UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the Fiscal Year Ended December 31, 2008
 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 
incorporation or organization)
    
    (Registrants telephone number,
including area code)
    
    (I.R.S. Employer Identification
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
    
    Name of each exchange on which registeredClass A Common Stock, $.01 par value
    
    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, 2008
 TABLE OF CONTENTS
 PagePART I.Item 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    20Item 1B. Unresolved Staff Comments
    
    
    24Item 2. Properties
    
    
    24Item 3. Legal Proceedings
    
    
    25Item 4. Submission of Matters to a Vote of Security Holders
    
    
    26PART II.Item 5. Market for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
    
    
    27Item 6. Selected Financial Data
    
    
    29Item 7. Managements Discussion and Analysis of Financial Condition
and Results of Operation
    
    
    31Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    46Item 8. Financial Statements and Supplementary Data
    
    
    46Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure
    
    
    46Item 9A. Controls and Procedures
    
    
    46Item 9B. Other Information
    
    
    49PART III.Item 10. Directors, Executive Officers and Corporate Governance
    
    
    49Item 11. Executive Compensation
    
    
    49Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
    
    
    49Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    49Item 14. Principal Accountant Fees and Services
    
    
    49PART IV.Item 15. Exhibits, Financial Statement Schedules
    
    
    50
  -2-




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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
   -4-




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Year Ended December 31,2008
    
    
    2007
    
    
    2006(dollars in thousands)Insurance premiums:Core Products:Disability income
    
    $
    572,630
    
    
    
    43.7
    %
    
    $
    527,500
    
    
    
    43.0
    %
    
    $
    458,130
    
    
    
    42.4
    %Life
    
    
    402,928
    
    
    
    30.8
    
    
    
    364,771
    
    
    
    29.7
    
    
    
    316,360
    
    
    
    29.2Excess workers compensation
    
    
    264,244
    
    
    
    20.2
    
    
    
    276,252
    
    
    
    22.5
    
    
    
    260,031
    
    
    
    24.0Travel accident, dental and other
    
    
    70,205
    
    
    
    5.3
    
    
    
    59,411
    
    
    
    4.8
    
    
    
    47,150
    
    
    
    4.4$
    1,310,007
    
    
    
    100.0
    %
    
    $
    1,227,934
    
    
    
    100.0
    %
    
    $
    1,081,671
    
    
    
    100.0
    %Non-Core Products:Loss portfolio transfers
    
    
    3,304
    
    
    
    
    
    
    
    14,697
    
    
    
    
    
    
    
    20,911Other
    
    
    29,712
    
    
    
    
    
    
    
    24,961
    
    
    
    
    
    
    
    21,54433,016
    
    
    
    
    
    
    
    39,658
    
    
    
    
    
    
    
    42,455Total insurance premiums
    
    $
    1,343,023
    
    
    
    
    
    
    $
    1,267,592
    
    
    
    
    
    
    $
    1,124,126Sales (new annualized gross premiums):Core Products:Disability income
    
    $
    121,507
    
    
    
    42.1
    %
    
    $
    131,818
    
    
    
    45.0
    %
    
    $
    114,622
    
    
    
    40.9
    %Life
    
    
    94,681
    
    
    
    32.8
    
    
    
    87,210
    
    
    
    29.8
    
    
    
    88,578
    
    
    
    31.6Excess workers compensation
    
    
    25,832
    
    
    
    8.9
    
    
    
    30,092
    
    
    
    10.3
    
    
    
    57,217
    
    
    
    20.4Travel accident, dental and other
    
    
    46,945
    
    
    
    16.2
    
    
    
    43,662
    
    
    
    14.9
    
    
    
    19,699
    
    
    
    7.1$
    288,965
    
    
    
    100.0
    %
    
    $
    292,782
    
    
    
    100.0
    %
    
    $
    280,116
    
    
    
    100.0
    %Non-Core Products:Loss portfolio transfers
    
    
    3,305
    
    
    
    
    
    
    
    3,800
    
    
    
    
    
    
    
    19,758Other
    
    
    17,607
    
    
    
    
    
    
    
    14,887
    
    
    
    
    
    
    
    11,56120,912
    
    
    
    
    
    
    
    18,687
    
    
    
    
    
    
    
    31,319Total sales
    
    $
    309,877
    
    
    
    
    
    
    $
    311,469
    
    
    
    
    
    
    $
    311,435
   Year Ended December 31,2008
    
    2007
    
    2006Loss ratio
    
    
    69.5
    %
    
    
    70.3
    %
    
    
    70.6
    %Expense ratio
    
    
    22.7
    
    
    
    22.1
    
    
    
    22.6Combined ratio
    
    
    92.2
    %
    
    
    92.4
    %
    
    
    93.2
    %
  -5-




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-6-




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-7-




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Asset Accumulation Products
   -8-




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Year Ended December 31,2008
    
    2007
    
    2006(dollars in thousands)Asset accumulation product deposits (sales):Fixed annuities
    
    $
    245,117
    
    
    $
    107,145
    
    
    $
    90,741Funding agreements
    
    
    
    
    
    
    
    
    
    
    100,000Funds under management (at period end)
    
    
    1,327,502
    
    
    
    1,053,221
    
    
    
    1,089,051
    -9-




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Other Products and Services
   Underwriting Procedures
   -10-




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Investments
    Year Ended December 31,2008
    
    2007
    
    2006(dollars in thousands)Average invested assets (1)
    
    $
    4,728,126
    
    
    $
    4,555,225
    
    
    $
    4,038,658Net investment income (2)
    
    
    134,850
    
    
    
    270,547
    
    
    
    255,871Tax equivalent weighted average annual yield (3)
    
    
    3.2
    %
    
    
    6.2
    %
    
    
    6.6
    %
 
 (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, along with
the changes in value, positive or negative, of the Companys investments in investment funds
organized as limited partnerships and limited liability companies, trading account securities
and hybrid financial instruments.(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. -11-




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Reinsurance
     -12-




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Life, Annuity, Disability and Accident Reserves
   -13-




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Property and Casualty Insurance Reserves
    Year Ended December 31,2008
    
    
    2007
    
    
    2006(dollars in thousands)Unpaid claims and claim expenses, net of reinsurance,
beginning of period
    
    $
    850,956
    
    
    $
    752,375
    
    
    $
    643,465Add provision for claims and claim expenses incurred, net
of reinsurance, occurring during:Current year
    
    
    152,069
    
    
    
    155,052
    
    
    
    136,134Prior years
    
    
    27,111
    
    
    
    37,443
    
    
    
    70,060Incurred claims and claim expenses, net of reinsurance,
during the current year
    
    
    179,180
    
    
    
    192,495
    
    
    
    206,194Deduct claims and claim expense payments, net of reinsurance,
occurring during:Current year
    
    
    1,625
    
    
    
    2,950
    
    
    
    4,524Prior years
    
    
    77,169
    
    
    
    90,964
    
    
    
    92,760Total paid
    
    
    78,794
    
    
    
    93,914
    
    
    
    97,284Unpaid claims and claim expenses, net of reinsurance, end of period
    
    
    951,342
    
    
    
    850,956
    
    
    
    752,375Reinsurance receivables, end of period
    
    
    109,704
    
    
    
    113,018
    
    
    
    105,287Unpaid claims and claim expenses, gross of reinsurance,
end of period (1)
    
    $
    1,061,046
    
    
    $
    963,974
    
    
    $
    857,662
 
 (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.  -14-




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December 31,1998
    
    1999
    
    2000
    
    2001
    
    2002
    
    2003
    
    2004
    
    2005
    
    2006
    
    2007
    
    2008(dollars in thousands)Reserve for unpaid
claims and claim
expenses, net of
reinsurance
    
    $
    422,159
    
    
    $
    434,512
    
    
    $
    444,061
    
    
    $
    638,189
    
    
    $
    680,835
    
    
    $
    744,760
    
    
    $
    853,515
    
    
    $
    1,011,699
    
    
    $
    1,175,979
    
    
    $
    1,341,764
    
    
    $
    1,544,282Cumulative amount of
liability paid:One year later
    
    
    40,815
    
    
    
    40,660
    
    
    
    (29,990
    )
    
    
    61,954
    
    
    
    57,235
    
    
    
    64,170
    
    
    
    81,847
    
    
    
    92,760
    
    
    
    90,963
    
    
    
    77,170Two years later
    
    
    74,571
    
    
    
    4,020
    
    
    
    26,398
    
    
    
    112,639
    
    
    
    118,685
    
    
    
    134,981
    
    
    
    149,983
    
    
    
    175,852
    
    
    
    163,149Three years later
    
    
    33,429
    
    
    
    54,846
    
    
    
    71,938
    
    
    
    169,890
    
    
    
    187,303
    
    
    
    198,133
    
    
    
    220,440
    
    
    
    241,235Four years later
    
    
    78,981
    
    
    
    94,899
    
    
    
    123,330
    
    
    
    231,870
    
    
    
    247,487
    
    
    
    266,834
    
    
    
    283,820Five years later
    
    
    114,295
    
    
    
    139,949
    
    
    
    178,852
    
    
    
    283,783
    
    
    
    311,350
    
    
    
    323,461Six years later
    
    
    154,101
    
    
    
    187,952
    
    
    
    221,817
    
    
    
    341,035
    
    
    
    361,095Seven years later
    
    
    196,599
    
    
    
    223,920
    
    
    
    270,792
    
    
    
    382,757Eight years later
    
    
    230,025
    
    
    
    266,415
    
    
    
    304,964Nine years later
    
    
    269,892
    
    
    
    298,579Ten years later
    
    
    299,284Liability reestimated as of:One year later
    
    
    410,875
    
    
    
    424,187
    
    
    
    442,624
    
    
    
    636,123
    
    
    
    678,535
    
    
    
    766,886
    
    
    
    908,162
    
    
    
    1,072,990
    
    
    
    1,198,719
    
    
    
    1,366,919Two years later
    
    
    404,559
    
    
    
    420,419
    
    
    
    442,807
    
    
    
    634,576
    
    
    
    714,303
    
    
    
    838,458
    
    
    
    1,007,198
    
    
    
    1,122,567
    
    
    
    1,264,493Three years later
    
    
    401,475
    
    
    
    417,868
    
    
    
    446,948
    
    
    
    678,009
    
    
    
    790,941
    
    
    
    939,254
    
    
    
    1,057,913
    
    
    
    1,192,300Four years later
    
    
    396,403
    
    
    
    423,425
    
    
    
    502,140
    
    
    
    754,717
    
    
    
    881,073
    
    
    
    991,103
    
    
    
    1,120,868Five years later
    
    
    399,311
    
    
    
    466,975
    
    
    
    568,993
    
    
    
    832,968
    
    
    
    933,259
    
    
    
