- 3 -

The reserving process requires management to continuously monitor and evaluate the life cycle of claims. Our claims range from the very routine private passenger automobile ~~“fender bender”~~"fender bender" to the highly complex and costly claims involving large tractor-trailer rigs and large-scale losses resulting from catastrophic events. Reserving for each class of claims requires a set of assumptions based upon historical experience, knowledge of current industry trends and seasoned judgment. The high limits provided by the ~~Company’s~~Company's fleet transportation liability policies provide for greater volatility in the reserving process for more serious claims. Court rulings, legislative actions, geographic location of the claim under consideration and trends in jury awards also play a significant role in the estimation process of larger claims. The Company continuously reviews and evaluates loss developments subsequent to each measurement date and adjusts its reserve estimation assumptions, as necessary, in an effort to achieve the best possible estimate of the ultimate remaining loss costs at any point in time.

Loss reserves related to certain permanent total disability (PTD) workers' compensation claims have been discounted to present value using tables provided by the National Council on Compensation Insurance which are based upon a pretax interest rate of 3.5% and adjusted for those portions of the losses retained by the insured. The loss and LAE reserves at December 31, ~~2014~~2015 have been reduced by approximately ~~$3.1~~$2.1 million as a result of such discounting. Had the Company not discounted these loss ~~and LAE~~ reserves, pretax income would have been approximately ~~$2.8~~$1.0 million higher for the year ended December 31, ~~2014.~~2015.

For policies inforce at December 31, ~~2014,~~2015, the maximum amount for which the Company insures a fleet transportation risk is $10 million, less applicable self-insured retentions, although for the majority of policies written, the maximum limits provided by the Company are $5 million or less. Occasionally, limits above $10 million required by customers are placed directly by Baldwin & Lyons, Inc. with non-affiliated carriers or written by the Company but 100% reinsured with non-affiliated reinsurers. Certain coverages, such as ~~workers’~~workers' compensation, provide essentially unlimited exposure, although the Company protects itself to the extent believed prudent through the purchase of excess reinsurance for these coverages. After giving effect to treaty and facultative reinsurance arrangements the ~~Company’s~~Company's maximum exposure to loss from a single occurrence for currently inforce business ranges from approximately $.25 million to $1.3 million for the vast majority of risks insured although, for certain losses occurring within the past five policy years, maximum exposure could be as high as ~~$2.5~~$2.5 million for a single occurrence. Certain reinsurance agreements effective since June 3, 2005 include provisions for aggregate deductibles that must be exceeded before the Company can recover under the terms of the treaties. The Company retains a higher percentage of the direct premium (and, therefore, cedes less premium to reinsurers) in consideration of these deductible provisions.

The Company is cedent under numerous reinsurance treaties covering its varied product lines. Treaties are typically written on an annual basis, each with its own renewal ~~date throughout the~~date. However, treaty terms may occasionally be agreed to for periods beyond one year. Treaty renewals are expected to largely continue to occur annually in the foreseeable future. Because losses from certain of the ~~Company’s~~Company's products can experience delays in being reported and can take years to ~~develop,~~settle, losses reported to the Company in the current year may be covered by a number of older reinsurance treaties with higher or lower net loss exposures than those provided by current treaty provisions.

- 4 -

The table on page 5 sets forth a reconciliation of beginning and ending loss and LAE liability balances for 2015, 2014 ~~2013~~ and ~~2012.~~2013. That table is presented net of reinsurance recoverable to correspond with income statement presentation. However, a reconciliation of these net reserves to those gross of reinsurance recoverable, as presented in the balance sheet, is also shown. The table on page 1110 shows the development of the estimated liability, net of reinsurance recoverable, for the ten years prior to ~~2014.~~2015. The table on page 1211 is a summary of the re-estimated liability, before consideration of reinsurance, for the ten years prior to ~~2014~~2015 as well as the related re-estimated reinsurance ceded for the same ~~periods~~.periods.

RECONCILIATION OF LIABILITY FOR LOSSES AND LOSS ADJUSTMENT	RECONCILIATION OF LIABILITY FOR LOSSES AND LOSS ADJUSTMENT										RECONCILIATION OF LIABILITY FOR LOSSES AND LOSS ADJUSTMENT
EXPENSES (GAAP BASIS)	EXPENSES (GAAP BASIS)										EXPENSES (GAAP BASIS)

		Year Ended December 31										Year Ended December 31
		2014			2013			2012				2015			2014			2013
NET OF REINSURANCE RECOVERABLE:					(in thousands)							(in thousands)
Liability for losses and LAE at the
Beginning of the year		$	288,088		$	289,236		$	290,092			$	295,583		$	288,088		$	289,236

Provision for losses and LAE:
Claims occurring during the current year			169,950			156,264			147,964				165,812			169,950			156,264
Claims occurring during prior years			(10,354	)		(5,563	)		(9,875	)			(10,062	)		(10,354	)		(5,563	)
			159,596			150,701			138,089				155,750			159,596			150,701
Payments of losses and LAE:
Claims occurring during the current year			59,826			47,908			44,942				56,710			59,826			47,908
Claims occurring during prior years			92,275			103,941			94,003				92,870			92,275			103,941
			152,101			151,849			138,945				149,580			152,101			151,849


Liability for losses and LAE at end of year			295,583			288,088			289,236				301,753			295,583			288,088

Reinsurance recoverable on unpaid losses
at end of the year			210,519			186,382			166,218				211,843			210,519			186,382

Liability for losses and LAE, gross of
reinsurance recoverable, at end of the year		$	506,102		$	474,470		$	455,454			$	513,596		$	506,102		$	474,470

The reconciliation above shows that the ~~Company’s~~Company's estimate of net losses on ~~2013~~2014 and prior accidents is approximately ~~$10.4~~$10.1 million lower at December 31, ~~2014~~2015 than was provided in loss reserves at December 31, ~~2013~~2014 (referred to as ~~“reserve savings”~~"reserve savings"), with comparative reserve savings for the two previous calendar years.

The following table is a summary of the ~~2014~~2015 calendar year reserve savings by accident year (dollars in thousands):

Years in Which Losses Were Incurred	Reserve at December 31, 2014		(Savings) Deficiency Recorded During 2015			% (Savings) Deficiency

2014	$	110,124	$	(1,085	)		(1.0	%)
2013		65,165		(6,281	)		(9.6	%)
2012		37,335		5,530			14.8	%
2011		28,343		(4,666	)		(16.5	%)
2010		10,285		2,685			26.1	%
2009 & prior		44,331		(6,245	)		(14.1	%)

	$	295,583	$	(10,062	)		(3.4	%)

Years in Which Losses Were Incurred Reserve at December 31, 2013 (Savings) Deficiency Recorded During 2014 % (Savings) Deficiency

2013 $ 108,356 $ (9,060 ) (8.4 %)
2012 63,718 (5,533 ) (8.7 %)
2011 45,278 6,405 14.1 %
2010 16,001 2,238 14.0 %
2009 8,171 (1,991 ) (24.4 %)
2008 & prior 46,564 (2,413 ) (5.2 %)

$ 288,088 $ (10,354 ) (3.6 %)

- 5 -

The (savings) deficiency recorded for ~~these~~the above individual loss years was derived from varied sources, as follows (dollars in thousands):

	2009 & Prior			2010			2011			2012			2013			2014

Losses and allocated loss expenses developed on cases known to exist at December 31, 2014	$	1,240		$	(301	)	$	(4,529	)	$	8,829		$	14,858		$	17,220
Losses and allocated loss expenses reported on cases unknown at December 31, 2014		432			44			1,147			400			1,348			16,886
Unallocated loss expenses paid		193			57			245			832			758			1,363
Change in reserves for incurred but not reported losses and allocated and unallocated loss expenses		(7,892	)		(1,168	)		1,167			(9,202	)		(21,650	)		(32,565	)
Net (savings) deficiency on losses from directly-produced business		(6,027	)		(1,368	)		(1,970	)		859			(4,686	)		2,904

(Savings) deficiency reported under voluntary reinsurance assumption agreements and residual markets		(218	)		4,053			(2,696	)		4,671			(1,595	)		(3,989	)

Net (savings) deficiency	$	(6,245	)	$	2,685		$	(4,666	)	$	5,530		$	(6,281	)	$	(1,085	)

2008 & Prior 2009 2010 2011 2012 2013

Losses and allocated loss expenses developed on cases known to exist at December 31, 2013 $ 1,261 $ (976 ) $ 1,770 $ 7,267 $ (1,191 ) $ 12,974
Losses and allocated loss expenses reported on cases unknown at December 31, 2013 116 5 54 58 2,089 6,585
Unallocated loss expenses paid 286 69 271 738 910 1,976
Change in reserves for incurred but not reported losses and allocated and unallocated loss expenses (3,235 ) (989 ) (862 ) (1,844 ) (4,217 ) (28,538 )
Net (savings) deficiency on losses from directly-produced business (1,572 ) (1,891 ) 1,233 6,219 (2,409 ) (7,003 )

(Savings) deficiency reported under voluntary reinsurance assumption agreements and residual markets (841 ) (100 ) 1,005 186 (3,124 ) (2,057 )

Net (savings) deficiency $ (2,413 ) $ (1,991 ) $ 2,238 $ 6,405 $ (5,533 ) $ (9,060 )

Loss and loss expense development savings, presented separately by segment, were as follows for the years ended December 31 (dollars in thousands):

	2015			2014			2013
Property and casualty insurance	$	(10,289	)	$	(5,423	)	$	(1,725	)
Reinsurance		227			(4,931	)		(3,838	)
Totals	$	(10,062	)	$	(10,354	)	$	(5,563	)

	2014			2013			2012
Development as a percent of beginning loss and loss adjustment expense reserves:										2015			2014			2013
Property and casualty insurance	$	(5,423	)	$	(1,725	)	$	(7,111	)		4.3	%		2.9	%		1.4	%
Reinsurance		(4,931	)		(3,838	)		(2,764	)		-.4	%		6.3	%		4.5	%
Totals	$	(10,354	)	$	(5,563	)	$	(9,875	)		3.4	%		3.6	%		1.9	%

In the first table on page 6, the amounts identified as "Net (savings) deficiency on losses from directly-produced business" consist of development on cases known at December 31, ~~2013,~~2014, losses reported which were previously unknown at December 31, ~~2013~~2014 (incurred but not reported), unallocated loss expense paid related to accident years ~~2013~~2014 and prior and changes in the reserves for incurred but not reported losses and loss expenses. Bulk loss reserves are established to provide for potential future adverse development on cases known to the Company and for cases unknown at the reserve date. Changes in the reserves for incurred but not reported losses and loss expenses occur based upon information received on known and newly reported cases during the current year and the effect of that development on the application of standard actuarial methods used by the Company.

Also shown in the table are amounts representing the "(savings) deficiency reported under reinsurance assumption agreements and residual markets". These amounts relate to the Company's participation in both voluntary reinsurance policies and treaties and government mandated pools. The Company records its share of losses from these policies, treaties and pools based on reports from the reinsured companies, retrocessionaires and residual market administrators and does not directly establish case reserves related to this portion of the Company's business. The Company does, however, establish additional reserves for reinsurance losses to supplement case reserves reported by the ceding companies, when considered necessary. Involuntary residual market premiums and losses are included in the property and casualty segment; however, claims are not administered by the Company but, rather, reserves on this business are established by the regulatory entities and, accordingly, development on these losses is largely dependent on the adequacy of loss reserving by these entities. Development deficiencies on residual market business ~~was~~were $3.0 million, $0.7 million, ~~$1.6 million,~~ and ~~$1.5~~$1.6 million for the years ended December 31, 2015, 2014 ~~2013~~ and ~~2012,~~2013, respectively.

- 6 -

The property and casualty insurance segment has historically constituted the largest portion of net reserve development savings as it has historically generated the majority of the ~~Company’s~~Company's premium revenue. As shown, the savings from this segment ranged from $1.7 million to a savings of ~~$7.1~~$10.3 million during the past three years. This fluctuation reflects the variability associated with higher premium volumes and, hence, the larger claims covered by the Company, as well as fluctuations in the ~~Company’s~~Company's net retentions. The Company continues to incorporate more recent loss development data into its loss reserving formulae; however, the change from excess of loss to quota share treaties beginning in 2005, the use of facultative reinsurance on larger risks, and the dynamic nature of losses associated with the fleet transportation business as well as the timing of settlement of large claims increases the likelihood of variability in loss developments from period to period. As discussed elsewhere, the Company has historically experienced savings in its loss developments owing to, among other things, its long-standing policy of reserving for the ultimate value of losses quickly and realistically and a willingness to settle claims based upon a seasoned evaluation of its exposures. While the ~~Company’s~~Company's basic assumptions have remained consistent, we continue to update loss data to reflect changing trends which can be expected to result in fluctuations in loss developments over time.

The development for the reinsurance segment ~~with a $4.9 million savings during 2013 and comparable savings recorded during 2013 and 2012,~~ is heavily dependent on the establishment of case basis and IBNR reserves by other insurance and reinsurance companies. However, the Company evaluates the sufficiency of such reserving and often adjusts reserves based on ~~management’s~~management's independent analysis, considering the number of different entities involved and the fact that the Company must rely on external sources of information, reserve development from these products is potentially subject to fluctuation from year to year. ~~The consistency of the savings developed during the past three years is reflective of management’s attention to reserving for this business.~~

Factors affecting the development of environmental claims are more fully discussed in the following paragraphs. The Company has very limited exposure to environmental losses and activity with respect to environmental losses during the three year period ending ~~2014~~2015 has been insignificant.

~~Management’s~~Management's goal is to produce an overall estimate of reserves which is sufficient and as close to expected ultimate losses as possible. The ~~$10.4~~$10.1 million in net savings developed during ~~2014~~2015 represents approximately ~~35%~~30% of pre-tax net income before realized capital gains for ~~2014~~2015 but only ~~3.6%~~ 3.4% of December 31, ~~2013~~2014 net loss and LAE reserves, which is well within the acceptable range of variation for the ~~Company’s~~Company's diverse and complex book of business. The Company has maintained a consistent, conservative posture in its reserving process which has proven to be fully adequate with no overall deficiencies developed since 1985. The Company constantly monitors changes in trends related to the numbers of claims incurred relative to correlative variances with premium volume, average settlement amounts, numbers of claims outstanding at period ends and the average value per claim outstanding and adjusts actuarial assumptions as necessary to accommodate observed trends.

As described on page 4, changes have occurred in the Company's net per accident retained exposure under reinsurance agreements in place during the periods presented in the previous table. It is much more difficult to reserve for losses where policy limits are as high as $10 million per accident as opposed to those losses related to business which carries lower policy limits, such as private passenger automobile. This is because there are fewer policy limit losses in the Company's historical loss database on which to project future loss developments and the larger and more complex the loss, the greater the likelihood that litigation will become involved in the settlement process. Consequently, the level of uncertainty in the reserving process is much greater when dealing with larger losses and will routinely result in fluctuations among accident year developments.

The differences between the liability for losses and LAE reported in the accompanying 2014 consolidated financial statements prepared in accordance with generally accepted accounting principles ("GAAP") and that reported in the annual statements filed with state and provincial insurance departments in the United States and Canada in accordance with statutory accounting practices ("SAP") are as follows (dollars in thousands):

~~Liability reported on a SAP basis - net of reinsurance recoverable $ 301,523~~

~~Add differences:~~

~~Reinsurance recoverable on unpaid losses and LAE 210,519~~

~~Additional reserve for residual market losses not~~

~~reported to the Company at the current year end 840~~

~~Deduct differences:~~

~~Estimated salvage and subrogation recoveries recorded on~~

~~a cash basis for SAP and on an accrual basis for GAAP~~ ~~(6,780~~)

~~Liability reported on a GAAP basis $~~ ~~506,102~~

- 7 -

Ten Year Historical Development Tables:

The table on page 1110 presents the development of GAAP balance sheet insurance reserves for each year-end from ~~2004~~2005 through ~~2013,~~2014, as of December 31, ~~2014,~~2015, net of all reinsurance credits. The top line of the table shows the estimated liability for unpaid losses and LAE recorded at the balance sheet date for each of the indicated years. This liability represents the estimated amount of losses and LAE for claims arising in all prior years that were unpaid at the respective balance sheet date, including losses that had been incurred, but not yet reported, to the Company.

The upper portion of the table shows the re-estimated amount of the previously recorded liability based on additional information available to the Company as of the end of each succeeding year. The estimate is increased or decreased as more information becomes known about the frequency and severity of individual claims and as claims are settled and paid.

The "cumulative redundancy" represents the aggregate change in the estimates of each calendar year end reserve through December 31, ~~2014.~~2015. For example, the ~~2004~~2005 liability has developed a ~~$40.6~~$51.9 million redundancy over ten years. That amount has been reflected in income over those ten years, as shown on the table. The effect on calendar year income of changes in estimates of the liability for losses and LAE during each of the past three years is shown in the table on page 5.

Historically, the ~~Company’s~~Company's net loss developments have been favorable. Reserve developments for all years ended in the period 1986 through ~~2013~~2014 have produced redundancies as of December 31, ~~2014.~~2015. In addition to a consistently conservative approach to reserving methods, loss reserve developments in recent years have been favorably affected by several other factors. Perhaps the most significant single factor has been the improvement in safety programs by the fleet transportation industry in general and by the ~~Company’s~~Company's insureds specifically. Statistics produced by a variety of sources show that driver quality in general and specifically as relates to the type of transportation companies underwritten by the Company, has improved markedly in the past decade resulting in fewer fatalities and serious accidents. The ~~Company’s~~Company's experience also shows that improved safety and hiring programs have a dramatic impact on the frequency and severity of fleet transportation accidents and, more recently, the introduction of numerous safety devices using state-of-the-art technology has reduced rear end and cross over accidents which often produce the most serious injuries. In addition, the expanded use of telematics to precisely measure driver behavior and provide focused training and remediation is positively impacting loss experience. Significant trucking industry and regulatory initiatives, such as CSA 2010, have provided strong motivation to trucking companies to upgrade their driver roster, increase monitoring of driver behavior and improve equipment maintenance, all resulting in fewer accidents. Higher self-insured retentions also play a part in reduced insurance losses. Higher retentions not only raise the excess insurance entry point but also encourage fleet transportation company management to focus even more intensely on safety programs.

The establishment of bulk reserves requires the use of historical data, where available, and generally a minimum of ten years of such data is required to provide statistically valid samples for most lines of business. As previously mentioned, numerous factors must be considered in reviewing historical data including inflation, legislative actions, new coverages provided and trends noted in the current book of business which are different from those present in the historical data. Clearly, the Company's book of business in ~~2014~~2015 is different, both in terms of exposures provided and rates charged, from that which generated much of the ten-year historical loss data used to establish reserves in recent years. Management has noted trends toward significantly higher settlements and jury awards associated with the more serious fleet transportation liability claims over the past several years. The inflationary factors affecting these claims appear to be more subjective in nature and not in line with compensatory equity. In addition to the factors mentioned above, savings realized in recent years upon the closing of claims, as reflected in the tables on pages 5 and ~~12,~~11, are attributable to the ~~Company’s~~Company's experience in specializing in long-haul trucking business for over 50 years as well as its long-standing policy of reserving for losses realistically and a willingness to settle claims based upon a seasoned evaluation of the underlying exposures. The Company will continue to review the trends noted and, should it appear that such trends are permanent and projectable, they will be reflected in future reserving method refinements.

