SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

Quarterly Report Pursuant to Section 13 or 15 (d)

of the Securities Exchange Act of 1934

For Quarter Ended Commission file number

~~June~~September 30, 2016 0-5534

BALDWIN & LYONS, INC.

(Exact name of registrant as specified in its charter)

INDIANA (State or other jurisdiction of Incorporation or organization	35-0160330 (I.R.S. Employer Identification Number)
111 Congressional Boulevard, Carmel, Indiana (Address of principal executive offices)	46032 (Zip Code)

Registrant's telephone number, including area code: (317) 636-9800

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes  No___

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  No ____

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a ~~non-accelerated filer.~~smaller reporting company. See ~~definition~~definitions of ~~"accelerated filer and large~~"large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ____ Accelerated filer  Non-accelerated filer ____

~~Small~~Smaller Reporting Company ____

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ____ No 

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of ~~August~~November 1, 2016:

TITLE OF CLASS NUMBER OF SHARES OUTSTANDING

Common Stock, No Par Value:

Class A (voting) 2,623,109

Class B (nonvoting) 12,460,900

~~Index to Exhibits located on page 30.~~

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PART I – FINANCIAL INFORMATION

ITEM 1 FINANCIAL STATEMENTS

Baldwin & Lyons, Inc. and Subsidiaries
Unaudited Consolidated Balance Sheets

(in thousands, except share data)

	June 30			December 31			September 30			December 31
	2016			2015			2016			2015
Assets
Investments:
Fixed maturities	$	472,364		$	437,184		$	486,137		$	437,184
Equity securities		137,744			145,498			134,454			145,498
Limited partnerships		72,794			75,458			77,197			75,458
Short-term		1,500			2,220			1,500			2,220
		684,402			660,360			699,288			660,360

Cash and cash equivalents		61,545			73,538			67,372			73,538
Accounts receivable		64,141			66,522			62,195			66,522
Reinsurance recoverable		235,995			215,888			242,183			215,888
Other assets		66,174			65,761			70,570			65,761
Current federal income taxes		63			3,702			3,770			3,702
	$	1,112,320		$	1,085,771		$	1,145,378		$	1,085,771

Liabilities and shareholders' equity
Reserves for losses and loss expenses	$	541,348		$	513,596		$	565,559		$	513,596
Reserves for unearned premiums		22,390			25,291			21,916			25,291
Short-term borrowings		20,000			20,000			20,000			20,000
Accounts payable and accrued expenses		114,752			121,188			118,200			121,188
Deferred federal income taxes		9,517			11,198			12,781			11,198
		708,007			691,273			738,456			691,273
Shareholders' equity:
Common stock-no par value:
Class A voting -- authorized 3,000,000 shares;
outstanding -- 2016 - 2,623,109; 2015 - 2,623,109		112			112			112			112
Class B non-voting -- authorized 20,000,000 shares;
outstanding -- 2016 - 12,460,900; 2015 - 12,402,941		532			529			532			529
Additional paid-in capital		54,286			52,946			54,286			52,946
Unrealized net gains on investments		34,674			38,924			37,410			38,924
Foreign exchange adjustment		(523	)		(1,066	)		(668	)		(1,066	)
Retained earnings		315,232			303,053			315,250			303,053
		404,313			394,498			406,922			394,498
	$	1,112,320		$	1,085,771		$	1,145,378		$	1,085,771

See notes to condensed consolidated financial statements.

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

(in thousands, except per share data)
(in thousands, except share and per share data)

	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June 30						June 30						September 30						September 30
	2016			2015			2016			2015			2016			2015			2016			2015
Revenues
Net premiums earned	$	68,726		$	65,449		$	135,635		$	131,895		$	71,235		$	65,445		$	206,870		$	197,340
Net investment income		3,549			2,898			6,988			5,713			3,513			3,014			10,501			8,727
Commissions and other income		1,463			1,501			2,828			2,798			1,207			1,173			4,035			3,970
Net realized gains (losses) on investments, excluding
impairment losses		1,375			(273	)		12,447			3,684			9,576			2,310			22,023			5,994
Total other-than-temporary impairment losses on investments		(1,095	)		(893	)		(3,155	)		(1,107	)		(1,844	)		(4,396	)		(4,999	)		(5,503	)
Net realized gains (losses) on investments		280			(1,166	)		9,292			2,577			7,732			(2,086	)		17,024			491
		74,018			68,682			154,743			142,983			83,687			67,546			238,430			210,528

Expenses
Losses and loss expenses incurred		42,666			37,031			81,289			78,678			56,827			35,212			138,116			113,890
Other operating expenses		22,437			23,221			43,101			46,584			21,225			20,724			64,326			67,307
		65,103			60,252			124,390			125,262			78,052			55,936			202,442			181,197
Income before federal income taxes		8,915			8,430			30,353			17,721			5,635			11,610			35,988			29,331
Federal income taxes		2,946			2,712			10,272			5,760			1,634			3,830			11,906			9,590
Net income	$	5,969		$	5,718		$	20,081		$	11,961		$	4,001		$	7,780		$	24,082		$	19,741

Per share data:
Basic and diluted earnings	$	.40		$	.38		$	1.33		$	.79		$	.27		$	.52		$	1.60		$	1.31

Dividends paid to shareholders	$	.26		$	.25		$	.52		$	.50		$	.26		$	.25		$	.78		$	.75

Reconciliation of shares outstanding:
Average shares outstanding - basic		15,075			15,017			15,060			15,005			15,084			15,015			15,068			15,009
Dilutive effect of share equivalents		9			8			24			20			-			3			16			10
Average shares outstanding - diluted		15,084			15,025			15,084			15,025			15,084			15,018			15,084			15,019

See notes to condensed consolidated financial statements.

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Baldwin & Lyons, Inc. and Subsidiaries
Unaudited Consolidated Statements of Comprehensive Income
Unaudited Consolidated Statements of Comprehensive Income (Loss)													Unaudited Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

	Three Months Ended						Six Months Ended							Three Months Ended						Nine Months Ended
	June 30						June 30							September 30						September 30
	2016			2015			2016			2015				2016			2015			2016			2015

Net income	$	5,969		$	5,718		$	20,081		$	11,961			$	4,001		$	7,780		$	24,082		$	19,741

Other comprehensive income (loss), net of tax:
Unrealized net gains (losses) on securities:
Unrealized net gains (losses) arising during the period		3,348			(729	)		2,572			(107	)			4,900			(13,192	)		7,471			(13,299	)
Less: reclassification adjustment for net gains (losses)
included in net income		(452	)		(567	)		6,822			(1,081	)			2,164			2,739			8,985			1,658
		3,800			(162	)		(4,250	)		974				2,736			(15,931	)		(1,514	)		(14,957	)

Foreign currency translation adjustments		124			106			543			(673	)			(145	)		(429	)		398			(1,102	)

Other comprehensive income (loss)		3,924			(56	)		(3,707	)		301				2,591			(16,360	)		(1,116	)		(16,059	)

Comprehensive income	$	9,893		$	5,662		$	16,374		$	12,262
Comprehensive income (loss)														$	6,592		$	(8,580	)	$	22,966		$	3,682

See notes to condensed consolidated financial statements.

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

(in thousands)

	Six Months Ended						Nine Months Ended
	June 30						September 30
	2016			2015			2016			2015

Net cash provided by operating activities	$	22,741		$	14,163		$	32,397		$	30,806
Investing activities:
Purchases of available-for-sale investments		(215,228	)		(183,337	)		(310,398	)		(275,591	)
Proceeds from sales or maturities
of available-for-sale investments		188,245			166,964			286,580			262,707
Net sales of short-term investments		720			747			720			746
Other investing activities		(1,112	)		1,039			(3,978	)		(1,281	)
Net cash used in investing activities		(27,375	)		(14,587	)		(27,076	)		(13,419	)
Financing activities:
Dividends paid to shareholders		(7,902	)		(7,530	)		(11,885	)		(11,267	)
Net cash used in financing activities		(7,902	)		(7,530	)		(11,885	)		(11,267	)

Effect of foreign exchange rates on cash and cash equivalents		543			(673	)		398			(1,102	)

Decrease in cash and cash equivalents		(11,993	)		(8,627	)
Increase (decrease) in cash and cash equivalents								(6,166	)		5,018
Cash and cash equivalents at beginning of period		73,538			64,632			73,538			64,632
Cash and cash equivalents at end of period	$	61,545		$	56,005		$	67,372		$	69,650

See notes to condensed consolidated financial statements.