    1,036,718Six years later
    
    
    437,913
    
    
    
    522,592
    
    
    
    636,007
    
    
    
    878,948
    
    
    
    975,524Seven years later
    
    
    488,849
    
    
    
    582,364
    
    
    
    670,762
    
    
    
    914,362Eight years later
    
    
    546,607
    
    
    
    611,869
    
    
    
    696,812Nine years later
    
    
    576,623
    
    
    
    633,617Ten years later
    
    
    590,437Cumulative
deficiency(1)
    
    $
    (168,278
    )
    
    $
    (199,105
    )
    
    $
    (252,751
    )
    
    $
    (276,173
    )
    
    $
    (294,689
    )
    
    $
    (291,958
    )
    
    $
    (267,353
    )
    
    $
    (180,601
    )
    
    $
    (88,514
    )
    
    $
    (25,155
    )
 
 (1)
    
    Full years 2000 through 2008 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.  -15-




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December 31,1998
    
    
    1999
    
    
    2000
    
    
    2001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008(dollars in thousands)Reserve for unpaid claims and
claim expenses before
discount:Net of reinsurance
    
    $
    422,159
    
    
    $
    434,512
    
    
    $
    444,061
    
    
    $
    638,189
    
    
    $
    680,835
    
    
    $
    744,760
    
    
    $
    853,515
    
    
    $
    1,011,699
    
    
    $
    1,175,979
    
    
    $
    1,341,764
    
    
    $
    1,544,282Add reinsurance
recoverable
    
    
    164,825
    
    
    
    179,180
    
    
    
    206,704
    
    
    
    92,828
    
    
    
    95,709
    
    
    
    93,030
    
    
    
    104,266
    
    
    
    103,014
    
    
    
    105,287
    
    
    
    113,018
    
    
    
    109,704Deduct discount for
time value of
money
    
    
    180,770
    
    
    
    192,220
    
    
    
    203,710
    
    
    
    224,241
    
    
    
    241,688
    
    
    
    265,100
    
    
    
    311,833
    
    
    
    368,234
    
    
    
    423,604
    
    
    
    490,808
    
    
    
    592,940Unpaid claims and claim
expenses as reported
on balance sheets
    
    
    406,214
    
    
    
    421,472
    
    
    
    447,055
    
    
    
    506,776
    
    
    
    534,856
    
    
    
    572,690
    
    
    
    645,948
    
    
    
    746,479
    
    
    
    857,662
    
    
    
    963,974
    
    
    
    1,061,046Reestimated unpaid claims
and claim expenses, gross
of reinsurance, net of
discount, as of December
31, 2008
    
    
    703,760
    
    
    
    762,849
    
    
    
    845,521
    
    
    
    924,415
    
    
    
    947,331
    
    
    
    945,188
    
    
    
    966,243
    
    
    
    976,221
    
    
    
    980,538
    
    
    
    997,632Discounted cumulative
deficiency, gross of
reinsurance
    
    
    (297,546
    )
    
    
    (341,377
    )
    
    
    (398,466
    )
    
    
    (417,639
    )
    
    
    (412,475
    )
    
    
    (372,498
    )
    
    
    (320,295
    )
    
    
    (229,742
    )
    
    
    (122,876
    )
    
    
    (33,658
    )Add accretion of
discount and change
in reinsurance
recoverable
    
    
    129,268
    
    
    
    142,272
    
    
    
    145,715
    
    
    
    141,466
    
    
    
    117,786
    
    
    
    80,540
    
    
    
    52,942
    
    
    
    49,141
    
    
    
    34,362
    
    
    
    8,503Cumulative deficiency,
before discount, net
of reinsurance (1)
    
    $
    (168,278
    )
    
    $
    (199,105
    )
    
    $
    (252,751
    )
    
    $
    (276,173
    )
    
    $
    (294,689
    )
    
    $
    (291,958
    )
    
    $
    (267,353
    )
    
    $
    (180,601
    )
    
    $
    (88,514
    )
    
    $
    (25,155
    )
 
 (1)
    
    Full years 2000 through 2008 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.  -16-




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Competition
   Regulation
     -17-




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Employees
  Other Subsidiaries
  Other Transactions
    -18-




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-19-




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Item 1A. Risk Factors.
  The current financial crisis has resulted in highly adverse conditions in the capital markets.
   The current recession in the United States economy could adversely affect the Companys
ability to achieve premium growth, as well as its claims experience.
  Reserves established for future policy benefits and claims may prove inadequate.
  -20-




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The Company may be adversely affected by declines in the market values of its investments.
    The Companys investment strategy exposes the Company to default and other risks.
   -21-




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The Company is exposed to interest rate risks.
  The Companys ability to reduce its exposure to risks depends on the availability and cost of
reinsurance.
   -22-




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##### 



The insurance business is a heavily regulated industry.
    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.
  -23-




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Robert Rosenkranz has the power to vote all of Delphis Class B Common Stock, and his
interests may differ from those of other Delphi securityholders.
  
 Item 1B. Unresolved Staff Comments.
  
 Item 2. Properties
 th th
 -24-




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Item 3. Legal Proceedings
   -25-




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Item 4. Submission of Matters to a Vote of Security Holders
  Executive Officers of the Company
  Name
    
    Age
    
    PositionRobert Rosenkranz
    
    
    66
    
    
    Director of the Company; Chairman of the Board and Chief Executive Officer of the Company;
Chairman of the Board of RSLICDonald A. Sherman
    
    
    58
    
    
    Director and President and Chief Operating Officer of the CompanyRobert M. Smith, Jr.
    
    
    57
    
    
    Director and Executive Vice President of the CompanyChad W. Coulter
    
    
    46
    
    
    Senior Vice President, Secretary and General Counsel of the Company; Vice President, General Counsel and Assistant Secretary of RSLICThomas W. Burghart
    
    
    50
    
    
    Senior Vice President and Treasurer of the Company and Senior Vice President and Treasurer of
RSLICLawrence E. Daurelle
    
    
    57
    
    
    Director of the Company and President and Chief Executive Officer of RSLIC
       -26-




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PART II
 
 Item 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities.
   High
    
    Low
    
    Dividends2007: 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
    
    
    
    0.092008: First Quarter
    
    $
    35.15
    
    
    $
    25.92
    
    
    $
    0.09Second Quarter
    
    
    30.95
    
    
    
    22.26
    
    
    
    0.10Third Quarter
    
    
    38.50
    
    
    
    20.17
    
    
    
    0.10Fourth Quarter
    
    
    31.00
    
    
    
    7.58
    
    
    
    0.10
   -27-




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Performance Graph
  
 2003
    
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008Delphi
    
    
    
    100
    
    
    
    
    129
    
    
    
    
    130
    
    
    
    
    173
    
    
    
    
    152
    
    
    
    
    81S&P 500 Index
    
    
    
    100
    
    
    
    
    111
    
    
    
    
    116
    
    
    
    
    134
    
    
    
    
    142
    
    
    
    
    59S&P Insurance Index
    
    
    
    100
    
    
    
    
    107
    
    
    
    
    132
    
    
    
    
    136
    
    
    
    
    127
    
    
    
    
    80
 -28-




---



##### 



Item 6. Selected Financial Data
  Year Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(dollars and shares in thousands, except per share data)Income Statement Data(1):Insurance premiums and fee income:Core group employee benefit products
    
    $
    1,310,007
    
    
    $
    1,227,934
    
    
    $
    1,081,671
    
    
    $
    936,244
    
    
    $
    784,990Non-core group employee benefit
products(2)
    
    
    33,016
    
    
    
    39,658
    
    
    
    42,455
    
    
    
    24,918
    
    
    
    16,066Asset accumulation products
    
    
    1,918
    
    
    
    2,666
    
    
    
    3,438
    
    
    
    3,220
    
    
    
    3,335Other
    
    
    39,949
    
    
    
    33,903
    
    
    
    29,014
    
    
    
    25,829
    
    
    
    23,6861,384,890
    
    
    
    1,304,161
    
    
    
    1,156,578
    
    
    
    990,211
    
    
    
    828,077Net investment income(3)
    
    
    134,850
    
    
    
    270,547
    
    
    
    255,871
    
    
    
    223,569
    
    
    
    202,444Net realized investment (losses)gains(4)
    
    
    (88,177
    )
    
    
    (1,897
    )
    
    
    (858
    )
    
    
    9,003
    
    
    
    15,460Loss on redemption of junior subordinated
deferrable interest debentures (5)
    
    
    (598
    )
    
    
    (2,192
    )
    
    
    
    
    
    
    
    
    
    
    Total revenue
    
    
    1,430,965
    
    
    
    1,570,619
    
    
    
    1,411,591
    
    
    
    1,222,783
    
    
    
    1,045,981Income from continuing operations (6)
    
    
    36,683
    
    
    
    164,512
    
    
    
    145,003
    
    
    
    126,684
    
    
    
    121,400Net income (6)
    
    
    36,683
    
    
    
    164,512
    
    
    
    142,068
    
    
    
    113,334
    
    
    
    123,543Basic Results Per Share(1) (6):Income from continuing operations
    
    $
    0.76
    
    
    $
    3.27
    
    
    $
    2.92
    
    
    $
    2.58
    
    
    $
    2.53Net income
    
    
    0.76
    
    
    
    3.27
    
    
    
    2.86
    
    
    
    2.31
    
    
    
    2.58Weighted average shares outstanding
    
    
    48,278
    
    
    
    50,269
    
    
    
    49,631
    
    
    
    49,008
    
    
    
    47,928Diluted Results Per Share(1) (6):Income from continuing operations
    
    $
    0.75
    
    
    $
    3.19
    
    
    $
    2.85
    
    
    $
    2.52
    
    
    $
    2.46Net income
    
    
    0.75
    
    
    
    3.19
    
    
    
    2.79
    
    
    
    2.25
    
    
    
    2.50Weighted average shares outstanding
    
    
    48,963
    
    
    
    51,579
    
    
    
    50,939
    
    
    
    50,267
    
    
    
    49,412Other Data:Cash dividends paid per share(7)
    
    $
    0.39
    
    
    $
    0.35
    
    
    $
    0.31
    
    
    $
    0.24
    
    
    $
    0.20Diluted book value per share(8)
    
    
    18.41
    
    
    
    23.57
    
    
    
    23.70
    
    
    
    20.97
    
    
    
    19.57
 December 31,2008
    
    2007
    
    2006
    
    2005
    
    2004(dollars in thousands)Balance Sheet Data:Total investments
    
    $
    4,654,923
    
    
    $
    4,987,868
    
    
    $
    4,483,380
    
    
    $
    3,912,604
    
    
    $
    3,541,076Total assets
    
    
    5,953,873
    
    
    
    6,094,810
    
    
    