~~- 8 -~~

The lower section of the table on page 1110 shows the cumulative amount paid with respect to the previously recorded calendar year end liability as of the end of each succeeding year. For example, as of December 31, ~~2014,~~2015, the Company had paid ~~$142.0~~$168.3 million of losses and LAE that had been incurred, but not paid, as of December 31, ~~2004;~~2005; thus, an estimated ~~$24.6~~$22.0 million ~~(15%~~(12%) of losses incurred through ~~2004~~2005 remain unpaid as of the current financial statement date ($~~166.6~~190.3 million incurred less ~~$142.0~~$168.3 million paid). The payment patterns shown in this table demonstrate the ~~“long-tail”~~"long-tail" nature of much of the ~~Company’s~~Company's business whereby portions of claims, principally in workers compensation coverages, do not fully pay out for more than ten years.

- 8 -

Readers should note that the table on page 1110 does not present accident or policy year development data which they may be more accustomed to analyzing. Rather, this table is intended to present an evaluation of the ~~Company’s~~Company's ability to establish its liability for losses and loss expenses at a given balance sheet date. In reviewing this information, it is important to understand that this method of presentation causes some development experience to be duplicated. For example, the amount of any redundancy or deficiency related to losses settled in ~~2007,~~2008, but incurred in ~~2004,~~2005, will be included in the cumulative development amount for each of the years ending December 31, ~~2004,~~ 2005, 2006, and ~~2006.~~2007. It is also important to note that conditions and trends that have affected development of the liability in the past may not necessarily occur in the future. Accordingly, it would not be appropriate to extrapolate future redundancies or deficiencies based on this table.

The table presented on page 1211 presents loss development data on a gross (before consideration of reinsurance) basis for the same ten year period December 31, ~~2004~~2005 through December 31, ~~2013,~~2014, as of December 31, ~~2014,~~2015, with a reconciliation of the data to the net amounts shown in the table on page ~~11.~~10. Readers are reminded that the gross data presented on page 1211 requires significantly more subjectivity in the estimation of incurred but not reported and loss expense reserves because of the high limits provided by the Company to its fleet transportation customers, ~~much~~some of which has been covered by excess of loss and facultative reinsurance. This is particularly true of excess of loss treaties where the Company retains risk in only the lower, more predictable, layers of coverage. Accordingly, one would generally expect more variability in development on a gross basis than on a net basis. The difference between loss developments before consideration of reinsurance, as presented on page ~~12,~~11, and those net of reinsurance, as shown on page 1110 do not impact the ~~Company’s~~Company's operating results as all such differences are borne by reinsurers.

Environmental Matters:

Given the Company's principal business is insuring fleet transportation companies, on occasion claims involving a commercial automobile accident which has resulted in the spill of a pollutant are made. Certain of the Company's policies may cover these situations on the basis that they were caused by an accident that resulted in the immediate and isolated spill of a pollutant. These claims are typically reported, evaluated and fully resolved within a short period of time.

In general, establishing reserves for environmental claims, other than those associated with ~~“sudden~~"sudden and ~~accidental”~~accidental" losses, is subject to uncertainties that are greater than those represented by other types of claims. Factors contributing to those uncertainties include a lack of historical data, long reporting delays, uncertainty as to the number and identity of insureds with potential exposure, unresolved legal issues regarding policy coverage, and the extent and timing of any such contractual liability. Courts have reached different and sometimes inconsistent conclusions as to when the loss occurred and what policies provide coverage, what claims are covered, whether there is an insured obligation to defend, how policy limits are determined, how policy exclusions are applied and interpreted, and whether cleanup costs represent insured property damage.

~~- 9 -~~

As previously noted, very few environmental claims have been reported to the Company. In addition, a review of the businesses of our past and current insureds indicates that exposure to claims of an environmental nature is limited because the vast majority of the Company's accounts are not currently, and have not in the past been, involved in the hauling of hazardous substances. Also, the revision of the pollution exclusion in the Company's policies since 1986 has, and is expected to, further limit exposure to claims from that point forward.

The Company has never been presented with an environmental claim relating to asbestos and, based on the types of business the Company has insured over the years, it is not expected that the Company could have any significant asbestos exposure.

The Company's reserves for unpaid losses and loss expenses at December 31, ~~2014~~2015 did not include significant amounts for liability related to environmental damage claims. The Company does not foresee significant future exposure to environmental damage claims and accordingly has established no reserve for incurred but not reported environmental losses at December 31, ~~2014.~~2015.

~~Space intentionally left blank~~

- 9 -

ANALYSIS OF LOSS AND LOSS ADJUSTMENT EXPENSE DEVELOPMENT--GAAP BASIS
(Dollars in thousands)

Year Ended December 31	2005		2006		2007			2008		2009		2010		2011		2012		2013		2014		2015

Liability for Unpaid Losses
and Loss Adjustment
Expenses	$	242,130	$	249,495	$	244,500		$	231,633	$	203,253	$	218,629	$	290,092	$	289,236	$	288,088	$	295,583	$	301,753

Liability Reestimated
as of:
One Year Later		225,183		228,211		227,423			222,049		194,430		208,933		280,217		283,673		277,734		285,521
Two Years Later		209,774		207,818		216,730			208,702		198,220		201,745		272,285		282,381		268,757
Three Years Later		200,955		199,503		206,445			210,562		188,110		204,243		276,525		279,685
Four Years Later		198,376		192,678		210,170			205,519		192,195		202,078		268,299
Five Years Later		191,846		198,023		208,132			208,398		187,792		198,518
Six Years Later		195,348		196,101		210,446			205,986		181,547
Seven Years Later		193,226		197,898		209,288			200,460
Eight Years Later		194,188		196,421		205,179
Nine Years Later		192,585		193,746
Ten Years Later		190,276


Cumulative Redundancy	$	51,854	$	55,749	$	39,321		$	31,173	$	21,706	$	20,111	$	21,793	$	9,551	$	19,331	$	10,062

Cumulative Amount of
Liability Paid
Through:
One Year Later	$	59,581	$	58,956	$	76,970		$	84,777	$	74,182	$	72,393	$	94,003	$	103,941	$	92,275	$	92,870
Two Years Later		94,947		100,990		124,870			120,628		107,413		109,382		156,271		162,087		159,282
Three Years Later		117,522		127,011		145,857			142,731		125,038		133,507		193,566		205,452
Four Years Later		136,652		143,612		157,724			152,679		137,460		147,462		214,873
Five Years Later		148,039		151,662		164,877			161,834		143,461		158,172
Six Years Later		154,573		157,223		170,554	��		166,290		148,101
Seven Years Later		159,428		162,331		174,190			170,126
Eight Years Later		163,779		165,372		177,275
Nine Years Later		166,062		168,157
Ten Years Later		168,303

- 10 -

ANALYSIS OF LOSS AND LOSS ADJUSTMENT EXPENSE DEVELOPMENT--GAAP BASIS
(Dollars in thousands)

Year Ended December 31	2005		2006		2007		2008		2009		2010		2011		2012		2013		2014		2015

Direct and Assumed:
Liability for Unpaid Losses and Loss
Adjustment Expenses	$	430,273	$	409,412	$	378,616	$	389,558	$	359,030	$	344,520	$	421,556	$	455,454	$	474,470	$	506,102	$	513,596

Liability Reestimated as of
December 31, 2014		324,746		300,304		305,844		298,439		289,678		300,507		382,745		423,750		438,189		463,951

Cumulative Redundancy		105,527		109,108		72,772		91,119		69,352		44,013		38,811		31,704		36,281		42,151


Ceded:
Liability for Unpaid Losses and Loss
Adjustment Expenses		188,143		159,917		134,116		157,925		155,777		125,891		131,464		166,218		186,382		210,519		211,843

Liability Reestimated as of
December 31, 2014		134,470		106,558		100,665		97,979		108,131		101,989		114,446		144,065		169,432		178,430

Cumulative Redundancy		53,673		53,359		33,451		59,946		47,646		23,902		17,018		22,153		16,950		32,089

Net:
Liability for Unpaid Losses and Loss
Adjustment Expenses		242,130		249,495		244,500		231,633		203,253		218,629		290,092		289,236		288,088		295,583		301,753

Liability Reestimated as of
December 31, 2014		190,276		193,746		205,179		200,460		181,547		198,518		268,299		279,685		268,757		285,521

Cumulative Redundancy		51,854		55,749		39,321		31,173		21,706		20,111		21,793		9,551		19,331		10,062

ANALYSIS OF LOSS AND LOSS ADJUSTMENT EXPENSE DEVELOPMENT--GAAP BASIS
(Dollars in thousands)

Year Ended December 31 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Liability for Unpaid Losses
  and Loss Adjustment
  Expenses $ 207,137 $ 242,130 $ 249,495 $ 244,500 $ 231,633 $ 203,253 $ 218,629 $ 290,092 $ 289,236 $ 288,088 $ 295,583

Liability Reestimated
   as of:
  One Year Later 193,445 225,183 228,211 227,423 222,049 194,430 208,933 280,217 283,673 277,734
  Two Years Later 180,455 209,774 207,818 216,730 208,702 198,220 201,745 272,285 282,381
  Three Years Later 171,332 200,955 199,503 206,445 210,562 188,110 204,243 276,525
  Four Years Later 171,225 198,376 192,678 210,170 205,519 192,195 202,078
  Five Years Later 171,005 191,846 198,023 208,132 208,398 187,792
  Six Years Later 167,590 195,348 196,101 210,446 205,986
  Seven Years Later 170,951 193,226 197,898 209,288
  Eight Years Later 167,613 194,188 196,421
  Nine Years Later 168,249 192,585
  Ten Years Later 166,569

Cumulative Redundancy $ 40,568 $ 49,545 $ 53,074 $ 35,212 $ 25,647 $ 15,461 $ 16,551 $ 13,567 $ 6,855 $ 10,354

Cumulative Amount of
Liability Paid
Through:
  One Year Later $ 60,343 $ 59,581 $ 58,956 $ 76,970 $ 84,777 $ 74,182 $ 72,393 $ 94,003 $ 103,941 $ 92,275
  Two Years Later 84,265 94,947 100,990 124,870 120,628 107,413 109,382 156,271 162,087
  Three Years Later 102,692 117,522 127,011 145,857 142,731 125,038 133,507 193,566
  Four Years Later 116,198 136,652 143,612 157,724 152,679 137,460 147,462
  Five Years Later 124,176 148,039 151,662 164,877 161,834 143,461
  Six Years Later 128,592 154,573 157,223 170,554 166,290
  Seven Years Later 132,775 159,428 162,331 174,190
  Eight Years Later 137,094 163,779 165,372
  Nine Years Later 140,348 166,062
  Ten Years Later 142,047

- 11 -

ANALYSIS OF LOSS AND LOSS ADJUSTMENT EXPENSE DEVELOPMENT--GAAP BASIS
(Dollars in thousands)

Year Ended December 31 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Direct and Assumed:
Liability for Unpaid Losses and Loss
  Adjustment Expenses $ 440,172 $ 430,273 $ 409,412 $ 378,616 $ 389,558 $ 359,030 $ 344,520 $ 421,556 $ 455,454 $ 474,470 $ 506,102

Liability Reestimated as of
  December 31, 2014 362,547 323,127 300,393 308,469 304,436 295,797 310,758 388,722 441,930 450,906

Cumulative Redundancy 77,625 107,146 109,019 70,147 85,122 63,233 33,762 32,834 13,524 23,564

Ceded:
Liability for Unpaid Losses and Loss
  Adjustment Expenses 233,035 188,143 159,917 134,116 157,925 155,777 125,891 131,464 166,218 186,382 210,519

Liability Reestimated as of
  December 31, 2014 195,978 130,542 103,972 99,181 98,450 108,005 108,680 112,197 159,549 173,172

Cumulative Redundancy 37,057 57,601 55,945 34,935 59,475 47,772 17,211 19,267 6,669 13,210

Net:
Liability for Unpaid Losses and Loss
  Adjustment Expenses 207,137 242,130 249,495 244,500 231,633 203,253 218,629 290,092 289,236 288,088 295,583

Liability Reestimated as of
  December 31, 2014 166,569 192,585 196,421 209,288 205,986 187,792 202,078 276,525 282,381 277,734

Cumulative Redundancy 40,568 49,545 53,074 35,212 25,647 15,461 16,551 13,567 6,855 10,354

~~- 12 -~~

Marketing

The Company's primary marketing areas are outlined on pages 2 and 3.

Historically, the Company has focused its fleet transportation marketing efforts on large and medium trucking fleets, with its biggest market share in the larger trucking fleets (over 150 power units). ~~These~~The largest of these fleets (over 250 power units) self-insure a significant portion of their risk and self-insurance plans are a specialty of the Company. The indemnity contract provided to self-insured customers is designed to cover all aspects of fleet transportation liability, including third party liability, property damage, physical damage, cargo and workers' compensation, arising from vehicular accident or other casualty loss. The self-insured program is supplemented with large deductible workers' compensation policies in states which do not allow for self-insurance of this coverage. Fleets with fewer than 250 power units typically purchase full insurance coverage or retain small deductibles on each claim. The ~~Company~~Company's fleet transportation offerings also ~~offers~~include public livery risks, principally large and medium sized operators of bus fleets. The Company's fleet transportation offerings include work-related accident insurance, on a group or individual basis, to independent contractors under contract to a fleet sponsor as well as ~~workers’~~workers' compensation coverage to employees of independent contractor fleet owners.

In addition, the Company offers a program of coverages for "small fleet" trucking concerns (owner-operators generally with one to six power units). ~~This program is currently being marketed through independent agents utilizing much of the technology developed in conjunction with marketing private passenger automobile insurance. The Company’s~~

In 2015, fleet transportation ~~offerings also include certain public livery risks, principally large and medium sized operators of bus fleets. In 2014, fleet transportation~~ products generated approximately ~~92%~~95% of direct premium written by the Property & Casualty Insurance Segment.

Since 1992, the Company has accepted reinsurance cessions and retrocessions, principally property coverages for catastrophe exposures, from selected insurers and reinsurers. Participation in this market, which included business produced by large reinsurance brokers and a single exclusive managing general agency agreement, has varied over the years depending on the adequacy of pricing, which can fluctuate widely from time to time. In addition to property coverages, the Company accepts reinsurance cessions for a limited amount of professional liability coverages from small and medium sized insurance companies.

Since 1995, the Company has sold private passenger automobile insurance. This program is currently being marketed primarily in a limited number of states through independent agents. Sagamore utilizes technology extensively in marketing its private passenger automobile insurance products in order to provide superior service to its agents and insureds.

Beginning in 2010, the Company began underwriting miscellaneous professional liability coverages through wholesale and retail agents and brokers on both an admitted and surplus lines basis.

Since 1992, the Company has accepted reinsurance cessions and retrocessions covering property and casualty risks from selected insurers and reinsurers. Participation in this market has varied over the years depending on the adequacy of pricing. Effective June 30, 2015, no property reinsurance risk remained inforce.

The Company terminated marketing of its private passenger automobile insurance products in late 2015 and all inforce business for this product line will expire in 2016.

Investments

The ~~Company’s~~Company's investment portfolio is essentially divided between (1) funds which are considered necessary to support insurance underwriting activities and (2) excess capital funds. ~~Funds~~Management believes the funds invested in fixed maturity and short-term securities are more than sufficient to cover underwriting operations while equity securities and limited partnerships are utilized to invest excess capital funds to achieve higher long-term returns. The following discussion will concentrate on the different investment strategies for these two major categories.

At December 31, ~~2014~~2015 the financial statement value of the Company's investment portfolio was approximately ~~$758~~$730 million, including ~~$59~~$70 million of short-term funds classified as cash equivalents. The adjusted cost of the portfolio was ~~$678~~$670 million with the ~~$80~~$60 million difference representing pre-tax unrealized appreciation.

- 1312 -

A comparison of the allocation of assets within the Company's investment portfolio, using adjusted cost as a basis, is as follows as of December 31:

	2015			2014

Corporate securities		25.1	%		25.2	%
State and municipal obligations		16.4			16.7
U.S. government obligations		15.4			14.9
Short-term and money markets		10.7			9.2
Commercial mortgage-backed securities		4.6			5.3
Foreign government obligations		3.8			4.2
Residential mortgage-backed securities		0.7			0.9
Total fixed maturities		76.7			76.4
Limited partnerships (equity basis)		11.3			12.0
Equity securities		12.0			11.6
		100.0	%		100.0	%

2014 2013

   Corporate securities 25.2 % 21.8 %
   State and municipal obligations 16.7 18.4
   U.S. government obligations 14.9 18.1
   Short-term and money markets 9.2 9.1
   Commercial mortgage-backed securities 5.3 4.5
   Foreign government obligations 4.2 3.8
   Residential mortgage-backed securities 0.9 1.9
      Total fixed maturities 76.4 77.6
   Limited partnerships (equity basis) 12.0 11.0
   Equity securities 11.6 11.4
100.0 % 100.0 %

Fixed Maturity and Short-Term Investments

Fixed maturity and short-term securities comprised ~~67.9%~~69.7% of the market value of the ~~Company’s~~Company's total invested assets at December 31, ~~2014.~~2015. Excluding U.S. government obligations, the fixed maturity portfolio is widely diversified with no concentrations in any single industry, geographic location or municipality. The largest amount invested in any single issuer was ~~$15.8~~$8.4 million ~~(2.1%~~(1.1% of total invested assets) although most individual investments, other than municipal bonds, are less than $750,000. The ~~Company’s~~Company's fixed maturity portfolio has a ~~very~~ short duration compared to the duration of its insurance liabilities and, accordingly, the Company does not actively trade fixed maturity securities but typically holds such investments until maturity. Exceptions exist in ~~the rare~~ instances where the underlying credit for a specific issue is deemed to be diminished. In such cases, the security will be considered for disposal prior to maturity. In addition, fixed maturity securities may be sold when realignment of the portfolio is considered beneficial (i.e., moving from taxable to non-taxable issues) or when valuations are considered excessive compared to alternative investments.

The Investment Committee has determined that the ~~Company’s~~Company's Insurance Subsidiaries will, at all times, hold high grade fixed maturity securities and short-term investments with a market value equal to at least 100% of reserves for losses and loss expenses and unearned premiums, net of applicable reinsurance credits. At December 31, ~~2014,~~2015, investment grade bonds and short-term instruments held by Insurance Subsidiaries equaled ~~137%~~136% of designated underwriting liabilities, thus providing a substantial margin above this conservative guideline.

The Company's concentration of fixed maturity funds in relatively short-term investments provides it with a level of liquidity which is more than adequate to provide for its anticipated cash flow needs.

The following comparison of the Company's fixed maturity and short-term investment portfolios, using par value as a basis, shows the changes in contractual maturities in the portfolio during ~~2014.~~2015. Note that the expected average maturity of the portfolio is less than the contractual maturity average life shown below because the Company has, in some cases, the right to put obligations and borrowers have, in some cases, the right to call or prepay obligations with or without call or prepayment penalties.

