SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
---------
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
-------------------------------------------______________________________________________________
For Quarter Ended Commission file number
September 30, 1997March 31, 1998 0-5534
BALDWIN & LYONS, INC.
(Exact name of registrant as specified in its charter)
INDIANA 35-0160330
--------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1099 North Meridian Street, Indianapolis, Indiana 46204
- ------------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (317) 636-9800
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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 [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of November 7, 1997:May 9, 1998:
TITLE OF CLASS NUMBER OF SHARES OUTSTANDING
Common Stock, No Par Value:
Class A (voting) 2,397,354
Class B (nonvoting) 11,291,24511,346,520
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
- ----------------------------
BALDWIN & LYONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30March 31 December 31
1998 1997
1996
------------ ----------------------- -----------
ASSETS
Investments:
Fixed maturities $ 289,210263,777 $ 273,828276,109
Equity securities 143,963 147,196170,493 158,614
Short-term and other 19,441 22,223
--------- ---------
452,614 443,24717,941 17,902
----------- -----------
452,211 452,625
Cash and cash equivalents 16,870 12,11731,897 23,402
Accounts receivable 19,153 13,96724,666 21,454
Reinsurance recoverable 46,690 43,829
Current federal income taxes - 56846,429 47,276
Other assets 13,299 12,732
--------- ---------14,794 12,258
----------- -----------
$ 548,626569,997 $ 526,460
========= =========557,015
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Reserves for losses and loss expenses $ 193,945197,106 $ 196,939197,195
Reserves for unearned premiums 17,447 10,83523,930 18,806
Accounts payable and accrued expenses 33,658 34,83029,170 29,662
Deferred federal income taxes 15,083 10,734
Currently payable18,236 16,249
Current federal income taxes 1,675 -
--------- ---------
261,808 253,3382,042 1,140
----------- -----------
270,484 263,052
Shareholders' equity:
Common stock-no par value 731 730 744
Additional paid-in capital 41,340 42,10041,360 41,361
Unrealized net gains on investments 42,360 38,47247,951 45,614
Retained earnings 202,388 191,806
--------- ---------
286,818 273,122
--------- ---------209,471 206,258
299,513 293,963
----------- -----------
$ 548,626569,997 $ 526,460
========= =========557,015
=========== ===========
Number of common and common
equivalent shares outstanding 13,848,463 14,034,24813,844,736 13,844,743
Book value per outstanding share $20.71 $19.46
$21.63 $21.23
See notes to condensed consolidated financial statements.
BALDWIN & LYONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------------- -----------------------Three Months Ended
March 31
-------------------------------
1998 1997
1996 1997 1996
----------- ----------- ----------- -----------
REVENUES
Net premiums earned $ 16,63316,985 $ 13,971 $ 44,942 $ 45,40713,322
Net investment income 4,534 4,832 13,809 14,6954,623 4,611
Realized net gains on investments 4,493 1,775 13,824 5,4592,339 5,444
Commissions and other income 480 233 1,299 892
--------- --------- --------- ---------
26,140 20,811 73,874 66,453315 378
----------- -----------
24,262 23,755
EXPENSES
Losses and loss expenses incurred 10,670 7,418 29,019 27,40310,722 8,863
Other operating expenses 6,394 5,102 17,017 15,211
--------- --------- --------- ---------
17,064 12,520 46,036 42,6146,794 5,202
----------- -----------
17,516 14,065
----------- -----------
INCOME FROM CONTINUING OPERATIONS BEFORE FEDERAL INCOME TAXES 9,076 8,291 27,838 23,8396,746 9,690
Federal income taxes 2,849 2,682 8,799 7,715
--------- --------- --------- ---------
NET INCOME FROM CONTINUING OPERATIONS 6,227 5,609 19,039 16,124
Discontinued operations,
net of federal income taxes - (19) - 250
--------- --------- --------- ---------2,030 3,117
----------- -----------
NET INCOME $ 6,2274,716 $ 5,590 $ 19,039 $ 16,374
========= ========= ========= =========6,573
=========== ===========
PER SHARE DATA Average number of common and common
equivalent shares outstanding 13,923,281 14,264,064 13,996,403 14,398,430- BASIC AND DILUTED:
Income before discontinued
operations and realized net gains $ .24.23 $ .31 $ .72 $ .87.22
Realized net gains on investments .21 .08 .64.11 .25
Discontinued operations - - - .02
--------- --------- --------- -------------------- -----------
NET INCOME $ .45.34 $ .39 $ 1.36 $ 1.14
========= ========= ========= =========
Dividends.47
=========== ===========
DIVIDENDS $ .10 $ .10
$ .30 $ .26
========= ========= ========= =========
=========== ===========
RECONCILIATION OF SHARES OUTSTANDING:
Average shares outstanding - basic 13,695,735 13,866,971
Dilutive effect of options outstanding 178,129 189,336
----------- -----------
Average shares outstanding - diluted 13,873,864 14,056,307
=========== ===========
See notes to condensed consolidated financial statements.