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Notes to Unaudited Condensed ~~Unaudited~~ Consolidated Financial Statements

(All dollar amounts presented in these notes are in thousands, except per share data)

(1) Summary of Significant Accounting Policies

Basis of Presentation: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and notes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. ~~Operating results for the interim periods are not necessarily indicative of the results that may be expected for the year ended December 31, 2016.~~ Interim financial statements should be read in conjunction with the Company's annual audited financial statements and other disclosures included in the Company's most recent Form 10-K. Operating results for interim periods are not necessarily indicative of results that may be expected for the year ended December 31, 2016.

Investments: Carrying amounts for fixed maturity securities represent fair value and are based on quoted market prices, where available, or broker/dealer quotes for specific securities where quoted market prices are not available. Equity securities are carried at quoted market prices (fair value). The Company accounts for investments in limited partnerships using the equity method of accounting, which requires an investor in a limited partnership to record its proportionate share of the limited partnership's net income. To the extent that the limited partnership investees include both realized and unrealized investment gains or losses in the determination of net income or loss, then the Company would also recognize, through its consolidated statements of income, its proportionate share of the investee's unrealized, as well as, realized investment gains or losses.

Other investments, if any, are carried at either fair value or cost, depending on the nature of the investment. Short-term investments are carried at cost, which approximates their fair values.

Realized gains and losses on disposals of investments are determined by specific identification of the cost of investments sold and are included in income. All fixed maturity and equity securities are considered to be available for sale; the related unrealized net gains or losses (net of applicable tax effect) are reflected directly in shareholders' equity. Included within available for sale fixed maturity securities are insurance-linked securities and convertible debt securities. The changes in fair values of insurance-linked securities and portions of the changes in fair values of convertible debt securities are reflected as a component of net realized gains (losses) on investments.

- 6 -

Notes to Unaudited Condensed ~~Unaudited~~ Consolidated Financial Statements (continued)

With respect to other–than-temporary impairment of investments, if a fixed maturity security is in an unrealized loss position and the Company has the intent to sell the fixed maturity security, or it is more likely than not that the Company will have to sell the fixed maturity 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 income. For impaired fixed maturity securities that the Company does not intend to sell or if 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 income and the non-credit component of the other-than-temporary impairment is recognized directly in shareholders' equity (accumulated other comprehensive income).

The credit component of an other-than-temporary impairment is determined by comparing the net present value of projected future cash flows with the amortized cost basis of the fixed maturity security. Furthermore, unrealized losses caused by non-credit related factors related to fixed maturity securities for which the Company expects to fully recover the amortized cost basis continue to be recognized in accumulated other comprehensive income.

The unrealized net gains or losses (net of applicable tax effect) related to equity securities are reflected directly in shareholders' equity, unless a decline in value is determined to be other-than-temporary, in which case the loss is charged to income. In determining if and when a decline in market value below cost is other-than-temporary, an objective analysis is made of each individual 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, subject to an evaluation as to possible future 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. Furthermore, the Company takes into account any known subjective information in evaluating for impairment without consideration to the Company's quantitative criteria defined above.

Recent Accounting Pronouncements: In January 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, or ASU 2016-01. The amendments in ASU 2016-01 change the accounting for non-consolidated equity investments that are not accounted for under the equity method of accounting by requiring changes in fair value to be recognized in income. Under current guidance, changes in fair value for investments of this nature are recognized in accumulated other comprehensive income as a component of shareholders' equity. Additionally, ASU 2016-01 simplifies the impairment assessment of equity investments without readily determinable fair values; requires entities to use the exit price when estimating the fair value of financial instruments; and modifies various presentation disclosure requirements for financial instruments. ASU 2016-01 is effective for interim and annual reporting periods beginning after December 15, 2017. The Company has not yet adopted the guidance and the adoption of this guidance is not ~~expected to have a material impact on the financial position or liquidity.~~

- 7 -

Notes to Unaudited Condensed ~~Unaudited~~ Consolidated Financial Statements (continued)

expected to have a material impact on the Company's statement of financial position, income statement or liquidity.

In May 2015, the FASB issued ASU 2015-09, Disclosures about Short-Duration Contracts, and this new guidance will enhance disclosures about an entity's insurance liabilities. This guidance will provide additional information about unpaid claims and claim development, including supplemental disaggregated incurred and paid claim data. Under the guidance, enhanced disclosures on claim frequency and reserving methodologies are ~~required.~~required and will be included within the Company's financial statement footnote disclosures. The guidance is effective for annual periods beginning after December 15, 2015 and for interim periods beginning after December 15, 2016, however early adoption is permitted. The Company has not yet adopted the guidance and the adoption of this guidance will not impact our consolidated financial position, results of operations or cash flows.

In May 2015, the FASB issued ASU 2015-07 – Fair Value Measurement – (Topic 820) Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share (or its equivalent) (a consensus of the Emerging Issues Task Force), which will be effective for fiscal years beginning after December 15, 2015. The new pronouncement was issued to ensure that all investments categorized in the fair value hierarchy are classified using a consistent approach. The Company adopted the guidance and the adoption of this guidance ~~does~~did not have a material impact on presentation of data in ~~the~~our consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), as amended by subsequently issued ASUs, to clarify the principles for recognizing revenue. While insurance contracts are not within the scope of this updated guidance, the Company's service and fee income could be subject to this updated guidance. The updated guidance requires an entity to recognize revenue as performance obligations are met, in order to reflect the transfer of promised goods or services to customers in an amount that reflects the consideration the entity is entitled to receive for those goods or services. The following steps are applied in the updated guidance: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which deferred the effective date of ASU 2014-09 to the quarter ending March 31, 2018. The Company is currently evaluating the impact this guidance will have on its results of operations, financial position or ~~liquidity. The~~liquidity, however the Company does not expect the guidance to have a material impact on its results of operations, financial position or liquidity.

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Notes to Unaudited Condensed ~~Unaudited~~ Consolidated Financial Statements (continued)

(2) Investments:

The following is a summary of available-for-sale securities at ~~June~~September 30, 2016 and December 31, 2015:

										Net												Net
			Cost or		Gross		Gross			Unrealized					Cost or		Gross		Gross			Unrealized
	Fair		Amortized		Unrealized		Unrealized			Gains			Fair		Amortized		Unrealized		Unrealized			Gains
	Value		Cost		Gains		Losses			(Losses)			Value		Cost		Gains		Losses			(Losses)
June 30, 2016
September 30, 2016
Fixed maturities
U.S. government obligations	$	109,031	$	108,414	$	618	$	(1	)	$	617		$	96,573	$	96,209	$	366	$	(2	)	$	364
Residential mortgage-backed securities		5,797		5,652		236		(91	)		145			5,608		5,433		221		(46	)		175
Commercial mortgage-backed securities		30,227		30,523		634		(930	)		(296	)		29,809		29,651		952		(794	)		158
States and municipal obligations		125,098		123,605		1,579		(86	)		1,493			131,697		130,783		1,144		(230	)		914
Corporate securities		177,696		179,254		3,663		(5,221	)		(1,558	)		197,677		196,984		3,248		(2,555	)		693
Foreign government obligations		24,515		25,770		411		(1,666	)		(1,255	)		24,773		25,921		363		(1,511	)		(1,148	)
Total fixed maturities		472,364		473,218		7,141		(7,995	)		(854	)		486,137		484,981		6,294		(5,138	)		1,156
Equity securities:
Financial institutions		24,918		15,060		10,454		(596	)		9,858			20,251		13,261		7,299		(309	)		6,990
Industrial & miscellaneous		112,826		68,485		47,625		(3,284	)		44,341			114,203		64,795		51,066		(1,658	)		49,408
Total equity securities		137,744		83,545		58,079		(3,880	)		54,199			134,454		78,056		58,365		(1,967	)		56,398

Total	$	610,108	$	556,763	$	65,220	$	(11,875	)		53,345		$	620,591	$	563,037	$	64,659	$	(7,105	)		57,554

							Applicable federal income taxes				(18,671	)							Applicable federal income taxes				(20,144	)

							Net unrealized gains - net of tax			$	34,674								Net unrealized gains - net of tax			$	37,410

