-----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, PwtZ8EntABsSliYO0xuTytMILJ1Y33SouynFeQuwVCjCQLmSvYr31JTEN5vFpOTg uKuhQI3Hi5OXKhsb3C5aJQ== 0000009346-02-000015.txt : 20021112 0000009346-02-000015.hdr.sgml : 20021111 20021112094618 ACCESSION NUMBER: 0000009346-02-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BALDWIN & LYONS INC CENTRAL INDEX KEY: 0000009346 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 350160330 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-05534 FILM NUMBER: 02815510 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 r10q093002.txt FORM 10Q 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 September 30, 2002 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 November 8, 2002: TITLE OF CLASS NUMBER OF SHARES OUTSTANDING Common Stock, No Par Value: Class A (voting) 2,133,362 Class B (nonvoting) 9,506,289 Index to Exhibits located on page 17. 1 2 PART I - FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS BALDWIN & LYONS, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30 December 31 2002 2001 ------------ ----------- ASSETS Investments: Fixed maturities $ 266,119 $ 246,632 Equity securities 101,988 136,399 Short-term and other 11,206 27,584 ---------- ---------- 379,313 410,615 Cash and cash equivalents 42,195 31,840 Accounts receivable 32,409 25,151 Reinsurance recoverable 121,397 111,585 Notes receivable from employees 7,473 2,257 Current federal income taxes - 2,590 Other assets 17,080 17,071 ---------- ---------- $ 599,867 $ 601,109 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Reserves for losses and loss expenses $ 249,676 $ 247,143 Reserves for unearned premiums 29,398 23,914 Accounts payable and accrued expenses 33,697 31,783 Note payable to bank 10,000 - Deferred federal income taxes 1,743 9,909 Current federal income taxes 399 - ---------- ---------- 324,913 312,749 Shareholders' equity: Common stock-no par value 621 644 Additional paid-in capital 35,214 36,272 Unrealized net gains on investments 18,049 32,377 Retained earnings 221,070 219,067 ---------- ---------- 274,954 288,360 ---------- ---------- $ 599,867 $ 601,109 ========== ========== Number of common and common equivalent shares outstanding 11,716 12,153 Book value per outstanding share $23.47 $23.73
See notes to condensed consolidated financial statements. 2 3 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 --------------------------- --------------------------- 2002 2001 2002 2001 ------------ ------------ ------------ ------------ REVENUES Net premiums earned $ 27,040 $ 20,657 $ 74,569 $ 61,225 Net investment income 3,524 4,144 11,200 13,123 Realized net gains (losses) on investments (4,972) 2,728 (4,872) 7,709 Commissions and other income 1,288 1,076 3,801 3,062 ---------- ---------- ---------- ---------- 26,880 28,605 84,698 85,119 EXPENSES Losses and loss expenses incurred 17,388 35,435 48,289 65,976 Other operating expenses 5,461 4,825 16,909 16,849 ---------- ---------- ---------- ---------- 22,849 40,260 65,198 82,825 ---------- ---------- ---------- ---------- INCOME (LOSS) BEFORE FEDERAL INCOME TAXES 4,031 (11,655) 19,500 2,294 Federal income taxes (credits) 1,200 (4,482) 6,288 (353) ---------- ---------- ---------- ---------- NET INCOME (LOSS) $ 2,831 ($ 7,173) $ 13,212 $ 2,647 ========== ========== ========== ========== DILUTED PER SHARE DATA: Income (loss) before realized net gains $ .52($ ..73)$ 1.39($ ..19) Realized net gains (losses) on investments (.28) ..14 (.27) ..41 ---------- ---------- ---------- ---------- NET INCOME (LOSS) $ .24($ ..59)$ 1.12$ .22 ========== ========== ========== ========== Dividends $ .10$ ..10$ .30$ ..30 ========== ========== ========== ========== RECONCILIATION OF SHARES OUTSTANDING: Average shares outstanding - basic 11,642 12,088 11,704 12,136 Dilutive effect of options outstanding 82 82 82 83 ---------- ---------- ---------- ---------- Average shares outstanding - diluted 11,724 12,170 11,786 12,219 ========== ========== ========== ==========
See notes to condensed consolidated financial statements. 3 4 BALDWIN & LYONS, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
Nine Months Ended September 30 2002 2001 ------------ ------------ Net cash provided by operating activities $ 16,837 $ 10,574 Investing activities: Purchases of long-term investments (123,809) (123,592) Proceeds from sales or maturities of long-term investments 108,011 123,262 Net sales of short-term investments 17,994 3,810 Increase in notes receivable from employees (4,976) - Other investing activities (1,254) 7,417 ---------- ---------- Net cash provided by (used in) investing activities (4,034) 10,898 Financing activities: Dividends paid to shareholders (3,472) (3,642) Cost of treasury stock purchased (8,978) (2,008) Drawing on line of credit 10,000 - Repayment on line of credit - (5,411) Proceeds from sales of common stock 2 3 ---------- ---------- Net cash used in financing activities (2,448) (11,058) ---------- ---------- Increase in cash and cash equivalents 10,355 10,413 Cash and cash equivalents at beginning of period 31,840 32,814 ---------- ---------- Cash and cash equivalents at end of period $ 42,195 $ 43,227 ========== ==========
See notes to condensed consolidated financial statements. NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION: 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, 2002. Interim financial statements should be read in conjunction with the Company's annual audited financial statements. 4 5 NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (2) FORWARD-LOOKING STATEMENTS: Forward-looking statements in this report 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 inherent risks and uncertainties. Readers are encouraged to review the Company's annual report for its full statement regarding forward- looking information. (3) REINSURANCE: The following table summarizes the Company's transactions with reinsurers for the 2002 and 2001 comparative periods.
