Acquisition of The Delphi Financial Group, Inc.

by Tokio Marine Holdings, Inc.

Course Title & Number: Mergers & Acquisitions, FI 317 SF1

Course Term: Spring 2012

Instructor: Professor Scott Buchanan

MBA Candidate: M. Scott Green

Mid-Term Project : February 29, 2012

In Partial Fulfillment to Meet the Requirements for the

Master of Business Administration Degree in Finance

at the Edward Ageno School of Business,

Golden Gate University

Merger and Acquisition Valuation Assessment Analysis Report

General Overview of Acquisition Proposal and Formal Prospectus

Continued Expansion of International Operations by Tokio Marine: Complimentary Addition

to Existing U.S. Operations

Principals Involved:

α Tokio Marine Holdings, Inc:

Financial Advisor: Macquerie Capital

External Legal Counsel: Sullivan & Cromwell LLP

β Delphi Financial Group, Inc:

Financial Advisor – Special Committee of IDBoDs: Lazard

External Legal Counsel – Special Committee: Cravath, Swaine, & Moore, LLP

External Legal Counsel - Delphi: Morris, Nichols, Arsht, & Tunnell LLP

Formal Announcement Date: December 21, 2011

Definitive Agreement Offer Amount: $2.7 Billion

Expected Official Closing Date: Second Quarter of 2012

Brief Historical PerspectivesBrief Historical Perspectives: Tokio Marine Holdings, Inc. (Acquirer) and Delphi Financial Group, Inc. (Target)

Holding Company Name: Tokio Marine

Holding, Inc.

Main Operating Holding Company: Tokio

Marine Group

Major Subsidiary (s) Name:

Tokio Marine & Nichido Fire (JP)

Philadelphia Consolidated (US)

Kiln Group at Lloyd’s (UK)

Founding/Incorporation: Founded in 1879

as Tokio Marine & Nichido Fire; Incorporated

in April 2002, Japan

NAICS Description: Direct Property Casualty

and Insurance Carriers

Holding Company Name: Delphi Financial

Group, Inc.

Major Subsidiary (s) Name:

Reliance Standard Life Insurance

Company (US) – Employee Benefits

Safety National Casualty Corporation

(US) – Workers’ Compensation

Matrix Absence Management, Inc.

(US) – Auxiliary for Employee Benefits

Founding/Incorporation: Incorporated in

November1987, United States

NAICS Description: Direct Life Insurance

Carriers; specialty involves employee

benefits

General Overview: Industry Standards and Market Performance Analysis(as of December 2011)

Delphi Financial Organization’s Chairman

& CEO: Robert Rosenkranz

# of Employees: 1,885

Global Reach: Exclusively in U.S.

Stock Exchange & Trade Symbol: NYSE;

DFG

Recent Closing Price & Beta: $44.56; 1.94

# of Shareholders: 2,600

# of Major Institutional Holders: 25

Industry Type (US – IBIS World IR

#52412): Property, Casualty, and Direct

Insurance

Similar Industries:

Life Insurance & Annuities

Reinsurance Carriers

Workers’ Compensation and Other

Insurance Funds

Brief Historical Perspectives Continued…

Tokio Marine Organization’s President:

Shuzo Sumi

# of Employees: 29,758

Global Reach: approximately 40 countries

Stock Exchange & Trade Symbol: TSE and

OSE; TMHD

Recent Closing Price & Beta: $25.89; 0.9659

# of Shareholders: 95,509

# of Major institutional Holders: 10

Competitive Landscape - Industry

Leaders (per market share):

1. State Farm Insurance (11.4%)

2. Liberty Mutual Group (5.6%)

3. The Travelers Companies (5.2%)

4. Allstate Insurance Companies

(5.2%)

5. AIG (4.0%)

General Overview: Industry Standards and Market Performance Analysis Continued…

(as of December 2011)

Supply Chain:

A. Key Buying Industries:

Mining

Wholesale Trade

Information

Education Services

Consumers

B. Key Selling Industries:

Reinsurance Carriers

Insurance Brokers & Agencies

TPAs & Insurance Claims

Adjusters

Product and Services Segmentation:

P & C Ins (personal): 39.9%

P & C Ins (Commercial): 37.6%

Reinsurance: 8%

Workers’ Compensation Ins: 5%

Market Segmentation:

Personal: 51.5%

Commercial: 40.5%

Top 5 Business Locations (US):

Industry Establishments versus

Population Trends (% ranking):