December 31, 2015
Fixed maturities
U.S. government obligations	$	103,245	$	103,448	$	56	$	(259	)	$	(203	)	$	103,245	$	103,448	$	56	$	(259	)	$	(203	)
Residential mortgage-backed securities		4,776		4,668		162		(54	)		108			4,776		4,668		162		(54	)		108
Commercial mortgage-backed securities		30,595		30,977		247		(629	)		(382	)		30,595		30,977		247		(629	)		(382	)
State and municipal obligations		110,578		109,932		806		(160	)		646			110,578		109,932		806		(160	)		646
Corporate securities		164,025		168,137		2,445		(6,557	)		(4,112	)		164,025		168,137		2,445		(6,557	)		(4,112	)
Foreign government obligations		23,965		25,416		404		(1,855	)		(1,451	)		23,965		25,416		404		(1,855	)		(1,451	)
Total fixed maturities		437,184		442,578		4,120		(9,514	)		(5,394	)		437,184		442,578		4,120		(9,514	)		(5,394	)
Equity securities:
Financial institutions		21,694		10,836		11,069		(211	)		10,858			21,694		10,836		11,069		(211	)		10,858
Industrial & miscellaneous		123,804		69,385		59,338		(4,919	)		54,419			123,804		69,385		59,338		(4,919	)		54,419
Total equity securities		145,498		80,221		70,407		(5,130	)		65,277			145,498		80,221		70,407		(5,130	)		65,277

Total	$	582,682	$	522,799	$	74,527	$	(14,644	)		59,883		$	582,682	$	522,799	$	74,527	$	(14,644	)		59,883

							Applicable federal income taxes				(20,959	)							Applicable federal income taxes				(20,959	)

							Net unrealized gains - net of tax			$	38,924								Net unrealized gains - net of tax			$	38,924

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Notes to Unaudited Condensed ~~Unaudited~~ Consolidated Financial Statements (continued)

The following table summarizes, for fixed maturity and equity security investments in an unrealized loss position at ~~June~~September 30, 2016 and December 31, 2015, respectively, the aggregate fair value and gross unrealized loss categorized by the duration those securities have been continuously in an unrealized loss position.

	June 30, 2016							December 31, 2015							September 30, 2016							December 31, 2015
	Number of Securities		Fair Value		Gross Unrealized Loss			Number of Securities		Fair Value		Gross Unrealized Loss			Number of Securities		Fair Value		Gross Unrealized Loss			Number of Securities		Fair Value		Gross Unrealized Loss
Fixed maturity securities:
12 months or less		213	$	119,094	$	(5,585	)		328	$	205,475	$	(5,070	)		251	$	198,916	$	(2,882	)		328	$	205,475	$	(5,070	)
Greater than 12 months		54		15,236		(2,410	)		168		108,043		(4,444	)		54		19,596		(2,256	)		168		108,043		(4,444	)
Total fixed maturities		267		134,330		(7,995	)		496		313,518		(9,514	)		305		218,512		(5,138	)		496		313,518		(9,514	)

Equity securities:
12 months or less		60		33,335		(3,880	)		73		26,517		(5,130	)		58		30,629		(1,967	)		73		26,517		(5,130	)
Greater than 12 months		-		-		-			-		-		-			-		-		-			-		-		-
Total equity securities		60		33,335		(3,880	)		73		26,517		(5,130	)		58		30,629		(1,967	)		73		26,517		(5,130	)
Total fixed maturity and equity securities		327	$	167,665	$	(11,875	)		569	$	340,035	$	(14,644	)		363	$	249,141	$	(7,105	)		569	$	340,035	$	(14,644	)

The fair value and the cost or amortized costs of fixed maturity investments at ~~June~~September 30, 2016, by contractual maturity, are shown below. Actual maturities may ultimately differ from contractual maturities because borrowers have, in some cases, the right to call or prepay obligations with or without call or prepayment penalties. Pre-refunded municipal bonds are classified based on their pre-refunded call dates.

	Fair Value		Cost or Amortized Cost		Fair Value		Cost or Amortized Cost

One year or less	$	116,328	$	116,599	$	92,876	$	92,984
Excess of one year to five years		236,062		235,283		261,413		261,261
Excess of five years to ten years		36,580		36,124		43,440		42,700
Excess of ten years		1,967		2,123		3,907		3,595
Contractual maturities		390,937		390,129		401,636		400,540
Asset-backed securities		81,427		83,089		84,501		84,441
Total	$	472,364	$	473,218	$	486,137	$	484,981

- 10 -

Notes to Unaudited Condensed ~~Unaudited~~ Consolidated Financial Statements (continued)

Following is a summary of the components of net realized gains (losses) on investments for the periods presented in the accompanying consolidated statements of income.

	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June 30						June 30						September 30						September 30
	2016			2015			2016			2015			2016			2015			2016			2015
Fixed maturities:
Gross gains	$	565		$	985		$	1,842		$	2,132		$	7,496		$	1,294		$	9,338		$	3,426
Gross losses		(1,140	)		(1,856	)		(4,036	)		(3,789	)		(8,434	)		(5,087	)		(12,470	)		(8,876	)
Net realized losses		(575	)		(871	)		(2,194	)		(1,657	)		(938	)		(3,793	)		(3,132	)		(5,450	)

Equity securities:
Gross gains		1,126			1,230			16,636			1,979			5,086			10,320			21,722			12,299
Gross losses		(1,248	)		(1,232	)		(3,948	)		(1,985	)		(819	)		(2,312	)		(4,767	)		(4,297	)
Net realized gains (losses)		(122	)		(2	)		12,688			(6	)
Net realized gains														4,267			8,008			16,955			8,002

Limited partnerships - net gain (loss)		977			(293	)		(1,202	)		4,240			4,403			(6,301	)		3,201			(2,061	)


Total net gains (losses)	$	280		$	(1,166	)	$	9,292		$	2,577		$	7,732		$	(2,086	)	$	17,024		$	491

Net realized gains (losses) activity for investments, as shown in the previous table, are further detailed as follows:

	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June 30						June 30						September 30						September 30
	2016			2015			2016			2015			2016			2015			2016			2015

Realized net gains (losses) on the disposal of securities	$	(1,142	)	$	(125	)	$	7,167		$	(413	)
Realized net gains on the disposal of securities													$	3,482		$	7,957		$	10,649		$	7,544
Mark-to-market adjustment		(133	)		(104	)		(434	)		(392	)		108			(300	)		(326	)		(692	)
Equity in gains (losses) of limited partnership
investments - realized and unrealized		977			(293	)		(1,202	)		4,240			4,403			(6,301	)		3,201			(2,061	)
Impairment:
Write-downs based upon objective criteria		(1,095	)		(893	)		(3,155	)		(1,107	)		(1,844	)		(4,396	)		(4,999	)		(5,503	)
Recovery of prior write-downs
upon sale or disposal		1,673			249			6,916			249			1,583			954			8,499			1,203

Total net gains (losses)	$	280		$	(1,166	)	$	9,292		$	2,577		$	7,732		$	(2,086	)	$	17,024		$	491

The mark-to-market adjustments in the table above represent the changes in fair value of (1) options embedded in convertible debt securities and (2) insurance-linked securities held by the Company.

- 11 -

Notes to Unaudited Condensed ~~Unaudited~~ Consolidated Financial Statements (continued)

The income from limited partnerships for the quarter and year-to-date periods ending June 30, 2016 includes an estimated $155 of net unrealized losses and $719 of net unrealized gains respectively, reported to the Company as part of the underlying assets of the various limited partnerships. The value of limited partnerships at June 30, 2016 includes approximately $5,780 of accumulated net unrealized gains reported to the Company as part of the underlying assets of the various limited partnerships. Shareholders' equity at ~~June~~September 30, 2016 ~~includes~~included approximately ~~$25,680,~~$28,606, net of federal income taxes, of reported earnings which remain undistributed by limited partnerships.

~~As of June 30, 2016,~~The Company's bridge loan investment program was terminated and the Company had no remaining committed funds related to bridge loan ~~agreements. When funds are committed, the~~agreements as of September 30, 2016. The Company ~~retains~~historically retained possession of these funds which ~~will~~were only be loaned in the unlikely event that long-term financing iswas unavailable to the counter party in the market.

At ~~June~~September 30, 2016, limited partnership investments ~~include~~included approximately ~~$44,400~~$46,855 consisting of two partnerships which are managed by organizations in which certain of the Company's directors are officers, directors, general partners or owners. Each of these investments contains profit sharing agreements, pursuant to which a portion of the gains will be paid to the affiliated organizations.