2002 2001 ------------ ------------ Quarter ended September 30: Premiums ceded to reinsurers $ 16,853 $ 9,932 Losses and loss expenses ceded to reinsurers 8,557 8,538 Commissions from reinsurers 4,551 3,475 Nine months ended September 30: Premiums ceded to reinsurers 44,318 26,463 Losses and loss expenses ceded to reinsurers 27,890 39,967 Commissions from reinsurers 12,342 9,414
(4) COMPREHENSIVE INCOME OR LOSS: The Company refers to comprehensive income or loss as realized and unrealized income or loss which is composed of net income or loss and changes in unrealized gains or losses on investments for the periods presented. The total realized and unrealized loss for the quarter ended September 30, 2002 was $2,638 and compares to a total realized and unrealized loss of $17,717 for the quarter ended September 30, 2001. For the nine months ended September 30, 2002, the total realized and unrealized loss was $1,059 and compares to a total realized and unrealized income of $12,281 for the nine months ended September 30, 2001. The operating results for the 2001 periods were heavily impacted by the World Trade Center disaster. 5 6 NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (5) REPORTABLE SEGMENTS - PROFIT AND LOSS: The following table provides certain profit and loss information for each reportable segment. All amounts presented are computed based upon generally accepted accounting principles. In addition, underwriting gain or loss for the fleet trucking segment is computed after elimination of inter-company commissions and, accordingly, consolidated underwriting gain or loss presented here will not agree with statutory underwriting gains or losses which may be quoted elsewhere in the Company's financial statements.
PRIVATE VOLUNTARY FLEET PASSENGER SMALL REINSURANCE TRUCKING AUTOMOBILE FLEET ASSUMED ALL OTHER TOTALS ------------ ------------ ------------ ------------ ------------ ------------ QUARTER ENDED SEPTEMBER 30: 2002: Direct and assumed premium written $ 28,899 $ 7,434 $ 2,884 $ 2,504 $ 1,943 $ 43,664 Net premium earned and fee income 14,055 8,570 2,076 2,327 1,104 28,132 Underwriting gain (loss) (a) 6,495 623 405 329 (335) 7,517 2001: Direct and assumed premium written 17,674 6,259 2,991 1,311 1,190 29,425 Net premium earned and fee income 8,980 8,408 2,533 959 791 21,671 Underwriting gain (loss) (a) 3,150 527 (188) (20,210) (81) (16,802) NINE MONTHS ENDED SEPTEMBER 30: 2002: Direct and assumed premium written $ 77,545 $ 27,036 $ 8,629 $ 6,450 $ 4,713 $ 124,373 Net premium earned and fee income 37,958 24,979 6,466 5,684 2,826 77,913 Underwriting gain (loss) (a) 15,943 1,933 1,112 969 (305) 19,652 2001: Direct and assumed premium written 47,777 24,629 9,816 4,704 3,405 90,331 Net premium earned and fee income 24,414 26,141 6,961 4,377 2,214 64,107 Underwriting gain (loss) (a) 7,886 (29) (326) (19,640) (345) (12,454) (a) Segment profit or loss includes the direct marketing agency operations conducted by Baldwin & Lyons, Inc. after intercompany eliminations.
