    
    Incorporated herein by reference to the designated exhibit to the Companys Form 10-K
for the year ended December 31, 1992.(2)
    
    Incorporated herein by reference to the designated exhibit to the Companys
Registration Statement on Form S-1 dated March 13, 1990 (Registration No. 33-32827).(3)
    
    Incorporated herein by reference to the designated exhibit to the Companys Form 10-K
for the year ended December 31, 1994.(4)
    
    Incorporated herein by reference to the designated exhibit to the Companys Form 10-K
for the year ended December 31, 1995.(5)
    
    Incorporated herein by reference to the designated exhibit to the Companys
Registration Statement on Form S-4 dated January 30, 1996 (Registration No. 33-99164).(6)
    
    Incorporated herein by reference to the designated exhibit to the Companys Form 10-Q
for the quarter ended June 30, 1997.(7)
    
    Incorporated herein by reference to the designated exhibit to the Companys Form 10-K
for the year ended December 31, 1998.(8)
    
    Incorporated herein by reference to the designated exhibit to the Companys Form 10-Q
for the quarter ended June 30, 2001.(9)
    
    Incorporated herein by reference to the designated exhibit to the Companys Form 10-Q
for the quarter ended September 30, 2002.(10)
    
    Incorporated herein by reference to the designated exhibit to the Companys Form 10-Q
for the quarter ended March 31, 2003.(11)
    
    Incorporated herein by reference to the designated exhibit to the Companys Current
Report on Form 8-K dated May 20, 2003.(12)
    
    Incorporated herein by reference to the designated exhibit to the Companys Form 10-Q
for the quarter ended June 30, 2003.(13)
    
    Incorporated herein by reference to the designated exhibit to the Companys Form 10-Q
for the quarter ended March 31, 2004.(14)
    
    Incorporated herein by reference to the designated exhibit to the Companys Form 10-Q
for the quarter ended June 30, 2004.(15)
    
    Incorporated herein by reference to the designated exhibit to the Companys Current
Report on Form 8-K dated February 9, 2005.(16)
    
    Incorporated herein by reference to the designated exhibit to the Companys Form 10-Q
for the quarter ended June 30, 2005.(17)
    
    Incorporated herein by reference to the designated exhibit to the Companys Form 10-K
for the year ended December 31, 2005.(18)
    
    Incorporated herein by reference to the designated exhibit to the Companys Current
Report on Form 8-K dated April 19, 2006.(19)
    
    Incorporated herein by reference to the designated exhibit to the Companys Form 10-Q
for the quarter ended June 30, 2006.(20)
    
    Incorporated herein by reference to the designated exhibit to the Companys Current
Report on Form 8-K dated October 25, 2006.(21)
    
    Incorporated herein by reference to the designated exhibit to the Companys Form 10-Q
for the quarter ended March 31, 2007(22)
    
    Incorporated herein by reference to the designated exhibit to the Companys Current
Report on Form 8-K dated May 8, 2007.(23)
    
    Incorporated herein by reference to the designated exhibit to the Companys Current
Report on Form 8-K dated May 23, 2007.(24)
    
    Incorporated herein by reference to the designated exhibit to the Companys Current
Report on Form 8-K dated August 23, 2007.(25)
    
    Incorporated herein by reference to the designated exhibit to the Companys Form 10-Q
for the quarter ended September 30, 2007.(26)
    
    Incorporated herein by reference to the designated exhibit to the Companys Current
Report on Form 8-K dated November 7, 2007.(27)
    
    Incorporated herein by reference to Note N to the Consolidated Financial Statements
included elsewhere herein.(28)
    
    Filed herewith. -48-




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##### Table of Contents



(c)
    
    The financial statement schedules listed in the Index to Consolidated Financial Statements
and Financial Statement Schedules on page 52 of this Form 10-K are included under Item 8 and
are presented beginning on page 84 of this Form 10-K. All other schedules for which provision
is made in the applicable accounting regulations of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable, and therefore have been
omitted.
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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
 
 SIGNATURES
  Delphi Financial Group, Inc.By:
    /s/ ROBERT ROSENKRANZChairman of the Board andChief Executive Officer  Name
    
    Capacity
    
    Date/s/ ROBERT ROSENKRANZ

(Robert Rosenkranz)
    
    Chairman of the Board and Chief Executive
Officer (Principal Executive Officer)
    
    February 28, 2008*

(Kevin R. Brine)
    
    Director
    
    February 28, 2008*

(Lawrence E. Daurelle)
    
    Director
    
    February 28, 2008*

(Edward A. Fox)
    
    Director
    
    February 28, 2008*

(Steven A. Hirsh)
    
    Director
    
    February 28, 2008*

(Harold F. Ilg)
    
    Director
    
    February 28, 2008*

(James M. Litvack)
    
    Director
    
    February 28, 2008*

(James N. Meehan)
    
    Director
    
    February 28, 2008*

(Philip R. OConnor)
    
    Director
    
    February 28, 2008/s/       DONALD A. SHERMAN

(Donald A. Sherman)
    
    Director, President and Chief Operating Officer
    
    February 28, 2008/s/       ROBERT M. SMITH, JR.

(Robert M. Smith, Jr.)
    
    Director and Executive Vice President
    
    February 28, 2008*

(Robert F. Wright)
    
    Director
    
    February 28, 2008*

(Thomas W. Burghart)
    
    Vice President and Treasurer (Principal
Accounting and Financial Officer)
    
    February 28, 2008
 
 * BY:
    
    /s/ ROBERT ROSENKRANZAttorney-in-Fact
 -50-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL RESULTS (Unaudited)
(Dollars in Thousands, Except Per Share Data)
 Year Ended December 31, 2007First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterRevenues excluding net realized investment (losses)
gains and loss on redemption of debentures
    
    $
    393,550
    
    
    $
    393,444
    
    
    $
    388,712
    
    
    $
    399,002Net realized investment (losses) gains
    
    
    (382
    )
    
    
    937
    
    
    
    (1,480
    )
    
    
    (972
    )Loss on redemption of junior subordinated
deferrable interest debentures
    
    
    (2,192
    )
    
    
    
    
    
    
    
    
    
    
    Total revenues
    
    
    390,976
    
    
    
    394,381
    
    
    
    387,232
    
    
    
    398,030Operating income
    
    
    62,213
    
    
    
    68,084
    
    
    
    65,075
    
    
    
    64,675Income from continuing operations
    
    
    39,194
    
    
    
    42,914
    
    
    
    40,729
    
    
    
    41,675Net income
    
    
    39,194
    
    
    
    42,914
    
    
    
    40,729
    
    
    
    41,675Basic results per share of common stock:Income from continuing operations
    
    $
    0.78
    
    
    $
    0.85
    
    
    $
    0.80
    
    
    $
    0.84Net income
    
    
    0.78
    
    
    
    0.85
    
    
    
    0.80
    
    
    
    0.84Diluted results per share of common stock:Income from continuing operations
    
    $
    0.76
    
    
    $
    0.83
    
    
    $
    0.79
    
    
    $
    0.81Net income
    
    
    0.76
    
    
    
    0.83
    
    
    
    0.79
    
    
    
    0.81
 Year Ended December 31, 2006First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterRevenues excluding realized investment (losses) gains
    
    $
    321,988
    
    
    $
    341,056
    
    
    $
    361,349
    
    
    $
    388,056Net realized investment (losses) gains
    
    
    (1,251
    )
    
    
    (294
    )
    
    
    (335
    )
    
    
    1,022Total revenues
    
    
    320,737
    
    
    
    340,762
    
    
    
    361,014
    
    
    
    389,078Operating income
    
    
    53,358
    
    
    
    57,862
    
    
    
    58,378
    
    
    
    63,826Income from continuing operations
    
    
    32,832
    
    
    
    35,824
    
    
    
    36,168
    
    
    
    40,179Net income
    
    
    32,822
    
    
    
    32,901
    
    
    
    36,169
    
    
    
    40,176Basic results per share of common stock:Income from continuing operations
    
    $
    0.66
    
    
    $
    0.72
    
    
    $
    0.73
    
    
    $
    0.80Net income
    
    
    0.66
    
    
    
    0.66
    
    
    
    0.73
    
    
    
    0.80Diluted results per share of common stock:Income from continuing operations
    
    $
    0.65
    
    
    $
    0.71
    
    
    $
    0.71
    
    
    $
    0.78Net income
    
    
    0.65
    
    
    
    0.65
    
    
    
    0.71
    
    
    