At ~~June~~September 30, 2016, invested assets other than limited partnerships ~~include~~included approximately ~~$62,600~~$39,572 in portfolios managed by organizations in which certain of the Company's directors are officers, directors, general partners or owners.

(3) Reinsurance:

The following table summarizes the Company's transactions with reinsurers for the 2016 and 2015 comparative periods.

	2016		2015		2016		2015
Quarter ended June 30:
Quarter ended September 30:
Premiums ceded to reinsurers	$	32,073	$	31,196	$	30,996	$	32,822
Losses and loss expenses
ceded to reinsurers		19,520		21,840		21,237		21,068
Commissions from reinsurers		9,914		7,430		11,898		10,228

Six months ended June 30:
Nine months ended September 30:
Premiums ceded to reinsurers	$	63,336	$	62,575	$	94,331	$	95,397
Losses and loss expenses
ceded to reinsurers		48,845		38,238		70,081		59,306
Commissions from reinsurers		20,688		15,045		32,587		25,273

- 12 -

Notes to Unaudited Condensed ~~Unaudited~~ Consolidated Financial Statements (continued)

(4) Reportable Segments:

The Company has two reportable business segments in its operations: Property and Casualty Insurance and Reinsurance.

The Property and Casualty Insurance segment provides multiple line insurance coverage primarily to fleet transportation companies as well as to independent contractors who contract with fleet transportation companies. In addition, the Company provides private passenger automobile products to individuals, workers' compensation coverage to small businesses and professional liability products on a selective basis. In late 2015, the Company discontinued marketing private passenger automobile liability and physical damage coverages and all business for this product line will expire inby the end of 2016.

The Reinsurance segment currently accepts professional liability cessions from other insurance ~~companies.~~companies from current in-force business. From 1992 until July 1, 2014, the Reinsurance segment accepted property cessions from other insurance companies and retrocessions from reinsurance companies, principally reinsuring against catastrophes. Final exposure to property catastrophe losses expired on June 30, 2015.

The following table provides certain revenue and profit and loss information for each reportable segment. All amounts presented are computed based upon U.S. generally accepted accounting principles. Segment profit for Property and Casualty Insurance includes the direct marketing agency operations conducted by the parent company for this segment and is computed after elimination of inter-company commissions.

	2016							2015						2016							2015
	Direct and Assumed Premium Written		Net Premium Earned		Segment Profit (Loss)			Direct and Assumed Premium Written		Net Premium Earned		Segment Profit		Gross Premiums Written		Net Premiums Earned		Segment Underwriting Gain (Loss)			Gross Premiums Written		Net Premiums Earned		Segment Underwriting Gain

Three months ended June 30:
Three months ended September 30:

Property and Casualty Insurance	$	98,374	$	65,714	$	9,897		$	89,163	$	60,031	$	10,358	$	100,467	$	68,828	$	2,009		$	92,584	$	60,837	$	10,446
Reinsurance		1,672		3,012		(281	)		3,632		5,418		413		1,454		2,407		(6,854	)		3,368		4,608		86

Totals	$	100,046	$	68,726	$	9,616		$	92,795	$	65,449	$	10,771	$	101,921	$	71,235	$	(4,845	)	$	95,952	$	65,445	$	10,532


Six months ended June 30:
Nine months ended September 30:

Property and Casualty Insurance	$	191,462	$	129,142	$	23,641		$	179,676	$	119,315	$	16,682	$	291,929	$	197,970	$	15,281		$	272,260	$	180,152	$	18,678
Reinsurance		4,737		6,493		(826	)		10,099		12,580		1,013		6,191		8,900		(7,680	)		13,467		17,188		1,099

Totals	$	196,199	$	135,635	$	22,815		$	189,775	$	131,895	$	17,695	$	298,120	$	206,870	$	7,601		$	285,727	$	197,340	$	19,777

- 13 -

Notes to Unaudited Condensed ~~Unaudited~~ Consolidated Financial Statements (continued)

The following table reconciles reportable segment ~~income~~underwriting gain (loss) to ~~the Company's consolidated~~ income before federal income ~~taxes.~~taxes included in the Company's consolidated statements of income for the three and nine months ended September 30, 2016.

	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June 30						June 30						September 30						September 30
	2016			2015			2016			2015			2016			2015			2016		2015
Profit:
Segment profit	$	9,616		$	10,771		$	22,815		$	17,695
Segment underwriting gain (loss)													$	(4,845	)	$	10,532		$	7,601	$	19,777
Net investment income		3,549			2,898			6,988			5,713			3,513			3,014			10,501		8,727
Net realized gains (losses) on investments		280			(1,166	)		9,292			2,577			7,732			(2,086	)		17,024		491
Corporate expenses and other		(4,530	)		(4,073	)		(8,742	)		(8,264	)		(765	)		150			862		336
Income before federal income taxes	$	8,915		$	8,430		$	30,353		$	17,721		$	5,635		$	11,610		$	35,988	$	29,331

~~Segment profit includes both net premiums earned and fees and other income associated with the business conducted by the segment.~~

Management does not identify or allocate assets to reportable segments when evaluating segment performance and depreciation expense is not material for any of the reportable segments.

(5) Debt:

The Company maintains a revolving line of credit with a $40,000 limit and an expiration date of September 23, 2018. Interest on this line of credit is referenced to LIBOR and can be fixed for periods of up to one year at the Company's option. Outstanding drawings on this line of credit were $20,000 as of both ~~June~~September 30, 2016 and December 31, 2015. At ~~June~~September 30, 2016, the effective interest rate was ~~1.55%~~1.64%. The Company has $20,000 remaining unused under the line of credit at ~~June~~September 30, 2016.

(6) Taxes:

As of ~~June~~September 30, 2016, the Company's calendar years 2015 and 2014 remain subject to examination by the IRS. The effective federal income tax rate differs from the normal statutory rate primarily as a result of tax-exempt investment income.

(Space Intentionally Left Blank)

- 14 -

Notes to Unaudited Condensed ~~Unaudited~~ Consolidated Financial Statements (continued)

(7) Fair Value:

Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The following tables summarize fair value measurements by level for assets measured at fair value on a recurring basis:

As of June 30, 2016:
As of September 30, 2016:

Description	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Fixed maturities:
U.S. government obligations	$	109,031	$	-	$	109,031	$	-	$	96,573	$	-	$	96,573	$	-
Residential mortgage-backed securities		5,797		-		4,063		1,734		5,608		-		3,874		1,734
Commercial mortgage-backed securities		30,227		-		28,908		1,319		29,809		-		28,418		1,391
State and municipal obligations		125,098		-		125,098		-		131,697		-		131,697		-
Corporate securities		175,503		-		161,948		13,555		194,033		-		178,588		15,445
Options embedded in convertible securities		2,193		-		2,193		-		3,644		-		3,644		-
Foreign government obligations		24,515		-		24,228		287		24,773		-		24,493		280
Total fixed maturities		472,364		-		455,469		16,895		486,137		-		467,287		18,850
Equity securities:
Financial institutions		24,918		24,918		-		-		20,251		20,251		-		-
Industrial & miscellaneous		112,826		112,826		-		-		114,203		114,203		-		-
Total equity securities		137,744		137,744		-		-		134,454		134,454		-		-
Short-term		1,500		1,500		-		-		1,500		1,500		-		-
Cash equivalents		56,517		-		56,517		-		62,812		-		62,812		-
	$	668,125	$	139,244	$	511,986	$	16,895	$	684,903	$	135,954	$	530,099	$	18,850

As of December 31, 2015:

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		-
	$	654,419	$	147,718	$	489,908	$	16,793

- 15 -

Notes to Unaudited Condensed ~~Unaudited~~ Consolidated Financial Statements (continued)

Level inputs, as defined by FASB Fair Value Measurements, are as follows:

Level Input: Input Definition:

~~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~~ 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 best estimate of what market participants would use in pricing the asset or liability at the measurement date.

The following methods, assumptions and inputs were used to determine the fair value of each class of the following assets recorded at fair value in the consolidated balance sheets:

Cash equivalents: Cash equivalents primarily consist of highly rated money market funds purchased at par value with specified yield rates. Due to underlying assets of these funds, we designate all cash equivalents as Level 2.

