- Amended Annual Report (10-K/A)
July 30 2009 - 5:16PM
Edgar (US Regulatory)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-K/A
(Amendment No. 1)
(Mark One)
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þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For
the Fiscal Year Ended
December 31, 2008
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
Commission File Number
001-11462
DELPHI FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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(302) 478-5142
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13-3427277
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(State or other jurisdiction of
incorporation or organization)
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(Registrants telephone number,
including area code)
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(I.R.S. Employer Identification
Number)
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1105 North Market Street, Suite 1230, P. O. Box 8985, Wilmington, Delaware
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19899
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(Address of principal executive offices)
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(Zip Code)
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which registered
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Class A Common Stock, $.01 par value
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New York Stock Exchange
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8.00% Senior Notes due May 15, 2033
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New York Stock Exchange
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7.376% Fixed-to-Floating Rate Junior Subordinated Debentures due May 1, 2067
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New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. Yes
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No
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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. Yes
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No
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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports) and (2) has been subject
to filing requirements for the past 90 days. Yes
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No
o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of the Registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer
þ
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Accelerated filer
o
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Non-accelerated filer
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(Do not check if a smaller reporting company)
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Smaller reporting company
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
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No
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The aggregate market value of the voting stock held by non-affiliates of the Registrant as of June
30, 2008 was $947,929,568.
As of February 13, 2009, the Registrant had 41,259,654 shares of Class A Common Stock and 5,753,833
shares of Class B Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Registrants 2009 Annual Meeting of Stockholders are
incorporated by reference into Part III of this Form 10-K.
TABLE OF CONTENTS
Explanatory Note
The Registrant is filing this Amendment No. 1 on Form 10-K/A to its Annual Report on Form 10-K for
the year ended December 31, 2008, as filed with the Securities and Exchange Commission on March 2,
2009 (the 2008 Form 10-K), for the sole purpose of correcting calculation errors relating to
certain of the diluted book value per share amounts set forth under the Other Data heading in the
table contained in Part II, Item 6 (Selected Financial Data). These errors did not affect any
financial information other than diluted book value per share. The remainder of Part II, as well
as Parts I, III and IV, have not changed and can be found in the 2008 Form 10-K. This Form 10-K/A
does not reflect events occurring after the 2008 Form 10-K, nor does it modify or update the
disclosures and information contained in the 2008 Form 10-K in any way other than described in this
Explanatory Note.
Item 6. Selected Financial Data
The selected financial data below should be read in conjunction with Item 7 Managements
Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated
Financial Statements and related notes.
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Year Ended December 31,
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2008
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2007
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2006
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2005
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2004
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(dollars and shares in thousands, except per share data)
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Income Statement Data
(1)
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Insurance premiums and fee income:
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Core group employee benefit products
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$
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1,310,007
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$
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1,227,934
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$
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1,081,671
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$
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936,244
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$
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784,990
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Non-core group employee benefit
products
(2)
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33,016
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39,658
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42,455
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24,918
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16,066
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Asset accumulation products
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1,918
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2,666
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3,438
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3,220
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3,335
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Other
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39,949
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33,903
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29,014
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25,829
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23,686
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1,384,890
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1,304,161
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1,156,578
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990,211
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828,077
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Net investment income
(3)
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134,850
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270,547
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255,871
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223,569
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202,444
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Net realized investment (losses)
gains
(4)
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(88,177
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(1,897
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(858
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9,003
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15,460
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Loss on redemption of junior subordinated
deferrable interest debentures
(5)
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(598
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(2,192
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Total revenue
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1,430,965
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1,570,619
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1,411,591
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1,222,783
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1,045,981
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Income from continuing operations
(6)
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36,683
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164,512
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145,003
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126,684
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121,400
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Net income
(6)
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36,683
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164,512
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142,068
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113,334
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123,543
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Basic Results Per Share
(1) (6)
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Income from continuing operations
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$
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0.76
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$
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3.27
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$
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2.92
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$
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2.58
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$
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2.53
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Net income
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0.76
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3.27
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2.86
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2.31
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2.58
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Weighted average shares outstanding
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48,278
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50,269
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49,631
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49,008
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47,928
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Diluted Results Per Share
(1) (6)
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Income from continuing operations
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$
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0.75
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$
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3.19
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$
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2.85
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$
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2.52
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$
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2.46
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Net income
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0.75
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3.19
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2.79
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2.25
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2.50
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Weighted average shares outstanding
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48,963
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51,579
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50,939
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50,267
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49,412
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Other Data:
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Cash dividends paid per share
(7)
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$
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0.39
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$
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0.35
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$
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0.31
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$
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0.24
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$
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0.20
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Diluted book value per share
(8)
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17.05
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23.28
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23.70
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20.96
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19.57
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December 31,
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2008
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2007
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2006
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2005
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2004
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(dollars in thousands)
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Balance Sheet Data:
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Total investments
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$
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4,654,923
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$
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4,987,868
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$
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4,483,380
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$
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3,912,604
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$
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3,541,076
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Total assets
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5,953,873
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6,094,810
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5,670,475
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5,276,170
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4,829,467
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Corporate debt
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350,750
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217,750
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263,750
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234,750
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157,750
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Junior subordinated debentures
(9)
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175,000
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175,000
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Junior subordinated deferrable interest
debentures underlying company-obligated
mandatorily redeemable capital securities
issued by unconsolidated subsidiaries
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20,619
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59,762
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59,762
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59,762
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Shareholders equity
(10)
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820,579
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1,141,390
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1,174,808
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1,033,039
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939,848
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Corporate debt to total capitalization
ratio
(11)
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26.1
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%
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14.0
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%
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17.6
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%
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17.7
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%
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13.6
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%
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(1)
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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.
