-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JcksW+k6JmdGSFie8q5eGQwI/bsK+PHXzLBbdNJkRP4+W8EgcTFu3ukcy9I/QkIH Jf72CxLPIsyFmAatozKDmA== 0000009346-98-000006.txt : 19980513 0000009346-98-000006.hdr.sgml : 19980513 ACCESSION NUMBER: 0000009346-98-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980512 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BALDWIN & LYONS INC CENTRAL INDEX KEY: 0000009346 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 350160330 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-05534 FILM NUMBER: 98616420 BUSINESS ADDRESS: STREET 1: 1099 N MERIDIAN ST STREET 2: STE 700 CITY: INDIANAPOLIS STATE: IN ZIP: 46204 BUSINESS PHONE: 3176369800 MAIL ADDRESS: STREET 1: 1099 NORTH MERIDIAN ST STREET 2: STE 700 CITY: INDIANAPOLIS STATE: IN ZIP: 46204 FORMER COMPANY: FORMER CONFORMED NAME: BALDWIN H C AGENCY INC DATE OF NAME CHANGE: 19720309 10-Q 1 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 March 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 -------------- 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 May 9, 1998: TITLE OF CLASS NUMBER OF SHARES OUTSTANDING Common Stock, No Par Value: Class A (voting) 2,397,354 Class B (nonvoting) 11,346,520 PART I - FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS BALDWIN & LYONS, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE DATA)
March 31 December 31 1998 1997 ----------- ----------- ASSETS Investments: Fixed maturities $ 263,777 $ 276,109 Equity securities 170,493 158,614 Short-term and other 17,941 17,902 ----------- ----------- 452,211 452,625 Cash and cash equivalents 31,897 23,402 Accounts receivable 24,666 21,454 Reinsurance recoverable 46,429 47,276 Other assets 14,794 12,258 ----------- ----------- $ 569,997 $ 557,015 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Reserves for losses and loss expenses $ 197,106 $ 197,195 Reserves for unearned premiums 23,930 18,806 Accounts payable and accrued expenses 29,170 29,662 Deferred federal income taxes 18,236 16,249 Current federal income taxes 2,042 1,140 ----------- ----------- 270,484 263,052 Shareholders' equity: Common stock-no par value 731 730 Additional paid-in capital 41,360 41,361 Unrealized net gains on investments 47,951 45,614 Retained earnings 209,471 206,258 299,513 293,963 ----------- ----------- $ 569,997 $ 557,015 =========== =========== Number of common and common equivalent shares outstanding 13,844,736 13,844,743 Book value per outstanding share $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 March 31 ------------------------------- 1998 1997 ----------- ----------- REVENUES Net premiums earned $ 16,985 $ 13,322 Net investment income 4,623 4,611 Realized net gains on investments 2,339 5,444 Commissions and other income 315 378 ----------- ----------- 24,262 23,755 EXPENSES Losses and loss expenses incurred 10,722 8,863 Other operating expenses 6,794 5,202 ----------- ----------- 17,516 14,065 ----------- ----------- INCOME BEFORE FEDERAL INCOME TAXES 6,746 9,690 Federal income taxes 2,030 3,117 ----------- ----------- NET INCOME $ 4,716 $ 6,573 =========== =========== PER SHARE DATA - BASIC AND DILUTED: Income before realized net gains $ .23 $ .22 Realized net gains on investments .11 .25 ----------- ----------- NET INCOME $ .34 $ .47 =========== =========== DIVIDENDS $ .10 $ .10 =========== =========== 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. ANDSUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
Three Months Ended March 31 ----------------------------- 1998 1997 ----------- ----------- Net cash provided by operating activities $ 5,843 $ 3,555 Investing activities: Purchases of long-term investments (40,253) (61,770) Proceeds from sales or maturities of long-term investments 44,807 75,603 Net sales (purchases) of short-term investments (7) 2,011 Other investing activities (319) (715) ----------- ----------- Net cash provided by investing activities 4,228 15,129 Financing activities: Dividends paid to shareholders (1,370) (1,386) Cost of treasury stock (213) (2,246) Proceeds from sales of common stock 7 1 ----------- ----------- Net cash used in financing activities (1,576) (3,631) ----------- ----------- Increase in cash and cash equivalents 8,495 15,053 Cash and cash equivalents at beginning of period 23,402 12,117 ----------- ----------- Cash and cash equivalents at end of period $ 31,897 $ 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, 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 all periods presented 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 ----------- ----------- Net premiums earned $ 2,304 $ 1,955 Losses and loss expenses 130 (2,915) Other operating expenses (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 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 during 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 incurred 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 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 EXHIBIT 27 Financial Data Schedule Filed herewith electronically BALDWIN & LYONS, INC. FORM 10-Q, EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE
Three Months Ended March 31 ------------------------------ 1998 1997 ------------ ------------ BASIC: Average number of shares outstanding 13,695,735 13,866,971 ============ ============ Net Income $ 4,716,081 $ 6,572,869 ============ ============ Per share amount $ .34 $ .47 ============ ============ DILUTED: Average number of shares outstanding 13,695,735 13,866,971 Dilutive stock options--based on treasury stock method using average market price 178,129 189,336 ------------ ------------ Totals 13,873,864 14,056,307 ============ ============ Net Income $ 4,716,081 $ 6,572,869 ============ ============ Per share amount $ .34 $ .47 ============ ============
EX-27 2
7 This schedule contains summary financial information extracted from the consolidated balance sheets and consolidated statements of operations enclosed herein electronically in Form 10Q for the year-to-date, and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 263,777 0 0 170,493 0 0 452,211 31,897 6,993 3,486 569,997 197,106 23,930 2 4,505 0 0 0 731 0 569,997 16,985 4,623 2,339 315 10,722 2,017 2,545 6,746 2,030 4,716 0 0 0 4,716 .34 .34 151,663 13,476 (2,754) 2,992 7,560 151,493 0 All loss data is presented net of applicable reinsurance recoverable. Includes money market cash equivalents of $31,734.
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