    0.78
   -51-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
 PageAudited Consolidated Financial Statements of Delphi Financial Group, Inc. and Subsidiaries:Report of Independent Registered Public Accounting Firm
    
    
    53Consolidated Statements of Income  Years Ended December 31, 2007, 2006 and 2005
    
    
    54Consolidated Balance Sheets  December 31, 2007 and 2006
    
    
    55Consolidated Statements of Shareholders Equity  Years Ended December 31, 2007, 2006 and 2005
    
    
    56Consolidated Statements of Cash Flows  Years Ended December 31, 2007, 2006 and 2005
    
    
    57Notes to Consolidated Financial Statements
    
    
    58Financial Statement Schedules of Delphi Financial Group, Inc. and Subsidiaries:Schedule I, Summary of Investments Other Than Investments in Related Parties
    
    
    84Schedule II, Condensed Financial Information of Registrant
    
    
    85Schedule III, Supplementary Insurance Information
    
    
    89Schedule IV, Reinsurance
    
    
    90Schedule VI, Supplemental Information Concerning Property-Casualty Insurance Operations
    
    
    91
 -52-




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
       
 -53-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
 (Dollars in Thousands, Except Per Share Data)
 Year Ended December 31,2007
    
    
    2006
    
    
    2005Revenue:Premium and fee income
    
    $
    1,304,161
    
    
    $
    1,156,578
    
    
    $
    990,211Net investment income
    
    
    270,547
    
    
    
    255,871
    
    
    
    223,569Net realized investment (losses) gains
    
    
    (1,897
    )
    
    
    (858
    )
    
    
    9,003Loss on redemption of junior subordinated deferrable interest
debentures underlying company-obligated mandatorily
redeemable capital securities issued by unconsolidated
subsidiaries
    
    
    (2,192
    )
    
    
    
    
    
    
    1,570,619
    
    
    
    1,411,591
    
    
    
    1,222,783Benefits and expenses:Benefits, claims and interest credited to policyholders
    
    
    944,901
    
    
    
    847,486
    
    
    
    725,207Commissions
    
    
    84,526
    
    
    
    74,391
    
    
    
    66,677Amortization of cost of business acquired
    
    
    81,222
    
    
    
    80,768
    
    
    
    69,281Other operating expenses
    
    
    199,923
    
    
    
    175,522
    
    
    
    157,5971,310,572
    
    
    
    1,178,167
    
    
    
    1,018,762Income from continuing operations before interest and income
tax expense
    
    
    260,047
    
    
    
    233,424
    
    
    
    204,021Interest expense:Corporate debt
    
    
    16,870
    
    
    
    20,172
    
    
    
    15,607Junior subordinated debentures
    
    
    7,891
    
    
    
    
    
    
    
    Junior subordinated deferrable interest debentures underlying
company-obligated redeemable capital securities issued by
unconsolidated subsidiaries
    
    
    2,727
    
    
    
    5,211
    
    
    
    4,85527,488
    
    
    
    25,383
    
    
    
    20,462Income from continuing operations before income tax expense
    
    
    232,559
    
    
    
    208,041
    
    
    
    183,559Income tax expense
    
    
    68,047
    
    
    
    63,038
    
    
    
    56,875Income from continuing operations
    
    
    164,512
    
    
    
    145,003
    
    
    
    126,684Loss from discontinued operations, net of income tax
benefit
    
    
    
    
    
    
    (2,935
    )
    
    
    (13,350
    )Net income
    
    $
    164,512
    
    
    $
    142,068
    
    
    $
    113,334Basic results per share of common stock:Income from continuing operations
    
    $
    3.27
    
    
    $
    2.92
    
    
    $
    2.58Net income
    
    
    3.27
    
    
    
    2.86
    
    
    
    2.31Diluted results per share of common stock:Income from continuing operations
    
    $
    3.19
    
    
    $
    2.85
    
    
    $
    2.52Net income
    
    
    3.19
    
    
    
    2.79
    
    
    
    2.25Dividends paid per share of common stock
    
    $
    0.35
    
    
    $
    0.31
    
    
    $
    0.24
  -54-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (Dollars in Thousands, Except Per Share Data)
 December 31,2007
    
    
    2006Assets:Investments:Fixed maturity securities, available for sale
    
    $
    3,691,694
    
    
    $
    3,377,578Short-term investments
    
    
    286,033
    
    
    
    400,239Other investments
    
    
    1,010,141
    
    
    
    705,5634,987,868
    
    
    
    4,483,380Cash
    
    
    51,240
    
    
    
    48,204Cost of business acquired
    
    
    174,430
    
    
    
    267,920Reinsurance receivables
    
    
    402,785
    
    
    
    410,593Goodwill
    
    
    93,929
    
    
    
    93,929Other assets
    
    
    260,602
    
    
    
    251,975Assets held in separate account
    
    
    123,956
    
    
    
    114,474Total assets
    
    $
    6,094,810
    
    
    $
    5,670,475Liabilities and Shareholders Equity:Future policy benefits:Life
    
    $
    290,775
    
    
    $
    279,919Disability and accident
    
    
    688,023
    
    
    
    610,618Unpaid claims and claim expenses:Life
    
    
    69,161
    
    
    
    58,752Disability and accident
    
    
    341,442
    
    
    
    300,693Casualty
    
    
    963,974
    
    
    
    857,662Policyholder account balances
    
    
    1,083,121
    
    
    
    1,119,218Corporate debt
    
    
    217,750
    
    
    
    263,750Junior subordinated debentures
    
    
    175,000
    
    
    
    Junior subordinated deferrable interest debentures underlying
company-obligated mandatorily redeemable capital
securities issued by unconsolidated subsidiaries
    
    
    20,619
    
    
    
    59,762Advances from Federal Home Loan Bank
    
    
    55,342
    
    
    
    55,342Other liabilities and policyholder funds
    
    
    924,257
    
    
    
    775,477Liabilities related to separate account
    
    
    123,956
    
    
    
    114,474Total liabilities
    
    
    4,953,420
    
    
    
    4,495,667Shareholders equity:Preferred Stock, $.01 par; 50,000,000 shares authorized, none issued
    
    
    
    
    
    
    Class A Common Stock, $.01 par; 150,000,000 shares authorized;
48,717,899 and 48,010,697 shares issued and outstanding, respectively
    
    
    487
    
    
    
    480Class B Common Stock, $.01 par; 20,000,000 shares authorized;
5,934,183 and 5,671,744 shares issued and outstanding
    
    
    59
    
    
    
    57Additional paid-in capital
    
    
    509,742
    
    
    
    474,722Accumulated other comprehensive (loss) income
    
    
    (42,497
    )
    
    
    19,133Retained earnings
    
    
    828,116
    
    
    
    763,386Treasury stock, at cost; 6,227,416 and 4,565,716 shares of Class A
Common Stock, respectively, and 227,216 and 0 shares of
Class B Common Stock, respectively
    
    
    (154,517
    )
    
    
    (82,970
    )Total shareholders equity
    
    
    1,141,390
    
    
    
    1,174,808Total liabilities and shareholders equity
    
    $
    6,094,810
    
    
    $
    5,670,475
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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 (Dollars in Thousands)
 AccumulatedClass A
    
    
    Class B
    
    
    Additional
    
    
    OtherCommon
    
    
    Common
    
    
    Paid-in
    
    
    Comprehensive
    
    
    Retained
    
    
    TreasuryStock
    
    
    Stock
    
    
    Capital
    
    
    Income (Loss)
    
    
    Earnings
    
    
    Stock
    
    
    TotalBalance, January 1, 2005
    
    $
    304
    
    
    $
    39
    
    
    $
    406,908
    
    
    $
    57,371
    
    
    $
    534,540
    
    
    $
    (59,314
    )
    
    $
    939,848Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    113,334
    
    
    
    
    
    
    
    113,334Other comprehensive income:Decrease in net unrealized
appreciation on investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,193
    )
    
    
    
    
    
    
    
    
    
    
    (37,193
    )Decrease in net loss on cash flow
hedge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    785
    
    
    
    
    
    
    
    
    
    
    
    785Net change in minimum pension
liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (699
    )
    
    
    
    
    
    
    
    
    
    
    (699
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76,227Issuance of stock, exercise of stock
options and share conversions
    
    
    9
    
    
    
    
    
    
    
    27,697
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,706Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    7,926
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,926Acquisition of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,079
    )
    
    
    (7,079
    )Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,589
    )
    
    
    
    
    
    
    (11,589
    )Balance, December 31, 2005
    
    $
    313
    
    
    $
    39
    
    
    $
    442,531
    
    
    $
    20,264
    
    
    $
    636,285
    
    
    $
    (66,393
    )
    