BALDWIN & LYONS, INC. AND SUBSIDIARIESANDSUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
NINE MONTHS ENDED
SEPTEMBER 30Three Months Ended
March 31
-----------------------------
1998 1997
1996
---------- --------------------- -----------
Net cash provided by operating activities $ 3,5275,843 $ 4,3453,555
Investing activities:
Purchases of long-term investments (191,325) (156,642)(40,253) (61,770)
Proceeds from sales or maturities
of long-term investments 199,401 154,52444,807 75,603
Net sales (purchases) of
short-term investments 3,710 9,029
Distributions from limited partnerships 289 2,506(7) 2,011
Other investing activities (1,595) (1,542)
---------- ----------(319) (715)
----------- -----------
Net cash provided by investing activities 10,480 7,8754,228 15,129
Financing activities:
Dividends paid to shareholders (4,139) (3,704)(1,370) (1,386)
Cost of treasury stock (5,116) (7,658)(213) (2,246)
Proceeds from sales of common stock 7 1
-
---------- --------------------- -----------
Net cash used in financing activities (9,254) (11,362)
---------- ----------(1,576) (3,631)
----------- -----------
Increase in cash and cash equivalents 4,753 8588,495 15,053
Cash and cash equivalents
at beginning of yearperiod 23,402 12,117
18,014
---------- --------------------- -----------
Cash and cash equivalents at end of period $ 16,87031,897 $ 18,872
========== ==========
27,170
=========== ===========
See notes to condensed consolidated financial statements.
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10Q and do not include all
of the information and footnotes required by 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, 1997.1998. Interim financial statements should be read in
conjunction with the Company's annual audited financial statements.
(2) Certain prior year balances have been reclassified to conform to the
current period presentation.
(3) The effective federal income tax rate is less than the statutory rate for
theall periods ended September 30, 1997 and September 30, 1996presented due primarily to tax-exempt investment income.
(4) The following line items from the Statements of Income are presented net of
the reinsurance amounts shown below.
Quarter Ending
March 31
-----------------------------
1998 1997
1996
---------- --------------------- -----------
Quarter ended September 30:
Net premiums earned $ 2,5632,304 $ 2,7651,955
Losses and loss expenses 4,809 3,137130 (2,915)
Other operating expenses (236) (194)
Nine(243) (209)
(5) Total realized and unrealized income for the quarter ended March 31, 1998
was $7,097 and compares to a net realized and unrealized loss of $5,849 for the
quarter ended March 31, 1997.
(6) If the Company had adopted Financial Accounting Standards Board Statement
No. 123, Accounting for Stock-Based Compensation, net income for the 1998
quarter would have been approximately $254 lower ($.02 per share).
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
between 25% and 35% 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. For the three months ended September 30:March 31, 1998,
positive cash flow from operations totaled $5.8 million, an increase from $3.6
million generated during the first quarter of 1997. Increased cash flows from
premiums from the Company's new products were partially offset by increases in
losses and operating expenses paid. Recent cash flows have, at times, lagged
behind those of earlier periods because of declining premium volume in
retrospectively rated workers' compensation and large fleet trucking liability
businesses. Management expects direct premium revenues from trucking insurance
products to remain level during 1998. Management also expects overall
insurance revenues to increase due to continued growth in the Company's private
passenger automobile program.