Fixed maturities: Fair values of fixed maturities are based on quoted market prices, where available. These fair values are obtained primarily from third party pricing services, which generally use Level 2 inputs for the determination of fair value to facilitate fair value measurements and disclosures. For securities not actively traded, the third party pricing services may use quoted market prices of comparable instruments or discounted cash flow analyses, incorporating inputs that are currently observable in the markets for similar securities. Inputs that are often used in the valuation methodologies include, but are not limited to, benchmark yields, credit spreads, default rates and prepayment speeds. The Level 3 assets consist of a portfolio of corporate convertible bonds, commercial mortgage-backed securities and corporate securities. The assets are valued using various unobservable inputs including extrapolated data, proprietary models and indicative quotes.

Equity securities: Fair values of equity securities are designated as Level 1 and are based on quoted market prices.

- 16 -

Notes to Unaudited Condensed ~~Unaudited~~ Consolidated Financial Statements (continued)

A reconciliation of the beginning and ending balances of assets measured at fair value on a recurring basis using Level 3 inputs is as follows for the ~~six~~nine months ended ~~June~~September 30, 2016 and for the year ended December 31, 2015:

	2016			2015			2016			2015
Beginning of period balance	$	16,793		$	12,208		$	16,793		$	12,208
Total gains or losses (realized or unrealized)
included in income		71			(104	)		(2,270	)		(104	)
Purchases		3,339			2,284			3,124			2,284
Settlements		(3,308	)		(8,068	)		(5,290	)		(8,068	)
Transfers into Level 3		-			11,586			6,869			11,586
Transfers out of Level 3		-			(1,113	)		(376	)		(1,113	)
End of period balance	$	16,895		$	16,793		$	18,850		$	16,793

Quoted market prices are obtained whenever possible. Where quoted market prices are not available, fair values are estimated using present value or other valuation techniques. These techniques are significantly affected by our assumptions, including discount rates and estimates of future cash flows. Potential taxes and other transaction costs have not been considered in estimating fair values.

Transfers between levels, if any, are recorded as of the beginning of the reporting period. There were no significant transfers of assets between Level 1 and Level 2 during the ~~six~~nine months ended ~~June~~September 30, 2016 and 2015.

In addition to the preceding disclosures on assets recorded at fair value in the consolidated balance sheets, FASB guidance also requires the disclosure of fair values for certain other financial instruments for which it is practicable to estimate fair value, whether or not such values are recognized in the consolidated balance sheets.

Non-financial instruments such as real estate, property and equipment, other assets, deferred income taxes and intangible assets, and certain financial instruments such as reserves for losses and loss expenses are excluded from the fair value disclosures. Therefore, the fair value amounts cannot be aggregated to determine the Company's underlying economic value.

The carrying amounts ~~reported in the consolidated balance sheets~~ for cash, accounts receivables, reinsurance recoverable, ~~notes receivable,~~ accounts payable and accrued expenses, income taxes receivable or payable and unearned premiums approximate fair value because of the short-term nature of these items. These assets and liabilities are not included in the table below.

The following methods, assumptions and inputs were used to estimate the fair value of each class of financial instrument:

- 17 -

Notes to Unaudited Condensed ~~Unaudited~~ Consolidated Financial Statements (continued)

Limited partnerships: The Company accounts for investments in limited partnerships using the equity method of accounting, which requires an investor in a limited partnership to carry the investment at its proportionate share of the limited partnership's equity. The underlying assets of the Company's investments in limited partnerships are carried primarily at fair value, and, therefore, the Company's carrying value of limited partnerships approximates fair value. As these investments are not actively traded and there are limitations on distributions and the corresponding inputs are based on data provided by the investees, they are classified as Level 3.

Short-term borrowings: The fair value of our short-term borrowings is based on quoted market prices for the same or similar debt, or, if no quoted market prices are available, on the current market interest rates available to us for debt of similar terms and remaining maturities.

A summary of the carrying value and fair value by level of financial instruments not recorded at fair value on the Company's consolidated balance sheets at ~~June~~September 30, 2016 and December 31, 2015 are as follows:

Carrying Fair Value
Value Level 1 Level 2 Level 3 Total

June 30, 2016
Assets: Limited partnerships $ 72,794 $ - $ - $ 72,794 $ 72,794
Liabilities: Short-term borrowings 20,000 - 20,000 - 20,000

December 31, 2015
Assets: Limited partnerships 75,458 - - 75,458 75,458
Liabilities: Short-term borrowings 20,000 - 20,000 - 20,000

	Carrying		Fair Value
	Value		Level 1		Level 2		Level 3		Total

September 30, 2016
Assets: Limited partnerships	$	77,197	$	-	$	-	$	77,197	$	77,197
Liabilities: Short-term borrowings		20,000		-		20,000		-		20,000

December 31, 2015
Assets: Limited partnerships		75,458		-		-		75,458		75,458
Liabilities: Short-term borrowings		20,000		-		20,000		-		20,000

(8) Restricted Stock:

The Company grants shares of class B restricted stock to the Company's outside directors, in lieu of cash, as their annual retainer compensation. The shares are distributed on the vesting date, one year following the date of grant, and have had an aggregate total value of $480 and $440 for the 2015 and 2016 annual periods presented, respectively. The table below provides detail of the stock issuances for 2015 and 2016:

					Value
					Per Share
Effective	Number of Shares		Vesting	Service	on Grant
Date	Issued		Date	Period	Date

5/12/2015		21,252	5/12/2016	7/1/2015 - 6/30/2016	$	22.59

5/10/2016		17,677	5/10/2017	7/1/2016 - 6/30/2017	$	24.89

Compensation expense related to the above stock grant is recognized over the period in which the directors render services.

- 18 -

Notes to Unaudited Condensed ~~Unaudited~~ Consolidated Financial Statements (continued)

Effective February 5, 2016, the Company issued 47,333 shares of class B restricted stock to certain of the Company's ~~executives.~~executives under the Company's existing equity plan. The restricted shares will be paid solely in the Company's class B common stock. The restricted shares represent a portion of the calendar year 2015 compensation to certain executives under the terms of the Company's Executive Incentive Bonus Plan. The restricted shares will vest ratably over a ~~three year~~three-year period from the date of grant and are accelerated for retirement eligible recipients in accordance with the non-substantive post-grant date vesting clause of ~~ASC~~ Accounting Standard Codification ("ASC") 715, ~~Compensation-Retirement~~Compensation—Retirement Benefits. ~~Restricted stock was~~The restricted shares were valued based on the closing price of the Company's class B common stock on the day the award was granted. Each share was valued at $23.30 per share representing a total value of $1,103. Non-vested restricted shares will be forfeited should an executive's employment terminate for any reason other than death, disability or retirement as defined by the Compensation Committee.

(9) Litigation, Commitments and Contingencies:

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.

(10) Accumulated Other Comprehensive Income:

The following table illustrates changes in accumulated other comprehensive income by component for the ~~six~~nine months ~~ending June~~ended September 30, 2016:

				Unrealized									Unrealized
				holding gains on									holding gains on
	Foreign			available-for-sale						Foreign			available-for-sale
	Currency			securities			Total			Currency			securities			Total

Beginning balance	$	(1,066	)	$	38,924		$	37,858		$	(1,066	)	$	38,924		$	37,858

Other comprehensive income
before reclassifications		543			2,572			3,115			398			7,471			7,869

Amounts reclassified from
accumulated other
comprehensive income		-			(6,822	)		(6,822	)		-			(8,985	)		(8,985	)

Net current-period other
comprehensive income		543			(4,250	)		(3,707	)		398			(1,514	)		(1,116	)

Ending balance	$	(523	)	$	34,674		$	34,151		$	(668	)	$	37,410		$	36,742

- 19 -

Notes to Unaudited Condensed ~~Unaudited~~ Consolidated Financial Statements (continued)

(11) Other Operating Expenses:

The Company incurred commission expense in connection with insurance policies written in 2016 through an insurance management firm of which a director of the Company is CEO and a Managing Director. ~~The total~~Total commission expense for the ~~quarter~~three and ~~year-to-date~~nine months ended September 30, 2016 was ~~$140.~~$140 and $280, respectively.

(12) Subsequent Events:

We have evaluated subsequent events for recognition or disclosure in the consolidated financial statements filed on Form 10-Q with the SEC and no events have occurred during the period which require recognition or disclosure.