    $
    1,033,039Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    142,068
    
    
    
    
    
    
    
    142,068Other comprehensive income:Increase in net unrealized
appreciation on investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,199
    
    
    
    
    
    
    
    
    
    
    
    3,199Decrease in net loss on cash flow
hedge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    785
    
    
    
    
    
    
    
    
    
    
    
    785Net change in minimum pension
liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    8Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    146,060Adoption of Statement of Financial
Accounting Standard No. 158
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,123
    )
    
    
    
    
    
    
    
    
    
    
    (5,123
    )Issuance of stock, exercise of stock
options and share conversions
    
    
    8
    
    
    
    (1
    )
    
    
    23,439
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,446Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    8,931
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,931Acquisition of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,577
    )
    
    
    (16,577
    )Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,967
    )
    
    
    
    
    
    
    (14,967
    )Three-for-two stock split
    
    
    159
    
    
    
    19
    
    
    
    (179
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )Balance, December 31, 2006
    
    $
    480
    
    
    $
    57
    
    
    $
    474,722
    
    
    $
    19,133
    
    
    $
    763,386
    
    
    $
    (82,970
    )
    
    $
    1,174,808Cumulative effect adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (82,553
    )
    
    
    
    
    
    
    (82,553
    )Adjusted balance, January 1, 2007
    
    
    480
    
    
    
    57
    
    
    
    474,722
    
    
    
    19,133
    
    
    
    680,833
    
    
    
    (82,970
    )
    
    
    1,092,255Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    164,512
    
    
    
    
    
    
    
    164,512Other comprehensive income:Decrease in net unrealized
appreciation on investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (65,621
    )
    
    
    
    
    
    
    
    
    
    
    (65,621
    )Decrease in net loss on cash flow
hedge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    786
    
    
    
    
    
    
    
    
    
    
    
    786Net change in pension
liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,205
    
    
    
    
    
    
    
    
    
    
    
    3,205Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102,882Issuance of stock, exercise of stock
options and share conversions
    
    
    7
    
    
    
    2
    
    
    
    27,438
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,447Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    7,582
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,582Acquisition of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (71,547
    )
    
    
    (71,547
    )Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,229
    )
    
    
    
    
    
    
    (17,229
    )Balance, December 31, 2007
    
    $
    487
    
    
    $
    59
    
    
    $
    509,742
    
    
    $
    (42,497
    )
    
    $
    828,116
    
    
    $
    (154,517
    )
    
    $
    1,141,390
  -56-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in Thousands)
 Year Ended December 31,2007
    
    
    2006
    
    
    2005Operating activities:Net income
    
    $
    164,512
    
    
    $
    142,068
    
    
    $
    113,334Adjustments to reconcile net income to net cash provided
by operating activities:Change in policy liabilities and policyholder accounts
    
    
    245,031
    
    
    
    270,620
    
    
    
    227,188Net change in reinsurance receivables and payables
    
    
    5,335
    
    
    
    5,160
    
    
    
    13,818Amortization, principally the cost of business acquired
and investments
    
    
    73,084
    
    
    
    70,935
    
    
    
    62,014Deferred costs of business acquired
    
    
    (108,574
    )
    
    
    (100,260
    )
    
    
    (89,601
    )Net realized losses (gains) on investments
    
    
    1,897
    
    
    
    858
    
    
    
    (9,003
    )Net change in federal income tax liability
    
    
    23,757
    
    
    
    28,590
    
    
    
    16,924Other
    
    
    (21,723
    )
    
    
    (15,046
    )
    
    
    (25,274
    )Net cash provided by operating activities
    
    
    383,319
    
    
    
    402,925
    
    
    
    309,400Investing activities:Purchases of investments and loans made
    
    
    (1,210,252
    )
    
    
    (1,119,894
    )
    
    
    (1,946,034
    )Sales of investments and receipts from repayment of loans
    
    
    550,991
    
    
    
    747,841
    
    
    
    1,408,018Maturities of investments
    
    
    171,927
    
    
    
    206,223
    
    
    
    180,292Net change in short-term investments
    
    
    114,206
    
    
    
    (305,849
    )
    
    
    1,484Change in deposit in separate account
    
    
    8,948
    
    
    
    (2,008
    )
    
    
    (5,876
    )Net cash used by investing activities
    
    
    (364,180
    )
    
    
    (473,687
    )
    
    
    (362,116
    )Financing activities:Deposits to policyholder accounts
    
    
    116,729
    
    
    
    200,820
    
    
    
    102,708Withdrawals from policyholder accounts
    
    
    (159,035
    )
    
    
    (131,229
    )
    
    
    (101,701
    )Borrowings under revolving credit facility
    
    
    112,000
    
    
    
    31,000
    
    
    
    88,000Principal payments under revolving credit facility
    
    
    (158,000
    )
    
    
    (2,000
    )
    
    
    (11,000
    )Change in liability for Federal Home Loan Bank advances
    
    
    
    
    
    
    
    
    
    
    (30,000
    )Proceeds from the issuance of 2007 Junior Debentures
    
    
    172,309
    
    
    
    
    
    
    
    Redemption of junior subordinated deferrable interest debentures
    
    
    (37,728
    )
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    (62,417
    )
    
    
    (16,577
    )
    
    
    (7,079
    )Other financing activities
    
    
    39
    
    
    
    8,459
    
    
    
    15,957Net cash (used) provided by financing activities
    
    
    (16,103
    )
    
    
    90,473
    
    
    
    56,885Increase in cash
    
    
    3,036
    
    
    
    19,711
    
    
    
    4,169Cash at beginning of year
    
    
    48,204
    
    
    
    28,493
    
    
    
    24,324Cash at end of year
    
    $
    51,240
    
    
    $
    48,204
    
    
    $
    28,493
  -57-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 December 31, 2007
 Note A  Summary of Significant Accounting Policies
 Principles of Consolidation.
 Nature of Operations.
 Use of Estimates.
 Investments.
 -58-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 Note A  Summary of Significant Accounting Policies  (Continued)
   Cost of Business Acquired.
  -59-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 Note A  Summary of Significant Accounting Policies  (Continued)
  Receivables from Reinsurers.
 Goodwill.
 Separate Account.
 Future Policy Benefits.
 Unpaid Claims and Claim Expenses.
 Policyholder Account Balances.
 Junior Subordinated Deferrable Interest Debentures underlying Company-obligated Mandatorily
Redeemable Capital Securities issued by Unconsolidated Subsidiaries.
 -60-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 Note A  Summary of Significant Accounting Policies  (Continued)
  Income Taxes.
  Pension and Other Postretirement Benefits.
 Premium Recognition.
 Stock-Based Compensation.
 -61-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 Note A  Summary of Significant Accounting Policies  (Continued)
    Year Ended December 31,2007
    
    2006
    
    2005Expected volatility
    
    
    19.2
    %
    
    
    24.4
    %
    
    
    17.5
    %Expected dividends
    
    
    0.8
    %
    
    
    0.9
    %
    
    
    0.8
    %Expected lives of options (in years)
    
    
    6.5
    
    
    
    6.5
    
    
    
    3.4Risk-free rate
    
    
    4.6
    %
    
    
    4.8
    %
    
    
    4.2
    %
    Statements of Cash Flows.
 Recently Issued Accounting Standards
  -62-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 Note A  Summary of Significant Accounting Policies  (Continued)
  Investment Companies Investment Companies
   -63-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 Note A  Summary of Significant Accounting Policies  (Continued)
  Note B  Investments
  December 31, 2007Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value(dollars in thousands)Mortgage-backed securities
    
    $
    1,105,518
    
    
    $
    16,306
    
    
    $
    (55,342
    )
    
    $
    1,066,482Corporate securities
    
    
    1,533,671
    
    
    
    22,985
    
    
    
    (52,519
    )
    
    
    1,504,137U.S. Treasury and other U.S. Government
guaranteed securities
    
    
    49,454
    
    
    
    2,704
    
    
    
    
    
    
    
    52,158U.S. Government-sponsored enterprises
    
    
    153,138
    
    
    
    1,112
    
    
    
    
    
    
    
    154,250Obligations of U.S. states, municipalities and
political subdivisions
    
    
    905,176
    
    
    
    16,370
    
    
    
    (6,879
    )
    
    
    914,667Total fixed maturity securities
    
    $
    3,746,957
    
    
    $
    59,477
    
    
    $
    (114,740
    )
    
    $
    3,691,694
 December 31, 2006Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value(dollars in thousands)Mortgage-backed securities
    