    5,670,475
    
    
    
    5,276,170
    
    
    
    4,829,467Corporate debt
    
    
    350,750
    
    
    
    217,750
    
    
    
    263,750
    
    
    
    234,750
    
    
    
    157,750Junior subordinated debentures (9)
    
    
    175,000
    
    
    
    175,000
    
    
    
    
    
    
    
    
    
    
    
    Junior subordinated deferrable interest
debentures underlying company-obligated
mandatorily redeemable capital securities
issued by unconsolidated subsidiaries
    
    
    
    
    
    
    20,619
    
    
    
    59,762
    
    
    
    59,762
    
    
    
    59,762Shareholders equity (10)
    
    
    820,579
    
    
    
    1,141,390
    
    
    
    1,174,808
    
    
    
    1,033,039
    
    
    
    939,848Corporate debt to total capitalization ratio (11)
    
    
    26.1
    %
    
    
    14.0
    %
    
    
    17.6
    %
    
    
    17.7
    %
    
    
    13.6
    %
 
 (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. -29-




---



##### 



Year Ended December 31,2008
    
    2007
    
    2006
    
    2005
    
    2004(dollars in thousands, except per share data)(Loss) income from discontinued operations, net of
income tax (benefit) expense
    
    $
    
    
    
    $
    
    
    
    $
    (2,935
    )
    
    $
    (13,350
    )
    
    $
    2,143Basic per share amount
    
    
    
    
    
    
    
    
    
    
    (0.06
    )
    
    
    (0.27
    )
    
    
    0.05Diluted per share amount
    
    
    
    
    
    
    
    
    
    
    (0.06
    )
    
    
    (0.27
    )
    
    
    0.04
 
 (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 $3.3 million, $14.7 million, $20.9 million, $10.4 million and $5.3
million in 2008, 2007, 2006, 2005 and 2004, respectively. See Group Employee Benefit
Products and Reinsurance in Part I, Item 1- Business.(3)
    
    Extraordinary volatility in the investment markets in 2008 resulted in a significant decrease
in net investment income. See Introduction in Part I, Item 7  Managements Discussion and
Analysis of Financial Condition and Results of Operations.(4)
    
    In 2008, 2007, 2006, 2005 and 2004, the Company recognized pre-tax losses of $78.6 million,
$4.1 million, $4.2 million, $4.2 million and $3.9 million, respectively, due to the other than
temporary declines in the market values of certain securities, which are reported as net
realized investment losses.(5)
    
    In the first quarter of 2007, the Company redeemed $36.0 million of junior subordinated
deferrable interest debentures and recognized a pre-tax loss of $2.2 million in connection
with this redemption. During the third quarter of 2008, the Company redeemed $20.6 million of
floating rate junior subordinated deferrable interest debentures and recognized a pre-tax loss
of $0.6 million in connection with this redemption.(6)
    
    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 31,2008
    
    2007
    
    2006
    
    2005
    
    2004(dollars in thousands, except per share data)Net realized investment (losses) gains, net of income tax
(benefit) expense
    
    $
    (57,315
    )
    
    $
    (1,233
    )
    
    $
    (558
    )
    
    $
    5,852
    
    
    $
    10,049Basic per share amount
    
    
    (1.19
    )
    
    
    (0.03
    )
    
    
    (0.01
    )
    
    
    0.11
    
    
    
    0.21Diluted per share amount
    
    
    (1.17
    )
    
    
    (0.02
    )
    
    
    (0.01
    )
    
    
    0.12
    
    
    
    0.21Loss on redemption of junior subordinated deferrable
interest debentures, net of income tax benefit
    
    $
    (389
    )
    
    $
    (1,425
    )
    
    $
    
    
    
    $
    
    
    
    $
    Basic per share amount
    
    
    (0.01
    )
    
    
    (0.03
    )
    
    
    
    
    
    
    
    
    
    
    Diluted per share amount
    
    
    (0.01
    )
    
    
    (0.03
    )
    
    
    
    
    
    
    
    
    
    
    
 
 (7)
    
    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 and has
subsequently increased the dividend rate from time to time. The quarterly cash dividend was
$0.03 per share during 2004. 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 the second
quarter of 2008, the Companys Board of Directors further increased the cash dividend to $0.10
per share. During 2008, 2007, 2006, 2005 and 2004, the Company paid cash dividends on its
capital stock in the amount of $18.4 million, $17.2 million, $15.0 million, $11.6 million and
$10.1 million, respectively. See Note J to the Consolidated Financial Statements.(8)
    
    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.(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)
    
    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.(11)
    
    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. -30-




---



##### 



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Introduction
    -31-




---



##### 



Results of Operations
 2008 Compared to 2007
 Summary of Results.
 Premium and Fee Income.
 -32-




---



##### 



Net Investment Income.
 Net Realized Investment Losses.
 -33-




---



##### 



Loss on Redemption of Junior Subordinated Deferrable Interest Debentures.
  Benefits and Expenses.
 Interest Expense
 Income Tax (Benefit) Expense.
 2007 Compared to 2006
 Summary of Results.
 -34-




---



##### 



Premium and Fee Income.
    Net Investment Income.
 Net Realized Investment Losses.
 -35-




---



##### 



Loss on Redemption of Junior Subordinated Deferrable Interest Debentures.
 Benefits and Expenses.
 Interest Expense
 Income Tax Expense.
 Liquidity and Capital Resources
 General.
   -36-




---



##### 



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
    
    $
    1,457,528
    
    
    $
    352,671
    
    
    $
    292,469
    
    
    $
    190,580
    
    
    $
    621,808Casualty
    
    
    1,653,986
    
    
    
    127,682
    
    
    
    229,454
    
    
    
    203,753
    
    
    
    1,093,097Annuity
    
    
    1,762,005
    
    
    
    237,122
    
    
    
    459,002
    
    
    
    407,430
    
    
    
    658,451Corporate debt (Note E)
    
    
    350,750
    
    
    
    207,000
    
    
    
    
    
    
    
    
    
    
    
    143,750Interest on corporate debt (Note E) (2)
    
    
    283,478
    
    
    
    12,070
    
    
    
    23,444
    
    
    
    23,778
    
    
    
    224,186Advances from Federal Home Loan Bank (Note F)
    
    
    55,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55,000Interest on advances from Federal
Home Loan Bank (Note F)
    
    
    46,954
    
    
    
    4,106
    
    
    
    8,211
    
    
    
    8,211
    
    
    
    26,426Junior subordinated debentures (Note I)
    
    
    175,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    175,000Interest on junior subordinated debentures (Note I)
(3)
    
    
    367,806
    
    
    
    12,908
    
    
    
    25,816
    
    
    
    25,816
    
    
    
    303,266Pension and other postretirement benefits
    
    
    29,987
    
    
    
    6,237
    
    
    
    4,667
    
    
    
    5,029
    
    
    
    14,054Operating lease obligations (Note L)
    
    
    77,642
    
    
    
    11,462
    
    
    
    23,299
    
    
    
    21,384
    
    
    
    21,497Total contractual obligations
    
    $
    6,260,136
    
    
    $
    971,258
    
    
    $
    1,066,362
    
    
    $
    885,981
    
    
    $
    3,336,535
 
 (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. 
 -37-




---



##### 



Cash Flows
 Share Repurchase Program.
 Investments.
 -38-




---



##### 



Asset/Liability Management and Market Risk.
 -39-




---



##### 



Reinsurance.
 Off-Balance Sheet Arrangements
  -40-




---



##### 



Critical Accounting Policies and Estimates
  Future Policy Benefits and Unpaid Claims and Claim Expenses.
   -41-




---



##### 



Balance, net of reinsurance:Case reserves:Disability and accident
    
    $
    801.4Property and casualty
    
    
    287.0IBNR reserves:Disability and accident
    
    
    225.0Property and casualty
    
    
    664.3Total reserves
    
    
    1,977.7Reinsurance receivables
    
    
    225.7Balance, gross of reinsurance
    
    $
    2,203.4Balance Sheets:Future policy benefits:Disability and accident
    
    $
    743.7Unpaid claims and claim expenses:Disability and accident
    
    
    398.7Property and casualty
    
    
    1,061.0$
    2,203.4
   -42-




---



##### 



Deferred Acquisition Costs.
   -43-




---



##### 



Investments.
   -44-




---



##### 



Forward-Looking Statements And Cautionary Statements Regarding Certain Factors That May Affect
Future Results
  -45-




---



##### 



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
   -46-




---



##### 



MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
    -47-




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
         
 -48-




---



##### 



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
  -49-




---



##### 



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 55 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)
 -50-




---



##### 



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)10.30
    
    Amendment and Consolidation of Prior Stock Option Award Agreements for Lawrence E. Daurelle
dated May 12, 2008 (Exhibit 10.1) (27)10.31
    
    Amendment and Consolidation of Prior Stock Option Award Agreements for Thomas W. Burghart
dated May 12, 2008 (Exhibit 10.2) (27)10.32
    
    Amendment to 2003 Employee Long-Term Incentive and Share Award Plan dated May 7, 2008
(Exhibit 10.3) (27)10.33
    
    Amendment to Second Amended and Restated Employee Stock Option Plan dated May 7, 2008
(Exhibit 10.4)(27)10.34
    
    Amendment to Employee Stock Purchase Plan dated May 7, 2008 (Exhibit 10.5) (27)10.35
    
    Restated Investment Consulting Agreement, dated as of August 14, 2008, between Rosenkranz
Asset Managers, LLC and the Registrant (Exhibit 10.1) (28)10.36
    
    Amendment to the Registrants Second Amended and Restated Long-Term Performance-Based
Incentive Plan dated August 12, 2008 (Exhibit 10.2) (28)10.37
    
    Stock Option Award Agreement for Robert Rosenkranz dated August 14, 2008 (Exhibit 10.3)
(28)10.38
    
    Amended and Restated Reliance Standard Life Insurance Company Supplemental Executive
Retirement Plan dated August 14, 2008 (Exhibit 10.4) (28)10.39
    
    Amended and Restated Reliance Standard Life Insurance Company Nonqualified Deferred
Compensation Plan dated August 14, 2008 (Exhibit 10.5)(28)10.40
    
    Amended and Restated Pension Plan for Robert Rosenkranz dated December 18, 2008 (Exhibit
10.1)(29)10.41
    
    Amended and Restated Nonqualified Deferred Compensation Plan  Reliance Standard Life
Insurance Company dated December 18, 2008 (Exhibit 10.2)(29)10.42
    
    Amendment, Restatement and Consolidation of Prior Award Agreements for Robert Rosenkranz
dated December 22, 2008 (Exhibit 10.3)(29)10.43
    
    Amendment and Restatement of Restricted Share Unit Award Agreement for Donald A. Sherman
dated December 22, 2008 (Exhibit 10.4)(29)10.44
    