6 7 NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (6) REPORTABLE SEGMENTS - RECONCILIATION TO CONSOLIDATED REVENUE AND CONSOLIDATED PROFIT OR LOSS: The following tables are reconciliations of reportable segment revenues and profit or loss to the Company's consolidated revenue and income from continuing operations before federal income taxes, respectively.
Three Months Ended Nine Months Ended September 30 September 30 --------------------------- --------------------------- 2002 2001 2002 2001 ------------ ------------ ------------ ------------ REVENUE: Net premium earned and fee income $ 28,132 $ 21,671 $ 77,913 $ 64,107 Net investment income 3,524 4,144 11,200 13,123 Realized net gains (losses) on investments (4,972) 2,728 (4,872) 7,709 Other income 196 62 457 180 ---------- ---------- ---------- ---------- Total consolidated revenue $ 26,880 $ 28,605 $ 84,698 $ 85,119 ========== ========== ========== ========== PROFIT: Underwriting gain $ 7,517 $ (16,802) $ 19,652 $ (12,454) Net investment income 3,524 4,144 11,200 13,123 Realized net gains (losses) on investments (4,972) 2,728 (4,872) 7,709 Corporate expenses (2,038) (1,725) (6,480) (6,084) ---------- ---------- ---------- ---------- Income (loss) before federal income taxes $ 4,031 $ (11,655) $ 19,500 $ 2,294 ========== ========== ========== ==========
(7) LOANS TO EMPLOYEES: The Company has provided loans to certain key employees for the sole purpose of purchasing the Company's Class B common stock in the open market. $7,473 of such full-recourse loans were issued and outstanding at September 30, 2002 and carry interest rates of between 4.75% and 6%, payable annually on the loan anniversary date. The underlying securities serve as collateral for these loans, which must be repaid no later than 10 years from the date of issue. No additional loans will be made under this program. 7 8 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. The Company's cash flows relating to premiums are 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 overall premium ceded rates, net of ceding commission allowances, have increased slightly over the past two years as premium volume in the Company's large fleet trucking division have increased relative to other products. The average ceding rate on large fleet trucking liability business had decreased since 2000 as Protective has retained more risk but still is substantially higher than the ceding rate on other products. For the nine months ended September 30, 2002, the Company experienced positive cash flow from operations totaling $16.8 million and compares to positive cash flow of $11.5 million for the nine months ended September 30, 2001. The increase in cash flows compared to the 2001 period is due primarily to an increase in net premium receipts due to rate increases and new business. Cash flow for the third quarter was impacted by large annual deposits paid in connection with the renewal of the Company's fleet trucking reinsurance program and by the settlement of large claims which were heavily covered by reinsurance. Approximately $9 million of reinsurance recoveries were made on third quarter claim payments in October, 2002. 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 2.5 years at September 30, 2002. The Company's assets at September 30, 2002 included $42.2 million in investments classified as short-term or cash equivalents which were readily convertible to cash without significant market penalty. An additional $62.6 million of fixed maturity investments will mature within the twelve month period following September 30, 2002. The Company believes that these liquid investments are more than sufficient to provide for projected claim payments and operating cost demands. Consolidated shareholders' equity is composed essentially of GAAP shareholder's equity of the insurance subsidiaries. As such, there are statutory restrictions on the transfer of portions of this equity to the parent holding company. At September 30, 2002, $39.2 million may be transferred by dividend or loan to the parent company without approval by, or notification to, regulatory authorities. An additional $180.3 million of shareholder's equity of the insurance subsidiaries may be advanced or loaned to the parent holding 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 8 9 sources of credit. The Company has borrowed $10 million under bank lines of credit in connection with recent purchases of treasury stock. Interest expense related to these borrowings is included in corporate expenses and is not material. In addition, the parent company had cash and marketable securities valued at $31.5 million at September 30, 2002. RESULTS OF OPERATIONS --------------------- COMPARISONS OF THIRD QUARTER, 2002 TO THIRD QUARTER, 2001 --------------------------------------------------------- Net premiums earned during the third quarter of 2002 increased $6.4 million (31%) as compared to the same period of 2001. The increase is due primarily to a 59% increase in premiums from the Company's large fleet trucking program as a tightening market has allowed for rate increases as well as the addition of new accounts since the first nine months of 2001. In addition, premiums from the Company's voluntary reinsurance assumed program increased 143% as improved pricing in the catastrophe reinsurance market has resulted in the Company entering several new treaties in 2002. Also, premiums from the Company's small business workers' compensation