(Space Intentionally Left Blank)

- 20 -

ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

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 property/casualty insurance subsidiaries, other than loss and loss expense payments and commissions paid to related agency companies, generally average less than one-third of premiums earned and the remaining amount is available for investment for varying periods of time pending the settlement of claims relating to the insurance coverage provided. The Company's cash flow relating to premiums is significantly affected by reinsurance programs in effect from time-to-time whereby the Company cedes both premium and risk to other insurance and reinsurance companies. These programs vary significantly among products and certain contracts call for reinsurance payment patterns which do not coincide with the collection of premium by the Company from its insureds.

For the first ~~six~~nine months of 2016, the Company produced positive cash flow from operations totaling ~~$22.7~~$32.4 million, which compares to positive cash flow from operations of ~~$14.2~~$30.8 million generated during the first ~~six~~nine months of 2015. The small increase in cash flow from the 2015 period ~~is primarily~~was due to ~~lower claim settlements for~~ the ~~period. The Company has achieved positive cash flow~~normal variances in 26timing and amount of ~~the past 28 quarters averaging $11.6 million per quarter.~~loss, loss adjustment expense and other operating expense payments.

The Company's investment philosophy has emphasized the purchase of relatively short-term instruments with maximum quality and liquidity. The average life of the Company's fixed income (bond and short-term investment) portfolio, using contractual maturities applied to par value, was ~~4.4~~4.5 years at ~~June~~September 30, 2016, and the effective duration of the portfolio was ~~2.3~~2.2 years, both of which are shorter than the average life of the Company's liabilities.

Financing activity for the first ~~six~~nine months of 2016 consisted solely of the regular cash dividend payments to shareholders of ~~$7.9~~$11.9 million ($~~.52~~.78 per share).

The Company maintains a revolving line of credit with a $40.0 million limit and an expiration date of September 23, 2018. Interest on this line of credit is referenced to LIBOR and can be fixed for periods of up to one year at the Company's option. Outstanding drawings on this line of credit were $20.0 million as of both September 30, 2016 and December 31, 2015. At September 30, 2016, the effective interest rate was 1.64%. The Company had $20.0 million remaining unused under the line of credit at September 30, 2016.

The Company's assets at ~~June~~September 30, 2016 included ~~$58.0~~$64.3 million in investments classified as cash equivalents that were readily convertible to cash without significant market penalty. An additional ~~$116.5~~$92.9 million of fixed maturity investments ~~(at par)~~ will mature within the twelve-month period following ~~June~~September 30, 2016. The Company believes that these liquid investments are more than sufficient to provide for projected claim payments and operating cost demands without consideration of expected future positive cash flows.

- 21 -

Consolidated shareholders' equity is composed largely of GAAP shareholders' equity of the insurance subsidiaries. As such, there are statutory restrictions on the transfer of substantial portions of this equity to the parent company. At ~~June~~September 30, 2016, ~~$52.5~~$47.5 million may be transferred by dividend or loan to the parent company during the remainder of 2016 without approval by, or prior notification to, regulatory authorities. An additional ~~$257.7~~$264.3 million of shareholder's equity of the insurance subsidiaries could, theoretically, be advanced or loaned to the parent company with prior notification to, and approval from, regulatory authorities, although transfers of this size would not be practical. The Company believes that these restrictions pose no material liquidity concerns to the Company. The Company also believes that the financial strength and stability of the subsidiaries would permit ready access by the parent company to short-term and long-term sources of credit. The parent company had cash and marketable securities valued at ~~$14.9~~$11.8 million at ~~June~~September 30, 2016.

~~- 21 -~~

The Company's annualized net premiums written to surplus ratio, a common industry metric to measure surplus leverage, for the first ~~six~~nine months of 2016 was approximately ~~66%~~67%. Regulatory guidelines generally allow for a ratio of between 100% and 300% of surplus, depending on the lines of business written. Accordingly, the Company could increase net premium writings significantly with no need to raise additional capital to satisfy regulatory requirements. Further, the insurance subsidiaries' individual capital levels are several times higher than the minimum amounts designated by the National Association of Insurance Commissioners.

Results of Operations

Comparison of ~~Second~~Third Quarter, 2016 to ~~Second~~Third Quarter, 2015

Direct and assumed premiums written during the ~~second~~third quarter of 2016 increased ~~$7.3~~$6.0 million ~~(7.8%~~(6.2%), while net premiums earned increased ~~$3.3~~$5.8 million ~~(5.0%~~(8.8%), as compared to the same period of 2015. The Company's Property and Casualty Insurance segment reported an increase in ~~premium~~premiums written of ~~10.3%~~8.5% and an increase in earned premiums of ~~9.5%~~13.1%, reflecting higher ~~premium~~premiums from the Company's core fleet transportation products, partially offset by the continued planned reduction in personal automobile ~~and professional liability~~ volume. The Reinsurance segment reported a decrease in ~~premium~~premiums written of ~~54.0%~~56.8% and a decrease in ~~premium~~premiums earned of ~~44.4%~~47.8%, reflecting the ongoing planned withdrawal from both property and casualty reinsurance businesses. The difference in the percentage changes for ~~premium~~premiums written compared to earned is reflective of the normal differences in the financial statement recognition of earned ~~premium~~premiums compared to written as well as differences in reinsurance ceding rates on the mix of business in-force. The following table provides information regarding premiums written and earned for each segment for the quarters ended ~~June~~September 30 (dollars in thousands):

Direct and Assumed Premium Written Net Premium Written Net Premium Earned
2016

Property & Casualty Insurance $ 98,374 $ 66,040 $ 65,714
Reinsurance 1,672 1,629 3,012

Totals $ 100,046 $ 67,669 $ 68,726

2015

Property & Casualty Insurance $ 89,163 $ 58,583 $ 60,031
Reinsurance 3,632 3,344 5,418

Totals $ 92,795 $ 61,927 $ 65,449

- 22 -

~~Premium~~

	Gross Premiums Written		Net Premiums Written		Net Premiums Earned
2016

Property & Casualty Insurance	$	100,467	$	69,075	$	68,828
Reinsurance		1,454		1,455		2,407

Totals	$	101,921	$	70,530	$	71,235

2015

Property & Casualty Insurance	$	92,584	$	59,576	$	60,837
Reinsurance		3,368		3,325		4,608

Totals	$	95,952	$	62,901	$	65,445

Premiums ceded to reinsurers on insurance business produced by the Property and Casualty Insurance segment averaged ~~32.9%~~31.2% of ~~premium~~premiums written for the current quarter compared to ~~34.3%~~35.7% in the 2015 ~~second~~third quarter, with the decrease associated principally with reductions ~~in the rates~~to ceded premiums of certain reinsurance treaties.

~~- 22 -~~

Net investment income, before tax, during the ~~second~~third quarter of 2016 was ~~22.4%~~16.5% higher than the ~~second~~third quarter of 2015 due primarily to increased pre-tax yields on the Company's fixed maturity securities resulting in redeployment of assets to higher yielding issues ~~and higher dividend yields on the equity securities portfolio.~~as well as increases in average funds invested resulting from positive cash flow. Overall investment portfolio after-tax income increased ~~16.9%~~21.4% compared to the 2015 ~~second~~third quarter, while average invested funds increased 5%1.5%.

The ~~second~~third quarter 2016 net realized investment gains of ~~$0.3~~$7.7 million resulted primarily from ~~$1.0~~$4.4 million in gains reported from limited partnerships ~~partially offset by $0.7~~and $3.2 million in ~~losses~~gains from direct trading activities, which included net impairment write-downs of ~~$1.1 million and net impairment recoveries of $1.7~~$1.2 million. Comparative ~~second~~third quarter 2015 ~~overall~~ net realized investment losses were ~~$1.2~~$2.1 million, consisting primarily of ~~$0.9~~$6.3 million in losses reported from limited partnerships, partially offset by $4.5 million in gains from direct trading activities, which included net impairment write-downs of $3.4 million. Realized investment gains and ~~$0.3~~losses result from decisions regarding overall portfolio realignment as well as the sale of individual securities, including the change in aggregate value of limited partnerships and, as such, should not be expected to be consistent from period to period.

Losses and loss expenses incurred during the third quarter of 2016 increased $21.6 million (61.4%). The loss ratios for each segment were as follows:

	2016		2015
Property and Casualty Insurance		70.9%		53.7%
Reinsurance		334.7		55.6
Total		79.8		53.8

- 23 -

The increase in loss ratio for the Property and Casualty Insurance segment primarily relates to unallocated loss adjustment expense reserve strengthening during the third quarter of 2016. The higher Reinsurance segment loss ratio reflects higher than expected professional liability assumed losses reported as well as additional reserve strengthening.