    Amendment to Safety National Casualty Corporation Stock Option Award Agreement dated
December 19, 2008 (Exhibit 10.5)(29)11.1
    
    Computation of Results per Share of Common Stock(30)21.1
    
    List of Subsidiaries of the Company(31)23.1
    
    Consent of Ernst & Young LLP(31)24.1
    
    Powers of Attorney (31)31.1
    
    Certification by the Chairman of the Board and Chief Executive Officer of Periodic Report
Pursuant to Rule 13a-14(a) or 15d-14(a) (31)31.2
    
    Certification by the Senior Vice President and Treasurer of Periodic Report Pursuant to Rule
13a-14(a) or 15d-14(a) (31)
 -51-




---



##### 



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 (31)
 
 (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 the designated exhibit to the Companys Current
Report on Form 8-K dated May 7, 2008.(28)
    
    Incorporated herein by reference to the designated exhibit to the Companys Current
Report on Form 8-K dated August 12, 2008(29)
    
    Incorporated herein by reference to the designated exhibit to the Companys Current
Report on Form 8-K dated December 17, 2008(30)
    
    Incorporated herein by reference to Note N to the Consolidated Financial Statements
included elsewhere herein.(31)
    
    Filed herewith. (c)
    
    The financial statement schedules listed in the Index to Consolidated Financial Statements
and Financial Statement Schedules on page 55 of this Form 10-K are included under Item 8 and
are presented beginning on page 90 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.
 -52-




---



##### 



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)
    
    March 2, 2009*

(Kevin R. Brine)
    
    Director
    
    March 2, 2009*

(Lawrence E. Daurelle)
    
    Director
    
    March 2, 2009*

(Edward A. Fox)
    
    Director
    
    March 2, 2009*

(Steven A. Hirsh)
    
    Director
    
    March 2, 2009*

(Harold F. Ilg)
    
    Director and Executive
Vice President
    
    March 2, 2009*

(James M. Litvack)
    
    Director
    
    March 2, 2009*

(James N. Meehan)
    
    Director
    
    March 2, 2009*

(Philip R. OConnor)
    
    Director
    
    March 2, 2009/s/          DONALD A. SHERMAN

(Donald A. Sherman)
    
    Director, President and
Chief Operating Officer
    
    March 2, 2009*

(Robert M. Smith, Jr.)
    
    Director and Executive
Vice President
    
    March 2, 2009*

(Robert F. Wright)
    
    Director
    
    March 2, 2009*

(Thomas W. Burghart)
    
    Senior Vice President and
Treasurer (Principal
Accounting and Financial
Officer)
    
    March 2, 2009
 * BY:
    
    /s/       ROBERT ROSENKRANZAttorney-in-Fact
 -53-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL RESULTS (Unaudited)
(Dollars in Thousands, Except Per Share Data)
 Year Ended December 31, 2008First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterRevenues excluding net realized investment (losses)
gains and loss on redemption of debentures
    
    $
    374,627
    
    
    $
    401,524
    
    
    $
    364,435
    
    
    $
    379,154Net realized investment (losses) gains
    
    
    (6,436
    )
    
    
    (19,499
    )
    
    
    (33,740
    )
    
    
    (28,502
    )Loss on redemption of junior subordinated
deferrable interest debentures
    
    
    
    
    
    
    
    
    
    
    (598
    )
    
    
    Total revenues
    
    
    368,191
    
    
    
    382,025
    
    
    
    330,097
    
    
    
    350,652Operating income (loss)
    
    
    35,386
    
    
    
    43,587
    
    
    
    (13,769
    )
    
    
    (1,163
    )Net income (loss)
    
    
    21,144
    
    
    
    26,875
    
    
    
    (9,810
    )
    
    
    (1,526
    )Basic results per share of common stock:Net income (loss)
    
    $
    0.43
    
    
    $
    0.56
    
    
    $
    (0.20
    )
    
    $
    (0.03
    )Diluted results per share of common stock:Net income (loss)
    
    $
    0.42
    
    
    $
    0.55
    
    
    $
    (0.20
    )
    
    $
    (0.03
    )
 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
    
    
    
    64,675Net income
    
    
    39,194
    
    
    
    42,914
    
    
    
    40,729
    
    
    
    41,675Basic results per share of common stock:Net income
    
    $
    0.78
    
    
    $
    0.85
    
    
    $
    0.80
    
    
    $
    0.84Diluted results per share of common stock:Net income
    
    $
    0.76
    
    
    $
    0.83
    
    
    $
    0.79
    
    
    $
    0.81
   -54-




---



##### 



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
    
    
    56Consolidated Statements of Income  Years Ended December 31, 2008, 2007 and 2006
    
    
    57Consolidated Balance Sheets  December 31, 2008 and 2007
    
    
    58Consolidated Statements of Shareholders Equity  Years Ended December 31, 2008, 2007 and 2006
    
    
    59Consolidated Statements of Cash Flows  Years Ended December 31, 2008, 2007 and 2006
    
    
    60Notes to Consolidated Financial Statements
    
    
    61Financial Statement Schedules of Delphi Financial Group, Inc. and Subsidiaries:Schedule I, Summary of Investments Other Than Investments in Related Parties
    
    
    90Schedule II, Condensed Financial Information of Registrant
    
    
    91Schedule III, Supplementary Insurance Information
    
    
    95Schedule IV, Reinsurance
    
    
    96Schedule VI, Supplemental Information Concerning Property-Casualty Insurance Operations
    
    
    97
 -55-




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
       
 -56-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
 (Dollars in Thousands, Except Per Share Data)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006Revenue:Premium and fee income
    
    $
    1,384,890
    
    
    $
    1,304,161
    
    
    $
    1,156,578Net investment income
    
    
    134,850
    
    
    
    270,547
    
    
    
    255,871Net realized investment losses
    
    
    (88,177
    )
    
    
    (1,897
    )
    
    
    (858
    )Loss on redemption of junior subordinated deferrable interest
debentures underlying company-obligated mandatorily
redeemable capital securities issued by unconsolidated
subsidiaries
    
    
    (598
    )
    
    
    (2,192
    )
    
    
    1,430,965
    
    
    
    1,570,619
    
    
    
    1,411,591Benefits and expenses:Benefits, claims and interest credited to policyholders
    
    
    989,253
    
    
    
    944,901
    
    
    
    847,486Commissions
    
    
    87,206
    
    
    
    84,526
    
    
    
    74,391Amortization of cost of business acquired
    
    
    80,411
    
    
    
    81,222
    
    
    
    80,768Other operating expenses
    
    
    210,054
    
    
    
    199,923
    
    
    
    175,5221,366,924
    
    
    
    1,310,572
    
    
    
    1,178,167Income from continuing operations before interest and income
tax (benefit) expense
    
    
    64,041
    
    
    
    260,047
    
    
    
    233,424Interest expense:Corporate debt
    
    
    17,701
    
    
    
    16,870
    
    
    
    20,172Junior subordinated debentures
    
    
    12,966
    
    
    
    7,891
    
    
    
    Junior subordinated deferrable interest debentures underlying
company-obligated redeemable capital securities issued by
unconsolidated subsidiaries
    
    
    934
    
    
    
    2,727
    
    
    
    5,21131,601
    
    
    
    27,488
    
    
    
    25,383Income from continuing operations before income
tax (benefit) expense
    
    
    32,440
    
    
    
    232,559
    
    
    
    208,041Income tax (benefit) expense
    
    
    (4,243
    )
    
    
    68,047
    
    
    
    63,038Income from continuing operations
    
    
    36,683
    
    
    
    164,512
    
    
    
    145,003Loss from discontinued operations, net of income tax
benefit
    
    
    
    
    
    
    
    
    
    
    (2,935
    )Net income
    
    $
    36,683
    
    
    $
    164,512
    
    
    $
    142,068Basic results per share of common stock:Income from continuing operations
    
    $
    0.76
    
    
    $
    3.27
    
    
    $
    2.92Net income
    
    
    0.76
    
    
    
    3.27
    
    
    
    2.86Diluted results per share of common stock:Income from continuing operations
    
    $
    0.75
    
    
    $
    3.19
    
    
    $
    2.85Net income
    
    
    0.75
    
    
    
    3.19
    
    
    
    2.79Dividends paid per share of common stock
    
    $
    0.39
    
    
    $
    0.35
    
    
    $
    0.31
  -57-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (Dollars in Thousands, Except Per Share Data)
 December 31,2008
    
    
    2007Assets:Investments:Fixed maturity securities, available for sale
    
    $
    3,773,382
    
    
    $
    3,691,694Short-term investments
    
    
    401,620
    
    
    
    286,033Other investments
    
    
    479,921
    
    
    
    1,010,1414,654,923
    
    
    
    4,987,868Cash
    
    
    63,837
    
    
    
    51,240Cost of business acquired
    
    
    264,777
    
    
    
    174,430Reinsurance receivables
    
    
    376,731
    
    
    
    402,785Goodwill
    
    
    93,929
    
    
    
    93,929Other assets
    
    
    409,103
    
    
    
    260,602Assets held in separate account
    
    
    90,573
    
    
    
    123,956Total assets
    
    $
    5,953,873
    
    
    $
    6,094,810Liabilities and Shareholders Equity:Future policy benefits:Life
    
    $
    300,567
    
    
    $
    290,775Disability and accident
    
    
    743,690
    
    
    
    688,023Unpaid claims and claim expenses:Life
    
    
    70,076
    
    
    
    69,161Disability and accident
    
    
    398,671
    
    
    
    341,442Casualty
    
    
    1,061,046
    
    
    
    963,974Policyholder account balances
    
    
    1,356,932
    
    
    
    1,083,121Corporate debt
    
    
    350,750
    
    
    
    217,750Junior subordinated debentures
    
    
    175,000
    
    
    
    175,000Junior subordinated deferrable interest debentures underlying
company-obligated mandatorily redeemable capital
securities issued by unconsolidated subsidiaries
    
    
    
    
    
    
    20,619Advances from Federal Home Loan Bank
    
    
    55,342
    
    
    
    55,342Other liabilities and policyholder funds
    
    
    530,647
    
    
    
    924,257Liabilities related to separate account
    
    
    90,573
    
    
    
    123,956Total liabilities
    
    
    5,133,294
    
    
    
    4,953,420Shareholders equity:Preferred Stock, $.01 par; 50,000,000 shares authorized, none issued
    
    
    
    
    
    
    Class A Common Stock, $.01 par; 150,000,000 shares authorized;
48,946,432 and 48,717,899 shares issued and outstanding, respectively
    
    
    489
    
    
    
    487Class B Common Stock, $.01 par; 20,000,000 shares authorized;
5,981,049 and 5,934,183 shares issued and outstanding, respectively
    