    $
    944,065
    
    
    $
    12,642
    
    
    $
    (16,764
    )
    
    $
    939,943Corporate securities
    
    
    1,394,478
    
    
    
    37,367
    
    
    
    (14,022
    )
    
    
    1,417,823U.S. Treasury and other U.S. Government
guaranteed and sponsored securities
    
    
    96,185
    
    
    
    1,472
    
    
    
    (2,483
    )
    
    
    95,174U.S. Government-sponsored enterprises
    
    
    157,635
    
    
    
    86
    
    
    
    (1,783
    )
    
    
    155,938Obligations of U.S. states, municipalities and
political subdivisions
    
    
    748,470
    
    
    
    20,457
    
    
    
    (227
    )
    
    
    768,700Total fixed maturity securities
    
    $
    3,340,833
    
    
    $
    72,024
    
    
    $
    (35,279
    )
    
    $
    3,377,578
 -64-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 Note B  Investments  (Continued)
  Amortized
    
    
    FairCost
    
    
    Value(dollars in thousands)Mortgage-backed securities
    
    $
    1,105,518
    
    
    $
    1,066,482Other securities:Less than one year
    
    
    116,484
    
    
    
    116,469Greater than 1, up to 5 years
    
    
    464,692
    
    
    
    463,342Greater than 5, up to 10 years
    
    
    849,726
    
    
    
    846,496Greater than 10 years
    
    
    1,210,537
    
    
    
    1,198,905Total
    
    $
    3,746,957
    
    
    $
    3,691,694
  Year Ended December 31,2007
    
    
    2006
    
    
    2005(dollars in thousands)Gross investment income:Fixed maturity securities
    
    $
    232,624
    
    
    $
    204,287
    
    
    $
    189,814Mortgage loans
    
    
    22,966
    
    
    
    19,291
    
    
    
    14,764Other
    
    
    41,626
    
    
    
    65,490
    
    
    
    44,012297,216
    
    
    
    289,068
    
    
    
    248,590Less: Investment expenses
    
    
    26,669
    
    
    
    33,197
    
    
    
    25,021$
    270,547
    
    
    $
    255,871
    
    
    $
    223,569
  Year Ended December 31,2007
    
    
    2006
    
    
    2005(dollars in thousands)Fixed maturity securities
    
    $
    (2,603
    )
    
    $
    (3,247
    )
    
    $
    2,656Other investments
    
    
    706
    
    
    
    2,389
    
    
    
    6,347$
    (1,897
    )
    
    $
    (858
    )
    
    $
    9,003
  -65-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 Note B  Investments  (Continued)
  December 31, 2007Less Than 12 Months
    
    
    12 Months or More
    
    
    TotalGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses(dollars in thousands)Mortgage-backed securities
    
    $
    285,684
    
    
    $
    (26,938
    )
    
    $
    240,650
    
    
    $
    (28,404
    )
    
    $
    526,334
    
    
    $
    (55,342
    )Corporate securities
    
    
    449,456
    
    
    
    (33,192
    )
    
    
    229,845
    
    
    
    (19,328
    )
    
    
    679,301
    
    
    
    (52,520
    )U.S. Treasury and other U.S. Government
guaranteed securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    U.S. Government-sponsored enterprises
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Obligations of U.S. states, municipalities
& political subdivisions
    
    
    264,460
    
    
    
    (6,710
    )
    
    
    2,586
    
    
    
    (168
    )
    
    
    267,046
    
    
    
    (6,878
    )Total fixed maturity securities
    
    $
    999,600
    
    
    $
    (66,840
    )
    
    $
    473,081
    
    
    $
    (47,900
    )
    
    $
    1,472,681
    
    
    $
    (114,740
    )
 December 31, 2006Less Than 12 Months
    
    
    12 Months or More
    
    
    TotalGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses(dollars in thousands)Mortgage-backed securities
    
    $
    191,460
    
    
    $
    (3,277
    )
    
    $
    362,590
    
    
    $
    (13,487
    )
    
    $
    554,050
    
    
    $
    (16,764
    )Corporate securities
    
    
    252,165
    
    
    
    (4,211
    )
    
    
    262,012
    
    
    
    (9,811
    )
    
    
    514,177
    
    
    
    (14,022
    )U.S. Treasury and other U.S. Government
guaranteed and sponsored securities
    
    
    14,133
    
    
    
    (203
    )
    
    
    47,411
    
    
    
    (2,280
    )
    
    
    61,544
    
    
    
    (2,483
    )U.S. Government-sponsored enterprises
    
    
    61,428
    
    
    
    (302
    )
    
    
    88,464
    
    
    
    (1,481
    )
    
    
    149,892
    
    
    
    (1,783
    )Obligations of U.S. states, municipalities
& political subdivisions
    
    
    33,040
    
    
    
    (162
    )
    
    
    6,414
    
    
    
    (65
    )
    
    
    39,454
    
    
    
    (227
    )Total fixed maturity securities
    
    $
    552,226
    
    
    $
    (8,155
    )
    
    $
    766,891
    
    
    $
    (27,124
    )
    
    $
    1,319,117
    
    
    $
    (35,279
    )
   -66-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 Note B  Investments  (Continued)
     -67-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 Note C  Disability, Accident and Casualty Future Policy Benefits and Unpaid Claims and Claim
Expenses
  Year Ended December 31,2007
    
    
    2006
    
    
    2005(dollars in thousands)Balance at beginning of year, net of reinsurance
    
    $
    1,521,829
    
    
    $
    1,284,400
    
    
    $
    1,088,984Add provisions for claims and claim expenses incurred, net
of reinsurance, occurring during:Current year
    
    
    620,286
    
    
    
    535,973
    
    
    
    486,752Prior years
    
    
    15,497
    
    
    
    44,793
    
    
    
    31,735Incurred claims and claim expenses during the current
year, net of reinsurance
    
    
    635,783
    
    
    
    580,766
    
    
    
    518,487Deduct claims and claim expenses payments, net of reinsurance,
occurring during:Current year
    
    
    126,763
    
    
    
    99,956
    
    
    
    98,247Prior years
    
    
    281,743
    
    
    
    243,381
    
    
    
    224,824408,506
    
    
    
    343,337
    
    
    
    323,071Balance at end of year, net of reinsurance
    
    
    1,749,106
    
    
    
    1,521,829
    
    
    
    1,284,400Reinsurance receivables at end of year
    
    
    244,333
    
    
    
    247,144
    
    
    
    249,101Balance at end of year, gross of reinsurance (1)
    
    $
    1,993,439
    
    
    $
    1,768,973
    
    
    $
    1,533,501Balance Sheets:Future policy benefits:Disability and accident
    
    $
    688,023
    
    
    $
    610,618Unpaid claims and claim expenses:Disability and accident
    
    
    341,442
    
    
    
    300,693Casualty (1)
    
    
    963,974
    
    
    
    857,662$
    1,993,439
    
    
    $
    1,768,973
 
 (1)
    
    All years include the results from the Companys discontinued non-core property
catastrophe reinsurance business. See Note R to the Consolidated Financial Statements.  -68-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 Note D  Corporate Debt
     -69-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 Note E  Advances from the Federal Home Loan Bank
  Note F  Income Taxes
  Year Ended December 31,2007
    
    
    2006
    
    
    2005(dollars in thousands)Federal income tax expense at statutory rate
    
    $
    81,396
    
    
    $
    72,814
    
    
    $
    64,245Tax-exempt income and dividends received deduction
    
    
    (12,781
    )
    
    
    (10,179
    )
    
    
    (7,753
    )Other
    
    
    (568
    )
    
    
    403
    
    
    
    383$
    68,047
    
    
    $
    63,038
    
    
    $
    56,875
    December 31,2007
    
    
    2006(dollars in thousands)Cost of business acquired
    
    $
    50,493
    
    
    $
    84,216Future policy benefits and unpaid claims and claim expenses
    
    
    88,992
    
    
    
    71,685Investments
    
    
    
    
    
    
    33,103Other
    
    
    11,550
    
    
    
    16,323Gross deferred tax liabilities
    
    
    151,035
    
    
    
    205,327Future policy benefits and unpaid claims and claim expenses
    
    
    (7,423
    )
    
    
    (8,133
    )Investments
    
    
    (17,277
    )
    
    
    Other
    
    
    (38,534
    )
    
    
    (37,155
    )Net operating loss carryforwards
    
    
    (962
    )
    
    
    (12,971
    )Gross deferred tax assets
    
    
    (64,196
    )
    