and private passenger automobile programs increased 19% and 2%, respectively, due to rate increases and continued geographic expansion. Net premiums from the Company's small fleet trucking program decreased 18% reflecting the intense competition in this market segment. The decline in premium from this division reflects the Company's philosophy that allows business to be lost rather than lowering prices to meet unrealistic competition. Net investment income during the third quarter of 2002 was 15% lower than the third quarter of 2001 due primarily to the continued decline in investment yields. The short-term nature of the Company's fixed income investment portfolio has been negatively impacted by the numerous interest rate reductions by the Federal Reserve Board since January 1, 2001. Pre-tax yields dropped nearly a full percentage point from the prior year quarter. After tax yields posted a similar decline. The third quarter 2002 net realized loss of $5.0 million consisted of net losses on equity securities and fixed maturity investments of $4.1 million and $1.0 million, respectively. Those losses were offset partially by net gains of $.1 from other investment categories. Losses and loss expenses incurred during the third quarter of 2002 decreased $18.0 million from that experienced during the third quarter of 2001. The 2001 quarter included $20.0 million in losses sustained from the Company's participation in certain catastrophe reinsurance treaties affected by the attacks on the World Trade Center. Adjusted for the World Trade Center loss, the higher current period losses are reflective of the increased premium volume in the Company's large fleet trucking business. Loss ratios for each of the Company's major product lines were as follows: 2002 2001 ---------- ---------- Large and medium fleet trucking 64.4% 78.8% Private passenger automobile 63.8 66.4 Voluntary reinsurance assumed 70.8 2,184.4 Small fleet trucking 44.3 78.8 All lines 64.3 171.5 All lines without WTC 64.3 74.7 9 10 The decrease in loss ratios, with the exception of voluntary reinsurance assumed, is due primarily to increased premium adequacy reflective of recent across-the-board rate increases. Other operating expenses for the third quarter of 2002 increased 13% from the third quarter of 2001, and, after consideration of ceding allowances, is consistent with the 31% increase in premiums earned from the 2001 quarter. The Company cedes a large portion of its direct premiums to reinsurers and these reinsurance premiums carry significant expense offsets. Total ceding allowances totaled $4.6 million for the 2002 quarter compared to $3.5 million for the 2001 quarter. The ratio of consolidated other operating expenses to operating revenue was 17.1% during the third quarter of 2002 compared to 18.7% for the 2001 third quarter. The effective federal tax rate for consolidated operations for the third quarter of 2002 was 29.8% and differs from the statutory rate primarily because of tax exempt investment income. As a result of the factors mentioned above, net income increased $10.0 million during the second quarter of 2002 as compared with the 2001 second quarter. After adjusting net income for the third quarter of 2001 for the World Trade Center disaster, and removing realized capital transactions, net income increased approximately $2.8 million in the 2002 quarter. COMPARISONS OF NINE MONTHS ENDED SEPTEMBER 30, 2002 TO ------------------------------------------------------ NINE MONTHS ENDED SEPTEMBER 30, 2001 ------------------------------------ Net premiums earned increased $13.3 million (22%) during the first nine months of 2002 as compared to the same period of 2001. The increased premium volume is primarily attributable to a 57% increase in the Company's fleet trucking product for the same reasons mentioned in the quarterly comparison. Premiums from the voluntary reinsurance assumed and small business workers' compensation programs also increased 30% and 24%, respectively. These increases were partially offset by decreases in small fleet and private passenger automobile premiums of 7% and 5%, respectively, resulting from substantial rate increases implemented by these divisions in 2001 and 2002. Net investment income during the first nine months of 2002 was 15% lower than the 2001 period for the same reasons as indicated in the quarterly comparison. Overall pre-tax and after tax yields were lower during the current period consistent with the change in net investment income. The net realized loss on investments of $4.9 million for the first nine months of 2002 consists of net losses on equity securities and fixed maturity investments of $4.2 million and $.7 million, respectively. Losses and loss expenses incurred during the first nine months of 2002 decreased $17.7 million from the 2001 period. The 2001 period included $20.0 million in losses sustained from the Company's participation in certain catastrophe reinsurance treaties affected by the attacks on the World Trade Center. Adjusted for the World Trade Center loss, the higher current period losses are reflective of the increased premium volume in the Company's large fleet trucking business. 