    
    60
    
    
    
    59Additional paid-in capital
    
    
    522,596
    
    
    
    509,742Accumulated other comprehensive loss
    
    
    (351,710
    )
    
    
    (42,497
    )Retained earnings
    
    
    846,390
    
    
    
    828,116Treasury stock, at cost; 7,761,216 and 6,227,416 shares of Class A
Common Stock, respectively, and 227,216 shares of
Class B Common Stock
    
    
    (197,246
    )
    
    
    (154,517
    )Total shareholders equity
    
    
    820,579
    
    
    
    1,141,390Total liabilities and shareholders equity
    
    $
    5,953,873
    
    
    $
    6,094,810
  -58-




---



##### 



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, 2006
    
    $
    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
    )
    
    $
    1,141,390Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,683
    
    
    
    
    
    
    
    36,683Other comprehensive loss:Increase in net unrealized
depreciation on investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (299,435
    )
    
    
    
    
    
    
    
    
    
    
    (299,435
    )Decrease in net loss on cash flow
hedge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    785
    
    
    
    
    
    
    
    
    
    
    
    785Net change in pension
liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,563
    )
    
    
    
    
    
    
    
    
    
    
    (10,563
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (272,530
    )Issuance of stock, exercise of stock
options and share conversions
    
    
    2
    
    
    
    1
    
    
    
    7,197
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,200Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    5,657
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,657Acquisition of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42,729
    )
    
    
    (42,729
    )Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,409
    )
    
    
    
    
    
    
    (18,409
    )Balance, December 31, 2008
    
    $
    489
    
    
    $
    60
    
    
    $
    522,596
    
    
    $
    (351,710
    )
    
    $
    846,390
    
    
    $
    (197,246
    )
    
    $
    820,579
  -59-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in Thousands)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006Operating activities:Net income
    
    $
    36,683
    
    
    $
    164,512
    
    
    $
    142,068Adjustments to reconcile net income to net cash provided
by operating activities:Change in policy liabilities and policyholder accounts
    
    
    233,116
    
    
    
    245,031
    
    
    
    270,620Net change in reinsurance receivables and payables
    
    
    30,746
    
    
    
    5,335
    
    
    
    5,160Amortization, principally the cost of business acquired
and investments
    
    
    63,438
    
    
    
    73,084
    
    
    
    70,935Deferred costs of business acquired
    
    
    (124,529
    )
    
    
    (108,574
    )
    
    
    (100,260
    )Net realized losses on investments
    
    
    88,177
    
    
    
    1,897
    
    
    
    858Net change in federal income tax liability
    
    
    (68,689
    )
    
    
    23,757
    
    
    
    28,590Other
    
    
    137,390
    
    
    
    (21,723
    )
    
    
    (15,046
    )Net cash provided by operating activities
    
    
    396,332
    
    
    
    383,319
    
    
    
    402,925Investing activities:Purchases of investments and loans made
    
    
    (1,474,661
    )
    
    
    (1,210,252
    )
    
    
    (1,119,894
    )Sales of investments and receipts from repayment of loans
    
    
    537,328
    
    
    
    550,991
    
    
    
    747,841Maturities of investments
    
    
    336,417
    
    
    
    171,927
    
    
    
    206,223Net change in short-term investments
    
    
    (115,587
    )
    
    
    114,206
    
    
    
    (305,849
    )Change in deposit in separate account
    
    
    12,429
    
    
    
    8,948
    
    
    
    (2,008
    )Net cash used by investing activities
    
    
    (704,074
    )
    
    
    (364,180
    )
    
    
    (473,687
    )Financing activities:Deposits to policyholder accounts
    
    
    388,419
    
    
    
    116,729
    
    
    
    200,820Withdrawals from policyholder accounts
    
    
    (120,984
    )
    
    
    (159,035
    )
    
    
    (131,229
    )Borrowings under revolving credit facility
    
    
    139,000
    
    
    
    112,000
    
    
    
    31,000Principal payments under revolving credit facility
    
    
    (6,000
    )
    
    
    (158,000
    )
    
    
    (2,000
    )Proceeds from the issuance of 2007 Junior Debentures
    
    
    
    
    
    
    172,309
    
    
    
    Redemption of junior subordinated deferrable interest debentures
    
    
    (20,619
    )
    
    
    (37,728
    )
    
    
    Acquisition of treasury stock
    
    
    (42,729
    )
    
    
    (62,417
    )
    
    
    (16,577
    )Other financing activities
    
    
    (16,748
    )
    
    
    39
    
    
    
    8,459Net cash provided (used) by financing activities
    
    
    320,339
    
    
    
    (16,103
    )
    
    
    90,473Increase in cash
    
    
    12,597
    
    
    
    3,036
    
    
    
    19,711Cash at beginning of year
    
    
    51,240
    
    
    
    48,204
    
    
    
    28,493Cash at end of year
    
    $
    63,837
    
    
    $
    51,240
    
    
    $
    48,204
  -60-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 December 31, 2008
 Note A  Summary of Significant Accounting Policies
 Principles of Consolidation.
 Nature of Operations.
 Basis of Accounting.
 Use of Estimates.
 Investments.
 -61-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 Note A  Summary of Significant Accounting Policies  (Continued)
   Fair Value Measurements.
      -62-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 Note A  Summary of Significant Accounting Policies  (Continued)
 Fair Value Option
 Cost of Business Acquired.
   -63-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 Note A  Summary of Significant Accounting Policies  (Continued)
 Reinsurance Receivables.
 Goodwill.
 Separate Account.
 Future Policy Benefits.
 Unpaid Claims and Claim Expenses.
 Policyholder Account Balances.
 Income Taxes.
 -64-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 Note A  Summary of Significant Accounting Policies  (Continued)
 Premium Recognition.
 Stock-Based Compensation.
 Statements of Cash Flows.
 Recently Issued Accounting Standards
   -65-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 Note A  Summary of Significant Accounting Policies  (Continued)
    -66-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 Note B  Investments
  December 31, 2008Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value(dollars in thousands)Mortgage-backed securities
    
    $
    1,411,231
    
    
    $
    40,489
    
    
    $
    (226,796
    )
    
    $
    1,224,924Corporate securities
    
    
    1,566,748
    
    
    
    9,688
    
    
    
    (300,263
    )
    
    
    1,276,173U.S. Treasury and other U.S. Government
guaranteed securities
    
    
    51,826
    
    
    
    5,905
    
    
    
    
    
    
    
    57,731U.S. Government-sponsored enterprise securities
    
    
    22,031
    
    
    
    3,147
    
    
    
    
    
    
    
    25,178Obligations of U.S. states, municipalities and
political subdivisions
    
    
    1,270,166
    
    
    
    19,230
    
    
    
    (100,020
    )
    
    
    1,189,376Total fixed maturity securities
    
    $
    4,322,002
    
    
    $
    78,459
    
    
    $
    (627,079
    )
    
    $
    3,773,382
 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 enterprise securities
    
    
    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
  Amortized
    
    
    FairCost
    
    
    Value(dollars in thousands)Mortgage-backed securities
    
    $
    1,411,231
    
    
    $
    1,224,924Other fixed maturity securities:One year or less
    
    
    67,337
    
    
    
    66,367Greater than 1, up to 5 years
    
    
    631,230
    
    
    
    567,754Greater than 5, up to 10 years
    
    
    849,901
    
    
    
    737,284Greater than 10 years
    
    
    1,362,303
    
    
    
    1,177,053Total
    
    $
    4,322,002
    
    
    $
    3,773,382
 -67-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 Note B  Investments  (Continued)
  Year Ended December 31,2008
    
    
    2007
    
    
    2006(dollars in thousands)Gross investment income:Fixed maturity securities, available for sale
    
    $
    183,694
    
    
    $
    232,624
    
    
    $
    204,287Mortgage loans
    
    
    12,529
    
    
    
    22,966
    
    
    
    19,291Other
    
    
    (33,115
    )
    
    
    41,626
    
    
    
    65,490163,108
    
    
    
    297,216
    
    
    
    289,068Less: Investment expenses
    
    
    28,258
    
    
    
    26,669
    
    
    
    33,197$
    134,850
    
    
    $
    270,547
    
    
    $
    255,871
  Year Ended December 31,2008
    
    
    2007
    
    
    2006(dollars in thousands)Fixed maturity securities, available for sale
    
    $
    (71,052
    )
    
    $
    (2,603
    )
    
    $
    (3,247
    )Other investments
    
    
    (17,125
    )
    
    
    706
    
    
    
    2,389$
    (88,177
    )
    
    $
    (1,897
    )
    
    $
    (858
    )
   December 31, 2008Less Than 12 Months
    
    
    12 Months or More
    
    
    TotalGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses(dollars in thousands)Mortgage-backed securities
    
    $
    437,827
    
    
    $
    (150,361
    )
    
    $
    155,182
    
    
    $
    (76,435
    )
    
    $
    593,009
    
    
    $
    (226,796
    )Corporate securities
    
    
    581,598
    
    
    
    (130,059
    )
    
    
    291,938
    
    
    
    (170,204
    )
    
    
    873,536
    
    
    
    (300,263
    )U.S. Treasury and other U.S. Government
guaranteed securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    U.S. Government-sponsored enterprise
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Obligations of U.S. states, municipalities
and political subdivisions
    
    
    520,492
    
    
    
    (61,106
    )
    
    
    164,817
    
    
    
    (38,914
    )
    
    
    685,309
    
    
    
    (100,020
    )Total fixed maturity securities
    
    $
    1,539,917
    
    
    $
    (341,526
    )
    
    $
    611,937
    
    
    $
    (285,553
    )
    
    $
    2,151,854
    
    
    $
    (627,079
    )
 -68-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 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
    
    
    
    (33,191
    )
    
    
    229,845
    
    
    
    (19,328
    )
    
    
    679,301
    
    
    
    (52,519
    )U.S. Treasury and other U.S. Government
guaranteed securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    U.S. Government-sponsored enterprise
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Obligations of U.S. states, municipalities
and political subdivisions
    
    
    264,460
    
    
    
    (6,711
    )
    
    
    2,586
    
    
    
    (168
    )
    
    
    267,046
    
    
    
    (6,879
    )Total fixed maturity securities
    
    $
    999,600
    
    
    $
    (66,840
    )
    
    $
    473,081
    
    
    $
    (47,900
    )
    
    $
    1,472,681
    
    
    $
    (114,740
    )
    -69-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 Note B  Investments  (Continued)
    Note C  Fair Value Measurements
     -70-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 Note C  Fair Value Measurements  (Continued)
         -71-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 Note C  Fair Value Measurements  (Continued)
  December 31, 2008Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3(dollars in thousands)Assets:Fixed maturity securities, available for sale:Mortgage-backed securities
    
    $
    1,224,924
    
    
    $
    
    
    
    $
    1,036,621
    
    
    $
    188,303Corporate securities
    
    
    1,276,173
    
    
    
    
    
    
    
    843,772
    
    
    
    432,401U.S. Treasury and other U.S. Government
guaranteed securities
    
    
    57,731
    
    
    
    26,617
    
    
    
    28,506
    
    
    
    2,608U.S. Government-sponsored enterprise
securities
    
    
    25,178
    
    
    
    
    
    
    
    25,178
    
    
    
    Obligations of U.S. states, municipalities
and political subdivisions
    
    
    1,189,376
    
    
    
    
    
    
    
    1,189,376
    
    
    
    Other investments
    
    
    143,510
    
    
    
    122,016
    
    
    
    
    
    
    
    21,494Assets held in separate account
    
    
    90,573
    
    
    
    
    
    
    
    
    
    
    
    90,573Total
    
    $
    4,007,465
    
    
    $
    148,633
    
    
    $
    3,123,453
    
    
    $
    735,379Liabilities:Other liabilities
    
    $
    67,299
    
    
    $
    67,299
    
    
    $
    
    
    
    $
    
  Year Ended December 31, 2008U.S.Treasury and
    
    
    U.S.Other U.S.
    