For several years, 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 was approximately 3 years at March 31, 1998.
The Company's assets at March 31, 1998 included $33.9 million in investments
classified as short-term or cash equivalents which were readily convertible to
cash without significant market penalty. In addition, fixed maturity
investments totaling $71.2 million will mature within the twelve month period
following March 31, 1998. The Company believes that these liquid investments
are more than sufficient to provide for projected claim payments and operating
cost demands.
Consolidated shareholders' equity totaled $299.5 million at March 31, 1998 and
includes $281.0 million representing GAAP shareholder's equity of insurance
subsidiaries, of which $39.5 million may be transferred by dividend or loan to
the parent company without approval by, or notification to, regulatory
authorities. An additional $216.1 million of shareholder's equity of such
insurance subsidiaries may be advanced or loaned to the Company with prior
notification to, and approval from, regulatory authorities. The Company
believes that these restrictions pose no material liquidity concerns to the
Company. 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, if necessary. In addition, the parent company had cash and marketable
securities valued at $52.3 million at March 31, 1998.
RESULTS OF OPERATIONS
---------------------
COMPARISONS OF FIRST QUARTER, 1998 TO FIRST QUARTER, 1997
---------------------------------------------------------
Net premiums earned 6,432 9,639during the first quarter of 1998 increased $3.7 million as
compared to the same period of 1997. The increased premium volume is primarily
attributable to the continued growth of the Company's private passenger
automobile program. Premium earned from this program totaled $6.3 million for
the quarter, an increase of $3.0 million (93%) from the prior year. Premiums
earned for this program have increased each quarter since its inception in 1995.
The remaining increase is attributable to a $.3 million increase in voluntary
assumptions from property catastrophe pools and growth in the Company's small
fleet trucking and small business workers' compensation programs. Premiums from
the Company's fleet trucking products were level with the prior year.
Net investment income during the first quarter of 1998 was level with the first
quarter of 1997. Overall pre-tax and after tax yields were consistent with the
first quarter of 1997.
The first quarter 1998 net realized gain of $2.3 million consists of net gains
on equity securities and short-term investments of $2.0 million and $.3 million,
respectively.
Losses and loss expenses 7,162 5,138incurred during the first quarter of 1998 increased
$1.9 million from that experienced during the first quarter of 1997. The
increase is due primarily to
the continued growth from the Company's private passenger automobile business.
Loss and loss expense ratios for the comparative first quarters were as follows:
1998 1997
------- -------
Large and medium fleet trucking 46.9% 68.4%
Voluntary reinsurance assumed 67.3 45.5
Private passenger automobile 84.1 74.2
Small fleet trucking 70.6 57.5
All lines 63.1 66.5
The lower loss ratio for fleet trucking results from favorable current year
claims activity and savings recognized on the settlement of prior year claims.
Voluntary reinsurance assumed loss ratios were increased by higher than expected
losses from a single non-catastrophe treaty. Increased loss ratios for the
other lines were unusually high due to unfavorable weather conditions.
Other operating expenses (565) (805)
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
between 15% and 30% 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. For the nine months ended September 30,
1997, positive cash flow from operations totaled $3.5 million, a decrease from
$4.3 million generated during the first nine months of 1996. Increased cash
flows from premiums from the Company's new products were offset by increases in
losses and operating expenses paid. In addition, investment income received
declined as a result of a change in the mix of investments favoring municipal
bonds and the disposal of certain dividend paying equity securities. Recent
cash flows have, at times, lagged behind those of earlier periods because of
declining premium volume in retrospectively rated workers' compensation and
fleet trucking liability businesses. Management expects premium revenues from
these products to continue trending downward during 1997 as the result of
competitive pressures in the trucking insurance markets. Management believes
this decline in trucking insurance revenues will be mitigated somewhat by
continued growth in Company's personal automobile program.
For several years, 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 was approximately 3 years at September 30, 1997.
The Company's assets at September 30, 1997 included $20.9 million in investments
classified as short-term which were readily convertible to cash without
significant market penalty. In addition, fixed maturity investments totaling
$80.6 million will mature within the twelve month period following September 30,
1997. The Company believes that these liquid investments are more than
sufficient to provide for projected claim payments and operating cost demands.