1. Southeast

2. West

3. Great Lakes

4. Mid-Atlantic

5. Southwest

Barriers to Entry Checklist: Level

Competition High

Concentration Low

Life Cycle Stage Mature

Capital Intensity Cost Ratio (0.13:1 cap to labor) Medium

Technology▲ (over 87% online auto ins since ‘04) High

Regulation & Policy Heavy

Industry Assistance None

General Overview: Industry Standards and Market Performance Analysis Continued…

(as of December 2011)

KPIs: Financials: Revenue Volatility -

Medium

Revenue: $515.6 billion

Profit: $51.6 billion

Annual GR (2006-2011): - 1.4%;

However, improved to 9.6% in 2011

Projected YGR (2011-2016): - 2.4%

Key External Drivers:

# of Motor Vehicle Registrations

Homeownership Rate

Natural Disaster Index

Yield on 10-Year Treasury Bond

Regulation: NAIC, UCAA, IRS, FASB, SAP

(more conservative than GAAP), TRIA of

2002,

S & P 500 (17% of investment income;

Revenue Volatility: 8.5% of industry

revenue by premium investment)

Health and Medical Insurance Industry: Geographic Breakdown of Uninsured Rate

RegionPopulation

(billion)Uninsured

(billion) Uninsured (%)USA 298.575 45.419 15.1West 50.799 8.650 17.0Rocky Mountains 10.530 1.769 16.8Plains 19.794 2.156 10.9Southwest 35.732 8.052 22.5Southeast 75.012 12.756 17.0Great Lakes 45.682 5.462 12.0Mid-Atlantic 46.939 5.215 11.1New England 14.083 1.021 7.2

*Data based on 2008 (latest data available) US Census Health Insurance Coverage Working Paper on personal healthcare expenditures

SOURCE: US CENSUS BUREAU

Life Insurance and Annuities Industry: Geographic spread of premiums

Region

Life insurance

(%)Annuities

(%)

Disability/LTC

insurance (%)

Deposit-type funds

(%)West 15 14 14 4

Rocky Mountains 3 3 4 3Plains 8 7 9 13Southwest 10 9 13 2Southeast 24 22 25 6Great Lakes 15 16 17 6Mid-Atlantic 20 22 13 55New England 5 7 5 11SOURCE: NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS

Financial Comparative Analysis: Stock Performance

Pre-Merger Deal Structuring & Partial Due Diligence Comparative Analysis

Tokio Marine Delphi Financial

Stock Price and Valuation (Data as of

02/03/2012)

Tokio Marine vs. Delphi Financial

(Performance Assessment)

Stock Price and Valuation (Data as of

02/03/2012)

Market Cap(mil) 20,065 9 Market Cap(mil) 2,177Share Outstanding(000's) 775,000 16 Share Outstanding(000's) 48,845Dividend Per Share(TTM) 0.6294 34% Dividend Per Share(TTM) 0.47Last Closing Price 25.89 -42% Last Closing Price 44.56

Management Effectiveness

Management Effectiveness

Revenue per Employee 110,692 8 Revenue per Employee 921,617Net Income per Employee 2,417 38 Net Income per Employee 91,855ROA % (Net) 0.43 -82% ROA % (Net) 2.36ROE % (Net) 3.55 -70% ROE % (Net) 11.72

Profitability Ratios Profitability Ratios

Calculated Tax Rate % 32.48 42% Calculated Tax Rate % 22.92Yield on Investment 1.71 -70% Yield on Investment 5.71Profit Margin (TTM) 2.18 -78% Profit Margin (TTM) 9.97

Valuation Ratios Valuation Ratios

Price/Earnings (TTM) 23.98 3 Price/Earnings (TTM) 9.21Price/Book (TTM) 0.89 1 Price/Book (TTM) 0.98Price/Cash Flow(TTM) 11.95 3 Price/Cash Flow(TTM) 4.4

Asset Management Asset Management

Total Asset Turnover 0.19 1.3 Total Asset Turnover 0.24Cash & Equivalents Turnover 7.09 3.5 Cash & Equivalents Turnover 25.13

Debt Management Debt Management

Total Debt/Equity 0.07 -82% Total Debt/Equity 0.38Liquidity Indicators Liquidity Indicators

Free Cash Flow per Share 166.70 25 Free Cash Flow per Share 6.56Revenue to Assets 0.20 -9% Revenue to Assets 0.22

Acquisition Initiative, Purpose, and Expectations(Summary of Pre-Acquisition Initiative: Primary Advantage of Consolidation/Merger)

