Zacks_Analysts' Blog : Delphi Sells Shares - Analyst Blog

Delphi Financial (DFG) commenced a $63 million common stock offering for sale to the general public on Monday. Underwriters have a 30-day option to purchase up to an additional 15% of common stock from the company to cover over-allotments, if any.

 

Proceeds from the sale will qualify as tangible common equity and Tier 1 regulatory capital. Delphi intends to use the proceeds for general corporate purposes. Barclays Capital will act as sole book running managers for the offering.

 

Delphi had exposure to the current credit market turmoil, which can be seen in the material decline in the company’s GAAP equity and earnings as well as the diminished quality of capital in the company's insurance subsidiaries. In April this year, the company offered 10 million shares at $17.50 each.

Despite reporting a profit in 2008, Delphi's equity declined by $320 million, or 28%, to $820 million primarily due to unrealized losses on its investment portfolio. Particular areas of concern in Delphi's investment portfolio for additional losses are its above-average exposure to residential mortgage-backed securities and asset-backed securities.

The latest offering comes as a measure to top up Delphi‘s capital levels. It will also bolster the company’s tangible common equity ratio, providing flexibility for future growth.

Delphi competes with Conesco Inc. (CNO), Stancorp Financial Group Inc. (SFG) and American Equity Investment Life Holding Co. (AEL).