Consolidated shareholders' equity totaled $286.8 million at September 30, 1997
and includes $267.8 million representing GAAP shareholder's equity of insurance
subsidiaries, of which $39.0 million may be transferred by dividend or loan to
the parent company without approval by, or notification to, regulatory
authorities. An additional $206.4 million of shareholder's equity of such
insurance subsidiaries may be advanced or loaned to the Company with prior
notification to, and approval from, regulatory authorities. The Company
believes that these restrictions pose no material liquidity concerns to the
Company. 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, if necessary. In addition, the parent company had cash and marketable
securities valued at $49.7 million at September 30, 1997.
RESULTS OF OPERATIONS
---------------------
COMPARISONS OF THIRD QUARTER, 1997 TO THIRD QUARTER, 1996
---------------------------------------------------------
Net premiums earned increased $2.7 million during the third quarter of 1997 as
compared to the same period of 1996. The increased premium volume is primarily
attributable to the continued growth of the Company's private passenger
automobile program. Premium earned from this program totaled $4.7 million for
the quarter, an increase of $2.2 million (84.2%) from the prior year. Premiums
earned for this program have increased each quarter since its inception in 1995.
The remaining increase is attributable to current quarter loss activity which
resulted in additional premium being recorded on expired retrospectively rated
workers' compensation policies.
Net investment income decreased $.3 million (6.2%) due to lower pre-tax
investment yields resulting from increases in the Company's municipal bond and
equity security portfolios as compared to the third quarter of 1996. Overall
pre-tax annualized yields decreased from 5.2% during the third quarter of 1996
to 4.9% for the current quarter while after tax yields decreased from 3.7%
during the third quarter of 1996 to 3.5% for the third quarter of 1997.
The third quarter 1997 net realized gain of $4.5 million consists of net gains
on equity securities of $4.9 and net losses of $.4 million on other securities.
The after tax annualized yield on invested assets, considering realized and
unrealized gains for the current quarter, was 13.3%.
Losses and loss expenses incurred during the third quarter of 1997 increased
$3.3 million from that experienced during the third quarter of 1996. The
increase is due primarily to increases in volume from the Company's private
passenger automobile program and favorable loss experience in the Company's
fleet trucking programs during the 1996 third quarter. In addition, losses
incurred from reinsurance assumed increased $.6 million during the current
quarter resulting from unfavorable development on cancelled treaties. Loss and
loss expense ratios for the comparative third quarters were as follows:
1997 1996
-------- --------
Fleet trucking 67.2% 50.8%
Voluntary reinsurance assumed 57.1 33.8
Small fleet trucking 69.6 42.7
Private passenger automobile 66.5 75.7
Residual market, assigned risk
and all other * *
All lines 64.2 53.1
* Premium and loss amounts for this category are insignificant.
Other operating expenses for the third quarter of 1997 increased $1.3 million
from the third quarter of 1996. The consolidated expense ratio of the Company's
insurance subsidiaries was 34.5% for the third quarter of 1997 compared to 30.6%
for the third quarter of 1996. The increase in the consolidated expense ratio
reflects a decline in trucking premium relative to fixed costs and insufficient
volume to minimize ratios in the Company's new product lines. Average
commission rates on reinsurance assumed from catastrophe and property pools also
increased during the 1997 period. The ratio of consolidated other operating
expenses to total revenue (excluding realized gains) increased to 29.5% during
the third quarter of 1997 compared to 26.8% for the 1996 third quarter.
The effective federal tax rate for consolidated operations for the third quarter
of 1997 was 31.4% and is less than the statutory rate primarily because of tax
exempt investment income.
As a result of the factors mentioned above, principally the increase in realized
capital gains after tax of $1.8 million, income from consolidated operations
increased $.6 million (11.0%) during 1997 compared with the 1996 third quarter.
