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Delphi Financial Group. Q1 2010 Earnings Call Transcript

Delphi Financial Group. Q1 2010 Earnings Call Transcript

Delphi Financial Group. (DFG)

Q1 2010 Earnings Conference Call

April 28, 2010 11:00 AM. ET


Robert Rosenkranz - Chairman and Chief Executing Officer

Bernie Kilkelly - Vice President of Investor Relations

Donald Sherman - President and Chief Operating Officer


Ryan Krueger – KBW

Beth Malone - (Wonder Leslie)

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Ladies and Gentlemen, thank you for standing by, and welcome to the first quarter 2010 earnings conference call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator instructions). And also as reminder today’s teleconference is being recorded.

And at this time, I will turn the conference call over to your host, Chairman, Mr. Robert Rosenkranz. Please, go ahead, sir.

Robert Rosenkranz

Thank you, and welcome to Delphi Financial’s first quarter 2010 conference call. The earnings release was distributed last evening and it’s posted on the company’s web site, along with the first quarter financial supplement. This call is also being broadcast live on our web site

Participating in the call this morning with me are Don Sherman, Delphi’s President and Chief Operating Officer, Nita Savage, Vice President of Finance, Bernie Kilkelly, Vice President of Investor Relations, and our colleagues at Reliance Standard Life, Safety National, and Matrix.

Before we get into the call, I want to take a moment to recognize Bob Smith. We announced last week he is retiring from Delphi. I know that many of you who known Bob over the year and join us and wishing him happy and fulfilling retirement. One of Bob’s many achievements with Delphi is the strong team he developed, overseeing investment and financial strategy, corporate development and investor relations.

Those executives include Nita and Bernie will now report to Don Sherman. Also participating with us in the call this morning is Rick Waldus [ph] who will now report to Don in our investment area. Now do I call and I am going to ask Bernie to read the Safe Harbor statement.

Bernie Kilkelly

Thanks, Bob and good morning, everyone. For those listening to a replay of this call that is being held on April 28, 2010. It contains time sensitive information that is current only as of this date. Statements made in this call relating to the future operations, performance goals, and expectations of the company, as opposed to historical facts, are forward-looking statements under the Federal Securities laws.

These statements are based on assumptions and estimates by the Company that are subject to various uncertainties and contingencies. Discussions of these risk factors can be found in our first quarter 2010 earnings release yesterday and our 2009 Form 10-K.

These factors could cause the company's actual results to differ materially from those expressed in any forward-looking statements made during this call and should be considered carefully. The company specifically disclaims any duty to update forward-looking statements made in this call.

In addition, certain non-GAAP financial measures will be discussed on this call. The comparable GAAP financial measures, along with reconciliations to such measures, are contained in our first quarter earnings release and financial supplement accessible on the company’s web site.

Now, I’ll turn the call back to Bob.

Robert Rosenkranz

Thanks Bernie. Delphi had an excellent first quarter, with strong growth and operating earnings and record high levels of shareholders' equity and book value per share. Operating earnings increased 22% from last year’s first quarter, driven by robust investment results and strong underwriting profits.

We more than offset the dilution from our equity offerings last year, and delivered EPS of $0.86 versus $0.81 in last year’s first quarter. We achieved operating return on beginning equity of 14% in the quarter, which is at the high end of our target range.

This morning we’re going to cover four main topics. First, I’m going to ask Don to review the performance of our insurance and asset accumulation businesses during the quarter. Second, I’ll discuss our investment performance. Third, I’ll be reviewing our balance sheet and the capital positioning. And final, I’ll discuss the outlook for the remainder of 2010 in longer term.

And of course, after our remarks we’ll be happy to answer your questions. So, now I would like to turn it over to Don.

Donald Sherman

Thanks, Bob and good morning, everyone. Underwriting profits in our insurance operations were inline with our expectations in the first quarter. Our combined ratio on the quarter was 94.1% compared with 93.2 in last year’s first quarter. Our loss ratio continued to improve in the quarter declining 80 basis points to 68.6%. Loss ratios that Reliance Standard Life improved and we have not seen any impact from the recession on disability claims, incidence or severity.

Expense ratio on the quarter increased to 25.5% from 23.8. This increase was mostly due to the impact of lower premiums in the quarter at Reliance Standard, as well as a modest amount for the investments we’ve made in new products or I should say continue to make a new product at Safety National which I’ll talk about shortly.

We continued to believe that the combine ratio level that we’ve achieved in 2009 in the range of 93% is achievable for the foreseeable future.

Turning now to premiums, our core employee benefit premium level declined 3% in the quarter to 333 million. Looking first at Safety National, we were pleased that Safety achieved to 7% increased in premiums. The increased was driven by 73% increase in our assumed to workers' compensation and casualty reinsurance line, which grew to a 11 million in premiums in the quarter.

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