Delphi Financial Beats Estimates

Excluding items, earnings came in at $54.9 million, or $1.09 per share, versus $39.5 million, or $0.81 per share, in the prior-year quarter. Premium and fee income, as well as investment income, contributed to the top-line growth.

Results bettered our consensus expectation. The Street expected $0.79 in earnings whereas our expectation hovered around $0.75 per share.

Delphi's premiums and fee income has been widening over the last few quarters. Premium and fee income amounted to $352.4 million, up from $340.8 million last year.

Increased yield, as well as increased invested assets, led to an increase in net investment income to $92.0 million from $60.8 million last year. The tax equivalent yield on the investment portfolio was 7.9%, versus 5.4% last year.

Diluted book value per share was $21.28, compared with $18.41 last year. Return on equity improved to 25.5%, versus 14.7% last year.

The $51 million stock offering in April this year would bolster Delphi's capital levels and provide flexibility for future growth. We are concerned with the company's above-average exposure to residential mortgage-backed-securities and asset-backed-securities in its investment portfolio. Given the market condition, top line will show restricted growth.

Thus we would recommend to Hold the shares.

Peer StanCorp Financial (SFG - Analyst Report) last week reported earnings of $1.29 per share, surpassing the Street's expectation.