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- 1 -
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Net income includes (loss) income from discontinued operations, net of federal income tax
(benefit) expense, as follows:
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Year Ended December 31,
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2008
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2007
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2006
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2005
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2004
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(dollars in thousands, except per share data)
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(Loss) income from discontinued operations, net of
income tax (benefit) expense
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$
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$
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$
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(2,935
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$
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(13,350
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$
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2,143
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Basic per share amount
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(0.06
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(0.27
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0.05
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Diluted per share amount
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(0.06
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(0.27
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0.04
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(2)
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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.
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(3)
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Extraordinary volatility in the investment markets in 2008 resulted in a significant decrease
in net investment income. See Introduction in Part I, Item 7 Managements Discussion and
Analysis of Financial Condition and Results of Operations.
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(4)
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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.
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(5)
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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.
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(6)
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During the second half of 2004, the Companys income taxes payable was reduced by $6.6
million primarily from the favorable resolution of Internal Revenue Service (IRS) audits of
the 1998 through 2002 tax years. This reduction represented the release of previous accruals
for potential audit adjustments which were subsequently settled or eliminated and the further
refinement of existing tax exposures.
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Income from continuing operations and net income include realized investment (losses) gains, net
of federal income tax (benefit) expense and the loss on redemption of junior subordinated
deferrable interest debentures, net of federal income tax benefit, as follows:
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Year Ended December 31,
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2008
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2007
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2006
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2005
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2004
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(dollars in thousands, except per share data)
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Net realized investment (losses) gains, net of income tax
(benefit) expense
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$
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(57,315
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$
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(1,233
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$
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(558
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$
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5,852
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$
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10,049
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Basic per share amount
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(1.19
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)
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(0.03
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(0.01
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0.11
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0.21
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Diluted per share amount
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(1.17
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)
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(0.02
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(0.01
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0.12
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0.21
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Loss on redemption of junior subordinated deferrable
interest debentures, net of income tax benefit
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$
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(389
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)
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$
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(1,425
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)
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$
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$
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$
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Basic per share amount
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(0.01
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)
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(0.03
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Diluted per share amount
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(0.01
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)
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(0.03
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(7)
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In 2001, the Companys Board of Directors approved the initiation of a quarterly cash
dividend payable on the Companys 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 Companys Board of Directors
increased the cash dividend to $0.06 per share. In the first quarter of 2006, the Companys
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
Companys Board of Directors increased the cash dividend to $0.09 per share. During the second
quarter of 2008, the Companys 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.
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(8)
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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.
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(9)
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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.
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(10)
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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.
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(11)
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The corporate debt to total capitalization ratio is calculated by dividing long-term
corporate debt by the sum of the Companys 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.
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- 2 -
Item 15. Exhibits
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31.1
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Certification by the Chairman of the Board and Chief Executive Officer of Periodic Report
Pursuant to Rule 13a-14(a) or 15d-14(a)
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31.2
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Certification by the Senior Vice President and Treasurer of Periodic Report Pursuant to Rule
13a-14(a) or 15d-14(a)
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
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Delphi Financial Group, Inc.
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By:
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/s/ ROBERT ROSENKRANZ
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Chairman of the Board and
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Chief Executive Officer
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By:
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/s/ THOMAS W. BURGHART
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Thomas W. Burghart
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Senior Vice President and Treasurer
(Principal Accounting and Financial Officer)
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Date: July 30, 2009
- 3 -
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