Other operating expenses, for the third quarter of 2016, increased $0.5 million, or 2.4%, from the third quarter of 2015. The ratio of consolidated other operating expenses to operating revenue was 29.3% during the third quarter of 2016 compared to 30.7% for the 2015 third quarter. The lower expense ratios are reflective of higher ceding commissions from reinsurers.

The effective federal tax rate on consolidated income for the third quarter of 2016 was 29.0%. The effective rate differs from the normal statutory rate primarily as a result of tax-exempt investment income.

As a result of the factors mentioned above, and primarily the strengthening of loss and loss expense reserves, net income decreased $3.8 million during the third quarter of 2016 as compared to the 2015 period.

Comparison of Nine Months Ended September 30, 2016 to Nine Months Ended September 30, 2015

Direct and assumed premiums written during the first nine months of 2016 increased $12.4 million (4.3%), while net premiums earned increased $9.5 million (4.8%), as compared to the same period of 2015. The Company's Property and Casualty Insurance segment reported an increase in premiums written of 7.2% and an increase in earned premiums of 9.9%, reflecting higher premiums from the Company's core fleet transportation products. The Reinsurance segment reported a decrease in premiums written of 54.0% and a decrease in premiums earned of 48.2%, reflecting the ongoing planned withdrawal from both property and casualty reinsurance businesses. The difference in the percentage changes for premiums written compared to earned is reflective of the normal differences in the financial statement recognition of earned premiums compared to written as well as differences in reinsurance ceding rates on the mix of business in-force. The following table provides information regarding premiums written and earned for each segment for the nine months ended September 30 (dollars in thousands):

	Gross Premiums Written		Net Premiums Written		Net Premiums Earned
2016

Property & Casualty Insurance	$	291,929	$	196,659	$	197,970
Reinsurance		6,191		6,105		8,900

Totals	$	298,120	$	202,764	$	206,870

2015

Property & Casualty Insurance	$	272,260	$	177,091	$	180,152
Reinsurance		13,467		12,949		17,188

Totals	$	285,727	$	190,040	$	197,340

- 24 -

Premiums ceded to reinsurers on insurance business produced by the Property and Casualty Insurance segment averaged 32.6% of premiums written for the current year period compared to 35.0% a year earlier, with the decrease associated principally with reductions to ceded premiums of certain reinsurance treaties.

Net investment income, before tax, during the first nine months of 2016 was 20.3% higher than the first nine months of 2015 for the same reasons mentioned in the quarterly comparison. Overall investment portfolio after-tax income increased 18.9% compared to the 2015 period, while average invested funds increased 3.1%.

Net realized investment gains for the first nine months of 2016 totaled $17.0 million and resulted primarily from $14.1 million in gains reported from direct trading activities, which included net impairment recoveries of $2.6 million, and $3.2 million in gains reported from limited partnerships. For the same period of 2015, net realized investment gains were $0.5 million, consisting primarily of $3.2 million in gains from direct trading activities, which included net impairment write-downs of $4.3 million, substantially offset by $2.1 million in losses reported from limited partnerships. Realized investment gains and losses result from decisions regarding overall portfolio realignment as well as the sale of individual securities, including the change in aggregate value of limited partnerships and, as such, should not be expected to be consistent from period to period.

Losses and loss expenses incurred during the ~~second quarter~~first nine months of 2016 increased ~~$5.6~~$24.2 million ~~(15.2%~~(21.3%). The loss ratios for each segment were as follows:

	2016	2015	2016		2015
Property and Casualty Insurance	61.8%	57.2%		63.3%		58.4%
Reinsurance	69.4	49.3		143.6		50.6
Total	62.1	56.6		66.8		57.7

The year-to-date increase in loss ratio for the Property and Casualty Insurance segment primarily ~~relates~~related to ~~less~~unallocated loss adjustment expense reserve strengthening during the third quarter of 2016, partially offset by more favorable ~~prior~~current accident year loss activity in the Company's core fleet transportation products. The impact of prior year reserve development was 1.9% and 6.1% in the second quarter of 2016 and 2015, respectively. This lowered the calendar second quarter overall loss and loss expense ratio by 1.8% for 2016 and 5.6% for 2015. The higher year-to-date Reinsurance segment loss ratio ~~reflects~~reflected higher than expected professional liability assumed losses reported ~~during the second quarter of 2016 and the impact of prior year~~as well as additional reserve ~~development.~~strengthening.

Other operating expenses for the ~~second quarter~~first nine months of 2016 decreased ~~$0.8~~$3.0 million, or ~~3.4%~~4.4%, from the ~~second quarter~~first nine months of 2015. The ratio of consolidated other operating expenses to operating revenue (operating revenue is defined as total revenue less realized gains (losses) on investments) was ~~30.4%~~28.1% during the ~~second quarter of~~ 2016 period compared to ~~33.2%~~32.4% for the 2015 ~~second quarter.~~period. The lower expense ratios are reflective of higher ceding commissions from ~~reinsurers and the termination of business which carried higher acquisition costs.~~reinsurers.

The effective federal tax rate on consolidated income for the ~~second quarter~~first nine months of 2016 was ~~33.0%~~33.1%. The effective rate differs from the normal statutory rate primarily as a result of tax-exempt investment income.

As a result of the factors mentioned above, and primarily the increase in realized gains on investments, net income increased ~~$0.3~~$4.3 million ~~during the second quarter of 2016~~ as compared to the 2015 period.

- 2325 -

~~Comparison of Six Months Ended June 30, 2016 to Six Months Ended June 30, 2015~~

Direct and assumed premiums written during the first six months of 2016 increased $6.4 million (3.4%), while net premiums earned increased $3.7 million (2.8%), as compared to the same period of 2015. The Company's Property and Casualty Insurance segment reported an increase in premium written of 6.6% and an increase in earned premiums of 8.2%, reflecting higher premium from the Company's core fleet transportation products. The Reinsurance segment reported a decrease in premium written of 53.1% and a decrease in premium earned of 48.4% reflecting the ongoing planned withdrawal from both property and casualty reinsurance businesses. The difference in the percentage changes for premium written compared to earned is reflective of the normal differences in the financial statement recognition of earned premium compared to written as well as differences in reinsurance ceding rates on the mix of business in-force. The following table provides information regarding premiums written and earned for each segment for the six months ended June 30 (dollars in thousands):

Direct and Assumed Premium Written Net Premium Written Net Premium Earned
2016

Property & Casualty Insurance �� $ 191,462 $ 127,584 $ 129,142
Reinsurance 4,737 4,650 6,493

Totals $ 196,199 $ 132,234 $ 135,635

2015

Property & Casualty Insurance $ 179,676 $ 117,515 $ 119,315
Reinsurance 10,099 9,624 12,580

Totals $ 189,775 $ 127,139 $ 131,895

Premium ceded to reinsurers on insurance business produced by the Property and Casualty Insurance segment averaged 33.4% of premium written for the current year period compared to 34.6% a year earlier, with the decrease associated principally with reductions in the rates of certain reinsurance treaties.

Net investment income, before tax, during the first six months of 2016 was 22.3% higher than the first six months of 2015 for the same reasons mentioned in the quarterly comparison. Overall investment portfolio after-tax income increased 17.6% compared to the 2015 period while average invested funds increased 3%.

Net realized investment gains for the first six months of 2016 totaled $9.3 million and resulted primarily from $10.5 million in gains reported from direct trading activities including net impairment write-downs of $3.2 million and net impairment recoveries of $7.0 million, partially offset by $1.2 million in realized losses from limited partnerships. For the same period of 2015, overall net realized investment gains were $2.6 million, consisting primarily of $4.2 million in gains from limited partnerships, partially offset by $1.6 million in losses from direct trading activities. Realized investment gains and losses result from decisions regarding overall portfolio realignment as well as the sale of individual securities, including the change in aggregate value of limited partnerships and, as such, should not be expected to be consistent from period to period.