	2015			2014
Less than one year		28.4	%		37.3	%
1 to 5 years		49.6			37.7
5 to 10 years		8.8			10.9
More than 10 years		13.2			14.1
		100.0	%		100.0	%

Average contractual life of portfolio (years)		4.6			4.8

2014 2013
Less than one year 37.3
%
32.5 %
1 to 5 years 37.7 41.0
5 to 10 years 10.9 11.1
More than 10 years 14.1 15.4
100.0 % 100.0 %

Average contractual life of portfolio (years) 4.8 4.8

Approximately ~~$66.8~~$61.3 million of fixed maturity investments ~~(8.8%~~(8.4% of total invested assets) consists of bonds rated as less than investment grade by the National Association of Insurance Commissioners at year end. These investments include a diversified portfolio of over 40 investments with a cost basis of approximately ~~$70.0~~$64.5 million.

- 1413 -

The market value of the consolidated fixed maturity portfolio was ~~$3.6~~$5.4 million lower than cost at December 31, ~~2014,~~2015, before income taxes, which compares to a ~~$1.8~~$3.6 million unrealized ~~gain~~loss at December 31, ~~2013~~2014, with the change due primarily to the ~~recent~~ decline in oil prices and the strengthening of the U.S. Dollar. The Company analyzes fixed maturity securities for other-than-temporary impairment ~~(“OTTI”~~("OTTI") in accordance with the Financial Accounting Standards Board ~~(“FASB”~~("FASB") OTTI guidance. As has been the ~~Company’s~~Company's consistent policy, other-than-temporary impairment is considered for any individual issue which has sustained a decline in current market value of at least 20% below original or adjusted cost, and the decline is ongoing for more than 6six months, regardless of the evaluation of the creditworthiness of the issuer or the specific issue. Additionally, the Company takes into account any known subjective information in evaluating for impairment without consideration to the ~~Company’s~~Company's 20% ~~threshold.~~threshold. In ~~2014,~~2015, the net effect of OTTI adjustments to fixed maturity securities was a charge against income of ~~$0.4~~$4.7 million with securities owned at year end having only an insignificant ~~non-credit~~credit related loss treated as unrealized. The current net unrealized gain on fixed maturity securities consists of ~~$3.9~~$4.1 million of gross unrealized gains and ~~$7.5~~$9.5 million of gross unrealized losses. The gross unrealized loss equals approximately ~~1.6%~~2.2% of the cost of all bonds in this category.

Equity Securities

Because of the large amount of high quality fixed maturity investments owned, relative to the ~~Company’s~~Company's loss and loss expense reserves and other liabilities, amounts invested in equity securities are not needed to fund current operations and, accordingly, can be committed for long periods of time. Equity securities comprise ~~21.4%~~19.9% of the market value of the consolidated investment portfolio at December 31, ~~2014,~~2015, but only ~~11.7%~~12.0% of the related adjusted cost basis, as long-term holdings have appreciated significantly. The ~~Company’s~~Company's equity securities portfolio consists of over 200 separate issues with diversification from large to small capitalization issuers and among several industries. The largest single equity issue owned has a market value of ~~$6.8~~$6.2 million at December 31, ~~2014~~2015 (0.9% of total invested assets) although the average equity holding of an individual issuer is less than $150,000.

In general, the Company maintains a buy-and-hold philosophy with respect to equity securities. Many current holdings have been continuously owned for more than ten years, ~~accounting~~which accounts for the fact that the portfolio, in total, carries a ~~$76.7~~$60.0 million pre-tax unrealized gain at the current year end using original cost and over ~~$83.3~~$65.3 million in unrealized gains using cost adjusted for previous other-than-temporary ~~impairment.~~impairment adjustments. An individual equity security will be disposed of when it is determined by investment managers or the Investment Committee that there is little potential for future appreciation. All equity securities are considered to be available for sale although portfolio turnover has historically been very low. Securities are not sold to meet any quarterly or annual earnings quotas but, rather, are disposed of only when market conditions are deemed to dictate, regardless of the impact, positively or negatively, on current period earnings. In addition, equity securities may be sold when realignment of the portfolio is considered beneficial or when valuations are considered excessive compared to alternative investments. Sales of equity securities during ~~2014~~2015 generated both gains and losses but netted to a realized gain of ~~$7.1~~$8.4 million before taxes.

The net effect of other-than-temporary impairment adjustments, including recovery of prior year write downs upon sale or disposal, increased investment gains from equity securities by ~~$0.03~~$1.3 million for the year before taxes. The reclassification of unrealized losses to realized losses occurred on each individual issue where the current market value was at least 20% below original or adjusted cost, and the decline was ongoing for more than 6six months at the date of write-down, regardless of the evaluation of the issuer or the potential for recovery. Additionally, for any equity security where the decline has existed for a period of at least one year, the decline is treated as an other-than-temporary impairment, regardless of the percentage decline. Further, the Company takes into account any known subjective information in evaluating for impairment without consideration to the ~~Company’s~~Company's 20% threshold. Net unrealized gains on the equity security portfolio were ~~$83.3~~$65.3 million, before tax at December 31, ~~2014~~2015 compared to ~~$73.7~~$83.3 million at December 31, ~~2013.~~2014. The current net unrealized gain consists of ~~$85.6~~$70.4 million of gross unrealized gains and ~~$2.2~~$5.1 million of gross unrealized losses.

Limited Partnerships

~~For several years, the~~The Company ~~has invested~~invests in various limited partnerships engaged in securities trading activities, real estate development or small venture capital funding, as an alternative to direct equity investments. The funds used for these investments are part of the ~~Company’s~~Company's excess capital strategy. At December 31, ~~2014, the~~2015, aggregate ~~original investment, less distributions,~~funds invested in ~~the~~ limited partnerships was ~~$35.1~~$31.0 million and the aggregate carrying value was ~~$81.2~~$75.5 million, comprising ~~10.7%~~10.3% of the market value of invested assets.

- 1514 -

As a group, these investments experienced ~~increases~~decreases in value during ~~2014,~~2015, with the aggregate of the ~~Company’s~~Company's share of such ~~gains~~losses reported by the limited partnerships totaling approximately ~~$7.1~~$1.7 million. The ~~increase~~decrease in value is composed of estimated realized gains of ~~$1.3~~$6.5 million and ~~increases~~decreases in estimated unrealized gains of ~~$5.8~~$8.2 million. On an inception-to-date basis, active limited partnerships have produced estimated realized income of ~~$32.3~~$38.8 million and estimated unrealized income of ~~$13.2~~$5.1 million.

The Company follows the equity method of accounting for its limited partnership investments and, accordingly, records the total change in value as a component of net gains or losses on investments. However, readers are cautioned that, to the extent that reported increases in equity value are unrealized, they can be reduced or eliminated quickly by volatile market conditions. Further, assets purchased with reinvested realized gains can also diminish in value. In addition, a significant minority of the investments included in the limited partnerships do not have readily ascertainable fair market values and, accordingly, values assigned by the general partners may not be realizable upon the sale or disposal of the related assets, which may not occur for several years. Limited partnerships also are highly illiquid investments and the ~~Company’s~~Company's ability to withdraw funds is generally subject to significant restrictions.

Investment Yields

Interest rates, particularly those on the short end of the yield curve where the vast majority of the ~~Company’s~~Company's fixed maturity investments are maintained, continued at historically low levels during ~~2014. As a result, pre-tax~~2015. Pre-tax net investment income increased ~~only $0.3~~$3.4 million, or 3%38% and after tax income increased ~~$0.3~~$2.2 million, or 5%32% during ~~2014.~~2015 reflecting a larger concentration in high-yield bonds and higher average invested assets from continuing positive cash flow from operations. A comparison of consolidated investment yields, before consideration of investment management expenses, is as follows:

	2014		2013		2015			2014
Before federal tax:
Investment income	2.0	%	1.9	%		2.5	%		2.0	%
Investment income plus investment gains (losses)	4.3		5.7			2.3			4.3

After federal tax:
Investment income	1.5		1.4			1.8			1.5
Investment income plus investment gains (losses)	2.9		3.9			1.7			2.9

Readers are also directed to the Results of Operations of this document for additional details of investment operations.

Regulatory Framework

The ~~Company’s~~Company's businesses are currently subject to insurance industry regulation by each of the fifty states in which the ~~Company’s~~Company's subsidiaries are licensed. In addition, minor portions of the ~~Company’s~~Company's business are subject to regulation by Bermudian and Canadian federal and provincial authorities. There can be no assurance that laws and regulations will not be changed by one or more of these regulatory bodies in ways that will require the Company to modify its business models and objectives. In particular, the United States federal government continues to undertake a substantial review and revision of the regulation and supervision of financial institutions, including insurance companies as well as tax laws and regulation, which could impact the ~~Company’s~~Company's operations and performance. While it is currently expected that federal government regulation will be focused on the largest financial companies, additional regulations are likely to increase the cost of compliance to the Company. Further, while management is not aware of any significant pending changes, the Company is also subject to regulatory risks from changes to state and federal tax laws that may affect the treatment of insurance related deductions or income recognition.

Additionally, changes in laws and regulations governing the insurance industry could have an impact on the ~~Company’s~~Company's ability to generate historical levels of income from its insurance operations. The Company is obliged to comply with numerous complex and varied governmental regulations in order to maintain its authority to write insurance business. While the Company has ~~consistently~~continuously maintained each of its licenses without exception, failure to maintain compliance could result in governmental regulators temporarily preventing the Company from writing new business, ~~and therefore~~thus having a detrimental effect on the Company. Also, the ability for the ~~Company’s~~Company's Insurance Subsidiaries to increase insurance rates is heavily regulated for significant portions of the ~~Company’s~~Company's business and such rate increases are often denied or delayed for substantial periods by regulators.

- 1615 -

Employees

As of December 31, ~~2014,~~2015, the Company had ~~425~~438 employees, an increase of 4113 employees from the prior year end.

Competition

The insurance brokerage and agency business is highly competitive. B&L competes with a large number of insurance brokerage and agency firms and individual brokers and agents throughout the country, many of which are considerably larger than B&L. B&L also competes with insurance companies which write insurance directly with their customers.

Insurance underwriting is also highly competitive. The Insurance Subsidiaries compete with other stock and mutual companies and inter-insurance exchanges (reciprocals). There are numerous insurance companies offering the lines of insurance which are currently written or may in the future be written by the Insurance Subsidiaries. Many of these companies have been in business for longer periods of time, have significantly larger volumes of business, offer more diversified lines of insurance coverage and have significantly greater financial resources than the Company. In many cases, competitors are willing to provide coverage for rates lower than those charged by the Insurance Subsidiaries. Many potential clients self-insure workers' compensation and other risks for which the Company offers coverage, and some concerns have organized "captive" insurance companies as subsidiaries through which they insure their own operations. Some states have workers' compensation funds that preclude private companies from writing this business in those states. Federal law also authorizes the creation of "Risk Retention Groups" which may write insurance coverages similar to those offered by the Company.

The Company believes it has a competitive advantage in its major lines of business as the result of the extensive experience of its long-tenured management and staff, its superior service and products, its willingness to custom build insurance programs for its customers, its centralized location with ready access to management, its extensive proprietary data bases and the ~~extensive~~ use of technology with respect to its insureds and independent agent force. However, the Company is not ~~“top-line”~~"top-line" oriented and will readily sacrifice premium volume during periods of unrealistic rate competition. Accordingly, should competitors determine to ~~“buy”~~"buy" market share with unprofitable rates, the ~~Company’s~~Company's Insurance Subsidiaries will generally experience a decline in business until pricing returns to profitable levels.

Availability of Documents

This Form 10-K as well as the ~~Company’s~~Company's Audit Committee Charter and Code of Conduct will be sent to shareholders without charge upon written request to the ~~Company’s~~Company's Investor Contact at the corporate address. These documents, along with all other filings with the Securities and Exchange Commission are available for review, download or printing from the ~~Company’s~~Company's web site at www.baldwinandlyons.com.

Item 101(b), (c)(1)(i) and (vii), and (d) of Regulation S-K:

Reference is made to Note J to the consolidated financial statements which provide information concerning industry segments and is filed herewith under Item 8, Financial Statements and Supplementary Data.

- 1716 -

Item 1A. RISK FACTORS

·●

The Company operates in the Property and Casualty insurance industry where many of its competitors are larger with far greater resources. Further, this industry is heavily regulated. Changes in laws and regulations governing the insurance industry could have a significant impact on the ~~Company’s~~Company's ability to generate income from its insurance operations. The ~~Company’s~~Company's Insurance Subsidiaries, as a group, are regulated and licensed in all 50 of the United States, the District of Columbia, all Canadian provinces, Puerto Rico and Bermuda. The Company is obliged to comply with numerous complex and varied governmental regulations in order to maintain its authority to write insurance business. Failure to maintain compliance could result in various governmental regulators preventing the Company from writing new business and therefore having a material impact on the Company. Further, the ability for the ~~Company’s~~Company's Insurance Subsidiaries to adjust insurance rates is regulated for significant portions of the ~~Company’s~~Company's business and needed rate adjustments can be denied or delayed for substantial periods by regulators.

●

The Company's main insurance subsidiary, Protective, currently has a financial strength rating of "A+" (Superior) by A.M. Best. A decline in the Company's rating below "A-" could adversely affect the Company's position in the insurance market, make it more difficult to market the Company's insurance products and cause a significant reduction in the Company's premiums and earnings. A downgrade could result in a loss of a number of insurance contracts the Company writes and in a substantial loss of business to other competitors. Financial ratings are an important factor influencing the competitive position of insurance companies. A.M. Best ratings, which are commonly used in the insurance industry, currently range from "A++" (Superior) to "F" (In Liquidation). The objective of A.M. Best's rating system is to provide potential policyholders and other interested parties an expert independent opinion of an insurer's financial strength and ability to meet ongoing obligations, including paying claims. This rating is subject to periodic review and may be revised downward, upward or revoked at the sole discretion of A.M. Best.

·●

The Company has two classes of common stock with unequal voting rights. The Company is effectively controlled by its principal stockholders and management, which limits other ~~stockholders’~~stockholders' ability to influence operations. The ~~Company’s~~Company's executive officers, directors and principal stockholders and their affiliates control approximately ~~64%~~58% of the outstanding shares of voting Class A common stock and ~~nearly 32%~~approximately 28% of the outstanding shares of non-voting Class B common stock. These parties effectively control the Company, direct its affairs, and exert significant influence in the election of directors and approval of significant corporate transactions. The interests of these stockholders may conflict with those of other stockholders, limit marketability of the stock and this concentration of voting power has the potential to delay, defer or prevent a change in control.

·●

The Company limits its risk of loss from policies of insurance issued by its Insurance Subsidiaries through the purchase of reinsurance coverage from other insurance companies. Such reinsurance does not relieve the Company from its responsibility to policyholders should the reinsurers be unable to meet their obligations to the Company under the terms of the underlying reinsurance agreements. As a result, the Company is subject to credit risk relating to our ability to recover amounts due from reinsurers. While the Company has not experienced any significant reinsurance losses for over twenty five years, a small number of our less significant historical reinsurance carriers have experienced deteriorating financial conditions or have been downgraded by rating ~~agencies.~~agencies and provisions for potential uncollectible balances from these reinsurers have been established. If the Company is unable to collect the amounts due to it from reinsurers, ~~the resultant~~any unreserved credit losses ~~would~~could adversely affect its results of operations, equity, business and insurer financial strength.

·●

Operating in the Property and Casualty insurance industry, the Company is exposed to loss from policies of insurance issued to its policyholders. A large portion of the provision for losses recorded by the Company is composed of estimates of future loss payments to be made. Such estimates of future loss payments may prove to be inadequate. Loss and loss expense reserves represent ~~management’s~~management's best estimate at a given point in time but are not an exact calculation of ultimate liability. Rather, they are complex estimates derived by utilizing a variety of reserve estimation techniques from numerous assumptions and expectations about future events, many of which are highly uncertain, such as estimates of claims severity, frequency of claims, inflation, claims handling, case reserving policies and procedures, underwriting and pricing policies, changes in the legal and regulatory environment and the lag time between the occurrence of an insured event and the time of its ultimate settlement. Many of these uncertainties are not precisely quantifiable and require significant judgment on ~~management’s~~management's part. As trends in underlying claims develop, particularly in so-called ~~“long tail”~~"long tail" lines where the adjudication of claims can take many years, management is sometimes required to revise reserves. This results in a charge to the ~~Company’s~~Company's earnings in the amount of the adjusted reserves, recorded in the period the change in estimate is made. These charges can be substantial and can potentially have a material impact, either positively or negatively, on calendar year results of operations and ~~shareholders’~~shareholders' equity.

- 17 -

·●

While much less significant in the past few years, a ~~meaningful~~ portion of the risk underwritten by the Insurance Subsidiaries ~~covers~~prior to June 30, 2015 covered property losses resulting from catastrophic events on a worldwide basis. The occurrence and valuation of loss events for this business is highly unpredictable and a single catastrophic event could result in a materially significant loss to the Company. Catastrophe losses are an inevitable part of our business. Various events can cause catastrophe losses, including hurricanes, windstorms, earthquakes, hail, explosions, severe winter weather, and fires, and their frequency and severity are inherently unpredictable. In addition, longer-term natural catastrophe trends may be changing and new types of catastrophe losses may be developing due to climate change, a phenomenon that has been associated with extreme weather events linked to rising temperatures, and includes effects on global weather patterns, greenhouse gases, sea, land and air temperatures, sea levels, rain, and snow. The extent of our losses from catastrophes is a function of both the total amount of our insured exposures in the affected areas and the severity of the events themselves. In addition, as in the case of catastrophic losses generally, it can take many months, or even years, for the ultimate cost ~~to us~~ to be finally determined. As our claim experience develops on a particular catastrophe, management may be required to adjust recorded reserves to reflect our revised estimates of the total cost of claims. While the eventual occurrence of catastrophic losses is expected, we are prohibited by U.S. generally accepted accounting principles from establishing reserves for the expected future occurrence of these losses (such as is done in the life insurance industry). Accordingly, upon the occurrence of such a loss, it will likely have a material adverse impact on the Company’s results of operations in the quarter in which it occurs.

~~- 18 -~~

·●

The Company derives a significant percentage of its direct premium volume from ~~FedEx Ground Systems, Inc. and~~ certain ~~of its~~FedEx subsidiaries and related entities ~~(“FedEx”~~("FedEx"), and from insurance coverage provided to ~~independent~~FedEx's contracted service ~~providers under contract with FedEx.~~providers. While the loss of this major customer could severely ~~reduce~~impact the ~~Company’s~~Company's revenue ~~and~~ earnings potential and A.M. Best rating, insurance programs provided to FedEx and programs provided to the ~~independent~~contracted service providers ~~under contract with FedEx~~ are not necessarily dependent upon one another and, therefore, could be viewed as separate entities.

·●

The Company, through its Insurance Subsidiaries, requires collateral from its insureds covering the ~~insureds’~~insureds' obligations for self-insured retentions or deductibles related to policies of insurance provided. Should the Company, as surety, become responsible for such insured obligations, the collateral held may prove to be insufficient. In this regard, FedEx ~~utilize~~utilizes significant self-insured retentions and deductibles under policies of insurance provided by the ~~Company’s~~Company's Insurance Subsidiaries. In the case of FedEx, the Company has determined that the financial strength of the customer is sufficient to allow for holding only partial collateral at this time. Should the Company become responsible for this entire ~~customer’s~~customer's self-insured retention and deductible obligations, the collateral held would be insufficient and the Company would sustain a significant operating loss.