Tokio Marine Holdings Delphi Financial Group

Fortifies existing U.S. property and casualty market presence

Improved financial robustness and expand niche or focus market base to Hybrid form

Effectuates as a product and service enhancer

More comprehensive international market acumen

Accelerates entrance into U.S. life insurance market

Create competitive advantage for Tokio Marine U.S. operations through leveraged partnership alliance

• Incentivize and empower Delphi Financial to seek future acquisition opportunities and enlarge acquisition transaction portfolio

Facilitate expansion and diversification of revenue streams and market serviceability for Tokio Marine

Acquisition Initiative, Purpose, and Expectations Continued…Deal Structuring Process

Preliminary Analysis (February 2012 financial performance data where indicated):

Historical Event: First significant U.S. acquisition since 2008

Pro Forma Basis Ascription: TMHD’s 2011 fiscal total adjusted earnings would increase from 37% to 46%, due to international insurance business from DFG

New Business Operation Model Directive: Merger value exceeds ‘Stand-Alone’ value

Corporate Culture: Mutual respect and encouraged autonomy

Target Company (DFG) Debt Highlights:

$250,000,000 corporate debt - 7.875% senior notes, maturing

Jan. 31, 2020 (pari passu, or equal step or footing)

$175,000,000 junior subordinated debentures, bearing interest

at a fixed rate of 7.376%, payable until May 15, 2017

After which the $175,000,000 junior subordinated debentures,

bearing interest at a variable rate equal to LIBOR for three-

month U.S. dollar deposits plus 3.19%, due on May 15, 2037

Transaction Process and PR

Approval Process for TMHD:

Unanimous approval by BoDs of TMHD

and Special Committee of IDs of DFG

SC determine transaction fair and in

best interest of Class A shareholders

Approval Process for DFG:

Approved by DoDs of DFG

Subject to approval by Delphi

shareholders, plus majority of Class A’s

Subject to approval by Mr. Rosenkranz

(49.9% of Delphi votes), Delphi’s BoDs

and their affiliates

Various regulatory authorities in U.S.

and Japan

Deal Announcement - Press Conferences:

TMHD press conference separately in

Japan

DFG teleconference for investment

community with webcast feeds

Payment Mechanism, Communication, & Contingency Plans

Transaction Terms - Form of Payment: Cash &

Borrowings

Total Purchase Price/Enterprise Value:

TMHD acquires 100% of DFG’s

outstanding Class A shares @ $43.875

and Class B shares @ $52.875

Post-closing special one-time cash

dividend payment to Delphi shareholders

of $1.00 per share

Delphi shareholders continue receiving

regular quarterly dividend up to closing

Forward-Looking Statements

Q & A Session and References

Business Wire, Inc. (2012). Newswire.com: Tokio Marine Holdings to Acquire Delphi Financial Group in $2.7 Billion Transaction. Retrieved on January 14, 2012 from (http://

www.businesswire.com/news/home/20111220006644/en/Tokio-Marine-Holdings-Acquire-Delphi-Financial-Group)

MSPmentor.com (2012). The Ultimate Guide to Managed Services. Retrieved on February 6, 2012 Fromhttp://www.mspmentor.net/2011/12/21/mergers-and-acquisitions-two-east-coast-msps-in-discussions/

Cutcaster.com (2007-2011). Images: Vector of Businessman Holding United States and Japan. Retrieved

on February 6, 2012 From

http://cutcaster.com/vector/100684413-Businessman-Holding-United-States-and-Japan-Internet-Flag

Bell, B (2012). SynEARTH.network: Images. Retrieved February 6, 2012 From

http://synearth.net/2009/02/20/what-is-the-synergic-mode-of-thinking-2

5thrirtyone (2007 – 2011). Vectorise Logo: My Vector Hub: Tokio Marine. Retrieved on February 6, 2012

From http://vectorise.net/logo/2010/06/17/tokio-marine

Here Is The City (HITC).com (2012). Business: People & Firms: Delphi Financial Group, Inc. Retrieved on

February 6, 2012 from http://hereisthecity.com/2011/06/22/

Yahoo!, Inc. (2012). Yahoo Finance.com: Quotes Delphi Financial Group, Inc. Retrieved on February 6,

2012 from http://finance.yahoo.com/q?s=DFG&ql=1

The Financial Times, Ltd. (2011). Financial Times.com:/Marketsdata: Tokio Marine Holdings, Inc. Retrieved

on February 6, 2012 from http://markets.ft.com/Research/Markets/Tearsheets/Business-

profile?s=8766:TYO