    
    (58,259
    )Net deferred tax liability
    
    $
    86,839
    
    
    $
    147,068
 -70-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 Note F  Income Taxes  (Continued)
  As of or for the Year EndedDecember 31,2007
    
    
    2006
    
    
    2005(dollars in thousands)Current tax expense
    
    $
    48,361
    
    
    $
    32,556
    
    
    $
    28,565Deferred tax expense
    
    
    19,686
    
    
    
    30,482
    
    
    
    28,310Current tax liability (recoverable)
    
    
    24,529
    
    
    
    7,427
    
    
    
    (1,283
    )Income taxes paid
    
    
    29,300
    
    
    
    23,700
    
    
    
    25,608Income tax refunds
    
    
    
    
    
    
    2,682
    
    
    
    
  Note G  Fair Values of Financial Instruments
  December 31,2007
    
    
    2006Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairValue
    
    
    Value
    
    
    Value
    
    
    Value(dollars in thousands)Assets:Fixed maturity securities, available for sale
    
    $
    3,691,694
    
    
    $
    3,691,694
    
    
    $
    3,377,578
    
    
    $
    3,377,578Short-term investments
    
    
    286,033
    
    
    
    286,033
    
    
    
    400,239
    
    
    
    400,239Other investments
    
    
    1,010,141
    
    
    
    1,010,141
    
    
    
    705,563
    
    
    
    705,563Assets held in separate account
    
    
    123,956
    
    
    
    123,956
    
    
    
    114,474
    
    
    
    114,474Liabilities:Policyholder account balances
    
    
    1,007,472
    
    
    
    963,914
    
    
    
    1,046,200
    
    
    
    1,008,560Corporate debt
    
    
    217,750
    
    
    
    210,275
    
    
    
    263,750
    
    
    
    268,235Junior subordinated debentures
    
    
    175,000
    
    
    
    129,220
    
    
    
    
    
    
    
    Junior subordinated deferrable interest debentures
underlying company-obligated mandatorily
redeemable capital securities issued by
unconsolidated subsidiaries
    
    
    20,619
    
    
    
    20,619
    
    
    
    59,762
    
    
    
    61,565Advances from Federal Home Loan Bank
    
    
    55,342
    
    
    
    67,338
    
    
    
    55,342
    
    
    
    65,694Liabilities related to separate account
    
    
    123,956
    
    
    
    123,956
    
    
    
    114,474
    
    
    
    114,474
 -71-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 Note G  Fair Values of Financial Instruments  (Continued)
    Note H  Junior Subordinated Deferrable Interest Debentures underlying the Company-Obligated
Mandatorily Redeemable Capital Securities of Unconsolidated Subsidiaries
    -72-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 Note H  Junior Subordinated Deferrable Interest Debentures underlying the Company-Obligated
Mandatorily Redeemable Capital Securities of Unconsolidated Subsidiaries  (Continued)
    Note I  Junior Subordinated Debentures
  -73-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 Note I  Junior Subordinated Debentures  (Continued)
   Note J  Shareholders Equity and Restrictions
     -74-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 Note J  Shareholders Equity and Restrictions  (Continued)
  Year Ended December 31,2007
    
    
    2006
    
    
    2005(shares in thousands)Class A Common Stock:Beginning balance
    
    
    48,011
    
    
    
    31,274
    
    
    
    30,418Issuance of stock, exercise of stock options and
conversion of shares
    
    
    707
    
    
    
    890
    
    
    
    856Three-for-two stock split
    
    
    
    
    
    
    15,847
    
    
    
    Ending balance
    
    
    48,718
    
    
    
    48,011
    
    
    
    31,274Class B Common Stock:Beginning balance
    
    
    5,672
    
    
    
    3,904
    
    
    
    3,904Issuance of stock, exercise of stock options and
conversion of shares
    
    
    262
    
    
    
    (123
    )
    
    
    Three-for-two stock split
    
    
    
    
    
    
    1,891
    
    
    
    Ending balance
    
    
    5,934
    
    
    
    5,672
    
    
    
    3,904Class A Treasury Stock:Beginning balance
    
    
    4,566
    
    
    
    2,723
    
    
    
    2,573Acquisition of treasury stock
    
    
    1,661
    
    
    
    321
    
    
    
    150Three-for-two stock split
    
    
    
    
    
    
    1,522
    
    
    
    Ending balance
    
    
    6,227
    
    
    
    4,566
    
    
    
    2,723Class B Treasury Stock:Beginning balance
    
    
    
    
    
    
    
    
    
    
    Acquisition of treasury stock
    
    
    227
    
    
    
    
    
    
    
    Ending balance
    
    
    227
    
    
    
    
    
    
    
    
 -75-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 Note K  Accumulated Other Comprehensive Income (Loss)
  NetUnrealizedAppreciation(Depreciation)
    
    
    Net
    
    
    Definedon Available
    
    
    Loss on
    
    
    Benefitfor Sale
    
    
    Cash Flow
    
    
    PensionSecurities
    
    
    Hedge
    
    
    Plans
    
    
    Total(dollars in thousands)Balance, January 1, 2005
    
    $
    64,683
    
    
    $
    (6,610
    )
    
    $
    (702
    )
    
    $
    57,371Unrealized depreciation on available for
sale securities (1)
    
    
    (35,803
    )
    
    
    
    
    
    
    
    
    
    
    (35,803
    )Reclassification adjustment for gains included in net
income  (2)
    
    
    (1,390
    )
    
    
    
    
    
    
    
    
    
    
    (1,390
    )Net change in unrealized depreciation on
investments
    
    
    (37,193
    )
    
    
    
    
    
    
    
    
    
    
    (37,193
    )Reclassification adjustment for losses included
in net income (3)
    
    
    
    
    
    
    785
    
    
    
    
    
    
    
    785Net change in minimum pension liability adjustment
 (4)
    
    
    
    
    
    
    
    
    
    
    (699
    )
    
    
    (699
    )Balance, December 31, 2005
    
    $
    27,490
    
    
    $
    (5,825
    )
    
    $
    (1,401
    )
    
    $
    20,264Unrealized appreciation on available for sale
securities (1)
    
    
    2,225
    
    
    
    
    
    
    
    
    
    
    
    2,225Reclassification adjustment for losses included in net
income  (2)
    
    
    974
    
    
    
    
    
    
    
    
    
    
    
    974Net change in unrealized appreciation on
investments
    
    
    3,199
    
    
    
    
    
    
    
    
    
    
    
    3,199Reclassification adjustment for losses included
in net income (3)
    
    
    
    
    
    
    785
    
    
    
    
    
    
    
    785Net change in minimum pension liability
adjustment  (4)
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    8Defined benefit pension plans:Amortization of prior service cost included in net
periodic pension cost  (5)
    
    
    
    
    
    
    
    
    
    
    357
    
    
    
    357Net loss arising during the period  (6)
    
    
    
    
    
    
    
    
    
    
    (6,104
    )
    
    
    (6,104
    )Amortization of net loss included in net periodic
pension cost(7)
    
    
    
    
    
    
    
    
    
    
    624
    
    
    
    624Net change in defined benefit pension plans
    
    
    
    
    
    
    
    
    
    
    (5,123
    )
    
    
    (5,123
    )Balance, December 31, 2006
    
    $
    30,689
    
    
    $
    (5,040
    )
    
    $
    (6,516
    )
    
    $
    19,133Unrealized depreciation on available for
sale securities (1)
    
    
    (66,731
    )
    
    
    
    
    
    
    
    
    
    
    (66,731
    )Reclassification adjustment for losses included in net
income  (2)
    
    
    1,110
    
    
    
    
    
    
    
    
    
    
    
    1,110Net change in unrealized appreciation on
investments
    
    
    (65,621
    )
    
    
    
    
    
    
    
    
    
    
    (65,621
    )Reclassification adjustment for losses included
in net income (3)
    
    
    
    
    
    
    786
    
    
    
    
    
    
    
    786Defined benefit pension plans:Amortization of prior service cost included in net
periodic pension cost  (5)
    
    
    
    
    
    
    
    
    
    
    338
    
    
    
    338Net gain arising during the period(6)
    
    
    
    
    
    
    
    
    
    
    2,410
    
    
    
    2,410Amortization of net loss included in net periodic
pension cost  (7)
    
    
    
    
    
    
    
    
    
    
    457
    
    
    
    457Net change in defined benefit pension plans
    
    
    
    
    
    
    
    
    
    
    3,205
    
    
    
    3,205Balance, December 31, 2007
    
    $
    (34,932
    )
    
    $
    (4,254
    )
    
    $
    (3,311
    )
    