    
    Government-
    
    
    
    
    
    
    AssetsMortgage-
    
    
    
    
    
    
    Government
    
    
    sponsored
    
    
    
    
    
    
    held inbacked
    
    
    Corporate
    
    
    Guaranteed
    
    
    Enterprise
    
    
    Other
    
    
    SeparateTotal
    
    
    Securities
    
    
    Securities
    
    
    Securities
    
    
    Securities
    
    
    Investments
    
    
    Account(dollars in thousands)Balance at beginning of year
    
    $
    1,060,154
    
    
    $
    302,852
    
    
    $
    476,299
    
    
    $
    
    
    
    $
    129,993
    
    
    $
    27,054
    
    
    $
    123,956Total (losses) gainsIncluded in earnings
    
    
    (119,897
    )
    
    
    (25,368
    )
    
    
    (61,209
    )
    
    
    
    
    
    
    42
    
    
    
    21
    
    
    
    (33,383
    )Included in other
comprehensive loss
    
    
    (129,917
    )
    
    
    (22,603
    )
    
    
    (104,324
    )
    
    
    9
    
    
    
    (3
    )
    
    
    (2,996
    )
    
    
    Purchases, issuances and settlements
    
    
    15,915
    
    
    
    34,117
    
    
    
    108,464
    
    
    
    919
    
    
    
    (125,000
    )
    
    
    (2,585
    )
    
    
    Net transfer (out) in of Level 3
    
    
    (90,876
    )
    
    
    (100,695
    )
    
    
    13,171
    
    
    
    1,680
    
    
    
    (5,032
    )
    
    
    
    
    
    
    Balance at end of the period
    
    $
    735,379
    
    
    $
    188,303
    
    
    $
    432,401
    
    
    $
    2,608
    
    
    $
    
    
    
    $
    21,494
    
    
    $
    90,573Net losses for the period included in earnings
attributable to the net change in unrealized
gains and losses of assets measured at fair
value using unobservable inputs and held
at December 31, 2008 (1)
    
    $
    (108,759
    )
    
    $
    (43,707
    )
    
    $
    (64,454
    )
    
    $
    
    
    
    $
    
    
    
    $
    (598
    )
    
    $
    
 
 (1)
    
    In 2008, net losses of $54.9 million and $53.9 million were reported in the
consolidated statements of income under the captions net investment income and net
realized investment losses, respectively. -72-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 Note C  Fair Value Measurements  (Continued)
  December 31,2008
    
    2007Carrying
    
    Fair
    
    Carrying
    
    FairValue
    
    Value
    
    Value
    
    Value(dollars in thousands)Assets:Short-term investments
    
    
    401,620
    
    
    
    401,620
    
    
    
    286,033
    
    
    
    286,033Other investments
    
    
    336,411
    
    
    
    336,411
    
    
    
    792,470
    
    
    
    792,470Liabilities:Policyholder account balances
    
    
    1,214,024
    
    
    
    1,160,047
    
    
    
    1,007,472
    
    
    
    963,914Corporate debt
    
    
    350,750
    
    
    
    289,168
    
    
    
    217,750
    
    
    
    210,275Junior subordinated debentures
    
    
    175,000
    
    
    
    85,400
    
    
    
    175,000
    
    
    
    129,220Junior subordinated deferrable interest debentures
underlying company-obligated mandatorily
redeemable capital securities issued by
unconsolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    20,619
    
    
    
    20,619Advances from Federal Home Loan Bank
    
    
    55,342
    
    
    
    75,861
    
    
    
    55,342
    
    
    
    67,338Liabilities related to separate account
    
    
    90,573
    
    
    
    90,573
    
    
    
    123,956
    
    
    
    123,956
    -73-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 Note D  Disability, Accident and Casualty Future Policy Benefits and Unpaid Claims and Claim
Expenses
  Year Ended December 31,2008
    
    
    2007
    
    
    2006(dollars in thousands)Balance at beginning of year, net of reinsurance
    
    $
    1,749,106
    
    
    $
    1,521,829
    
    
    $
    1,284,400Add provisions for claims and claim expenses incurred, net
of reinsurance, occurring during:Current year
    
    
    660,335
    
    
    
    620,286
    
    
    
    535,973Prior years
    
    
    (17,299
    )
    
    
    15,497
    
    
    
    44,793Incurred claims and claim expenses during the current
year, net of reinsurance
    
    
    643,036
    
    
    
    635,783
    
    
    
    580,766Deduct claims and claim expenses payments, net of reinsurance,
occurring during:Current year
    
    
    143,290
    
    
    
    126,763
    
    
    
    99,956Prior years
    
    
    271,132
    
    
    
    281,743
    
    
    
    243,381414,422
    
    
    
    408,506
    
    
    
    343,337Balance at end of year, net of reinsurance
    
    
    1,977,720
    
    
    
    1,749,106
    
    
    
    1,521,829Reinsurance receivables at end of year
    
    
    225,687
    
    
    
    244,333
    
    
    
    247,144Balance at end of year, gross of reinsurance (1)
    
    $
    2,203,407
    
    
    $
    1,993,439
    
    
    $
    1,768,973Balance Sheets:Future policy benefits:Disability and accident
    
    $
    743,690
    
    
    $
    688,023Unpaid claims and claim expenses:Disability and accident
    
    
    398,671
    
    
    
    341,442Casualty (1)
    
    
    1,061,046
    
    
    
    963,974$
    2,203,407
    
    
    $
    1,993,439
 
 (1)
    
    All years include the results from the Companys discontinued non-core property
catastrophe reinsurance business. See Note R.  -74-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 December 31, 2008
 Note E  Corporate Debt
     -75-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 Note F  Advances from the Federal Home Loan Bank
  Note G  Income Taxes
  Year Ended December 31,2008
    
    
    2007
    
    
    2006(dollars in thousands)Federal income tax expense at statutory rate
    
    $
    11,354
    
    
    $
    81,396
    
    
    $
    72,814Tax-exempt income and dividends received deduction
    
    
    (16,027
    )
    
    
    (12,781
    )
    
    
    (10,179
    )Other
    
    
    430
    
    
    
    (568
    )
    
    
    403$
    (4,243
    )
    
    $
    68,047
    
    
    $
    63,038
    December 31,2008
    
    
    2007(dollars in thousands)Cost of business acquired
    
    $
    80,193
    
    
    $
    50,493Future policy benefits and unpaid claims and claim expenses
    
    
    105,305
    
    
    
    88,992Other
    
    
    12,355
    
    
    
    11,550Gross deferred tax liabilities
    
    
    197,853
    
    
    
    151,035Future policy benefits and unpaid claims and claim expenses
    
    
    (7,583
    )
    
    
    (7,423
    )Investments
    
    
    (252,590
    )
    
    
    (17,277
    )Other
    
    
    (53,165
    )
    
    
    (38,534
    )Net operating loss carryforwards
    
    
    (10,140
    )
    
    
    (962
    )Gross deferred tax assets
    
    
    (323,478
    )
    
    
    (64,196
    )Net deferred tax (asset) liability
    
    $
    (125,625
    )
    
    $
    86,839
 -76-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 Note G  Income Taxes  (Continued)
  As of or for the Year EndedDecember 31,2008
    
    2007
    
    2006(dollars in thousands)Current tax expense
    
    $
    36,024
    
    
    $
    48,361
    
    
    $
    32,556Deferred tax (benefit) expense
    
    
    (40,267
    )
    
    
    19,686
    
    
    
    30,482Current tax (recoverable) liability
    
    
    (2,151
    )
    
    
    24,529
    
    
    
    7,427Income taxes paid
    
    
    62,563
    
    
    
    29,300
    
    
    
    23,700Income tax refunds
    
    
    
    
    
    
    
    
    
    
    2,682
  Note H  Junior Subordinated Deferrable Interest Debentures underlying the Company-Obligated
Mandatorily Redeemable Capital Securities of Unconsolidated Subsidiaries
      -77-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 Note H  Junior Subordinated Deferrable Interest Debentures underlying the Company-Obligated
Mandatorily Redeemable Capital Securities of Unconsolidated Subsidiaries  (Continued)
  Note I  Junior Subordinated Debentures
    -78-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 Note J  Shareholders Equity and Restrictions
     -79-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 Note J  Shareholders Equity and Restrictions  (Continued)
  Year Ended December 31,2008
    
    2007
    
    2006(shares in thousands)Class A Common Stock:Beginning balance
    
    
    48,718
    
    
    
    48,011
    
    
    
    31,274Issuance of stock, exercise of stock options and
conversion of shares
    
    
    228
    
    
    
    707
    
    
    
    890Three-for-two stock split
    
    
    
    
    
    
    
    
    
    
    15,847Ending balance
    
    
    48,946
    
    
    
    48,718
    
    
    
    48,011Class B Common Stock:Beginning balance
    
    
    5,934
    
    
    
    5,672
    
    
    
    3,904Issuance of stock, exercise of stock options and
conversion of shares
    
    
    47
    
    
    
    262
    
    
    
    (123
    )Three-for-two stock split
    
    
    
    
    
    
    
    
    
    
    1,891Ending balance
    
    
    5,981
    
    
    
    5,934
    
    
    
    5,672Class A Treasury Stock:Beginning balance
    
    
    6,227
    
    
    
    4,566
    
    
    
    2,723Acquisition of treasury stock
    
    
    1,534
    
    
    
    1,661
    
    
    
    321Three-for-two stock split
    
    
    
    
    
    
    
    
    
