Delphi's asset accumulation business took advantage of favorable conditions in our wholesaler distribution channel to increase annuity sales and funds under management while maintaining targeted interest rate spreads. We continued to invest in our businesses to position Delphi for continued growth in profits, particularly as the economy improves and payroll growth eventually follows.

Safety National

Safety National achieved strong top-line growth in 2010, with core premiums rising 9% to $341 million through a combination of strong growth in newer product offerings and continued success in our leading product, excess workers' compensation.

Premiums from our assumed workers' compensation and casualty reinsurance line grew 51% to surpass $51 million. In this product line, we leverage Safety National's deep expertise in underwriting excess layers of workers' compensation by participating in reinsurance treaties with mostly smaller regional workers' compensation insurers. We have been writing this line of business since 2000 and have expanded it rapidly in the past three years. As this book of business gets larger, we do not expect premiums to grow at the rate we reported in 2010, but we do expect further strong growth from this line. Pricing has been favorable and we are achieving excellent underwriting margins.

In Safety National's largest product line, excess workers' compensation for self-insured employers, premiums grew 4% to a record $290 million and production rose 5% to $47 million. We continued to expand our leading market share position, accounting for 27% of the U.S. market in 2010 compared to 25% in 2009 and 22% in 2008. The competitive environment remains favorable as there continue to be meaningful barriers to profitable entry, including our proprietary database, underwriting expertise and strong broker relationships. Despite high unemployment levels in the U.S., Safety National experienced payroll growth in our customer base during 2010, since roughly twothirds of Safety National's book of business is in less economically sensitive sectors, including health care, government entities and education.

Excess workers' compensation remains Delphi's most profitable insurance line, representing 21% of premiums in our group employee benefits insurance segment and 46% of operating profits from this segment. This is due to the long buildup of our insurance reserves and the resulting compounding of investment income. Safety National's average self-insured retention (SIR), the important attachment point where the risk shifts from our client to us, is now over $520,000. Since the self-insured client makes all payments until the SIR is reached, over half of our excess workers' compensation claim payments are made more than 17 years after the claim is incurred. The average SIR for Safety National's customer base has risen substantially over the past decade, which is having a favorable impact on our loss ratios as we take in more premiums for less risk.

We believe Safety National's margins will continue to be attractive as the market for excess workers' compensation stayed firm in the January 2011 renewal period. Safety National typically writes 25% to 30% of its business in January. We selectively increased rates for excess workers' compensation in 2011 to maintain our targeted returns in a low interest rate environment. These pricing actions helped drive the average rates on January renewals up 2%. We also achieved a 2% increase in the average SIR, along with high levels of production, strong renewals of our customer base and a modest increase in payrolls. Sales growth benefited from increased quoting activity resulting from our new Large Casualty Program, which has greatly expanded Safety National's target market. Through this program we now have the ability to sell our large deductible workers' compensation product in a package with auto liability and general liability, which is how the majority of large employers purchase these coverages. We believe this represents an attractive long-term growth opportunity for Safety National as we continue to gain wider recognition as a market leader in providing alternative market solutions for workers' compensation.

Reliance Standard

Reliance Standard's premiums and production were impacted in 2010 by an intensified competitive environment brought on by weak payroll growth across all segments of the U.S. economy, particularly in the first half of the year. Core premiums declined 2% to $1.02 billion and core production grew 4% to $239 million, well below our historical growth rates, as we remained focused on profitability. We were pleased, however, that Reliance Standard's premiums and production rose in the second half of 2010, as competitive pressures eased somewhat in our key small case market niche. We have been encouraged by recent data from ADP employment surveys showing accelerating growth in payrolls among smaller companies with less than 500 employees. Reliance Standard continues to enjoy significant competitive advantages in the small case market, including our strong broker relationships and our technology platform that automates a large part of the underwriting process for cases with less than 300 employees, enabling our sales force to respond rapidly to broker requests for quotes.