    $
    (42,497
    )
 -76-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 Note K  Accumulated Other Comprehensive Income (Loss)  (Continued)
 
 (1)
    
    Net of an income tax (benefit) expense of $(19.3) million, $1.2 million and $35.9 million
for the years ended December 31, 2005, 2006 and 2007, respectively. Also, net of related
adjustment to cost of business acquired of $15.3 million, $0.3 million and $6.2 million for
the years ended December 31, 2005, 2006 and 2007, respectively.(2)
    
    Net of an income tax expense (benefit) of $0.7 million, $(0.5) million and $(0.6) million
for the years ended December 31, 2005, 2006 and 2007, respectively.(3)
    
    Net of an income tax benefit of $0.4 million for each of the years ended December 31,
2005, 2006 and 2007, respectively.(4)
    
    Net of an income tax benefit of $0.4 million and $4,400 for the years ended December 31,
2005 and 2006, respectively.(5)
    
    Net of income tax expense of $0.2 million for each of the years ended December 31, 2006
and 2007, respectively.(6)
    
    Net of an income tax (benefit) expense of $(3.3) million and $1.3 million for the years
ended December 31, 2006 and 2007, respectively.(7)
    
    Net of income tax expense of $0.3 million and $0.2 million for the years ended December
31, 2006 and 2007, respectively. Note L  Commitments and Contingencies
   Note M  Stock-Based Compensation
   -77-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 Note M  Stock-Based Compensation  (Continued)
 Restricted Share Units
  Restricted Shares
  Performance-Contingent Incentive Options
  -78-




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##### Table of Contents



Note M  Stock-Based Compensation  (Continued)
     Amended Performance Plan
  -79-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 Note M  Stock-Based Compensation  (Continued)
    Service-Based Stock Options
  WeightedWeighted
    
    
    Average
    
    
    AggregateNumber
    
    
    Average
    
    
    Remaining
    
    
    Intrinsicof
    
    
    Exercise
    
    
    Contractual
    
    
    ValueOptions
    
    Options
    
    
    Price
    
    
    Term
    
    
    ($000)Outstanding at January 1, 2007
    
    
    3,552,668
    
    
    $
    20.93Granted
    
    
    800,571
    
    
    
    40.68Exercised
    
    
    (1,053,887
    )
    
    
    16.27Forfeited
    
    
    (35,250
    )
    
    
    34.49Expired
    
    
    (3,851
    )
    
    
    15.60Outstanding at December 31, 2007
    
    
    3,260,251
    
    
    
    27.15
    
    
    
    5.5
    
    
    $
    30,876Exercisable at December 31, 2007
    
    
    1,768,406
    
    
    $
    19.54
    
    
    
    2.9
    
    
    $
    27,873
 -80-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 Note N  Computation of Results per Share
 Year Ended December 31,2007
    
    
    2006
    
    
    2005(dollars in thousands, except per share data)Numerator:Income from continuing operations
    
    $
    164,512
    
    
    $
    145,003
    
    
    $
    126,684Loss from discontinued operations, net of income tax benefit
    
    
    
    
    
    
    (2,935
    )
    
    
    (13,350
    )Net income
    
    $
    164,512
    
    
    $
    142,068
    
    
    $
    113,334Denominator:Weighted average common shares outstanding
    
    
    50,269
    
    
    
    49,631
    
    
    
    49,008Effect of dilutive securities
    
    
    1,310
    
    
    
    1,308
    
    
    
    1,259Weighted average common shares outstanding, assuming dilution
    
    
    51,579
    
    
    
    50,939
    
    
    
    50,267Basic results per share of common stock:Income from continuing operations
    
    $
    3.27
    
    
    $
    2.92
    
    
    $
    2.58Loss from discontinued operations, net of income tax benefit
    
    
    
    
    
    
    (0.06
    )
    
    
    (0.27
    )Net income
    
    $
    3.27
    
    
    $
    2.86
    
    
    $
    2.31Diluted results per share of common stock:Income from continuing operations
    
    $
    3.19
    
    
    $
    2.85
    
    
    $
    2.52Loss from discontinued operations, net of income tax benefit
    
    
    
    
    
    
    (0.06
    )
    
    
    (0.27
    )Net income
    
    $
    3.19
    
    
    $
    2.79
    
    
    $
    2.25
 Note O  Reinsurance
   Year Ended December 31,2007
    
    2006
    
    2005(dollars in thousands)Premium income assumed
    
    $
    91,714
    
    
    $
    93,227
    
    
    $
    58,852Premium income ceded
    
    
    114,614
    
    
    
    112,020
    
    
    
    95,688Benefits, claims and interest credited ceded
    
    
    106,845
    
    
    
    111,176
    
    
    
    95,088
 -81-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 Note P  Other Operating Expenses
  Note Q  Segment Information
 Year Ended December 31,2007
    
    
    2006
    
    
    2005(dollars in thousands)Revenues:Group employee benefit products
    
    $
    1,431,293
    
    
    $
    1,273,473
    
    
    $
    1,091,875Asset accumulation products
    
    
    101,143
    
    
    
    101,290
    
    
    
    87,797Other (1)
    
    
    42,272
    
    
    
    37,686
    
    
    
    34,1081,574,708
    
    
    
    1,412,449
    
    
    
    1,213,780Net realized investment (losses) gains
    
    
    (1,897
    )
    
    
    (858
    )
    
    
    9,003Loss on redemption of junior subordinated deferrable
interest debentures underlying the Company-obligated
mandatorily redeemable capital securities issued
by unconsolidated subsidiaries
    
    
    (2,192
    )
    
    
    
    
    
    
    $
    1,570,619
    
    
    $
    1,411,591
    
    
    $
    1,222,783Operating income:Group employee benefit products
    
    $
    259,487
    
    
    $
    225,409
    
    
    $
    187,279Asset accumulation products
    
    
    31,511
    
    
    
    30,251
    
    
    
    23,565Other (1)
    
    
    (26,862
    )
    
    
    (21,378
    )
    
    
    (15,826
    )264,136
    
    
    
    234,282
    
    
    
    195,018Net realized investment (losses) gains
    
    
    (1,897
    )
    
    
    (858
    )
    
    
    9,003Loss on redemption of junior subordinated deferrable
interest debentures underlying the Company-obligated
mandatorily redeemable capital securities issued
by unconsolidated subsidiaries
    
    
    (2,192
    )
    
    
    
    
    
    
    $
    260,047
    
    
    $
    233,424
    
    
    $
    204,021Net investment income (2):Group employee benefit products
    
    $
    163,701
    
    
    $
    149,347
    
    
    $
    130,713Asset accumulation products
    
    
    98,477
    
    
    
    97,852
    
    
    
    84,577Other (1)
    
    
    8,369
    
    
    
    8,672
    
    
    
    8,279$
    270,547
    
    
    $
    255,871
    
    
    $
    223,569Amortization of cost of business acquired:Group employee benefit products
    
    $
    72,725
    
    
    $
    70,560
    
    
    $
    62,120Asset accumulation products
    
    
    8,497
    
    
    
    10,208
    
    
    
    7,161$
    81,222
    
    
    $
    80,768
    
    
    $
    69,281Segment assets (2):Group employee benefit products
    
    $
    4,068,006
    
    
    $
    3,654,195Asset accumulation products
    
    
    1,823,899
    
    
    
    1,807,638Other (1)
    
    
    202,905
    
    
    
    208,642$
    6,094,810
    
    
    $
    5,670,475
 -82-




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##### Table of Contents



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2007
 Note Q  Segment Information  (Continued)
 
 (1)
    
    Primarily consists of operations from integrated disability and absence management
services and certain corporate activities.(2)
    
    Net investment income includes income earned on the assets of the insurance companies
as well as on the assets of the holding company and is allocated among business lines in
proportion to average reserves and the capital placed at risk for each segment. Segment
assets include assets of the insurance companies as well as the assets of the holding
company, which are allocated across business lines in proportion to average reserves and
the capital placed at risk for each segment. Note R  Discontinued Operations
  -83-




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##### Table of Contents



SCHEDULE I
 DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
December 31, 2007
(Dollars in Thousands)
 AmountShown inAmortized
    
    
    Fair
    
    
    BalanceType of Investment
    
    Cost
    
    
    Value
    
    
    SheetFixed maturity securities available for sale:U.S. Government backed mortgage-backed securities
    
    $
    640,852
    
    
    $
    640,963
    
    
    $
    640,963Other mortgage-backed securities
    
    
    464,666
    
    
    
    425,519
    
    
    