COMPARISONS OF NINE MONTHS ENDED SEPTEMBER 30, 1997 TO
------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, 1996
------------------------------------
Net premiums earned decreased $.5 million (1.0%) during the first nine months of
1997 as compared to the same period of 1996. Intense competition in the
trucking insurance markets has resulted in a decline of $5.0 million in the
Company's fleet trucking products from the same period last year. In addition
to premium declines relating to the non-renewal of business and premium
reductions on business retained, the Company has increased its use of
facultative reinsurance to cede larger portions of its trucking liability risk
because of favorable facultative reinsurance pricing. Offsetting these
decreases was a $5.7 million (89.9%) increase in premiums earned from the
Company's private passenger automobile product. Increased volume in this
product has resulted from continued penetration of the Indiana market as well as
expansion into additional states.
Net investment income decreased by $.9 million (6.0%) during the first nine
months of 1997 compared to the same period in 1996 for the same reasons
mentioned above for the quarterly comparison. Overall pretax yields decreased
to 5.0% from 5.3% a year earlier while after tax yields decreased from 3.7%
during the first nine months of 1996 to 3.5% for the first nine months of 1997.
The net realized gain on investments of $13.8 million for the first nine months
of 1997 consists of net gains of $14.6 million on equity securities and net
losses of $.8 million on other investments. The after tax annualized yield on
invested assets, considering realized and unrealized gains for the current year-
to-date, was 7.9%.
Losses and loss expenses incurred during the first nine months of 1997 were $1.6
million higher than the same period of 1996. The increase is due primarily to
increases in losses and loss expenses from the Company's growing private
passenger automobile program and higher losses incurred from reinsurance assumed
resulting from unfavorable development on cancelled treaties. These increases
were largely offset by decreases in losses from the Company's fleet trucking
products in line with the decreased premium volume for the 1997 period.
Loss and loss expense ratios for the comparative nine month periods were as
follows:
1997 1996
-------- --------
Fleet trucking 62.6% 62.5%
Voluntary reinsurance assumed 60.9 39.0
Small fleet trucking 54.3 68.1
Private passenger automobile 71.9 74.7
Residual market, assigned risk
and all other 57.7 50.4
All lines 64.6 60.3
Other operating expenses increased $1.8 million (11.9%) during the first nine
months of 1997 compared to the same period of 1996. The consolidated expense
ratio of the Company's insurance subsidiaries was 32.8% for 1997 compared to
26.8% for 1996 for the same reasons provided above for the quarterly comparison.
The ratio of other operating expenses to total revenue (excluding realized
gains) was 28.3% for 1997 compared to 24.9% for 1996.
The effective federal tax rate for consolidated operations for the first nine
months of 1997 was 31.6% and is less than the statutory rate primarily because
of tax exempt investment income.
As a result of the factors mentioned above, principally the increase in realized
capital gains after tax of $5.4 million, income from consolidated operations for
the first nine months of 1997 was $19.0 million, up $2.9 million from the
comparable 1996 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 risks and
uncertainties including 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.
EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS
---------------------------------------
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. No material impact is expected on primary
earnings per share for the quarter and nine months ended September 30, 1997 and
September 30, 1996 as a result of the adoption of Statement 128. The impact of
Statement 128 on the calculation of fully diluted earnings per share for these
periods is also not expected to be material.
In June 1997, the Financial Accounting Standards Board issued Statements No.
130, REPORTING COMPREHENSIVE INCOME, and No. 131, DISCLOSURES ABOUT SEGMENTS OF
AN ENTERPRISE AND RELATED INFORMATION, which require adoption in 1998. The
Company has not completed its analysis of these new standards and, as such, has
not determined the full impact of their adoption.
PART II - OTHER INFORMATION
---------------------------
ITEM 6 (a) EXHIBITS
- --------------------
Number and caption from Exhibit
Table of Regulation S-K Item 601 Exhibit No.
- ------------------------------------ ----------------------------
(11) Statement regarding computation EXHIBIT 11 --
of per share earnings Computation of Per Share
Earnings
Item 6 (b) REPORTS ON FORM 8-K
- -------------------------------
No reports on Form 8-K have been filed by the registrant during the three months
ended September 30, 1997.