·●

Given the ~~Company’s~~Company's significant interest-bearing investment portfolio, a material drop in interest rates could have an adverse impact on the ~~Company’s~~Company's earnings and, potentially, its financial position. Conversely, because of the inverse relationship between interest rates and the market value of bonds, a material increase in interest rates could have a significant temporary negative impact on the market value of the ~~Company’s~~Company's fixed maturity investment portfolio. The functioning of the fixed income markets, the values of the investments the Company holds and the ~~Company’s~~Company's ability to liquidate them may be adversely affected if those markets are disrupted by a change in interest rates or otherwise affected by significant negative factors, including, without limitation: local, national, or international events, such as regulatory changes, wars, or terrorist attacks; a recession, depression, or other adverse developments in either the U.S. or other economies that adversely affects the value of securities held in the ~~Company’s~~Company's portfolio; financial weakness or failure of one or more financial institutions that play a prominent role in securities markets or act as a counterparty for various financial instruments, which could further disrupt the markets; inactive markets for specific kinds of securities, or for the securities of certain issuers or in certain sectors, which could result in decreased valuations and impact the ~~Company’s~~Company's ability to sell a specific security or a group of securities at a reasonable price when desired; a significant change in inflation expectations, or the onset of deflation or stagflation. If the fixed-income portfolio were to suffer a decrease in value to a substantial degree, the ~~Company’s~~Company's liquidity, financial position, and financial results could be materially adversely affected. Under these circumstances, the ~~Company’s~~Company's income from these investments could be materially reduced, and declines in the value of certain securities could further reduce the ~~Company’s~~Company's results of operations, equity, business and insurer financial strength.

·●

The Company has a large portfolio of equity securities and limited partnership investments which can fluctuate in value with a wide variety of market conditions. A decline in the aggregate value of the equity securities and limited partnership investments would result in a commensurate decline in the ~~Company’s~~Company's shareholders equity, either through the income statement or directly to equity. The resultant decline could, at least temporarily, materially adversely affect the ~~Company’s~~Company's results of operations, equity, business and insurer financial ~~strength.~~strength ratings.

- 1918 -

·●

Technological advances, inincluding those specific to the transportation industry, could present the Company with added competitive risks. An increase in accident prevention technologies and the growth of autonomous or partially autonomous vehicles could reduce the amount of accidents over time and shift the liability from the owner of the vehicle to the manufacturer, which would cause automobile insurance to become a smaller portion of the ~~Company’s~~Company's overall Property and Casualty insurance book of business. Innovations in telematics and the increase in usage-based information have become more important and will likely change the way premiums are determined in the future. These advances in technology could materially change the way products in the transportation industry are designed, priced and underwritten and it will take time for the Company to adjust to these changes.

●

The Company's operations rely upon complex and expensive information technology systems for interacting with policyholders, brokers and employers. The Company's success involves providing customers with easy-to-use products and ensuring the Company's workforce has the technology to support the customer base. The pace at which information systems must be upgraded is continually increasing, requiring an ongoing commitment of significant resources to maintain or upgrade to current standards. The Company's success is reliant on developing and expanding the effectiveness of existing systems and continuing to enhance information systems that support the Company's operations in a cost effective manner.

●

·The Company relies upon the information technology systems and other operational systems and on the integrity and timeliness of data to run the businesses and service the customers. These systems may fail to operate properly or become disabled as a result of events or circumstances wholly or partly beyond our control. Despite our implementation of a variety of security measures, the information technology and other systems could be subject to physical or electronic break-ins, unauthorized tampering or other cyber security breaches, resulting in a failure to maintain the security, confidentiality or privacy of sensitive data, including personal information relating to customers, or in theft of intellectual property or proprietary information. A failure to maintain proper security, confidentiality or privacy of sensitive data residing on such systems could delay or disrupt the Company's ability to do business and service customers, harm the Company's reputation, subject the Company to litigation, regulatory fines, a loss of customers and revenues or otherwise adversely affect the business.

●

Changes in current accounting practices and future pronouncements may materially impact the ~~Company’s~~Company's reported financial results. Developments in accounting practices may require the Company to incur considerable additional expenses to comply with such developments, particularly if the Company is required to prepare information relating to prior periods for comparative purposes or to apply the new requirements retroactively. The impact of changes in current accounting practices and future pronouncements cannot be predicted but may affect the calculation of net income, net equity and other historical financial statement line items that are important to users of the financial statements. Changes could also introduce significant volatility in the ~~Company’s~~Company's results of operations, equity, business and insurer financial strength.

The Company’s operations rely upon complex and expensive information technology systems for interacting with policyholders, brokers and employers. The Company’s success involves providing customers with easy-to-use products and ensuring the Company’s workforce has the technology to support the customer base. The pace at which information systems must be upgraded is continually increasing, requiring an ongoing commitment of significant resources to maintain or upgrade to current standards. The Company’s success is reliant on developing and expanding the effectiveness of existing systems and continuing to enhance information systems that support the Company’s operations in a cost effective manner.

The Company relies upon the information technology systems and other operational systems and on the integrity and timeliness of data to run the businesses and service the customers. These systems may fail to operate properly or become disabled as a result of events or circumstances wholly or partly beyond our control. Despite our implementation of a variety of security measures, the information technology and other systems could be subject to physical or electronic break-ins, unauthorized tampering or other security breaches, resulting in a failure to maintain the security, confidentiality or privacy of sensitive data, including personal information relating to customers, or in theft of intellectual property or proprietary information. A failure to maintain proper security, confidentiality or privacy of sensitive data residing on such systems could delay or disrupt the Company’s ability to do business and service customers, harm the Company’s reputation, subject the Company to litigation, regulatory fines, a loss of customers and revenues or otherwise adversely affect the business.

Item 2. PROPERTIES

The Company owns its home office building and the adjacent real estate in Carmel, Indiana, approximately 14 miles from downtown Indianapolis. The home office building contains a total of ~~184,000~~181,000 usable square feet and the Company currently occupies approximately ~~60%~~70% of this space with the remainder being leased to non-affiliated entities on relatively ~~short- term~~short-term leases.

The Company also owns a building and the adjacent real estate in Indianapolis, approximately nine miles from its main office in Carmel. The building contains approximately 15,000 square feet of usable space, and is used primarily for off-site data storage and as a contingent back up and disaster recovery site.

The Company's entire operations are conducted from these facilities. The current facilities are expected to be adequate for the Company's operations for the foreseeable future.

- 2019 -

Item 3. LEGAL PROCEEDINGS

In the ordinary, regular and routine course of their business, the Company and its Insurance Subsidiaries are frequently involved in various matters of litigation relating principally to claims for insurance coverage provided. No currently pending matter is deemed by management to be material to the Company.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Nothing to report.

~~PART II~~

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PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The ~~Company’s~~Company's Class A and Class B common stocks are traded on The NASDAQ Stock Market® under the symbols BWINA and BWINB, respectively. The Class A and Class B common shares have identical rights and privileges except that Class B shares have no voting rights other than on matters for which Indiana law requires class voting. As of December 31, ~~2014,~~2015, there were approximately 400 record holders of Class A Common Stock and approximately 1,000 record holders of Class B Common Stock.

The table below sets forth the range of high and low sale prices for the Class A and Class B Common Stock for ~~2014~~2015 and ~~2013,~~2014, as reported by NASDAQ and published in the financial press. The quotations reflect interdealer prices without retail markup, markdown or commission and do not necessarily represent actual transactions.

									Cash										Cash
	Class A				Class B				Dividends		Class A				Class B				Dividends
	High		Low		High		Low		Declared		High		Low		High		Low		Declared

2015:
Fourth Quarter											$	24.89	$	22.43	$	24.99	$	21.27	$	.25
Third Quarter												24.40		21.04		23.69		21.85		.25
Second Quarter												24.40		22.50		24.36		22.02		.25
First Quarter												27.63		22.57		25.80		23.00		.25

2014:
Fourth Quarter	$	24.80	$	23.25	$	27.44	$	24.19	$	.25		24.80		23.25		27.44		24.19		.25
Third Quarter		24.50		23.25		26.68		24.55		.25		24.50		23.25		26.68		24.55		.25
Second Quarter		25.20		22.89		26.94		24.36		.25		25.20		22.89		26.94		24.36		.25
First Quarter		24.88		22.06		27.24		23.40		.25		24.88		22.06		27.24		23.40		.25

2013:
Fourth Quarter		26.64		23.12		28.38		23.84		.25
Third Quarter		26.57		23.00		27.75		23.23		.25
Second Quarter		24.74		22.52		24.92		23.01		.25
First Quarter		26.70		22.05		25.06		22.50		.25

The Company has paid quarterly cash dividends continuously since 1974. The current regular quarterly dividend rate ~~is $.25~~has been increased to $.26 per ~~share.~~share, effective February 2016. The Company expects to continue its policy of paying regular cash dividends although there is no assurance as to future dividends because they are dependent on future earnings, capital requirements and financial conditions and are subject to regulatory restrictions. The Board intends to address the subject of dividends at each of its future meetings considering the ~~Company’s~~Company's earnings, returns on investments and its capital needs.

- 21 -

Corporate Performance

The following graph shows a five year comparison of cumulative total return for the ~~Corporation’s~~Corporation's Class B common shares, the NASDAQ Insurance Stock Index and the Russell 2000 Index. The basis of comparison is a $100 investment at December 31, ~~2009,~~2010, in each of (i) Baldwin & Lyons, Inc., (ii) Nasdaq Insurance Stocks, and (iii) the Russell 2000 Index. All dividends are assumed to be reinvested.

	Period Ending
Index	12/31/10		12/31/11		12/31/12		12/31/13		12/31/14		12/31/15
Baldwin & Lyons, Inc.		100.00		96.80		110.86		132.22		129.80		126.28
NASDAQ Insurance Index		100.00		105.63		123.41		161.85		178.92		194.53
Russell 2000		100.00		95.82		111.49		154.78		162.35		155.18

Period Ending
Index 12/31/09 12/31/10 12/31/11 12/31/12 12/31/13 12/31/14
Baldwin & Lyons, Inc. 100.00 104.70 101.35 116.08 138.44 135.91
NASDAQ Insurance Index 100.00 118.13 124.78 145.78 191.19 211.36
Russell 2000 100.00 126.86 121.56 141.43 196.34 205.95

- 22 -

Item 6. SELECTED FINANCIAL DATA

Year Ended December 31
2014 2013 2012 2011 2010
(Dollars in thousands, except per share data)

Direct and assumed premiums written $ 382,388 $ 369,476 $ 341,286 $ 334,526 $ 295,802

Net premiums earned 261,627 252,743 237,461 244,570 214,738

Net investment income 9,055 8,770 9,930 10,729 11,335

Net gains (losses) on investments 14,930 23,515 9,011 (17,803 ) 16,485

Losses and loss expenses incurred 159,596 150,701 138,088 215,555 145,952

Net income (loss) 29,717 36,588 31,919 (28,175 ) 25,015

Earnings per share -- net income (loss) 1
1.98 2.45 2.15 (1.90 ) 1.69

Cash dividends per share 2
1.00 1.00 1.00 1.00 2.25

Investment portfolio 3
757,421 703,259 681,856 637,681 635,174

Total assets 1,144,247 1,072,270 983,024 905,294 837,946

Shareholders' equity 399,496 381,724 346,712 319,061 368,735

Book value per share 1
26.67 25.57 23.25 21.49 24.90

Underwriting ratios 4

   Losses and loss expenses 61.0 % 59.6 % 58.1 % 88.1 % 68.0 %

   Underwriting expenses 32.0 % 32.4 % 30.8 % 30.2 % 31.0 %

   Combined 93.0 % 92.0 % 88.9 % 118.3 % 99.0 %
The table below provides selected consolidated financial data of the Company.   The information has been derived from our consolidated financial statements for each of the years in the five year period ended December 31, 2015. You should read this selected consolidated financial data in conjunction with the audited consolidated financial statements and notes as of and for the year ended December 31, 2015 included in Part II, Item 8 "Financial Statements and Supplementary Data", and Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in this Annual Report on Form 10-K.

	Year Ended December 31
	2015			2014			2013			2012			2011
	(Dollars in thousands, except per share data)

Direct and assumed premiums written	$	383,553		$	382,388		$	369,476		$	341,286		$	334,526

Net premiums earned		263,335			261,627			252,743			237,461			244,570

Net investment income		12,498			9,055			8,770			9,930			10,729

Net gains (losses) on investments		(1,261	)		14,930			23,515			9,011			(17,803	)

Losses and loss expenses incurred		155,750			159,596			150,701			138,088			215,555

Net income (loss)		23,283			29,717			36,588			31,919			(28,175	)

Earnings per share -- net income (loss) ¹		1.55			1.98			2.45			2.15			(1.90	)

Cash dividends per share		1.00			1.00			1.00			1.00			1.00

Investment portfolio ²		729,877			757,421			703,259			681,856			637,681

Total assets		1,085,771			1,144,247			1,072,270			983,024			905,294

Shareholders' equity		394,498			399,496			381,724			346,712			319,061

Book value per share ¹		26.25			26.67			25.57			23.25			21.49

Underwriting ratios ³

Losses and loss expenses		59.2	%		61.0	%		59.6	%		58.1	%		88.1	%

Underwriting expenses		32.2	%		32.0	%		32.4	%		30.8	%		30.2	%

Combined		91.4	%		93.0	%		92.0	%		88.9	%		118.3	%

¹ Earnings and book value per share are adjusted for the dilutive effect of stock options outstanding.

² Includes money market instruments classified with cash in the Consolidated Balance Sheets.

2 ~~Includes extra dividend of $1.25 for 2010.~~

3 ~~Includes money market instruments classified with cash in the Consolidated Balance Sheets.~~

4³ Data is for all coverages combined, does not include fee income and is presented based upon U.S. generally accepted accounting principles.

- 23 -

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Liquidity and Capital Resources

The primary sources of the ~~Company’s~~Company's liquidity are (1) funds generated from insurance operations including net investment income, (2) proceeds from the sale of investments and (3) proceeds from maturing investments. The Company generally experiences positive cash flow from operations resulting from the fact that premiums are collected on insurance policies in advance of the disbursement of funds in payment of claims. Operating costs of the Insurance Subsidiaries, other than loss and loss expense payments, generally average less than 33% of net premiums earned on a consolidated basis and the remaining amount is available for investment for varying periods of time depending on the type of insurance coverage provided. Because losses are often settled in periods subsequent to when they are incurred, operating cash flows may, at times, become negative as loss settlements on claim reserves established in prior years exceed current revenues. During ~~2014,~~2015, cash flow from operations totaled ~~$30.2~~$38.2 million compared to ~~$35.9~~$30.2 million total for ~~2013.~~2014. The ~~decrease~~increase in operating cash flow resulted mainly from ~~increased~~decreased loss, LAE and other operating expense payments ~~partially offset by~~in addition to higher premium volume in ~~2014.~~

2015.

For several years, the ~~Company’s~~Company's investment philosophy has emphasized the purchase of short-term bonds with superior quality and liquidity. As flat yield curves have not provided incentive to lengthen maturities in recent years, the Company has continued to maintain its fixed maturity portfolio at short-term levels. The average contractual life of the ~~Company’s~~Company's bond and short-term investment portfolio ~~remained level at 4.8~~decreased slightly to 4.6 years during ~~2014.~~2015. The average duration of the ~~Company’s~~Company's fixed maturity portfolio remains much shorter than the contractual maturity average and significantly shorter than the duration of the ~~Company’s~~Company's liabilities. The Company also remains an active participant in the equity securities market using capital which is in excess of amounts considered necessary to fund current operations. The long-term horizon for the ~~Company’s~~Company's equity investments allows it to invest in positions where ultimate value, and not short-term market fluctuation, is the primary focus. Investments made by the ~~Company’s~~Company's domestic Insurance Subsidiaries are regulated by guidelines promulgated by the National Association of Insurance Commissioners which are designed to provide protection for both policyholders and shareholders.

The ~~Company’s~~Company's assets at December 31, ~~2014 included $62.3~~2015 included $71.7 million in short-term and cash equivalent investments which are readily convertible to cash without market penalty and an additional ~~$129.6 million~~$73.9 million of fixed maturity investments (at par) maturing in less than one year. The Company believes that these liquid investments, plus the expected cash flow from ~~current operations,~~premium collections, are more than sufficient to provide for projected claim payments and operating cost demands. In the event competitive conditions produce inadequate premium rates and the Company chooses to further restrict volume, the liquidity of its investment portfolio would permit management to continue to pay claims as settlements are reached without requiring the disposal of investments at a loss, regardless of interest rates in effect at the time. In addition, the ~~Company’s~~Company's reinsurance program is structured to avoid significant cash outlays that accompany large losses.

Net premiums written by the ~~Company’s~~Company's Insurance Subsidiaries for ~~2014~~2015 equaled approximately ~~66%~~65% of the combined statutory surplus of these subsidiaries, a level consistent with the past several years. Premium writings of 100% to 200% of surplus are generally considered acceptable by regulatory authorities. Further, the statutory capital of each of the Insurance Subsidiaries substantially exceeds minimum risk based capital requirements set by the National Association of Insurance Commissioners. Accordingly, the Company has the ability to significantly increase its business without seeking additional capital to meet regulatory guidelines.

At December 31, ~~2014, $94.9~~2015, $87.7 million, or ~~24%~~22% of ~~shareholders’~~shareholders' equity, represented net assets of the ~~Company’s~~Company's Insurance Subsidiaries which, at that time, could not be transferred in the form of dividends, loans or advances to the parent company because of minimum statutory capital requirements. However, management believes that these restrictions pose no material liquidity concerns for the Company. The financial strength and stability of the subsidiaries permit ready access by the parent company to short-term and long-term sources of credit. The Company maintains a $40 million unsecured line of credit with $20 million of unused capacity at December 31, ~~2014.~~

2015.

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Results of Operations

2015 Compared to 2014

Premiums written by the Property and Casualty Insurance segment for 2015 totaled $366.7 million, an increase of $23.5 million (7%) from 2014. This increase is attributable to a $30.1 million (10%) increase in premiums generated by fleet transportation products resulting from the addition of several new accounts during 2015, rate increases and increased revenue and miles driven by our insureds, which is immediately reflected in premium. This increase was partially offset by decreases of $4.7 million and $4.1 million in premiums generated by primary professional liability and personal automobile, respectively, reflecting the Company's strategic initiatives of reducing exposures in these products. Premiums ceded to reinsurers on Property and Casualty Insurance segment business averaged 35.0% of gross written premium for 2015 compared to 34.7% for 2014, with the small variation attributable to fluctuation in the mix of business as well reinsurance treaty placement changes.

Premiums written by the Reinsurance segment totaled $16.9 million during 2015, a decrease of $22.3 million (57%) from 2014. Premiums generated by property reinsurance products decreased $13.4 million (85%), reflective of management's decision to completely withdraw from the property catastrophe market. As of June 30, 2015, all exposure to catastrophic losses has expired. Further contributing to the Reinsurance segment premium written decrease was an $8.9 million (38%) decline in the Company's book of professional liability reinsurance assumed, reflective of the Company's decision to non-renew certain business in response to deteriorating rates and treaty terms.