    425,519U.S. Treasury and other U.S. Government guaranteed securities
    
    
    49,454
    
    
    
    52,158
    
    
    
    52,158U.S.
Government-sponsored entities
    
    
    153,138
    
    
    
    154,250
    
    
    
    154,250Obligations of U.S. states, municipalities and
political subdivisions
    
    
    905,176
    
    
    
    914,667
    
    
    
    914,667Corporate securities
    
    
    1,533,671
    
    
    
    1,504,137
    
    
    
    1,504,137Total fixed maturity securities
    
    
    3,746,957
    
    
    
    3,691,694
    
    
    
    3,691,694Equity securities:Common stocks
    
    
    56,842
    
    
    
    59,697
    
    
    
    59,697Non-redeemable preferred stocks
    
    
    16,000
    
    
    
    12,527
    
    
    
    12,527Total equity securities
    
    
    72,842
    
    
    
    72,224
    
    
    
    72,224Mortgage loans
    
    
    177,653
    
    
    
    177,653
    
    
    
    177,653Short-term investments
    
    
    286,033
    
    
    
    286,033
    
    
    
    286,033Other investments
    
    
    774,808
    
    
    
    760,264
    
    
    
    760,264Total investments
    
    $
    5,058,293
    
    
    $
    4,987,868
    
    
    $
    4,987,868
 -84-




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##### Table of Contents



SCHEDULE II
 DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
DELPHI FINANCIAL GROUP, INC. (PARENT COMPANY)
BALANCE SHEETS
(Dollars in Thousands)
 December 31,2007
    
    
    2006Assets:Short-term investments
    
    $
    12,786
    
    
    $
    10,229Other invested assets
    
    
    40,736
    
    
    
    47,200Investment in operating subsidiaries
    
    
    1,472,432
    
    
    
    1,421,079Investment in investment subsidiaries
    
    
    43,841
    
    
    
    45,760Other assets
    
    
    45,099
    
    
    
    50,048Total assets
    
    $
    1,614,894
    
    
    $
    1,574,316Liabilities:Corporate debt
    
    $
    217,750
    
    
    $
    263,750Junior subordinated debentures
    
    
    175,000
    
    
    
    Junior subordinated deferrable interest debentures underlying
company-obligated mandatorily redeemable capital
securities issued by unconsolidated subsidiaries
    
    
    20,619
    
    
    
    59,762Amounts due to subsidiaries
    
    
    6,896
    
    
    
    4,783Other liabilities
    
    
    53,239
    
    
    
    71,213473,504
    
    
    
    399,508Shareholders Equity:Class A Common Stock
    
    
    487
    
    
    
    480Class B Common Stock
    
    
    59
    
    
    
    57Additional paid-in capital
    
    
    509,742
    
    
    
    474,722Accumulated other comprehensive (loss) income
    
    
    (42,497
    )
    
    
    19,133Retained earnings
    
    
    828,116
    
    
    
    763,386Treasury stock
    
    
    (154,517
    )
    
    
    (82,970
    )1,141,390
    
    
    
    1,174,808Total liabilities and shareholders equity
    
    $
    1,614,894
    
    
    $
    1,574,316
  -85-




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##### Table of Contents



SCHEDULE II (Continued)
 DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)
DELPHI FINANCIAL GROUP, INC. (PARENT COMPANY)
STATEMENTS OF INCOME
(Dollars in Thousands)
 Year Ended December 31,2007
    
    
    2006
    
    
    2005Revenue:Equity in undistributed earnings of subsidiaries
    
    $
    277,613
    
    
    $
    244,983
    
    
    $
    192,650Dividends from operating subsidiaries
    
    
    3,600
    
    
    
    3,600
    
    
    
    1,600Other income
    
    
    4,373
    
    
    
    5,042
    
    
    
    8,524Realized investment losses
    
    
    
    
    
    
    
    
    
    
    (1,193
    )Loss on redemption of junior subordinated deferrable
interest debentures underlying company-obligated
mandatorily redeemable capital securities issued
by unconsolidated subsidiaries
    
    
    (2,192
    )
    
    
    
    
    
    
    283,394
    
    
    
    253,625
    
    
    
    201,581Expenses:Operating expenses
    
    
    21,460
    
    
    
    22,447
    
    
    
    16,446Interest expense
    
    
    29,375
    
    
    
    27,652
    
    
    
    22,11450,835
    
    
    
    50,099
    
    
    
    38,560Income before income tax expense
    
    
    232,559
    
    
    
    203,526
    
    
    
    163,021Income tax expense
    
    
    68,047
    
    
    
    61,458
    
    
    
    49,687Net income
    
    $
    164,512
    
    
    $
    142,068
    
    
    $
    113,334
  -86-




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##### Table of Contents



SCHEDULE II (Continued)
 DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)
DELPHI FINANCIAL GROUP, INC. (PARENT COMPANY)
STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
 Year Ended December 31,2007
    
    
    2006
    
    
    2005Operating activities:Net income
    
    $
    164,512
    
    
    $
    142,068
    
    
    $
    113,334Adjustments to reconcile net income to net cash
used by operating activities:Equity in undistributed earnings of subsidiaries
    
    
    (193,797
    )
    
    
    (169,015
    )
    
    
    (132,593
    )Change in other assets and other liabilities
    
    
    5,660
    
    
    
    14,693
    
    
    
    3,986Change in current and deferred income taxes
    
    
    (9,566
    )
    
    
    (12,209
    )
    
    
    (11,833
    )Amortization, principally of investments and debt
issuance costs
    
    
    772
    
    
    
    1,048
    
    
    
    1,249Net realized gains on investments
    
    
    
    
    
    
    
    
    
    
    1,193Change in amounts due from/to subsidiaries
    
    
    2,113
    
    
    
    6,706
    
    
    
    2,043Net cash used by operating activities
    
    
    (30,306
    )
    
    
    (16,709
    )
    
    
    (22,621
    )Investing activities:Purchases of investments and loans made
    
    
    (2,709
    )
    
    
    (3,496
    )
    
    
    (26,453
    )Sales of investments and receipts from repayment of loans
    
    
    5,636
    
    
    
    2,073
    
    
    
    2,362Net change in short-term investments
    
    
    (2,557
    )
    
    
    (6,539
    )
    
    
    486Sales (purchases) of investments in subsidiaries
    
    
    1,011
    
    
    
    1,436
    
    
    
    (37,000
    )Net cash provided (used) by investing activities
    
    
    1,381
    
    
    
    (6,526
    )
    
    
    (60,605
    )Financing activities:Borrowings under revolving credit facility
    
    
    112,000
    
    
    
    31,000
    
    
    
    88,000Principal payments under revolving credit facility
    
    
    (158,000
    )
    
    
    (2,000
    )
    
    
    (11,000
    )Proceeds from the issuance of 2007 Junior Debentures
    
    
    172,309
    
    
    
    
    
    
    
    Redemption of Junior Debentures
    
    
    (37,728
    )
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    (62,417
    )
    
    
    (16,577
    )
    
    
    (7,079
    )Other financing activities
    
    
    2,761
    
    
    
    10,542
    
    
    
    13,342Net cash provided by financing activities
    
    
    28,925
    
    
    
    22,965
    
    
    
    83,263(Decrease) increase in cash
    
    
    
    
    
    
    (270
    )
    
    
    37Cash at beginning of year
    
    
    
    
    
    
    270
    
    
    
    233Cash at end of year
    
    $
    
    
    
    $
    
    
    
    $
    270
  -87-




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##### Table of Contents



SCHEDULE II (Continued)
 DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)
DELPHI FINANCIAL GROUP, INC. (PARENT COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
   -88-




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##### Table of Contents



SCHEDULE III
 DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
(Dollars in Thousands)
 Future PolicyBenefits andCost of
    
    
    Unpaid Claim
    
    
    
    
    
    
    PolicyholderBusiness
    
    
    and Claim
    
    
    Unearned
    
    
    AccountAcquired
    
    
    Expenses
    
    
    Premiums
    
    
    Balances2007Group employee benefits products
    
    $
    110,985
    
    
    $
    2,189,961
    
    
    $
    118,311
    
    
    $
    Asset accumulation products
    
    
    63,445
    
    
    
    92,510
    
    
    
    
    
    
    
    1,053,221Other
    
    
    
    
    
    
    70,904
    
    
    
    
    
    
    
    29,900Total
    
    $
    174,430
    
    
    $
    2,353,375
    
    
    $
    118,311
    
    
    $
    1,083,1212006Group employee benefits products
    
    $
    209,430
    
    
    $
    1,945,215
    
    
    $
    124,426
    
    
    $
    Asset accumulation products
    
    
    58,490
    
    
    