We believe high unemployment rates contributed in 2010 to an industry-wide increase in long-term disability (LTD) claims incidence, which affected Reliance Standard in the second half of the year. Although severity and termination rates (which measure how quickly claims are closed) were in line with our expectations, the higher LTD claims incidence resulted in an elevated group employee benefits segment loss ratio for 2010. The increased claims were primarily related to soft tissue and musculoskeletal disorders – neck and back pain, joint and muscle disorders – that are the most common causes for new LTD claims industry-wide according to the Council for Disability Awareness. Reliance Standard has responded to this claims trend by applying with increased vigilance our core principles of thorough underwriting, pricing discipline and continuous improvement in our risk evaluation process. We have increased our manual rates and are pursuing an aggressive pricing strategy on renewal of cases that have poor experience. These actions could constrain Reliance Standard's premium growth in 2011, but we believe they are necessary. As we continue to actively address this issue, we expect that our loss ratio will trend down over the course of 2011 and that the full-year ratio will be similar to full-year 2010. Longer-term, we expect that Reliance Standard's small case focus and underwriting discipline, along with general improvement in the economy, will enable us to return to our historical underwriting margins.

Voluntary products continue to be a growing portion of Reliance Standard's business, as employers seek to control costs by shifting some or all of the cost of group insurance coverage to employees. Premiums from voluntary products represented 15% of Reliance Standard's total core premiums in 2010, up from 14% in 2009. We continue to invest in new product development to ensure that we have a full suite of attractive voluntary products to meet employers' needs.

Premiums from Reliance Standard's turnkey disability division, Custom Disability Solutions, declined to $51 million in 2010 from $56 million in the prior year, primarily due to the loss of one large client in the second half of 2009. In this division, we partner with large health and life insurers who want to offer disability coverage to their customers but do not have the internal capability. We provide our partners with coverage on a private label basis, with Custom Disability Solutions handling all underwriting, pricing and claims management. The sales cycle for adding new turnkey partners is long, but we remain optimistic about future growth opportunities. Custom Disability Solutions is one of the largest turnkey disability operations in the U.S. and continues to provide us with significant alternative distribution to the profitable small case market.

Matrix/Integrated Employee Benefits

Delphi's Integrated Employee Benefits (IEB) program, targeted at larger companies, generated revenues of $308 million in 2010, a gain of 9% from the prior year. About 90% of this revenue consists of insurance premiums, primarily from Reliance Standard products, which are bundled with absence management services from our Matrix Absence Management subsidiary. The IEB program allows us to differentiate our insurance products and maintain attractive margins by avoiding the purely price-driven competition that is typical in selling insurance to larger companies. Matrix remains a market leader in helping companies improve productivity by reducing days lost to employee absence from sickness or injury. We also continue to benefit from the growing trend among larger companies of outsourcing benefits management functions such as Family and Medical Leave Act compliance.

"Delphi's insurance and asset accumulation businesses are well-positioned to achieve consistent long-term earnings growth."

Our IEB production was impacted in the first half of 2010 by intense competition and a longer sales cycle, as payrolls of larger companies were under pressure. Production rebounded in the second half of the year as we experienced an increase in quoting activity. In the fourth quarter of 2010, we had the first sale of our next generation of the IEB program, called RelianceONE. This new offering includes an employee wellness component offered in partnership with AllOne Health, a national leader in workforce health and productivity management. RelianceONE was well received in its rollout during 2010 and we expect it to help us continue to compete effectively in the larger case market.

Asset Accumulation

Reliance Standard achieved a 52% increase in annuity sales in 2010, surpassing $377 million, and funds under management at year-end grew 21% over the prior year to $1.7 billion. We continue to have the advantage of being opportunistic in this business since we have minimal overhead and no captive sales force. Reliance Standard distributes its annuity products through a network of independent wholesalers that contract with retail agents focusing primarily on the retiree market. Our sales in 2010 benefited from market disruption in the second half of the year in our wholesaler distribution channel, as certain competitors had ratings downgrades or exited the market.

Reliance Standard remained disciplined during 2010 in setting crediting rates to hit our target spreads of 150 to 250 basis points. Operating profits for the segment rose 12% to $47 million, representing 16% of Delphi's total operating profits, boosted by improved investment performance. We believe this segment will continue to provide Delphi with a strong profit contribution based on the outlook for continued strong demand for fixed annuities versus competing products such as bank CDs.

Outlook

We believe Delphi's insurance and asset accumulation businesses are well-positioned to achieve consistent long-term earnings growth. While we expect topline growth in our insurance businesses to remain challenged in 2011 due to weak payroll growth, we believe Safety National and Reliance Standard will continue to capitalize on their leading positions in their niche markets. Delphi is well-capitalized and able to support the growth of our insurance and asset accumulation businesses, including further expansion of our product offerings and distribution capabilities.

Respectfully submitted,

Donald A. Sherman

President and Chief Operating Officer