After giving effect to changes in unearned premiums, consolidated net premiums earned totaled $263.3 million for 2015 compared to $261.6 million for 2014, an increase of 0.7%. The small net premium earned increase reflects a 10.3% increase in premium earned from the fleet transportation products mentioned above, partially offset by decreased premium written from primary professional liability and personal automobile products and in the Reinsurance segment.

Pre-tax investment income of $12.5 million during 2015 was 38% higher than the 2014 reflecting an increased allocation to high-yield bonds and increases in average invested assets. After tax investment income increased by 32% during 2015 compared to the prior year reflecting a mix in taxable compared to tax-exempt investment income.

Net pre-tax losses on investments, before taxes, totaled $1.3 million in 2015 compared to net pre-tax gains on investments of $14.9 million during 2014. The 2015 results were heavily influenced by direct trading results with gains of $4.5 million in 2015 compared to gains of $7.9 million in 2014. In addition, limited partnership results produced losses of $1.7 million in 2015 compared to gains of $7.1 million during the prior year. Limited partnership ventures utilized by the Company are primarily engaged in the trading of public and private securities, including foreign securities and, to a lesser extent, small venture capital activities and real estate development. The aggregate of the Company's share of gains and losses in these entities represented a 2% decrease in value for 2015 compared to a 10% appreciation in value for 2014. To the extent that accounting rules require the limited partnerships to include realized and unrealized gains or losses in their net income, the Company's proportionate share of net income will include the results as reported to the Company by the various general partners. During 2015, the limited partnership $1.7 million net loss was composed of $8.2 million attributable to a decrease in unrealized gains and $6.5 million attributable to realized gains. Other-than-temporary impairments of $7.7 million netted with losses of $4.4 million on previously impaired available-for-sale securities that were sold in 2015 are included in the net losses stated above.

Losses and loss expenses incurred during 2015 decreased $3.8 million (2.4%) from 2014 to $155.8 million, a decrease generally consistent with the decreased reinsurance exposure described above. The 2015 consolidated loss and loss expense ratio was 59.2% compared to 61.0% for 2014. The Company's loss and loss expense ratios for major product lines are summarized in the following table:

	2015			2014
Fleet transportation		55.7	%		58.8	%
All other		96.4			93.9
All lines		59.2			61.0

- 25 -

The lower loss ratio for Fleet Transportation during 2015 was the result of more favorable frequency and severity related to current accident year losses. Prior year reserve savings lowered the 2015 calendar year Fleet Transportation loss ratio by 4.3 points compared to a 4.4 point decrease experienced in 2014.

The Company produced an overall savings on the handling of prior year claims during 2015 of $10.1 million. This net savings is included in the computation of loss ratios shown in the previous table, as is the $10.4 million savings produced during 2014 on prior year claims. Separated by segment, a $10.3 million net savings attributable to the property and casualty insurance segment during 2015 was primarily attributable to the Company's Fleet Transportation business, a described in the previous paragraph. A $0.2 million deficiency attributable to the reinsurance segment in 2015 related primarily to professional liability assumed losses. Because of the high limits provided by the Company to its fleet transportation insureds, the length of time necessary to settle larger, more complex claims and the volatility of the fleet transportation liability insurance business, the Company believes it is important to take a conservative posture in its reserving process. As claims are settled in years subsequent to their occurrence, the Company's claim handling process has, historically, tended to produce savings from the reserves provided. Changes in both gross premium volumes and the Company's reinsurance structure for its fleet transportation business can have a significant impact on future loss developments and, as a result, loss and loss expense ratios and prior year reserve development may not be consistent year to year.

Other operating expenses for 2015, before credits for ceding allowances from reinsurers, increased $7.7 million (7%) to $119.5 million, generally in line with increases in Property and Casualty Insurance segment premium written. This increase is due primarily to (1) an increase in salary and salary related expenses, reflective of the Company's growing workforce in response to the continued expansion of the Company's products and services, (2) a non-recurring recovery during 2014 of a substantial previously written off reinsurance recovery and (3) increased commissions related to business produced by non-affiliated agents and brokers. Reinsurance ceded credits were 22% higher in 2015, resulting primarily from favorable changes to the terms of certain reinsurance treaties. After consideration of these expense offsets, operating expenses increased $2.5 million, or 3%, from the prior year.

A portion of the Company's fleet transportation business is produced by the direct sales efforts of Baldwin & Lyons, Inc. employees and, accordingly, this business does not incur commission expense on a consolidated basis. Rather, the expenses of the agency operations, including salaries and bonuses of salesmen, travel expenses, etc. is included in operating expenses. In general, commissions paid by the Insurance Subsidiaries to the parent company exceed related acquisition costs incurred in the production of the property and casualty insurance business. The ratio of net operating expenses of the Insurance Subsidiaries to net premiums earned was 32.2% in 2015 and 32.0% in 2014. Including the agency operations and corporate expenses, and after elimination of inter-company commissions, the ratio of operating expenses to operating revenue (defined as total revenue less gains or losses on investments) was 32.2% for 2015 compared with 31.8% for 2014.

The effective federal tax rate on the consolidated pre-tax income for 2015 was 31.4%. The effective rate differs from the normal statutory rate primarily as a result of tax-exempt investment income.

Net income for 2015 of $23.3 million compares to net income of $29.7 million during 2014 with the decline attributable to realized investment gains. Diluted earnings per share of $1.55 were recorded in 2015 compared to per share income of $1.98 in 2014.

2014 Compared to 2013

Premiums written by the Property and Casualty Insurance segment for 2014 totaled $343.2 million, an increase of $28.4 million (9%) from 2013. This increase is primarily attributable to a $32.0 million (11%) increase in premiums generated by fleet transportation products resulting from the addition of several new accounts during 2014, rate increases and increased revenue and miles driven by our insureds, which is immediately reflected in premium. This increase was partially offset by a decrease of $10.0 million in premiums generated by primary professional liability reflecting the termination of products produced through a single managing general agency which had experienced unfavorable results in recent years. Premiums ceded to reinsurers on direct business averaged ~~34.5%~~34.7% of gross written premium for 2014 compared to 35.9% for 2013, with the decrease attributable to the above-described changes in mix of business.

- 26 -

Premiums written by the Reinsurance segment totaled $39.2 million during 2014, a decrease of $15.5 million (28%) from 2013. Premiums generated by property reinsurance products decreased $13.0 million (45%), reflective of ~~management’s~~management's decision to reduce exposures to property catastrophe losses. Further contributing to the Reinsurance segment decrease was a decrease in the ~~Company’s~~Company's book of professional liability reinsurance assumed.

After giving effect to changes in unearned premiums, consolidated net premiums earned totaled $261.6 million for 2014 compared to $252.7 million for 2013, an increase of 3.5%. The premium earned increase also reflects the higher premium volume generated by the fleet transportation products mentioned above which was partially offset by decreased premium written in the primary professional liability products.

Pre-tax investment income of $9.1 million during 2014 was 3% higher than the 2013 total as available pre-tax yields began to level and average invested assets continued to grow marginally. After tax investment income increased by 5% during 2014 compared to the prior year reflecting a mix in taxable compared to tax-exempt investment income.

Net gains on investments, before taxes, totaled $14.9 million in 2014 compared to net gains on investments of $23.5 million during 2013. The 2014 results were once again heavily influenced by direct trading results with gains of $7.9 million in 2014 compared to gains of $13.6 million in 2013. In addition, limited partnership results produced gains of $7.1 million in 2014 compared to gains of $8.0 million during the prior year. Limited partnership ventures utilized by the Company are primarily engaged in the trading of public and private securities, including foreign securities and, to a lesser extent, small venture capital activities and real estate development. The aggregate of the ~~Company’s~~Company's share of gains in these entities represented a 10% appreciation in value for 2014 compared to a 13% appreciation in value for 2013. To the extent that accounting rules require the limited partnerships to include realized and unrealized gains or losses in their net income, the ~~Company’s~~Company's proportionate share of net income will include the results as reported to the Company by the various general partners. During 2014, the $7.1 million net gain was composed of $5.8 million attributable to an increase in unrealized gains and $1.3 million attributable to realized gains. Recoveries of $0.3 million on previously impaired available-for-sale securities that were sold in 2014 are included in the net gains stated above.

Losses and loss expenses incurred during 2014 increased $8.9 million (5.9%) from 2013 to $159.6 million, an increase generally consistent with the increased premium volume described above and reflects higher property catastrophe losses occurring in 2014. The 2014 consolidated loss and loss expense ratio was 61.0% compared to 59.6% for 2013. The Company's loss and loss expense ratios for major product lines are summarized in the following table:

	2014			2013
Fleet transportation		58.8	%		63.0	%
All other		93.9			84.8
All lines		61.0			59.6

2014 2013
Fleet transportation 58.8 % 63.0 %
Private passenger automobile 75.1 62.1
Professional liability 158.3 126.6
Property reinsurance 68.6 12.0
Casualty reinsurance 46.0 60.8
Residual market and all other 86.6 76.4
All lines 61.0 59.6

~~- 25 -~~

The lower loss ratio for Fleet Transportation was the result of more favorable frequency and severity experience during the year as well as prior year reserve savings. The increase in the ~~Private Passenger Automobile~~All Other loss ratio ~~is reflective of adverse weather conditions early~~ in ~~the year and increases in frequency throughout the year. Unfavorable~~2014 was attributable to unfavorable loss development on a single MGA produced program in Primary Professional Liability resulted in the increase in loss ratios reported in 2014. This program was terminated late in 2013 with inforce policies running off during 2014. The property reinsurance loss ratio for 2014 was impacted byand a small number of catastrophic losses aggregating over $11 million.

The Company produced an overall savings on the handling of prior year claims during 2014 of $10.4 million. This net savings is included in the computation of loss ratios shown in the previous table, as is the $5.6 million savings produced during 2013 on prior year claims. Separated by segment, a $5.4 million net savings attributable to the property and casualty insurance segment during 2014 was attributable to the Company's Fleet Transportation and Personal Automobile business with deficiencies in Primary Professional Liability and a discontinued line of Commercial Multi-Peril partially offsetting the savings. The $4.9 million savings attributable to the reinsurance segment in 2014 related largely to the casualty reinsurance business. Because of the high limits provided by the Company to its fleet transportation insureds, the length of time necessary to settle larger, more complex claims and the volatility of the fleet transportation liability insurance business, the Company believes it is important to take a conservative posture in its reserving process. As claims are settled in years subsequent to their occurrence, the Company's claim handling process has, historically, tended to produce savings from the reserves provided. Changes in both gross premium volumes and the Company's reinsurance structure for its fleet transportation business can have a significant impact on future loss developments and, as a result, loss and loss expense ratios and prior year reserve development may not be consistent year to year.

- 27 -

Other operating expenses for 2014, before credits for ceding allowances from reinsurers, increased $5.7 million (5%) to $111.8 million, generally in line with increases in premium written. This increase is due primarily to an increase in salary and salary related expenses, reflective of the ~~Company’s~~Company's growing workforce in response to the continued expansion of the ~~Company’s~~Company's products and services, and from higher expenses related to technological advances within the Company, both in the area of telematics and information technology. Reinsurance ceded credits were 14% higher in 2014, resulting from favorable changes to the terms of certain reinsurance treaties as well as increased business ceded to other companies under quota share reinsurance treaties which provide commissions to the Insurance Subsidiaries. After consideration of these expense offsets, operating expenses increased $2.7 million, or 3% from the prior year.

A portion of the ~~Company’s~~Company's fleet transportation business is produced by the direct sales efforts of Baldwin & Lyons, Inc. employees and, accordingly, this business does not incur commission expense on a consolidated basis. Rather, the expenses of the agency operations, including salaries and bonuses of salesmen, travel expenses, etc. is included in operating expenses. In general, commissions paid by the Insurance Subsidiaries to the parent company exceed related acquisition costs incurred in the production of the property and casualty insurance business. The ratio of net operating expenses of the Insurance Subsidiaries to net premiums earned was 32.0% in 2014 and 32.4% in 2013. Including the agency operations and corporate expenses, and after elimination of inter-company commissions, the ratio of operating expenses to operating revenue (defined as total revenue less gains or losses on investments) was 31.8% for 2014 compared with 31.9% for 2013.

The effective federal tax rate on the consolidated pre-tax income for 2014 was 33.1%. The effective rate differs from the normal statutory rate primarily as a result of tax-exempt investment income.

Net income for 2014 of $29.7 million compares to net income of $36.6 million during 2013. Diluted earnings per share of $1.98 were recorded in 2014 compared to per share income of $2.45 in 2013.

~~- 26 -~~

~~2013 Compared to 2012~~

Premiums written by the Property and Casualty Insurance segment for 2013 totaled $314.8 million, an increase of $30.6 million (11%) from 2012. This increase is primarily attributable to a $50.2 million (21%) increase in premiums generated by fleet transportation products resulting from increased revenue and miles driven by our insureds, which is immediately reflected in premium, rate increases and the addition of several new accounts during 2013. This increase was partially offset by a decrease of $21.1 million in premiums generated by commercial multi-peril business as the result of management’s decision to exit this business as part of its program to reduce property catastrophe exposures. Premiums ceded to reinsurers on direct business averaged 35.9% for 2013 compared to 37.1 % for 2012, with the decrease attributable to the above described changes in mix of business.

Premiums written by the Reinsurance segment totaled $54.7 million during 2013, a decrease of $2.4 million (4%) from 2012. Premiums generated by property reinsurance products decreased $5.5 million (16%), reflective of management’s decision to reduce exposures to property catastrophe losses. Partially offsetting the property decrease was an increase of $3.1 million (14%) in the Company’s growing book of professional liability reinsurance assumed.

After giving effect to changes in unearned premiums, consolidated net premiums earned totaled $252.7 million for 2013 compared to $237.5 million for 2012, an increase of 6.4%. This increase is in line with the greater premium volume generated by the fleet transportation products mentioned above which were partially offset by decreased premium written in the commercial multi-peril and personal automobile products.

Pre-tax investment income of $8.8 million during 2013 was 12% lower than the 2012 total as pre-tax yields were down nearly 11% on average, reflecting the impact of continuing depressed worldwide available rates on the reinvestment of maturing fixed maturity investments and the redeployment of a portion of invested assets into securities that emphasize capital gains over interest income. After tax investment income decreased by a similar 12% during 2013, compared to the prior year.

Net gains on investments, before taxes, totaled $23.5 million in 2013 compared to net gains on investments of $9.0 million during 2012. The 2013 results were heavily influenced by direct trading results with gains of $13.6 million in 2013 compared to gains of $1.5 million in 2012. In addition, limited partnership results produced gains of $8.0 million in 2013 compared to gains of $7.0 million during the prior year. Limited partnership ventures utilized by the Company are primarily engaged in the trading of public and private securities, including foreign securities and, to a lesser extent, small venture capital activities and real estate development. The aggregate of the Company’s share of gains in these entities represented a 13% appreciation in value for both 2013 and 2012. To the extent that accounting rules require the limited partnerships to include realized and unrealized gains or losses in their net income, the Company’s proportionate share of net income will include the results as reported to the Company by the various general partners. During 2013, the $8.0 million net gain was composed of $3.0 million attributable to an increase in unrealized gains and $5.0 million attributable to realized gains. Recoveries of $1.7 million on previously impaired available-for-sale securities that were sold in 2013 are included in the net gains stated above.

Losses and loss expenses incurred during 2013 increased $12.6 million (9%) from 2012 to $150.7 million, an increase generally consistent with the increased premium volume described above. The 2013 consolidated loss and loss expense ratio was 59.6% compared to 58.1% for 2012. The Company's loss and loss expense ratios for major product lines are summarized in the following table:

2013 2012
Fleet transportation 63.0 % 66.8 %
Private passenger automobile 62.1 65.2
Commercial multi-peril 94.0 45.9
Professional liability 126.6 67.5
Property reinsurance 12.0 11.1
Casualty reinsurance 60.8 61.4
Residual market and all other 76.4 98.2
All lines 59.6 58.1

The lower loss ratios for Fleet Transportation and Private Passenger Automobile in 2013 were the result of more favorable frequency and severity experience during the year. The increase in the Commercial Multi-Peril loss ratio is associated with higher than expected liability losses on the runoff of this terminated business line. Unfavorable loss development on a single MGA produced program in Primary Professional Liability resulted in the increase in loss ratios reported in 2013. This program was terminated late in 2013 with inforce policies running off during 2014. The property reinsurance loss ratio for 2013 was consistent with the 2012 ratio due to the lack of any major catastrophic losses to the Company in either year.

~~- 27 -~~

The Company produced an overall savings on the handling of prior year claims during 2013 of $5.6 million. This net savings is included in the computation of loss ratios shown in the previous table, as is the $9.9 million savings produced during 2012 on prior year claims. The $1.7 million net savings attributable to the property and casualty insurance segment during 2013 was attributable to the Company's Fleet Transportation and Personal Automobile business with deficiencies in Primary Professional Liability and Commercial Multi-Peril offsetting much of the other savings. The $3.9 million savings attributable to the reinsurance segment in 2013 related solely to property catastrophe business.

Other operating expenses for 2013, before credits for ceding allowances from reinsurers, increased $13.6 million (15%) to $106.2 million. This increase is due primarily to an increase in salary and salary related expenses, reflective of the Company’s growing workforce in response to the continued expansion of the Company’s products and services and to an increase in commission expenses, representing an increase in average commission rates from 15.4% to 16.4% due to higher profit commissions on favorable property reinsurance results.

Reinsurance ceded credits were 37% higher in 2013, resulting from favorable changes to the terms of certain reinsurance treaties as well as increased business ceded to other companies under quota share reinsurance treaties which provide commissions to the Insurance Subsidiaries. After consideration of these expense offsets, operating expenses increased $7.9 million, or 10% from the prior year.

The ratio of net operating expenses of the Insurance Subsidiaries to net premiums earned was 32.4% in 2013 and 30.8% in 2012. Including the agency operations and corporate expenses, and after elimination of inter-company commissions, the ratio of operating expenses to operating revenue (defined as total revenue less gains (losses) on investments) was 31.9% for 2013 compared with 30.6% for 2012 with the current year increase being largely attributable to higher salary expense as noted above.

The effective federal tax rate on the consolidated pre-tax income for 2013 was 33.4%. The effective rate differs from the normal statutory rate primarily as a result of tax-exempt investment income.

~~Net income for 2013 of $36.6 million compares to net income of $31.9 million during 2012. Diluted earnings per share of $2.45 were recorded in 2013 compared to per share income of $2.15 in 2012.~~

Critical Accounting Policies

The ~~Company’s~~Company's significant accounting policies which are material and/or subject to significant degrees of judgment are highlighted below.

Investment Valuation

All marketable securities are included in the ~~Company’s~~Company's balance sheets at current fair market value.

Approximately ~~66%~~67% of the ~~Company’s~~Company's assets are composed of investments at December 31, ~~2014.~~2015. Approximately ~~89%~~90% of these investments are publicly-traded, owned directly and have readily-ascertainable market values. The remaining ~~11%~~10% of investments are composed primarily of minority interests in several limited partnerships. These

limited partnerships are engaged in the trading of public and non-public equity securities and debt, hedging transactions, real estate development and venture capital investment. These partnerships, themselves, do not have readily-determinable market values. Rather, the values recorded are those provided to the Company by the respective partnerships based on the underlying assets of the partnerships. While a substantial portion of the underlying assets are publicly-traded securities, those which are not publically traded have been valued by the respective partnerships using their experience and judgment.