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 November 10, 1997 By /s/ Gary W. Miller
-------------------- ------------------------------
Gary W. Miller, President and
Chief Operating Officer
Date November 10, 1997 By /s/ G. Patrick Corydon
-------------------- ------------------------------
G. Patrick Corydon,
Vice President - Finance
(Principal Financial and
Accounting Officer)
BALDWIN & LYONS, INC.
Form 10-Q for the fiscal quarter
ended September 30, 1997
INDEX TO EXHIBITS
Exhibit Number Method of Filing
---------------------------------for the first quarter of 1998 increased $1.6 million
from the first quarter of 1997. The consolidated expense ratio of the Company's
insurance subsidiaries was 34.1% for the first quarter of 1998 compared to 31.5%
for the first quarter of 1997. The increase in the consolidated expense ratio
reflects the effect of promotional and system development costs associated with
the Company's new product lines which, for GAAP purposes, can not be deferred
and amortized over the life of policies written. The ratio of consolidated
other operating expenses to total revenue (adjusted for realized gains)
increased to 31.0% during the first quarter of 1998 compared to 28.4% for the
1997 first quarter.
The effective federal tax rate for consolidated operations for the first quarter
of 1998 was 30.1% and is less than the statutory rate primarily because of tax
exempt investment income.
As a result of the factors mentioned above, net income decreased $1.9 million
(28%) during 1998 compared with the 1997 first quarter.
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 risks and
uncertainties including 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.
PART II - OTHER INFORMATION
ITEM 6 (a) EXHIBITS
- --------------------
Number and caption from Exhibit
Table of Regulation S-K Item 601 Exhibit No.
- ------------------------------------ -------------------------
(11) Statement regarding computation EXHIBIT 11 --
of per share earnings Computation of Per Share
Earnings
Item 6 (b) REPORTS ON FORM 8-K
- -------------------------------
No reports on Form 8-K have been filed by the registrant during the three months
ended March 31, 1998.
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 May 12, 1998 By /s/ Gary W. Miller
------------------ --------------------------------
Gary W. Miller, Chairman and CEO
Date May 12, 1998 By /s/ G. Patrick Corydon
------------------ --------------------------------
G. Patrick Corydon,
Vice President - Finance
(Principal Financial and
Accounting Officer)
BALDWIN & LYONS, INC.
Form 10-Q for the fiscal quarter
ended March 31, 1998
INDEX TO EXHIBITS
Begins on sequential
page number of Form
Exhibit Number 10-Q
----------------- ---------------------
EXHIBIT 11 Filed herewith electronically
Computation of per share earnings File herewith electronically
EXHIBIT 27
Financial Data Schedule Filed herewith electronically
BALDWIN & LYONS, INC.
FORM 10-Q, EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- --------------------------Three Months Ended
March 31
------------------------------
1998 1997 1996 1997 1996
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PRIMARY:BASIC:
Average number of shares
outstanding 13,732,625 14,098,344 13,806,541 14,233,36413,695,735 13,866,971
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Net Income $ 4,716,081 $ 6,572,869
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Per share amount $ .34 $ .47
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DILUTED:
Average number of shares
outstanding 13,695,735 13,866,971
Dilutive stock options--based on
treasury stock method using
average market price 190,656 165,720 189,862 165,066
----------- ----------- ----------- -----------178,129 189,336
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Totals 13,923,281 14,264,064 13,996,403 14,398,430
=========== =========== =========== ===========13,873,864 14,056,307
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Net Income $ 6,227,8964,716,081 $ 5,590,777 $19,039,444 $16,374,455
=========== =========== =========== ===========6,572,869
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Per share amount $ .45.34 $ .39 $ 1.36 $ 1.14
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FULLY DILUTED:
Average number of shares
outstanding 13,732,625 14,098,344 13,806,541 14,233,364
Dilutive stock options--based on
treasury stock method using
average market price 190,843 165,720 190,305 165,414
----------- ----------- ----------- -----------
Totals 13,923,468 14,264,064 13,996,846 14,398,778
=========== =========== =========== ===========
Net Income $ 6,227,896 $ 5,590,777 $19,039,444 $16,374,455
=========== =========== =========== ===========
Per share amount $ .45 $ .39 $ 1.36 $ 1.14
=========== =========== =========== ===========.47
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