    
    1,522Ending balance
    
    
    7,761
    
    
    
    6,227
    
    
    
    4,566Class B Treasury Stock:Beginning balance
    
    
    227
    
    
    
    
    
    
    
    Acquisition of treasury stock
    
    
    
    
    
    
    227
    
    
    
    Ending balance
    
    
    227
    
    
    
    227
    
    
    
    
 -80-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 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, 2006
    
    $
    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
    )Unrealized depreciation on available for sale securities (1)
    
    
    (346,974
    )
    
    
    
    
    
    
    
    
    
    
    (346,974
    )Reclassification adjustment for losses included in net
income (2)
    
    
    47,539
    
    
    
    
    
    
    
    
    
    
    
    47,539Net change in unrealized depreciation on
investments
    
    
    (299,435
    )
    
    
    
    
    
    
    
    
    
    
    (299,435
    )Reclassification adjustment for losses included
in net income(3)
    
    
    
    
    
    
    785
    
    
    
    
    
    
    
    785Defined benefit pension plans:Amortization of prior service cost included in net
periodic pension cost(5)
    
    
    
    
    
    
    
    
    
    
    (38
    )
    
    
    (38
    )Net loss arising during the period (6)
    
    
    
    
    
    
    
    
    
    
    (10,098
    )
    
    
    (10,098
    )Amortization of net benefit included in net periodic
pension cost(7)
    
    
    
    
    
    
    
    
    
    
    (427
    )
    
    
    (427
    )Net change in defined benefit pension plans
    
    
    
    
    
    
    
    
    
    
    (10,563
    )
    
    
    (10,563
    )Balance, December 31, 2008
    
    $
    (334,367
    )
    
    $
    (3,469
    )
    
    $
    (13,874
    )
    
    $
    (351,710
    )
 -81-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 Note K  Accumulated Other Comprehensive Income (Loss)  (Continued)
 
 (1)
    
    Net of an income tax expense (benefit) of $1.2 million, $(35.9) million and $(186.8)
million for the years ended December 31, 2006, 2007 and 2008, respectively. Also, net of
related adjustment to cost of business acquired of $0.3 million, $6.2 million and $46.2
million for the years ended December 31, 2006, 2007 and 2008, respectively.(2)
    
    Net of an income tax benefit of $0.5 million, $0.6 million and $25.6 million for the
years ended December 31, 2006, 2007 and 2008, respectively.(3)
    
    Net of an income tax benefit of $0.4 million for each of the years ended December 31,
2006, 2007 and 2008, respectively.(4)
    
    Net of an income tax benefit of $4,400 for the year ended December 31, 2006.(5)
    
    Net of income tax expense of $0.2 million, $0.2 million and $20,500 for the years ended
December 31, 2006, 2007 and 2008, respectively.(6)
    
    Net of an income tax (benefit) expense of $(3.3) million, $1.3 million and $(5.4) million
for the years ended December 31, 2006, 2007 and 2008, respectively.(7)
    
    Net of income tax expense (benefit) of $0.3 million, $0.2 million and $(0.2) million for
the years ended December 31, 2006, 2007 and 2008, respectively. Note L  Commitments and Contingencies
    Note M  Stock-Based Compensation
   Year Ended December 31,2008
    
    2007
    
    2006Expected volatility
    
    
    19.2
    %
    
    
    19.2
    %
    
    
    24.4
    %Expected dividends
    
    
    1.3
    %
    
    
    0.8
    %
    
    
    0.9
    %Expected lives of options (in years)
    
    
    6.8
    
    
    
    6.5
    
    
    
    6.5Risk-free rate
    
    
    3.2
    %
    
    
    4.6
    %
    
    
    4.8
    %
 -82-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 Note M  Stock-Based Compensation  (Continued)
     Restricted Share Units
  -83-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 Note M  Stock-Based Compensation  (Continued)
 Restricted Shares
  Performance-Contingent Incentive Options
    -84-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 Note M  Stock-Based Compensation  (Continued)
    Amended Performance Plan
  -85-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 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, 2008
    
    
    3,260,251
    
    
    $
    27.15Granted
    
    
    1,490,231
    
    
    
    29.15Exercised
    
    
    (607,853
    )
    
    
    21.22Forfeited
    
    
    (31,220
    )
    
    
    33.90Expired
    
    
    (18,455
    )
    
    
    27.16Outstanding at December 31, 2008
    
    
    4,092,954
    
    
    
    28.71
    
    
    
    6.9
    
    
    $
    3,378Exercisable at December 31, 2008
    
    
    1,573,950
    
    
    $
    22.81
    
    
    
    4.1
    
    
    $
    3,378
 -86-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 Note N  Computation of Results per Share
 Year Ended December 31,2008
    
    
    2007
    
    
    2006(dollars in thousands, except per share data)Numerator:Income from continuing operations
    
    $
    36,683
    
    
    $
    164,512
    
    
    $
    145,003Loss from discontinued operations, net of income tax benefit
    
    
    
    
    
    
    
    
    
    
    (2,935
    )Net income
    
    $
    36,683
    
    
    $
    164,512
    
    
    $
    142,068Denominator:Weighted average common shares outstanding
    
    
    48,278
    
    
    
    50,269
    
    
    
    49,631Effect of dilutive securities
    
    
    685
    
    
    
    1,310
    
    
    
    1,308Weighted average common shares outstanding, assuming dilution
    
    
    48,963
    
    
    
    51,579
    
    
    
    50,939Basic results per share of common stock:Income from continuing operations
    
    $
    0.76
    
    
    $
    3.27
    
    
    $
    2.92Loss from discontinued operations, net of income tax benefit
    
    
    
    
    
    
    
    
    
    
    (0.06
    )Net income
    
    $
    0.76
    
    
    $
    3.27
    
    
    $
    2.86Diluted results per share of common stock:Income from continuing operations
    
    $
    0.75
    
    
    $
    3.19
    
    
    $
    2.85Loss from discontinued operations, net of income tax benefit
    
    
    
    
    
    
    
    
    
    
    (0.06
    )Net income
    
    $
    0.75
    
    
    $
    3.19
    
    
    $
    2.79
 Note O  Reinsurance
 
  Year Ended December 31,2008
    
    2007
    
    2006(dollars in thousands)Premium income assumed
    
    $
    87,243
    
    
    $
    91,714
    
    
    $
    93,227Premium income ceded
    
    
    108,738
    
    
    
    114,614
    
    
    
    112,020Benefits, claims and interest credited ceded
    
    
    89,964
    
    
    
    106,845
    
    
    
    111,176
 -87-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 Note P  Other Operating Expenses
  Note Q  Segment Information
 Year Ended December 31,2008
    
    
    2007
    
    
    2006(dollars in thousands)Revenues:Group employee benefit products
    
    $
    1,414,253
    
    
    $
    1,431,293
    
    
    $
    1,273,473Asset accumulation products
    
    
    59,841
    
    
    
    101,143
    
    
    
    101,290Other (1)
    
    
    45,646
    
    
    
    42,272
    
    
    
    37,6861,519,740
    
    
    
    1,574,708
    
    
    
    1,412,449Net realized investment losses
    
    
    (88,177
    )
    
    
    (1,897
    )
    
    
    (858
    )Loss on redemption of junior subordinated deferrable
interest debentures underlying the Company-obligated
mandatorily redeemable capital securities issued
by unconsolidated subsidiaries
    
    
    (598
    )
    
    
    (2,192
    )
    
    
    $
    1,430,965
    
    
    $
    1,570,619
    
    
    $
    1,411,591Operating income:Group employee benefit products
    
    $
    176,073
    
    
    $
    259,487
    
    
    $
    225,409Asset accumulation products
    
    
    (3,130
    )
    
    
    31,511
    
    
    
    30,251Other (1)
    
    
    (20,127
    )
    
    
    (26,862
    )
    
    
    (21,378
    )152,816
    
    
    
    264,136
    
    
    
    234,282Net realized investment losses
    
    
    (88,177
    )
    
    
    (1,897
    )
    
    
    (858
    )Loss on redemption of junior subordinated deferrable
interest debentures underlying the Company-obligated
mandatorily redeemable capital securities issued
by unconsolidated subsidiaries
    
    
    (598
    )
    
    
    (2,192
    )
    
    
    $
    64,041
    
    
    $
    260,047
    
    
    $
    233,424Net investment income (2):Group employee benefit products
    
    $
    71,230
    
    
    $
    163,701
    
    
    $
    149,347Asset accumulation products
    
    
    57,923
    
    
    
    98,477
    
    
    
    97,852Other (1)
    
    
    5,697
    
    
    
    8,369
    
    
    
    8,672$
    134,850
    
    
    $
    270,547
    
    
    $
    255,871Amortization of cost of business acquired:Group employee benefit products
    
    $
    81,961
    
    
    $
    72,725
    
    
    $
    70,560Asset accumulation products
    
    
    (1,550
    )
    
    
    8,497
    
    
    
    10,208$
    80,411
    
    
    $
    81,222
    
    
    $
    80,768Segment assets (2):Group employee benefit products
    
    $
    4,098,540
    
    
    $
    4,068,006Asset accumulation products
    
    
    1,746,356
    
    
    
    1,823,899Other (1)
    
    
    108,977
    
    
    
    202,905$
    5,953,873
    
    
    $
    6,094,810
 -88-




---



##### 



DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
December 31, 2008
 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
  -89-




---



##### 



SCHEDULE I
 DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
December 31, 2008
(Dollars in Thousands)
 AmountShown inAmortized
    
    
    Fair
    
    
    BalanceType of Investment
    
    Cost
    
    
    Value
    
    
    SheetFixed maturity securities, available for sale:U.S. Government backed mortgage-backed securities
    
    $
    600,337
    
    
    $
    625,650
    
    
    $
    625,650Other mortgage-backed securities
    
    
    810,894
    
    
    
    599,274
    
    
    
    599,274U.S. Treasury and other U.S. Government
guaranteed securities
    
    
    51,826
    
    
    
    57,731
    
    
    
    57,731U.S. Government-sponsored enterprise securities
    
    
    22,031
    
    
    
    25,178
    
    
    
    25,178Obligations of U.S. states, municipalities and
political subdivisions
    
    
    1,270,166
    
    
    
    1,189,376
    
    
    
    1,189,376Corporate securities
    
    
    1,566,748
    
    
    
    1,276,173
    
    
    
    1,276,173Total fixed maturity securities
    
    
    4,322,002
    
    
    
    3,773,382
    
    
    
    3,773,382Equity securities:Common stocks
    
    
    78,228
    
    
    
    63,274
    
    
    
    63,274Non-redeemable preferred stocks
    
    
    16,029
    
    
    
    9,328
    
    
    
    9,328Total equity securities
    
    
    94,257
    
    
    