    89,500
    
    
    
    
    
    
    
    1,089,051Other
    
    
    
    
    
    
    72,929
    
    
    
    
    
    
    
    30,167Total
    
    $
    267,920
    
    
    $
    2,107,644
    
    
    $
    124,426
    
    
    $
    1,119,2182005Group employee benefits products
    
    $
    187,541
    
    
    $
    1,702,950
    
    
    $
    109,289
    
    
    $
    Asset accumulation products
    
    
    60,597
    
    
    
    84,534
    
    
    
    
    
    
    
    1,008,787Other
    
    
    
    
    
    
    75,388
    
    
    
    
    
    
    
    30,823Total
    
    $
    248,138
    
    
    $
    1,862,872
    
    
    $
    109,289
    
    
    $
    1,039,610
 Benefits,Claims and
    
    
    AmortizationPremium
    
    
    Net
    
    
    Interest
    
    
    of Cost of
    
    
    Otherand Fee
    
    
    Investment
    
    
    Credited to
    
    
    Business
    
    
    OperatingIncome (1)
    
    
    Income (2)
    
    
    Policyholders
    
    
    Acquired
    
    
    Expenses (3)2007Group employee benefits products
    
    $
    1,267,592
    
    
    $
    163,701
    
    
    $
    890,918
    
    
    $
    72,725
    
    
    $
    208,163Asset accumulation products
    
    
    2,666
    
    
    
    98,477
    
    
    
    52,814
    
    
    
    8,497
    
    
    
    8,321Other
    
    
    33,903
    
    
    
    8,369
    
    
    
    1,169
    
    
    
    
    
    
    
    67,965Total
    
    $
    1,304,161
    
    
    $
    270,547
    
    
    $
    944,901
    
    
    $
    81,222
    
    
    $
    284,4492006Group employee benefits products
    
    $
    1,124,126
    
    
    $
    149,347
    
    
    $
    793,303
    
    
    $
    70,560
    
    
    $
    184,201Asset accumulation products
    
    
    3,438
    
    
    
    97,852
    
    
    
    53,349
    
    
    
    10,208
    
    
    
    7,482Other
    
    
    29,014
    
    
    
    8,672
    
    
    
    834
    
    
    
    
    
    
    
    58,230Total
    
    $
    1,156,578
    
    
    $
    255,871
    
    
    $
    847,486
    
    
    $
    80,768
    
    
    $
    249,9132005Group employee benefits products
    
    $
    961,162
    
    
    $
    130,713
    
    
    $
    674,118
    
    
    $
    62,120
    
    
    $
    168,358Asset accumulation products
    
    
    3,220
    
    
    
    84,577
    
    
    
    49,856
    
    
    
    7,161
    
    
    
    7,215Other
    
    
    25,829
    
    
    
    8,279
    
    
    
    1,233
    
    
    
    
    
    
    
    48,701Total
    
    $
    990,211
    
    
    $
    223,569
    
    
    $
    725,207
    
    
    $
    69,281
    
    
    $
    224,274
 
 (1)
    
    Net written premiums for casualty insurance products totaled $304.5 million, $312.2 million
and $257.7 million for the years ended December 31, 2007, 2006 and 2005, respectively.(2)
    
    Net investment income includes income earned on the assets of the insurance companies as
well as on the assets of the holding company and is allocated among business lines in
proportion to average reserves and the capital placed at risk for each segment.(3)
    
    Other operating expenses include commissions. 
 -89-




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##### Table of Contents



SCHEDULE IV
 DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
REINSURANCE
(Dollars in Thousands)
 PercentageCeded to
    
    
    Assumed
    
    
    
    
    
    
    of AmountGross
    
    
    Other
    
    
    from Other
    
    
    Net
    
    
    AssumedAmount
    
    
    Companies
    
    
    Companies
    
    
    Amount
    
    
    to NetLife insurance in force as of
December 31, 2007
    
    $
    159,363,539
    
    
    $
    17,358,631
    
    
    $
    27,114
    
    
    $
    142,032,022
    
    
    
    
    %Year ended December 31, 2007:Premium and fee income:Life insurance and annuity
    
    $
    402,457
    
    
    $
    32,811
    
    
    $
    499
    
    
    $
    370,145
    
    
    
    
    %Accident and health insurance
    
    
    593,911
    
    
    
    51,442
    
    
    
    51,524
    
    
    
    593,993
    
    
    
    9
    %Casualty insurance
    
    
    300,669
    
    
    
    29,099
    
    
    
    33,343
    
    
    
    304,913
    
    
    
    11
    %Other
    
    
    35,115
    
    
    
    
    
    
    
    
    
    
    
    35,115Total premium and fee income
    
    $
    1,332,152
    
    
    $
    113,352
    
    
    $
    85,366
    
    
    $
    1,304,166Life insurance in force as of
December 31, 2006
    
    $
    145,990,536
    
    
    $
    21,400,901
    
    
    $
    28,617
    
    
    $
    124,618,252
    
    
    
    
    %Year ended December 31, 2006:Premium and fee income:Life insurance and annuity
    
    $
    359,708
    
    
    $
    37,629
    
    
    $
    1,126
    
    
    $
    323,205
    
    
    
    
    %Accident and health insurance
    
    
    498,199
    
    
    
    44,135
    
    
    
    52,536
    
    
    
    506,600
    
    
    
    10
    %Casualty insurance
    
    
    291,852
    
    
    
    30,256
    
    
    
    39,570
    
    
    
    301,166
    
    
    
    13
    %Other
    
    
    25,607
    
    
    
    
    
    
    
    
    
    
    
    25,607Total premium and fee income
    
    $
    1,175,366
    
    
    $
    112,020
    
    
    $
    93,232
    
    
    $
    1,156,578Life insurance in force as of
December 31, 2005
    
    $
    132,847,822
    
    
    $
    20,236,656
    
    
    $
    30,495
    
    
    $
    112,641,661
    
    
    
    
    %Year ended December 31, 2005:Premium and fee income:Life insurance and annuity
    
    $
    319,889
    
    
    $
    32,562
    
    
    $
    511
    
    
    $
    287,838
    
    
    
    
    %Accident and health insurance
    
    
    433,699
    
    
    
    38,560
    
    
    
    39,565
    
    
    
    434,704
    
    
    
    9
    %Casualty insurance
    
    
    250,319
    
    
    
    24,566
    
    
    
    18,790
    
    
    
    244,543
    
    
    
    8
    %Other
    
    
    23,126
    
    
    
    
    
    
    
    
    
    
    
    23,126Total premium and fee income
    
    $
    1,027,033
    
    
    $
    95,688
    
    
    $
    58,866
    
    
    $
    990,211
 -90-




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##### Table of Contents



SCHEDULE VI
 DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION CONCERNING
PROPERTY-CASUALTY INSURANCE OPERATIONS (1)  (Dollars in Thousands)
 December 31,2007
    
    2006Deferred policy acquisition costs
    
    $
    13,169
    
    
    $
    13,816Reserves for unpaid claims and claim expenses
    
    
    963,974
    
    
    
    857,662Discount, if any, deducted from above (2)
    
    
    490,808
    
    
    
    423,604Unearned premiums
    
    
    110,719
    
    
    
    109,760
 Year Ended December 31,2007
    
    2006
    
    2005Earned premiums
    
    $
    305,305
    
    
    $
    302,373
    
    
    $
    261,903Net investment income
    
    
    84,712
    
    
    
    76,602
    
    
    
    65,065Claims and claim expenses incurred related to:Current year
    
    
    155,052
    
    
    
    136,134
    
    
    
    141,785Prior years (3)
    
    
    37,443
    
    
    
    70,060
    
    
    
    56,698Amortization of deferred policy acquisition costs
    
    
    32,958
    
    
    
    29,896
    
    
    
    26,601Paid claims and claim adjustment expenses
    
    
    93,914
    
    
    
    97,283
    
    
    
    96,700Net premiums written
    
    
    304,845
    
    
    
    312,129
    
    
    
    273,219
 
 (1)
    
    All years include the results from the Companys discontinued non-core property
catastrophe reinsurance business.(2)
    
    Based on discount rates ranging from 3.7% to 7.5%.(3)
    
    In 2007, 2006 and 2005, the change in the provision for claims and claim expenses incurred in
prior years reflects the accretion of discounted reserves and net unfavorable claims
development. The Companys insurance policies do not provide for the retrospective adjustment
of premiums based on claim experience. -91-