Under FASB guidance, if a fixed maturity security is in an unrealized loss position and the Company has the intent to sell the security, or it is more likely than not that the Company will have to sell the security before recovery of its amortized cost basis, the decline in value is deemed to be other-than-temporary and is recorded to net realized losses on investments in the consolidated statements of operations. For impaired fixed maturity securities that the Company does not intend to sell or it is more likely than not that the Company will not have to sell such securities, but the Company expects that it will not fully recover the amortized cost basis, the credit component of the other-than-temporary impairment is recognized in net realized losses on investments in the consolidated statements of operations and the non-credit component of the other-than-temporary impairment is recognized directly in ~~shareholder’s~~shareholder's equity (accumulated other comprehensive income).

- 28 -

In determining if and when an equity ~~security’s~~security's decline in market value below cost is other-than-temporary, we first make an objective analysis of each individual equity security where current market value is less than cost. For any equity security where the unrealized loss exceeds 20% of original or adjusted cost, and where that decline has existed for a period of at least six months, the decline is treated as an other-than-temporary impairment, without any subjective evaluation as to possible future recovery. For individual issues where the decline in value is less than 20% but the amount of the decline is considered significant, we will also evaluate the market conditions, trends of earnings, price multiples and other key measures for the securities to determine if it appears that the decline is other-than-temporary. In those instances, the Company also considers its intent and ability to hold equity investments until recovery can be reasonably expected. Additionally, for any equity security where the decline has existed for a period of at least one year, the decline is treated as an other-than-temporary impairment. For any decline which is considered to be other-than-temporary, we recognize an impairment loss in the current period earnings as an investment loss. Declines which are considered to be temporary are recorded as a reduction in ~~shareholders’~~shareholders' equity, net of related federal income tax credits.

It is important to note that all available for sale securities included in the ~~Company’s~~Company's financial statements are valued at current fair market values. The evaluation process for determination of other-than-temporary decline in value of investments, as described above, does not change these valuations but, rather, determines when a decline in value will be recognized in the income statement (other-than-temporary decline) as opposed to a charge to ~~shareholders’~~shareholders' equity (temporary decline). Another seemingly inconsistent aspect of this accounting policy which is important to understand is that any subsequent recoveries in value of investments which have incurred other-than-temporary impairment adjustments are accounted for as unrealized gains (with credits to equity but not reflected in the income statement) until the security is actually disposed of or sold. At December 31, ~~2014,~~2015, unrealized gains include ~~$17.1~~$14.7 million of appreciation on investments previously adjusted for other-than-temporary impairment, compared to a cumulative total of ~~$7.2~~$10.5 million of impairment write-downs at that date. This evaluation process is subject to risks and uncertainties since it is not always clear what has caused a decline in value of an individual security or since some declines may be associated with general market conditions or economic factors which relate to an industry, in general, but not necessarily to an individual issue. The Company has attempted to minimize many of these uncertainties by adopting a largely objective evaluation process as described above. However, to the extent that certain declines in value are reported as unrealized at December 31, ~~2014,~~2015, it is possible that future earnings charges will result should the declines in value increase or persist or should the security actually be disposed of while market values are less than cost. At December 31, ~~2014,~~2015, the total gross unrealized loss included in the ~~Company’s~~Company's investment portfolio was approximately ~~$9.7~~$14.6 million. No individual issue constituted a material amount of this total. Had this entire amount been considered other-than-temporary at December 31, ~~2014,~~2015, there would have been no impact on total ~~shareholders’~~shareholders' equity or book value since the decline in value of these securities was recognized as a reduction to ~~shareholders’~~shareholders' equity.

Reinsurance Recoverable

Reinsurance ceded transactions were as follows for the years ended December 31 (dollars in thousands):

	2015		2014		2013
Reinsurance recoverable	$	215,888	$	220,221	$	195,568
Premium ceded (reduction to premium earned)		133,548		119,248		113,882
Losses ceded (reduction to losses incurred)		75,581		105,891		107,321
Commissions from reinsurers (reduction to operating expenses)		28,956		23,797		20,822

2014 2013 2012
Premium ceded (reduction to premium earned) $ 119,248 $ 113,882 $ 103,712
Losses ceded (reduction to losses incurred) 105,891 107,321 90,899
Commissions from reinsurers (reduction to operating expenses) 23,797 20,822 15,185

A discussion of the ~~Company’s~~Company's reinsurance strategies is presented in Item 1, Business, on page 3.

- 29 -

Amounts recoverable under the terms of reinsurance contracts comprise approximately ~~19%~~20% of total Company assets as of December 31, ~~2014.~~2015. In order to be able to provide the high limits required by the ~~Company’s~~Company's insureds, ~~we share~~the Company shares a significant amount of the insurance risk of the underlying contracts with various insurance entities through the use of reinsurance contracts. Some reinsurance contracts provide that a loss be shared among the Company and its reinsurers on a predetermined pro-rata basis ~~(“quota-share”~~("quota-share") while other contracts provide that the Company keep a fixed amount of the loss, similar to a deductible, with reinsurers taking all losses above this fixed amount (“("excess of ~~loss”~~loss"). Some risks are covered by a combination of quota-share and excess of loss contracts. The computation of amounts due from reinsurers is based upon the terms of the various contracts and follows the underlying estimation process for loss and loss expense reserves, as described below. Accordingly, the uncertainties inherent in the loss and loss expense reserving process also affect the amounts recorded as recoverable from reinsurers. Estimation uncertainties are greatest for claims which have occurred but which have not yet been reported to the Company. Further, the high limits provided by the ~~Company’s~~Company's insurance policies for fleet transportation liability, ~~workers’~~workers' compensation and professional liability risks provide more variability in the estimation process than lines of business with lower coverage limits.

~~- 29 -~~

It should be noted, however, that a change in the estimate of amounts due from reinsurers on unpaid claims will not, in itself, result in charges or credits to losses incurred. This is because any change in estimated recovery follows the estimate of the underlying loss. Thus, it is the computation of the gross underlying loss that is critical.

As with any receivable, credit risk exists in the recoverability of reinsurance. This may be even more pronounced than in normal receivable situations since recoverable amounts are not generally due until the loss is settled which, in some cases, may be many years after the contract was written. If a reinsurer is unable, in the future, to meet its financial commitments under the terms of the contracts, the Company would be responsible to satisfy the reinsurer's portion of the loss. The financial condition of each of the ~~Company’s~~Company's reinsurers is vetted upon the execution of a given treaty and only reinsurers with the superior credit ratings available are utilized. However, as noted above, reinsurers are often not called upon to satisfy their obligations for several years and changes in credit worthiness can occur in the interim period. Reviews of the current financial strength of each reinsurer are made frequently and, should impairment in the ability of a reinsurer be determined to exist, current year operations would be charged in amounts sufficient to provide for the ~~Company’s~~Company's additional liability. Such charges are included in other operating expenses, rather than losses and loss expenses incurred, since the inability of the Company to collect from reinsurers is a credit loss rather than a deficiency associated with the loss reserving process.

Loss and Loss Expense Reserves

The ~~Company’s~~Company's loss and loss expense reserves for each segment are shown in the following table on both a gross (before consideration of reinsurance) and on a net of reinsurance basis at December 31, ~~2014~~2015 and ~~2013~~2014 (dollars in thousands).

	Gross				Net
Line of Business (Segment)	2015		2014		2015		2014

Property and casualty insurance	$	464,305	$	449,133	$	254,299	$	241,215
Reinsurance		49,291		56,969		47,454		54,369

	$	513,596	$	506,102	$	301,753	$	295,584

Direct and Assumed Net
Line of Business (Segment) 2014 2013 2014 2013

Property and casualty insurance $ 449,133 $ 408,469 $ 241,215 $ 227,322
Reinsurance 56,969 66,001 54,369 60,766

$ 506,102 $ 474,470 $ 295,584 $ 288,088

The ~~Company’s~~Company's reserves for losses and loss expenses ~~(“reserves”~~("reserves") are determined based on complex estimation processes using historical experience, current economic information and, when necessary, available industry statistics. The ~~Company’s~~Company's claims range from the very routine private passenger automobile ~~“fender bender”~~"fender bender" to the highly complex and costly third party bodily injury claim involving large tractor-trailer rigs. Reserving for each class of claims requires a set of assumptions based upon historical experience, knowledge of current industry trends and seasoned judgment. The high limits provided in many of the ~~Company’s~~Company's policies provide for greater volatility in the reserving process for more serious claims. Court rulings, legislative actions and trends in jury awards also play a significant role in the estimation process of larger claims. The Company continuously reviews and evaluates loss developments subsequent to each measurement date and adjusts its reserve estimation assumptions, as necessary, in an effort to achieve the best possible estimate of the ultimate remaining loss costs at any point in time. Changes to previously established reserve amounts are charged or credited to losses and loss expenses incurred in the accounting periods in which they are determined. Note C to the consolidated financial statements includes additional information relating to loss and loss adjustment expense reserve development.

- 30 -

The ~~Company’s~~Company's methods for determining loss and loss expense reserves are essentially identical for interim and annual reporting periods.

~~- 30 -~~

A detailed analysis and discussion for each of the above basic reserve categories follows.

Reserves for known losses (Case reserves)

Each known claim, regardless of complexity, is handled by a claims adjuster experienced with claims of this nature and a ~~“case”~~"case" reserve, appropriate for the individual loss occurrence, is established. For very routine ~~“short-tail”~~"short-tail" claims such as private passenger physical damage, the Company records an initial reserve that is based upon historical loss settlements adjusted for current trends. As information regarding the loss occurrence is gathered in the claim handling process, the initial reserve is adjusted to reflect the anticipated ultimate cost to settle the claim. For more complex claims which can tend toward being ~~“long-tail”~~"long-tail" in nature, an experienced claims adjuster will review the facts and circumstances surrounding the loss occurrence to make a determination of the reserve to be established. Many of the more complex claims involve litigation and necessitate an evaluation of potential jury awards in addition to the factual information to determine the value of each claim. Each claim is frequently monitored and the recorded reserve is increased or decreased relative to information gathered during the settlement life cycle.

Reserves for incurred but not reported losses

The Company uses both standard actuarial techniques common to most insurance companies as well as proprietary techniques developed by the Company in consideration of its specialty business products. For its short-tail lines of business, the Company uses predominantly the incurred or paid loss development factor methods. The Company has found that the use of accident quarter loss development triangles, rather than those based upon accident year, are most responsive to claim settlement trends and fluctuations in premium exposures for its short-tail lines. A minimum of 12 running accident quarters is used to project the reserve necessary for incurred but not reported losses for its short-tail lines.

The Company also uses the loss development factor approach for its long-tail lines of business. A minimum of 15 accident years is included in the loss development triangles used to calculate link ratios and the selected loss development factors used to determine the reserves for incurred but not reported losses. A minimum of 20 accident years is used for long-tail ~~workers’~~workers' compensation reserve projections. Significant emphasis is placed on the use of tail factors for the ~~Company’s~~Company's long-tail lines of business.

For the ~~Company’s~~Company's fleet transportation risks, which are covered by regularly changing reinsurance agreements and which contain wide-ranging self-insured retentions ~~(“SIR”~~("SIR"), traditional actuarial methods are supplemented by other methods in consideration of the ~~Company’s~~Company's exposures to loss. In situations where the ~~Company’s~~Company's reinsurance structure, the ~~insured’s~~insured's SIR selections, policy volume, and other factors are changing, current accident period loss exposures may not be homogenous with historical loss data to allow for reliable projection of future developed losses. Therefore, the Company supplements the above-described actuarial methods with loss ratio reserving techniques developed from the ~~Company’s~~Company's extensive, proprietary databases to arrive at the reserve for losses incurred but not reported for the calendar/accident period under review. As losses for a given calendar/accident period develop with the passage of time, management evaluates such development on a monthly and quarterly basis and adjusts reserve factors, as necessary, to reflect current judgment with regard to the anticipated ultimate incurred losses. This process continues until all losses are settled for each period subject to this method.

Reserves for loss adjustment expenses

While certain of the ~~Company’s~~Company's products involve case basis reserving for allocated loss adjustment expenses, the majority of such reserves are determined on a bulk basis. The Company uses historical analysis of the ratios of allocated loss adjustment expenses paid to losses paid on closed claims to arrive at the expected ultimate incurred loss adjustment expense factors applicable to each affected product. Once developed, the factors are applied to the expected ultimate incurred losses, including IBNR, on all open claims. The resulting ultimate incurred allocated loss adjustment expense is then reduced by amounts paid to date on all open claims to arrive at the reserve for allocated loss adjustment expenses to be incurred in the future for the handling of specific claims.

- 31 -

For those loss adjustment expenses not specific to individual claims (general claims handling expenses referred to as unallocated loss adjustment expenses) the Company uses standard industry loss adjustment expenses paid to losses paid (net of reinsurance) ratio analysis to establish the necessary reserves. The selected factors are applied to 100% of IBNR reserves and to case reserves with consideration given for that portion of loss adjustment expense already paid at the reserve measurement date. Such factors are monitored and revised, as necessary, on a quarterly basis.

~~- 31 -~~

The reserving process requires management to continuously monitor and evaluate the life cycle of claims based on the class of business and the nature of the individual losses. As previously noted, our claims vary widely in scope and complexity. Reserving for each class of claims requires a set of assumptions based upon historical experience, knowledge of current industry trends and seasoned judgment. The high limits provided in the ~~Company’s~~Company's fleet transportation liability policies provide for greater volatility in the reserving process for more serious claims. Court rulings, legislative actions and trends in jury awards also play a significant role in the estimation process of larger claims. The Company continuously reviews and evaluates loss developments subsequent to each measurement date and adjusts its reserve estimations, as necessary, in an effort to achieve the best possible estimate of the ultimate remaining loss costs at any point in time.

Sensitivity Analysis - Potential impact on reserve volatility from changes in key assumptions

Management is aware of the potential for variation from the reserves established at any particular point in time. Savings or deficiencies could develop in future valuations of the currently established loss and loss expense reserve estimates under a variety of reasonably possible scenarios. The ~~Company’s~~Company's reserve selections are developed to be a ~~“best estimate”~~"best estimate" of unpaid loss at a point in time and, due to the unique nature of our exposures, particularly in the large fleet transportation excess product where ~~insured’s~~insured's policies of insurance combine large self-insured retentions with high policy limits, ranges of reserve estimates are not established during the reserving process. However, basic assumptions that could potentially impact future volatility of our valuations of current loss and loss expense reserve estimates include, but are not limited to, the following:

Consistency in the individual case reserving processes

The selection of loss development factors in the establishment of bulk reserves for incurred but reported losses and loss expenses

Projected future loss trend

Expected loss ratios for the current book of business, particularly the ~~Company’s~~Company's fleet transportation products, where the number of accounts insured, selected self-insured retentions, policy limits and reinsurance structure may vary widely period to period

Under reasonably possible scenarios, it is conceivable that the ~~Company’s~~Company's selected loss reserve estimates could be 10%, or more, redundant or deficient. The majority of the ~~Company’s~~Company's reserves for losses and loss expenses, on either a gross or a net of reinsurance basis, ~~relates~~relate to its fleet transportation products. Perhaps the most significant example of sensitivity to variation in the key assumptions is the loss ratio selection for the ~~Company’s~~Company's fleet transportation products for policies subject to certain major reinsurance treaties (approximately ~~$152.5~~$169.5 million, or approximately ~~34%~~37% of carried ~~direct~~gross reserves for directly produced property and casualty business). The following table presents the approximate impacts on gross and net loss reserves of both a 10 percentage point and 20 percentage point increase or decrease in the loss factors actually utilized in the ~~Company’s~~Company's reserve determination at December 31, ~~2014.~~2015. The ~~Company’s~~Company's selection of the range of values presented should not be construed as the ~~Company’s~~Company's prediction of future events, but rather simply an illustration of the impact of such events, should they occur:

	10 Point Increase	10 Point Decrease	20 Point Increase	20 Point Decrease
Gross reserves	$~~54.8~~64.6 million	~~$46.2~~($42.3) million	$~~109.9~~129.1 million	~~$69.4~~($76.7) million
Net reserves	$~~23.3~~26.2 million	~~$20.5~~($18.9) million	$~~63.7~~48.0 million	~~$29.7~~($30.6) million

The variation in impact from loss ratio increases and decreases is attributable to minimum and maximum premium rate factors included in the various reinsurance contracts.

- 32 -

Federal Income Tax Considerations

The liability method is used in accounting for federal income taxes. Using this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The provision for deferred federal income tax is based on items of income and expense which are reported in different years in the financial statements and tax returns and are measured at the tax rate in effect in the year the difference originated. Net deferred tax liabilities reported at December 31 are as follows (dollars in thousands):

	2014			2013			2015			2014
Total deferred tax liabilities	$	(37,493	)	$	(34,377	)	$	(27,833	)	$	(37,493	)
Total deferred tax assets		17,520			17,526			16,635			17,520
Net deferred tax liabilities	$	(19,973	)	$	(16,851	)	$	(11,198	)	$	(19,973	)

Deferred tax assets at December 31, ~~2014,~~2015, include approximately ~~$11.0~~$9.3 million related to the timing of deductibility of loss and loss expense reserves, the majority of which relates to policy liability discounts required by the Internal Revenue Code which are perpetual in nature and, in the absence of the termination of business, will not, in the aggregate, reverse to a material degree in the foreseeable future. An additional ~~$2.0~~$3.4 million relates to impairment adjustments made to investments, as required by accounting regulations. The sizable unrealized gains in the ~~Company’s~~Company's investment portfolios would allow for the recovery of this deferred tax at any time. Unearned premiums discount and deferred ceding commissions represent ~~$2.2~~$1.6 and ~~$0.5~~$0.4 million of deferred tax assets, respectively. The balance of deferred tax assets consists of various normal operating expense accruals and is not considered to be material. As a result of its analysis, management has determined that no valuation allowance is necessary at December 31, ~~2014.~~

2015.

FASB provides guidance for recognizing and measuring uncertain tax positions and prescribes a threshold condition that a tax position must meet for any of the benefit of the uncertain tax position to be recognized in the financial statements. Based on this guidance, management regularly analyzes tax positions taken or expected to be taken in a tax return based on the threshold condition prescribed. Tax positions that do not meet or exceed this threshold condition are considered uncertain tax positions. Interest related to uncertain tax positions, if any, would be recognized in income tax expense. Penalties, if any, related to uncertain tax positions would be recorded in income tax expenses.

Forward-Looking Information

Any forward-looking statements in this report including, without limitation, statements relating to the ~~Company’s~~Company's plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties including, without limitation, the following: (i) the ~~Company’s~~Company's plans, strategies, objectives, expectations and intentions are subject to change at any time at the discretion of the Company; (ii) the ~~Company’s~~Company's business is highly competitive and the entrance of new competitors into or the expansion of the operations by existing competitors in the ~~Company’s~~Company's markets and other changes in the market for insurance products could adversely affect the ~~Company’s~~Company's plans and results of operations; and (iii) other risks and uncertainties indicated from time to time in the ~~Company’s~~Company's filings with the Securities and Exchange Commission.