~~- 24 -~~

~~Losses and loss expenses incurred during the first six months of 2016 increased $2.6 million (3.3%). The loss ratios for each segment were as follows:~~

2016 2015
Property and Casualty Insurance 59.3% 60.8%
Reinsurance 72.7 48.8
Total 59.9 59.7

The decrease in loss ratio for the Property and Casualty Insurance segment primarily relates to more favorable current accident year loss activity in the Company's core fleet transportation products. The impact of prior year reserve development was 2.5% and 4.6% in 2016 and 2015, respectively. This lowered the calendar year overall loss and loss expense ratio by 2.4% for 2016 and 4.2% for 2015. The higher Reinsurance segment loss ratio reflects higher than expected professional liability assumed losses reported during the first six months of 2016 and the impact of prior year reserve development.

Other operating expenses, for the first six months of 2016, decreased $3.5 million, or 7.5%, from the first six months of 2015. The ratio of consolidated other operating expenses to operating revenue was 29.6% during the 2016 period compared to 33.2% for the 2015 period. The lower expense ratios are reflective of higher ceding commissions from reinsurers and the termination of business which carried higher acquisition costs.

The effective federal tax rate on consolidated income for the first six months of 2016 was 33.8%. The effective rate differs from the normal statutory rate primarily as a result of tax-exempt investment income.

~~As a result of the factors mentioned above, and primarily the increase in realized gains on investments, net income increased $8.1 million as compared to the 2015 period.~~

Forward-Looking Information

Any forward-looking statements in this report, including without limitation, statements relating to the 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~~are based on current expectations and assumptions that are subject to risks and uncertainties ~~including~~that could cause actual results to differ materially from such forward-looking statements. These risks and uncertainties include without limitation the following: (i) the 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 business is highly competitive and the entrance of new competitors into or the expansion of the operations by existing competitors in the Company's markets and other changes in the market for insurance products could adversely affect the Company's plans and results of operations; (iii) other risks and uncertainties indicated from time to time in the Company's filings with the Securities and Exchange Commission; and (iv) other risks and factors which may be beyond the control or foresight of the Company. Readers of this report are ~~encouraged~~cautioned not to ~~review~~place undue reliance on these forward-looking statements. While the ~~Company's annual report for its full statement regarding~~Company believes the assumptions on which the forward-looking ~~information.~~statements are based are reasonable, there can be no assurance that these forward-looking statements will prove to be accurate. The Company expressly disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

~~- 25 -~~

Critical Accounting Policies

There have been no changes in the Company's critical accounting policies as disclosed in the Form 10-K filed for the year ended December 31, 2015.

Concentrations of Credit Risk

The insurance subsidiaries cede portions of their gross premiums to numerous reinsurers under quota share and excess of loss treaties as well as facultative placements. These reinsurers assume commensurate portions of the risk of loss covered by the contracts. As losses are reported and reserved, portions of the gross losses attributable to reinsurers are established as receivable assets and losses incurred are reduced. At ~~June~~September 30, 2016, amounts due from reinsurers on paid and unpaid losses are estimated to total approximately ~~$233~~$238 million. Of this total, approximately ~~$110~~$108 million ~~(47%~~(45%) represents the Company's provision for incurred but not reported losses and loss adjustment expenses attributable to reinsurers. Because of the large policy limits reinsured by the Company, the ultimate amount of incurred but not reported losses and loss adjustment expenses attributable to reinsurers could vary significantly from the estimate provided; however, absent the inability to collect from reinsurers, such variance would not result in changes in net claim losses incurred by the Company.

- 26 -

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our exposure to market risk since the disclosure in our Form 10-K for the year ended December 31, 2015.

~~- 26 -~~

ITEM 4. CONTROLS AND PROCEDURES

The Company carried out an evaluation as of ~~December 31, 2015,~~September 30, 2016, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as defined in Rule 13a-15(e) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, or the "Exchange Act". Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective in timely alerting the Company to material information required to be disclosed in reports under the Exchange Act. In addition, based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective in ensuring that information required to be disclosed in reports that the Company files or submits under the Exchange Act is (a) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms; and (b) accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. The Company noted no change in its internal control over financial reporting that occurred during the ~~last fiscal quarter~~period covered by this report that materially affected, or is reasonably likely to materially affect, the internal control over financial reporting.

PART II – OTHER INFORMATION

~~ITEM 5. OTHER INFORMATION~~ITEM 1A. RISK FACTORS

In addition to the information set forth in this Quarterly Report on Form 10-Q and before deciding to invest in, or retain, shares of the Company's common stock, you also should carefully review and consider the information contained in the Company's other reports and periodic filings that it makes with the Securities and Exchange Commission, including, without limitation, the information contained under the caption Part I, Item 1A "Risk Factors" in its Annual Report on Form 10-K for the year ended December 31, 2015. Those risk factors could materially affect the Company's business, financial condition and results of operations. There have been no material changes from the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2015.

~~At our Annual Meeting of Shareholders held on May 10, 2016, shareholders voted on the following proposals:~~

FOR

AGAINST

WITHHOLD
(ABSTAIN)

Advisory vote to approve executive compensation
1,735,756

162,041

25,067

To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016 1,919,038 3,826 -

Vote to approve amendments to the Articles of Incorporation
Subproposal 1 – Director removal 1,878,791 15,422 28,651

Subproposal 2 – Other changes 1,893,157 4,340 25,367

~~Election of Directors: All presently serving directors were reelected in an uncontested election.~~

Each of the above matters submitted to a vote of shareholders was described in greater detail in the definitive proxy soliciting materials which were sent to shareholders and were filed with the Commission on April 4, 2016.

- 27 -

ITEM 6 (a) EXHIBITS

Number and caption from Exhibit

Table of Regulation S-K Item 601 Exhibit No.

(31.1)Certification of CEOEXHIBIT 31.1

pursuant to Section 302 of the Certification of CEO

Sarbanes-Oxley Act of 2002

(31.2)Certification of ~~Interim~~ CFOEXHIBIT 31.2

pursuant to Section 302 of the Certification of ~~Interim~~ CFO

Sarbanes-Oxley Act of 2002

(32)Certification of CEO and ~~Interim~~ CFO EXHIBIT 32

pursuant to 18 U.S.C. 1350, as Certification of CEO ~~and~~

adopted pursuant to Section 906 ~~Interim~~and CFO

of the Sarbanes-Oxley Act of 2002

(101)

The following materials from Baldwin & Lyons, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, formatted in XBRL (eXtensible Business Reporting Language): (1) the Consolidated Balance Sheets, (2) the Consolidated Statements of Income, (3) the Consolidated Statements of Comprehensive Income (Loss), (4) the Consolidated Statements of Cash Flows, and (5) the Notes to Unaudited Condensed Consolidated Financial Statements.

- 28 -

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

BALDWIN & LYONS, INC.

Date ~~August~~November 9, 2016 By /s/ W. Randall Birchfield

W. Randall Birchfield,

Chief Executive Officer & President

Date ~~August~~November 9, 2016By /s/ ~~Douglas W. Collins~~William C. Vens

~~Douglas W. Collins,~~ William C. Vens,

~~Interim~~ Chief Financial Officer

- 29 -

~~BALDWIN & LYONS, INC.~~

~~Form 10-Q for the fiscal quarter ended June 30, 2016~~

INDEX TO EXHIBITS

~~Begins on sequential~~

~~page number of Form~~

Exhibit Number ~~10-Q _~~

EXHIBIT 31.1 31

Certification of CEO

pursuant to Section 302 of the

Sarbanes-Oxley Act

EXHIBIT 31.2 33

Certification of ~~Interim~~ CFO

pursuant to Section 302 of the

Sarbanes-Oxley Act

EXHIBIT 32 35

Certification of CEO and ~~Interim~~ CFO

pursuant to 18 U.S.C. 1350,

as adopted pursuant to Section

906 of the Sarbanes-Oxley Act

EXHIBIT 101

- 30 -

	Direct and Assumed Premium Written		Net Premium Written		Net Premium Earned
2016

Property & Casualty Insurance	$	98,374	$	66,040	$	65,714
Reinsurance		1,672		1,629		3,012

Totals	$	100,046	$	67,669	$	68,726

2015

Property & Casualty Insurance	$	89,163	$	58,583	$	60,031
Reinsurance		3,632		3,344		5,418

Totals	$	92,795	$	61,927	$	65,449

	FOR		AGAINST		WITHHOLD (ABSTAIN)
Advisory vote to approve executive compensation		1,735,756		162,041		25,067

To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016		1,919,038		3,826		-

Vote to approve amendments to the Articles of Incorporation
Subproposal 1 – Director removal		1,878,791		15,422		28,651

Subproposal 2 – Other changes		1,893,157		4,340		25,367