    72,602
    
    
    
    72,602Mortgage loans
    
    
    128,634
    
    
    
    128,634
    
    
    
    128,634Real Estate
    
    
    18,309
    
    
    
    18,309
    
    
    
    18,309Short-term investments
    
    
    401,620
    
    
    
    401,620
    
    
    
    401,620Other investments
    
    
    268,304
    
    
    
    260,376
    
    
    
    260,376Total investments
    
    $
    5,233,126
    
    
    $
    4,654,923
    
    
    $
    4,654,923
 -90-




---



##### 



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 31,2008
    
    
    2007Assets:Fixed maturity securities, available for sale
    
    $
    7,023
    
    
    $
    Short-term investments
    
    
    201
    
    
    
    12,786Other invested assets
    
    
    4,202
    
    
    
    40,736Investment in operating subsidiaries
    
    
    1,435,962
    
    
    
    1,472,432Investment in investment subsidiaries
    
    
    15,675
    
    
    
    43,841Cash
    
    
    745
    
    
    
    Other assets
    
    
    34,596
    
    
    
    45,099Total assets
    
    $
    1,498,404
    
    
    $
    1,614,894Liabilities:Corporate debt
    
    $
    350,750
    
    
    $
    217,750Junior subordinated debentures
    
    
    175,000
    
    
    
    175,000Junior subordinated deferrable interest debentures underlying
company-obligated mandatorily redeemable capital
securities issued by unconsolidated subsidiaries
    
    
    
    
    
    
    20,619Amounts due to subsidiaries
    
    
    15,786
    
    
    
    6,896Other liabilities
    
    
    25,649
    
    
    
    53,239567,185
    
    
    
    473,504Shareholders Equity:Class A Common Stock
    
    
    489
    
    
    
    487Class B Common Stock
    
    
    60
    
    
    
    59Additional paid-in capital
    
    
    522,596
    
    
    
    509,742Accumulated other comprehensive loss
    
    
    (351,710
    )
    
    
    (42,497
    )Retained earnings
    
    
    833,927
    
    
    
    828,116Treasury stock
    
    
    (74,143
    )
    
    
    (154,517
    )931,219
    
    
    
    1,141,390Total liabilities and shareholders equity
    
    $
    1,498,404
    
    
    $
    1,614,894
  -91-




---



##### 



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 31,2008
    
    
    2007
    
    
    2006Revenue:Equity in undistributed earnings of subsidiaries
    
    $
    79,514
    
    
    $
    277,613
    
    
    $
    244,983Dividends from operating subsidiaries
    
    
    3,600
    
    
    
    3,600
    
    
    
    3,600Other (loss) income
    
    
    (450
    )
    
    
    4,373
    
    
    
    5,042Realized investment losses
    
    
    (3,160
    )
    
    
    
    
    
    
    Loss on redemption of junior subordinated deferrable
interest debentures underlying company-obligated
mandatorily redeemable capital securities issued
by unconsolidated subsidiaries
    
    
    (598
    )
    
    
    (2,192
    )
    
    
    78,906
    
    
    
    283,394
    
    
    
    253,625Expenses:Operating expenses
    
    
    14,566
    
    
    
    21,460
    
    
    
    22,447Interest expense
    
    
    31,900
    
    
    
    29,375
    
    
    
    27,65246,466
    
    
    
    50,835
    
    
    
    50,099Income before income tax (benefit) expense
    
    
    32,440
    
    
    
    232,559
    
    
    
    203,526Income tax (benefit) expense
    
    
    (4,243
    )
    
    
    68,047
    
    
    
    61,458Net income
    
    $
    36,683
    
    
    $
    164,512
    
    
    $
    142,068
  -92-




---



##### 



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 31,2008
    
    
    2007
    
    
    2006Operating activities:Net income
    
    $
    36,683
    
    
    $
    164,512
    
    
    $
    142,068Adjustments to reconcile net income to net cash
used by operating activities:Equity in undistributed earnings of subsidiaries
    
    
    (67,281
    )
    
    
    (193,797
    )
    
    
    (169,015
    )Change in other assets and other liabilities
    
    
    (13,493
    )
    
    
    5,660
    
    
    
    14,693Change in current and deferred income taxes
    
    
    5,172
    
    
    
    (9,566
    )
    
    
    (12,209
    )Amortization, principally of investments and debt
issuance costs
    
    
    1,712
    
    
    
    772
    
    
    
    1,048Net realized gains on investments
    
    
    3,160
    
    
    
    
    
    
    
    Change in amounts due from/to subsidiaries
    
    
    8,890
    
    
    
    2,113
    
    
    
    6,706Net cash used by operating activities
    
    
    (25,157
    )
    
    
    (30,306
    )
    
    
    (16,709
    )Investing activities:Purchases of investments and loans made
    
    
    (10,247
    )
    
    
    (2,709
    )
    
    
    (3,496
    )Sales of investments and receipts from repayment of loans
    
    
    26,921
    
    
    
    5,636
    
    
    
    2,073Net change in short-term investments
    
    
    12,585
    
    
    
    (2,557
    )
    
    
    (6,539
    )Sales (purchases) of investments in subsidiaries
    
    
    (60,000
    )
    
    
    1,011
    
    
    
    1,436Net cash (used) provided by investing activities
    
    
    (30,741
    )
    
    
    1,381
    
    
    
    (6,526
    )Financing activities:Borrowings under revolving credit facility
    
    
    139,000
    
    
    
    112,000
    
    
    
    31,000Principal payments under revolving credit facility
    
    
    (6,000
    )
    
    
    (158,000
    )
    
    
    (2,000
    )Proceeds from the issuance of 2007 Junior Debentures
    
    
    
    
    
    
    172,309
    
    
    
    Redemption of Junior Debentures
    
    
    (20,619
    )
    
    
    (37,728
    )
    
    
    Purchase of treasury stock
    
    
    (42,729
    )
    
    
    (62,417
    )
    
    
    (16,577
    )Other financing activities
    
    
    (13,009
    )
    
    
    2,761
    
    
    
    10,542Net cash provided by financing activities
    
    
    56,643
    
    
    
    28,925
    
    
    
    22,965Increase (decrease) in cash
    
    
    745
    
    
    
    
    
    
    
    (270
    )Cash at beginning of year
    
    
    
    
    
    
    
    
    
    
    270Cash at end of year
    
    $
    745
    
    
    $
    
    
    
    $
    
  -93-




---



##### 



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
   -94-




---



##### 



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
    
    
    Balances2008Group employee benefits products
    
    $
    139,699
    
    
    $
    2,405,518
    
    
    $
    124,376
    
    
    $
    Asset accumulation products
    
    
    125,078
    
    
    
    100,115
    
    
    
    
    
    
    
    1,327,502Other
    
    
    
    
    
    
    68,417
    
    
    
    
    
    
    
    29,430Total
    
    $
    264,777
    
    
    $
    2,574,050
    
    
    $
    124,376
    
    
    $
    1,356,9322007Group 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
    
    
    $
    1,119,218
 Benefits,Claims and
    
    
    AmortizationPremium
    
    
    Net
    
    
    Interest
    
    
    of Cost of
    
    
    Otherand Fee
    
    
    Investment
    
    
    Credited to
    
    
    Business
    
    
    OperatingIncome (1)
    
    
    Income (2)
    
    
    Policyholders
    
    
    Acquired
    
    
    Expenses (3)2008Group employee benefits products
    
    $
    1,343,023
    
    
    $
    71,230
    
    
    $
    933,215
    
    
    $
    81,961
    
    
    $
    223,004Asset accumulation products
    
    
    1,918
    
    
    
    57,923
    
    
    
    55,285
    
    
    
    (1,550
    )
    
    
    9,236Other
    
    
    39,949
    
    
    
    5,697
    
    
    
    753
    
    
    
    
    
    
    
    65,020Total
    
    $
    1,384,890
    
    
    $
    134,850
    
    
    $
    989,253
    
    
    $
    80,411
    
    
    $
    297,2602007Group 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
    
    
    $
    249,913
 
 (1)
    
    Net written premiums for casualty insurance products totaled $302.9 million, $304.5 million
and $312.2 million for the years ended December 31, 2008, 2007 and 2006, 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. 
 -95-




---



##### 



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, 2008
    
    $
    163,258,702
    
    
    $
    11,115,197
    
    
    $
    25,456
    
    
    $
    152,168,961
    
    
    
    
    %Year ended December 31, 2008:Premium and fee income:Life insurance and annuity
    
    $
    431,881
    
    
    $
    24,457
    
    
    $
    561
    
    
    $
    407,985
    
    
    
    
    %Accident and health insurance
    
    
    647,728
    
    
    
    59,055
    
    
    
    52,068
    
    
    
    640,741
    
    
    
    8
    %Casualty insurance
    
    
    287,907
    
    
    
    25,225
    
    
    
    34,579
    
    
    
    297,261
    
    
    
    12
    %Other
    
    
    38,903
    
    
    
    
    
    
    
    
    
    
    
    38,903Total premium and fee income
    
    $
    1,406,419
    
    
    $
    108,737
    
    
    $
    87,208
    
    
    $
    1,384,890Life 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
    
    
    $
    1,156,578
 -96-




---



##### 



SCHEDULE VI
 DELPHI FINANCIAL GROUP, INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION CONCERNING
PROPERTY-CASUALTY INSURANCE OPERATIONS (1)  (Dollars in Thousands)
 December 31,2008
    
    2007Deferred policy acquisition costs
    
    $
    13,961
    
    
    $
    13,169Reserves for unpaid claims and claim expenses
    
    
    1,061,046
    
    
    
    963,974Discount, if any, deducted from above (2)
    
    
    592,940
    
    
    
    490,808Unearned premiums
    
    
    116,140
    
    
    
    110,719
 Year Ended December 31,2008
    
    2007
    
    2006Earned premiums
    
    $
    297,300
    
    
    $
    305,305
    
    
    $
    302,373Net investment income
    
    
    48,245
    
    
    
    84,712
    
    
    
    76,602Claims and claim expenses incurred related to:Current year
    
    
    152,069
    
    
    
    155,052
    
    
    
    136,134Prior years (3)
    
    
    27,111
    
    
    
    37,443
    
    
    
    70,060Amortization of deferred policy acquisition costs
    
    
    31,556
    
    
    
    32,958
    
    
    
    29,896Paid claims and claim adjustment expenses
    
    
    78,794
    
    
    
    93,914
    
    
    
    97,283Net premiums written
    
    
    302,979
    
    
    
    304,845
    
    
    
    312,129
 
 (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 2008, 2007 and 2006, 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, partially offset by the accrual of additional discount with respect to prior
years reserves. The Companys insurance policies do not provide for the retrospective
adjustment of premiums based on claim experience. -97-