Impact of Inflation

To the extent possible, the Company attempts to recover the impact of inflation to loss costs and operating expenses by increasing the premiums it charges. Within the fleet transportation business, a majority of the ~~Company’s~~Company's accounts are charged as a percentage of an ~~insured’s~~insured's gross revenue, mileage or payroll. As these charging bases increase with inflation, premium revenues are immediately increased. The remaining premium rates charged are adjustable only at periodic intervals and often require state regulatory approval. Such periodic increases in premium rates may lag far behind cost increases.

- 33 -

To the extent inflation influences yields on investments, the Company is also affected. The ~~Company’s~~Company's short-term and fixed investment portfolios are structured in direct response to available interest rates over the yield curve. As available market interest rates fluctuate in response to the presence or absence of inflation, the yields on the ~~Company’s~~Company's investments are impacted. Further, as inflation affects current market rates of return, previously committed investments might increase or decline in value depending on the type and maturity of investment (see additional comments under Market Risk, following).

Inflation must also be considered by the Company in the creation and review of loss and loss adjustment expense reserves since portions of these reserves are expected to be paid over extended periods of time. The anticipated effect of inflation is implicitly considered when estimating liabilities for losses and loss adjustment expenses.

~~- 33 -~~

Market Risk

The Company operates within the property and casualty insurance industry and, accordingly, has significant invested assets which are exposed to various market risks. These market risks relate to interest rate fluctuations, credit risks, equity security market prices and, to a lesser extent, foreign currency rate fluctuations. All of the Company's invested assets, with the exception of investments in limited partnerships, are classified as available for sale.

Based on the structure of the ~~Company’s~~Company's investment portfolio, the most potentially significant of the three identified market risks relates to prices in the equity security market. Though not the largest category of the Company's invested assets, equity securities have a high potential for short-term price fluctuation. The market value of the Company's equity positions at December 31, ~~2014~~2015 was ~~$162.1~~$145.4 million or approximately ~~21%~~20% of invested assets. This market valuation includes ~~$83.3~~$65.3 million of appreciation over the adjusted cost basis of the equity security investments. Funds invested in the equities market are not considered to be assets necessary for the Company to conduct its daily operations and, therefore, can be committed for extended periods of time. The long-term nature of the Company's equity investments allows it to invest in positions where ultimate value, and not short-term market fluctuations, is the primary focus.

Reference is made to the discussion of limited partnership investments in Critical Accounting Policies in this report. All of the market risks, attendant to equity securities, apply to the underlying assets in these partnerships, and to a greater degree because of the generally more aggressive investment philosophies utilized by the partnerships. In addition, these investments are illiquid. There is no primary or secondary market on which these limited partnerships trade and, in most cases, the Company is prohibited from disposing of its limited partnership interests for some period of time and must seek approval from the general partner for any such disposal. Distributions of earnings from these partnerships are largely at the sole discretion of the general partners and distributions are generally not received by the Company for many years after the earnings have been reported. Finally, through the application of the equity method of accounting, the ~~Company’s~~Company's share of net income reported by the limited partnerships often includes significant amounts of unrealized appreciation on the underlying investments. As such, the likelihood that reported income from limited partnership investments will be ultimately returned to the Company in the form of cash is markedly lower than the ~~Company’s~~Company's other investments, where appreciation is recognized as income only when a security is actually sold.

The Company's fixed maturity portfolio totaled ~~$451.8~~$437.2 million at December 31, ~~2014.~~2015. Approximately 49% of this portfolio is made up of U.S. Government and government agency obligations and state and municipal debt securities; ~~75%~~78% of the portfolio matures within 5 years; and the average contractual maturity of the Company's fixed maturity investments is approximately ~~4.8~~4.6 years with an average modified duration of approximately ~~2.0~~2.3 years. Although the Company is exposed to interest rate risk on its fixed maturity investments, given the anticipated duration of the Company's liabilities (principally insurance loss and loss expense reserves) relative to investment maturities, even a 100 to 200 basis point increase in interest rates would not have even a moderate impact on the Company's ability to conduct daily operations or to meet its obligations and would, in fact, result in significantly higher investment income in a relatively short period of time as short term investments and maturing bonds could be reinvested in the higher yielding securities very quickly.

- 34 -

There is an inverse relationship between interest rate fluctuations and the fair value of the Company's fixed maturity investments. Additionally, the fair value of interest rate sensitive instruments may be affected by the financial strength of the issuer, prepayment options, relative values of alternative investments, liquidity of the investment, currency fluctuations for non-U.S. debt holdings and other general market conditions. The Company monitors its sensitivity to interest rate risk by measuring the change in fair value of its fixed maturity investments relative to hypothetical changes in interest rates.

The following tables present the estimated effects on the fair value of financial instruments at December 31 which would result from an instantaneous change in yield rates of varying magnitudes on a static balance sheet to determine the effect such a change in rates would have on current fair value. The analysis presents the sensitivity of the fair value of the ~~Company’s~~Company's financial instruments to selected changes in market rates and prices. The range of change chosen reflects the ~~Company’s~~Company's view of changes that the Company believes are reasonably possible over a one-year period. The ~~Company’s~~Company's selection of the range of values chosen to represent changes in interest rates should not be construed as the ~~Company’s~~Company's prediction of future market events, but rather an illustration of the impact of such events, should they occur. The equity portfolio was compared to the S&P 500 index due to its correlation with the vast majority of the ~~Company’s~~Company's current equity portfolio. The limited partnership portfolio was compared to the S&P 500 and Indian BSE 500 indices due to their significant correlation with the vast majority of our limited partnership portfolio. As previously indicated, several other factors can impact the fair values of fixed maturity investments and, therefore, significant variations in market interest rates could produce quite different results from the hypothetical estimates presented below.

- 35 -

Indiana (State or other jurisdiction of Incorporation or organization)	35-0160330 (I.R.S. Employer Identification No.)
111 Congressional Boulevard, Carmel, Indiana (Address of principal executive offices)	46032 (Zip Code)

			Increase (Decrease)								Increase (Decrease)
	Fair		Interest			Equity			Fair		Interest			Equity
									Value		Rate Risk			Risk
2015:
Fixed maturities
U.S. government obligations									$	103,245	$	(1,430	)	$	-
Residential mortgage-backed securities										4,776		(103	)		-
Commercial mortgage-backed securities										30,595		(655	)		-
State and municipal obligations										110,578		(3,326	)		-
Corporate securities										164,025		(5,030	)		-
Foreign government obligations										23,965		(531	)		-
Total fixed maturities										437,184		(11,075	)		-
Equity securities:
Financial institutions										21,694		-			(2,169	)
Industrial & miscellaneous										123,804		-			(12,380	)
Total equity securities										145,498		-			(14,549	)
Limited partnerships										75,458		-			(5,349	)
Short-term										2,220		-			-
Total									$	660,360	$	(11,075	)	$	(19,898	)
	Value		Rate Risk			Risk
2014:
Fixed maturities
U.S. government obligations	$	101,094	$	(1,208	)	$	-		$	101,094	$	(1,208	)	$	-
Residential mortgage-backed securities		6,066		(198	)		-			6,066		(198	)		-
Commercial mortgage-backed securities		36,440		(1,183	)		-			36,440		(1,183	)		-
State and municipal obligations		113,777		(3,224	)		-			113,777		(3,224	)		-
Corporate securities		166,966		(5,646	)		-			166,966		(5,646	)		-
Foreign government obligations		27,466		(922	)		-			27,466		(922	)		-
Total fixed maturities		451,809		(12,381	)		-			451,809		(12,381	)		-
Equity securities:
Financial institutions		25,343		-			(2,534	)		25,343		-			(2,534	)
Industrial & miscellaneous		136,764		-			(13,676	)		136,764		-			(13,676	)
Total equity securities		162,107		-			(16,210	)		162,107		-			(16,210	)
Limited partnerships		81,230		-			(5,450	)		81,230		-			(5,450	)
Short-term		2,966		-			-			2,966		-			-
Total	$	698,112	$	(12,381	)	$	(21,660	)	$	698,112	$	(12,381	)	$	(21,660	)

2013:
Fixed maturities
U.S. government obligations	$	113,389	$	(1,666	)	$	-
Residential mortgage-backed securities		13,252		(759	)		-
Commercial mortgage-backed securities		28,565		(1,635	)		-
State and municipal obligations		115,250		(2,512	)		-
Corporate securities		137,215		(5,519	)		-
Foreign government obligations		23,879		(792	)		-
Total fixed maturities		431,550		(12,883	)		-
Equity securities:
Financial institutions		18,850		-			(1,885	)
Industrial & miscellaneous		126,978		-			(12,698	)
Total equity securities		145,828		-			(14,583	)
Limited partnerships		68,988		-			(4,609	)
Short-term		4,891		-			-
Total	$	651,257	$	(12,883	)	$	(19,192	)

			Increase (Decrease)								Increase (Decrease)
	Fair		Interest			Equity			Fair		Interest			Equity
									Value		Rate Risk			Risk
2015:
Fixed maturities
U.S. government obligations									$	103,245	$	(2,144	)	$	-
Residential mortgage-backed securities										4,776		(153	)		-
Commercial mortgage-backed securities										30,595		(983	)		-
State and municipal obligations										110,578		(4,988	)		-
Corporate securities										164,025		(7,547	)		-
Foreign government obligations										23,965		(797	)		-
Total fixed maturities										437,184		(16,612	)		-
Equity securities:
Financial institutions										21,694		-			(3,254	)
Industrial & miscellaneous										123,804		-			(18,571	)
Total equity securities										145,498		-			(21,825	)
Limited partnerships										75,458		-			(8,023	)
Short-term										2,220		-			-
Total									$	660,360	$	(16,612	)	$	(29,848	)
	Value		Rate Risk			Risk
2014:
Fixed maturities
U.S. government obligations	$	101,094	$	(1,800	)	$	-		$	101,094	$	(1,800	)	$	-
Residential mortgage-backed securities		6,066		(297	)		-			6,066		(297	)		-
Commercial mortgage-backed securities		36,440		(1,787	)		-			36,440		(1,787	)		-
State and municipal obligations		113,777		(4,724	)		-			113,777		(4,724	)		-
Corporate securities		166,966		(8,333	)		-			166,966		(8,333	)		-
Foreign government obligations		27,466		(1,366	)		-			27,466		(1,366	)		-
Total fixed maturities		451,809		(18,307	)		-			451,809		(18,307	)		-
Equity securities:
Financial institutions		25,343		-			(3,801	)		25,343		-			(3,801	)
Industrial & miscellaneous		136,764		-			(20,515	)		136,764		-			(20,515	)
Total equity securities		162,107		-			(24,316	)		162,107		-			(24,316	)
Limited partnerships		81,230		-			(8,175	)		81,230		-			(8,175	)
Short-term		2,966		-			-			2,966		-			-
Total	$	698,112	$	(18,307	)	$	(32,491	)	$	698,112	$	(18,307	)	$	(32,491	)

2013:
Fixed maturities
U.S. government obligations	$	113,389	$	(2,483	)	$	-
Residential mortgage-backed securities		13,252		(1,105	)		-
Commercial mortgage-backed securities		28,565		(2,382	)		-
State and municipal obligations		115,250		(3,720	)		-
Corporate securities		137,215		(8,125	)		-
Foreign government obligations		23,879		(1,171	)		-
Total fixed maturities		431,550		(18,986	)		-
Equity securities:
Financial institutions		18,850		-			(2,828	)
Industrial & miscellaneous		126,978		-			(19,047	)
Total equity securities		145,828		-			(21,875	)
Limited partnerships		68,988		-			(6,914	)
Short-term		4,891		-			-
Total	$	651,257	$	(18,986	)	$	(28,789	)

	Payments Due by Period										Payments Due by Period
	Total		Less than 1 year		1 - 3 Years		3 - 5 Years		More Than 5 Years		Total		Less than 1 year		1 - 3 Years		3 - 5 Years		More Than 5 Years
	(dollars in millions)										(dollars in millions)
Loss and loss expense reserves	$	506.1	$	175.6	$	149.3	$	60.2	$	121.0	$	513.6	$	174.6	$	174.6	$	63.7	$	100.7

Investment commitments		17.9		17.9		-		-		-		17.5		17.5		-		-		-

Operating leases		0.4		0.1		0.3		-		-		0.3		0.2		0.1		-		-

Borrowings		20.0		20.0		-		-		-		20.0		20.0		-		-		-

Total	$	544.4	$	213.6	$	149.6	$	60.2	$	121.0	$	551.4	$	212.3	$	174.7	$	63.7	$	100.7

Consolidated Balance Sheets
Baldwin & Lyons, Inc. and Subsidiaries

	December 31
	2014		2013
	(dollars in thousands)
Assets
Investments:
Fixed maturities	$	451,809	$	431,550
Equity securities		162,107		145,828
Limited partnerships		81,230		68,988
Short-term and other		2,966		4,891
		698,112		651,257

Cash and cash equivalents		64,632		59,297
Accounts receivable--less allowance (2014, $605; 2013, $615)		98,144		100,830
Accrued investment income		3,682		3,448
Reinsurance recoverable		220,221		195,568
Prepaid reinsurance premiums		2,274		1,057
Deferred policy acquisition costs		2,263		2,319
Property and equipment--less accumulated depreciation
$(2014, 13,777; 2013, $15,835)		43,815		36,329
Other assets		9,413		19,051
Current federal income taxes recoverable		1,691		3,114
	$	1,144,247	$	1,072,270

Liabilities and Shareholders' Equity
Reserves:
Losses and loss expenses	$	506,102	$	474,470
Unearned premiums		35,019		36,693
		541,121		511,163

Reinsurance payable		46,338		39,122
Short-term borrowings		20,000		10,000
Depository liabilities		48,893		57,544
Accounts payable and other liabilities		68,426		55,866
Deferred federal income taxes		19,973		16,851
		744,751		690,546
Shareholders' equity:
Common stock, no par value:
Class A voting -- authorized 3,000,000 shares;
outstanding -- 2014 - 2,623,109; 2013 - 2,623,109 shares		112		112
Class B non-voting -- authorized 20,000,000 shares;
outstanding -- 2014 - 12,356,389; 2013 - 12,304,191 shares		527		525
Additional paid-in capital		51,854		50,594
Unrealized net gains on investments		51,840		49,089
Foreign exchange adjustment		390		1,401
Retained earnings		294,773		280,003
		399,496		381,724
	$	1,144,247	$	1,072,270

Years in Which Losses Were Incurred	Reserve at December 31, 2013		(Savings) Deficiency Recorded During 2014			% (Savings) Deficiency

2013	$	108,356	$	(9,060	)		(8.4	%)
2012		63,718		(5,533	)		(8.7	%)
2011		45,278		6,405			14.1	%
2010		16,001		2,238			14.0	%
2009		8,171		(1,991	)		(24.4	%)
2008 & prior		46,564		(2,413	)		(5.2	%)

	$	288,088	$	(10,354	)		(3.6	%)

	Period Ending
Index	12/31/09		12/31/10		12/31/11		12/31/12		12/31/13		12/31/14
Baldwin & Lyons, Inc.		100.00		104.70		101.35		116.08		138.44		135.91
NASDAQ Insurance Index		100.00		118.13		124.78		145.78		191.19		211.36
Russell 2000		100.00		126.86		121.56		141.43		196.34		205.95

	Direct and Assumed				Net
Line of Business (Segment)	2014		2013		2014		2013

Property and casualty insurance	$	449,133	$	408,469	$	241,215	$	227,322
Reinsurance		56,969		66,001		54,369		60,766

	$	506,102	$	474,470	$	295,584	$	288,088

Consolidated Statements of Operations
Baldwin & Lyons, Inc. and Subsidiaries


	Year Ended December 31
	2015			2014			2013
	(dollars in thousands, except per share data)
Revenue:
Net premiums earned	$	263,335		$	261,627		$	252,743
Net investment income		12,498			9,055			8,770
Commissions and other income		5,703			6,430			5,944
Net realized gains on investments, excluding
impairment losses		6,439			15,619			24,257
Total other-than-temporary impairment losses on investments		(7,700	)		(689	)		(744	)
Portion of other-than-temporary impairment losses
recognized in other comprehensive income		-			-			2
Net realized gains (losses) on investments		(1,261	)		14,930			23,515
		280,275			292,042			290,972
Expenses:
Losses and loss expenses incurred		155,750			159,596			150,701
Other operating expenses		90,573			88,048			85,361
		246,323			247,644			236,062
Income before federal income taxes		33,952			44,398			54,910

Federal income taxes		10,669			14,681			18,322
Net income	$	23,283		$	29,717		$	36,588

Per share data:
Basic and diluted earnings	$	1.55		$	1.98		$	2.45

Consolidated Statements of Comprehensive Income
Baldwin & Lyons, Inc. and Subsidiaries





	2015			2014			2013
	(dollars in thousands)

Net income	$	23,283		$	29,717		$	36,588

Other comprehensive income (loss), net of tax:
Unrealized net gains (losses) on securities:
Unrealized holding net gains (losses) arising during the period		(12,639	)		7,835			23,711
Less: reclassification adjustment for net losses
included in net income		(277	)		(5,084	)		(10,089	)
		(12,916	)		2,751			13,622

Foreign currency translation adjustments		(1,456	)		(1,011	)		(575	)

Other comprehensive income (loss)		(14,372	)		1,740			13,047

Comprehensive income	$	8,911		$	31,457		$	49,635

Consolidated Statements of Shareholders' Equity
Baldwin & Lyons, Inc. and Subsidiaries



	2015			2014			2013
	(dollars in thousands)

Shareholders' equity at beginning of year	$	399,496		$	381,724		$	346,712

Net income		23,283			29,717			36,588

Other comprehensive income (loss)		(14,372	)		1,740			13,047

Cash dividends paid to shareholders		(15,003	)		(14,947	)		(14,943	)

Issuance of common stock		1,094			1,262			320

Shareholders' equity at end of year:	$	394,498		$	399,496		$	381,724

Consolidated Statements of Cash Flows
Baldwin & Lyons, Inc. and Subsidiaries

	2015			2014			2013
	(dollars in thousands)
Operating activities
Net income	$	23,283		$	29,717		$	36,588
Adjustments to reconcile net income to net cash
provided by operating activities:
Change in accounts receivable and unearned premium		22,939			3,230			(16,488	)
Change in accrued investment income		(307	)		(234	)		939
Change in reinsurance recoverable on paid losses		4,458			(2,785	)		(1,618	)
Change in losses and loss expenses reserves net of reinsurance		6,325			7,545			(1,264	)
Change in other assets, other liabilities and current income taxes		(28,299	)		(4,847	)		29,892
Amortization of net policy acquisition costs		21,314			25,075			26,592
Net policy acquisition costs deferred		(20,495	)		(25,019	)		(25,819	)
Provision for deferred income taxes (benefits)		(1,819	)		1,640			939
Bond amortization		3,388			4,235			5,068
(Gain) loss on sale of property		18			474			(27	)
Depreciation		5,037			4,797			4,300
Net realized (gains) losses on investments		1,261			(14,930	)		(23,515	)
Compensation expense related to restricted stock		1,094			1,262			320
Net cash provided by operating activities		38,197			30,160			35,907

Investing activities
Purchases of fixed maturities and equity securities		(342,592	)		(288,283	)		(369,259	)
Purchases of limited partnership interests		(409	)		(6,886	)		(3,568	)
Distributions from limited partnerships		4,494			1,752			2,528
Proceeds from maturities		161,706			98,714			129,113
Proceeds from sales of fixed maturities		117,338			167,406			207,723
Proceeds from sales of equity securities		53,270			19,263			29,858
Net sales (purchases) of short-term investments		746			1,925			(690	)
Purchases of property and equipment		(7,662	)		(13,451	)		(28,607	)
Proceeds from disposals of property and equipment		277			693			261
Net cash used in investing activities		(12,832	)		(18,867	)		(32,641	)

Financing activities
Dividends paid to shareholders		(15,003	)		(14,947	)		(14,943	)
Drawings on line of credit		-			10,000			-
Net cash used in financing activities		(15,003	)		(4,947	)		(14,943	)

Effect of foreign exchange rates on cash and cash equivalents		(1,456	)		(1,011	)		(575	)

Increase (decrease) in cash and cash equivalents		8,906			5,335			(12,252	)
Cash and cash equivalents at beginning of year		64,632			59,297			71,549
Cash and cash equivalents at end of year	$	73,538		$	64,632		$	59,297

Note B - Investments

The following is a summary of available for sale securities at December 31:

										Net
			Cost or		Gross		Gross			Unrealized
	Fair		Amortized		Unrealized		Unrealized			Gains
	Value		Cost		Gains		Losses			(Losses)
2014:
Fixed maturities:
U.S. government obligations	$	101,094	$	101,058	$	108	$	(72	)	$	36
Residential mortgage-backed securities		6,066		5,830		273		(37	)		236
Commercial mortgage-backed securities		36,440		36,210		630		(400	)		230
State and municipal obligations		113,777		113,133		784		(140	)		644
Corporate securities		166,966		170,822		2,005		(5,861	)		(3,856	)
Foreign government obligations		27,466		28,332		114		(980	)		(866	)
Total fixed maturities		451,809		455,385		3,914		(7,490	)		(3,576	)
Equity securities:
Financial institutions		25,343		10,100		15,303		(60	)		15,243
Industrial & miscellaneous		136,764		68,678		70,260		(2,174	)		68,086
Total equity securities		162,107		78,778		85,563		(2,234	)		83,329
Total	$	613,916	$	534,163	$	89,477	$	(9,724	)		79,753

							Applicable federal income taxes				(27,913	)

							Net unrealized gains - net of tax			$	51,840

2013:
Fixed maturities:
U.S. government obligations	$	113,389	$	113,348	$	81	$	(40	)	$	41
Residential mortgage-backed securities		13,252		12,058		1,334		(140	)		1,194
Commercial mortgage-backed securities		28,565		28,406		308		(149	)		159
State and municipal obligations		115,250		115,278		407		(435	)		(28	)
Corporate securities		137,215		136,991		3,207		(2,983	)		224
Foreign government obligations		23,879		23,689		588		(398	)		190
Total fixed maturities		431,550		429,770		5,925		(4,145	)		1,780
Equity securities:
Financial institutions		18,850		7,780		11,171		(101	)		11,070
Industrial & miscellaneous		126,978		64,307		63,009		(338	)		62,671
Total equity securities		145,828		72,087		74,180		(439	)		73,741
Total	$	577,378	$	501,857	$	80,105	$	(4,584	)		75,521

							Applicable federal income taxes				(26,432	)

							Net unrealized gains - net of tax			$	49,089

	Fair Value				Cost or Amortized Cost

One year or less	$	74,187	17.0	%	$	75,854	17.1	%
Excess of one year to five years		242,713	55.5			244,033	55.1
Excess of five years to ten years		36,452	8.3			37,269	8.4
Excess of ten years		3,218	0.8			2,901	0.7
Total maturities		356,570	81.6			360,057	81.3
Asset-backed securities		80,614	18.4			82,521	18.7
	$	437,184	100.0	%	$	442,578	100.0	%

The major components of the developments shown above are as follows for the years ended December 31:

	2014			2013			2012

Property and casualty insurance	$	(5,423	)	$	(1,725	)	$	(7,111	)
Reinsurance		(4,931	)		(3,838	)		(2,764	)
Totals	$	(10,354	)	$	(5,563	)	$	(9,875	)

	Premiums Written									Premiums Earned
	2015			2014			2013			2015			2014			2013
Direct	$	366,668		$	343,200		$	314,784		$	370,499		$	342,656		$	313,842
Ceded on direct		(128,338	)		(118,942	)		(112,967	)		(128,135	)		(117,973	)		(111,057	)
Net direct		238,330			224,258			201,817			242,364			224,683			202,785

Assumed		16,885			39,188			54,692			21,533			38,219			52,783
Ceded on assumed		(562	)		(1,275	)		(2,825	)		(562	)		(1,275	)		(2,825	)
Net assumed		16,323			37,913			51,867			20,971			36,944			49,958

Net	$	254,653		$	262,171		$	253,684		$	263,335		$	261,627		$	252,743

	2014		2013
Case unpaid losses, net of valuation allowance	$	143,403	$	133,484
Incurred but not reported unpaid losses and loss expenses		66,325		52,157
Paid losses and loss expenses		6,910		4,126
Unearned premiums		3,583		5,801
	$	220,221	$	195,568

Federal income tax expense consists of the following:
	2014		2013		2012
Taxes on pre-tax income:
Current	$	13,041	$	17,383	$	10,819
Deferred		1,640		939		3,868
	$	14,681	$	18,322	$	14,687

The components of the provision for deferred federal income taxes are as follows:	The components of the provision for deferred federal income taxes are as follows:										The components of the provision for deferred federal income taxes are as follows:

		2014			2013			2012				2015			2014			2013
Limited partnerships		$	2,025		$	1,058		$	3,013			$	(2,865	)	$	2,025		$	1,058
Discounts of loss and loss expense reserves			113			313			(57	)			1,526			113			313
Unearned premium discount			(38	)		(65	)		265				608			(38	)		(65	)
Deferred compensation			(685	)		(146	)		112				(127	)		(685	)		(146	)
Other-than-temporary investment declines			(19	)		680			169				(1,416	)		(19	)		680
Deferred acquisitions costs and ceding commission			(20	)		(271	)		(520	)			(287	)		(20	)		(271	)
Other			264			(630	)		886				742			264			(630	)
	Provision for deferred federal income tax	$	1,640		$	939		$	3,868
Provision for deferred federal income tax												$	(1,819	)	$	1,640		$	939

Note F - Shareholders' Equity

Changes in common stock outstanding and additional paid-in capital are as follows:	Changes in common stock outstanding and additional paid-in capital are as follows:													Changes in common stock outstanding and additional paid-in capital are as follows:
												Additional													Additional
				Class A					Class B			Paid-in					Class A					Class B			Paid-in
		Shares			Amount		Shares			Amount		Capital			Shares			Amount		Shares			Amount		Capital
Balance at January 1, 2012			2,623,109		$	112		12,225,348		$	522	$	48,751
Restricted stock grants			-			-		64,687			2		1,524
Balance at December 31, 2012			2,623,109			112		12,290,035			524		50,275
Balance at January 1, 2013																2,623,109		$	112		12,290,035		$	524	$	50,275
Restricted stock grants			-			-		14,156			1		319			-			-		14,156			1		319
Balance at December 31, 2013			2,623,109			112		12,304,191			525		50,594			2,623,109			112		12,304,191			525		50,594
Restricted stock grants			-			-		52,198			2		1,260			-			-		52,198			2		1,260
Balance at December 31, 2014			2,623,109		$	112		12,356,389		$	527	$	51,854			2,623,109			112		12,356,389			527		51,854
Restricted stock grants																-			-		46,552			2		1,092
Balance at December 31, 2015																2,623,109		$	112		12,402,941		$	529	$	52,946

Note G - Other Operating Expenses

Details of other operating expenses for the years ended December 31:

	2015			2014			2013
Amortization of gross deferred policy acquisition costs	$	50,270		$	48,872		$	47,414
Other underwriting expenses		42,638			37,830			35,281
Expense allowances from reinsurers		(28,956	)		(23,797	)		(20,822	)
Total underwriting expenses		63,952			62,905			61,873

Operating expenses of non-insurance companies		26,621			25,143			23,488
Total other operating expenses	$	90,573		$	88,048		$	85,361

Description	Total		Level 1		Level 2		Level 3

Fixed maturities:
U.S. government obligations	$	103,245	$	-	$	103,245	$	-
Residential mortgage-backed securities		4,776		-		4,776		-
Commercial mortgage-backed securities		30,595		-		29,226		1,369
State and municipal obligations		110,578		-		110,578		-
Corporate securities		161,630		-		146,488		15,142
Options embedded in convertible securities		2,395		-		2,395		-
Foreign government obligations		23,965		-		23,683		282
Total fixed maturities		437,184		-		420,391		16,793
Equity securities:
Financial institutions		21,694		21,694		-		-
Industrial & miscellaneous		123,804		123,804		-		-
Total equity securities		145,498		145,498		-		-
Short term		2,220		2,220		-		-
Cash equivalents		69,517		-		69,517		-
Total	$	654,419	$	147,718	$	489,908	$	16,793

Level Input:		Input Definition:
Level 1		Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
Level 2		Inputs other than quoted prices included in Level 1 that are observable for the asset or liability through corroboration with market data at the measurement date.
Level 3		Unobservable inputs that reflect ~~management’s~~management's best estimate of what market participants would use in pricing the asset or liability at the measurement date.

2015:	Carrying		Fair Value
	Value		Level 1		Level 2		Level 3		Total
Assets:
Limited partnerships	$	75,458	$	-	$	-	$	75,458	$	75,458

Liabilities:
Short-term borrowings		20,000		-		20,000		-		20,000

2014:
Assets:
Limited partnerships	$	81,230	$	-	$	-	$	81,230	$	81,230

Liabilities:
Short-term borrowings		20,000		-		20,000		-		20,000

Note O - Quarterly Results of Operations (Unaudited)

Quarterly results of operations are as follows:
												Results by Quarter
			2015												2014
	1st		2nd			3rd			4th				1st		2nd		3rd		4th

Net premiums earned	$	66,446	$	65,449		$	65,445		$	65,995			$	63,842	$	62,905	$	65,947	$	68,933
Net investment income		2,815		2,898			3,014			3,771				2,294		2,090		2,073		2,599
Net gains (losses) on investments		3,743		(1,166	)		(2,086	)		(1,753	)			4,070		8,089		658		2,113
Losses and loss expenses incurred		41,646		37,031			35,212			41,860				39,289		40,282		38,693		41,332

Net income		6,243		5,718			7,780			3,541				6,361		9,340		5,770		8,246

Net income per share - diluted	$	.42	$	.38		$	.52		$	.24			$	.42	$	.62	$	.39	$	.55

Note P - Quarterly Results of Operations (Unaudited)

Quarterly results of operations are as follows:
									Results by Quarter
			2014									2013
	1st		2nd		3rd		4th			1st		2nd		3rd		4th

Net premiums earned	$	63,842	$	62,905	$	65,947	$	68,933		$	61,098	$	61,775	$	64,448	$	65,422
Net investment income		2,294		2,090		2,073		2,599			2,410		1,985		2,192		2,183
Net gains on investments		4,070		8,089		658		2,113			14,347		719		1,430		7,019
Losses and loss expenses incurred		39,289		40,282		38,693		41,332			34,533		38,343		36,967		40,858

Net income		6,361		9,340		5,770		8,246			14,943		4,907		7,771		8,967

Net income per share - diluted	$	.42	$	.62	$	.39	$	.55		$	1.00	$	.33	$	.52	$	.60

2015		144
2016		138
2017		106
2018		-
2019		-
Thereafter		-
Total minimum payments required	$	388

2016	$	148
2017		116
2018 & thereafter		-
Total minimum payments required	$	264

Name	Age		Title	Served in Such Capacity Since
Joseph J. DeVito		6364	CEO, President and COO		2010 (1)
Steven A. Shapiro		51	Executive Chairman		2015 (2)
Gary W. Miller		7475	Deputy Chairman		~~2010 (2)~~2015 (3)
G. Patrick Corydon		6667	Executive Vice President and CFO		2008 ~~(3)~~(4)
William R. Birchfield		5152	Executive Vice President		2014 ~~(4)~~(5)
~~Craig C. Morfas~~Michael J. Case		5546	~~Executive~~Senior Vice President and Secretary		~~2012 (5)~~2015 (6)

Number & Caption from Exhibit Table of Item 601 of Regulation S-K	Exhibit Number and Description
(3) (Articles of Incorporation & By Laws)	EXHIBIT 3(i) – Articles of Incorporation of Baldwin & Lyons, Inc., as amended (Incorporated as an exhibit by reference to Exhibit 3(a) to the Company's Annual Report on Form 10-K for the year ended December 31, 1986)
	EXHIBIT 3(ii)-- By-Laws of Baldwin & Lyons, Inc., as restated
(10) (Material Contracts)	EXHIBIT 10(a)-- 1981 Employee Stock Purchase Plan (Incorporated as an exhibit by reference to Exhibit A to the Company's definitive Proxy Statement for its Annual Meeting held May 5, 1981)
	EXHIBIT 10(f)-- Baldwin & Lyons, Inc. Executive Incentive Bonus Plan (Incorporated as an exhibit by reference to the Company's definitive Proxy Statement for its Annual Meeting held May 4, 2010)
	~~EXHIBIT 10(g)--~~ ~~Baldwin & Lyons, Inc. Managing General Agency Agreement with Paladin Catastrophe Management LLC~~
(21) (Subsidiaries of the registrant)	EXHIBIT ~~21--~~21-- Subsidiaries of Baldwin & Lyons, Inc.

(23) (Consents of experts and counsel)	EXHIBIT 23-- Consent of Ernst & Young LLP
(24) (Powers of Attorney)	EXHIBIT 24-- Powers of Attorney for certain Officers and Directors
(31) (Certification)	EXHIBIT 31.1-- Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act
	EXHIBIT 31.2-- Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act

SCHEDULE I -- SUMMARY OF INVESTMENTS-
OTHER THAN INVESTMENTS IN RELATED PARTIES

Form 10-K - Year Ended December 31, 2014

Baldwin & Lyons, Inc. and Subsidiaries
(Dollars in thousands)


Column A	Column B		Column C		Column D

					Amount At
					Which Shown
			Fair		In The Balance
Type of Investment	Cost		Value		Sheet (A)

Fixed Maturities:
Bonds:
U.S. government obligations		101,058		101,094		101,094
Mortgage-backed securities		42,040		42,506		42,506
State and municipal obligations		113,133		113,777		113,777
Foreign government obligations		28,332		27,466		27,466
Corporate securities		170,822		166,966		166,966
Total fixed maturities		455,385		451,809		451,809

Equity Securities:
Common Stocks:
Industrial, miscellaneous and all other		78,778		162,107		162,107
Total equity securities		78,778		162,107		162,107

Limited partnerships		81,230		81,230		81,230

Short-term:
Certificates of deposit		2,966		2,966		2,966
Total short-term and other		2,966		2,966		2,966

Total investments	$	618,359	$	698,112	$	698,112

(A) Investments presented above do not include $59,309 of money market funds classified with cash and
cash equivalents in the balance sheet.

SCHEDULE I -- SUMMARY OF INVESTMENTS-
OTHER THAN INVESTMENTS IN RELATED PARTIES

Form 10-K - Year Ended December 31, 2015

Baldwin & Lyons, Inc. and Subsidiaries
(Dollars in thousands)


Column A	Column B			Column C			Column D

							Amount At
							Which Shown
				Fair			In The Balance
Type of Investment	Cost			Value			Sheet (A)

Fixed Maturities:
Bonds:
U.S. government obligations			103,448			103,245			103,245
Mortgage-backed securities			35,645			35,371			35,371
State and municipal obligations			109,932			110,578			110,578
Foreign government obligations			25,416			23,965			23,965
Corporate securities			168,137			164,025			164,025
Total fixed maturities			442,578			437,184			437,184

Equity Securities:
Common Stocks:
Industrial, miscellaneous and all other			80,221			145,498			145,498
Total equity securities			80,221			145,498			145,498

Limited partnerships			30,449			30,449			30,449

Short-term:
Certificates of deposit			2,220			2,220			2,220
Total short-term and other			2,220			2,220			2,220

Total investments		$	555,468		$	615,351		$	615,351

(A) Investments presented above do not include $69,517 of money market funds classified with cash and
cash equivalents in the balance sheet.

SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF REGISTRANT

Form 10-K

Baldwin & Lyons, Inc.
(Dollars in thousands)

Condensed Balance Sheets
	December 31
	2014		2013
Assets
Investment in subsidiaries	$	415,304	$	398,008
Due from affiliates		2,762		2,465
Investments other than subsidiaries:
Fixed maturities		11,924		11,093
Limited partnerships		233		248
		12,157		11,341
Cash and cash equivalents		16,615		9,848
Accounts receivable		5,157		7,075
Other assets		17,905		13,453
Total assets	$	469,900	$	442,190
Liabilities and shareholders' equity

Liabilities:
Premiums payable	$	27,850	$	30,004
Deposits from insureds		18,303		16,307
Notes payable to bank		20,000		10,000
Other liabilities		4,251		4,155
		70,404		60,466
Shareholders' equity:
Common stock:
Class A		112		112
Class B		527		525
Additional paid-in capital		51,854		50,594
Unrealized net gains on investments		51,840		49,089
Foreign exchange adjustment		390		1,401
Retained earnings		294,773		280,003
		399,496		381,724

Total liabilities and shareholders' equity	$	469,900	$	442,190

SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION

Form 10-K

Baldwin & Lyons, Inc. and Subsidiaries

(Dollars in thousands)


Column A	Column B		Column C		Column D		Column E		Column F		Column G		Column H		Column I		Column J		Column K


	As of December 31								Year Ended December 31
			Reserves
			for Unpaid				Other						Benefits,		Amortization
	Deferred		Claims				Policy						Claims,		of Deferred
	Policy		and Claim				Claims and		Net		Net		Losses and		Policy		Other		Net
	Acquisition		Acquisition		Unearned		Benefits		Premium		Investment		Settlement		Acquisition		Operating		Premiums
Segment	Costs		Expenses		Premiums		Payable		Earned		Income		Expenses		Costs		Expenses		Written
											(C)		(A)				(B) (C)
Property/Casualty
Insurance

2015	$	1,443	$	464,305	$	18,579		---	$	242,364	$	12,498	$	142,258	$	50,270	$	13,682	$	238,330

2014		2,263		449,133		23,659		---		224,683		9,055		139,308		48,872		14,033		224,258

2013		2,319		408,469		26,303		---		202,785		8,770		133,005		47,414		14,459		201,817

Reinsurance

2015		---	$	49,291	$	6,712		---	$	20,971	$	12,498	$	13,492		---	$	13,682	$	16,323

2014		---		56,969		11,360		---		36,944		9,055		20,288		---		14,033		37,913

2013		---		66,001		10,390		---		49,958		8,770		17,696		---		14,459		51,867