10 11 Loss and loss expense ratios for the comparative nine-month periods were as follows: 2002 2001 ---------- ---------- Fleet trucking 67.6% 78.5% Private passenger automobile 64.1 71.3 Voluntary reinsurance assumed 64.7 533.7 Small fleet trucking 50.0 75.7 All lines 64.8 107.8 All lines without WTC 64.8 75.1 Other operating expenses increased only $.1 million (.4%) during the first nine months of 2002 compared to the same period of 2001 because the majority of the Company's operating expenses do not vary proportionately with premium volume. Total expenses, before consideration of ceding commission allowances, increased 11% while direct premium written and assumed was up 38%. Ceding commission allowances included in net expenses were $12.3 million for the 2002 period compared to $9.4 million in the prior year period. The ratio of other operating expenses to operating revenue was 18.9% for 2002 compared to 21.8% for 2001. The effective federal tax rate for consolidated operations for the first nine months of 2002 was a 32.2% and differs from the statutory rate due to tax exempt investment income. As a result of the factors mentioned above net income increased $10.6 million during the nine months ended September 30, 2002 as compared with 2001 period. After adjusting net income for the 2001 period for the World Trade Center disaster, and removing realized capital transactions, net income increased approximately $5.7 million in the 2002 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. 11 12 ITEM 4. CONTROLS AND PROCEDURES - ------------------------------- Baldwin & Lyons, Inc. management, including the Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective in ensuring that all material information required to be filed in this quarterly report has been made known to them in a timely fashion. There have been no significant changes in internal controls, or in factors that could significantly affect internal controls, subsequent to the date the Chief Executive Officer and Chief Financial Officer completed their evaluation. 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 (99.1) Certification of CEO EXHIBIT 99.1 pursuant to 18 U.S.C. 1350 Certification of CEO (99.2) Certification of CFO EXHIBIT 99.2 pursuant to 18 U.S.C. 1350 Certification of CFO 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, 2002. 12 13 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 11, 2002 By /s/ Gary W. Miller ----------------- ------------------------- Gary W. Miller, Chairman of the Board and Chief Executive Officer Date November 11, 2002 By /s/ G. Patrick Corydon ----------------- ------------------------- G. Patrick Corydon, Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 13 14 BALDWIN & LYONS, INC. CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION I, Gary W. Miller, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Baldwin & Lyons, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): 14 15 a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 11, 2002 /s/ Gary W. Miller - ------------------------------ Gary W. Miller Chairman of the Board and Chief Executive Officer CERTIFICATION I, G. Patrick Corydon, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Baldwin & Lyons, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: 15 16 a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 11, 2002 /s/ G. Patrick Corydon - ------------------------- G. Patrick Corydon Senior Vice President and Chief Financial Officer 16 17 BALDWIN & LYONS, INC. Form 10-Q for the fiscal quarter ended September 30, 2002 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 99.1 Filed herewith electronically Certification of CEO pursuant to 18 U.S.C. 1350 EXHIBIT 99.2 Filed herewith electronically Certification of CFO pursuant to 18 U.S.C. 1350 17 EX-11 4 exhibit11.txt EPS 18
BALDWIN & LYONS, INC. FORM 10-Q, EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ---------------------------- ---------------------------- 2002 2001 2002 2001 ------------- ------------- ------------- ------------- BASIC: Average number of shares Outstanding 11,642,129 12,088,201 11,704,002 12,136,383 ============ ============ ============ ============ Net income (loss) $ 2,830,709 ($ 7,172,664) $13,211,521 $ 2,647,565 ============ ============ ============ ============ Per share amount $ .24 ($ .59) $ 1.13 $ .22 ============ ============ ============ ============ DILUTED: Average number of shares Outstanding 11,642,129 12,088,201 11,704,002 12,136,383 Dilutive stock options--based on treasury stock method using average market price 81,512 82,300 81,830 82,732 ------------ ------------ ------------ ------------ Totals 11,723,641 12,170,501 11,785,832 12,219,115 ============ ============ ============ ============ Net income (loss) $ 2,830,709 ($ 7,172,664) $13,211,521 $ 2,647,565 ============ ============ ============ ============ Per share amount $ .24 ($ .59) $ 1.12 $ .22 ============ ============ ============ ============
18 EX-99 5 exhibit991.txt CEO CERTIFICATION 19 Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Baldwin & Lyons, Inc. (the "Company") on Form 10-Q for the quarterly period ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gary W. Miller, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Gary W. Miller - ------------------------- Gary W. Miller Chairman of the Board and Chief Executive Officer November 11, 2002 19 EX-99 6 exhibit992.txt CFO CERTIFICATION 20 Exhibit 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Baldwin & Lyons, Inc. (the "Company") on Form 10-Q for the quarterly period ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, G. Patrick Corydon, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ G. Patrick Corydon - ------------------------- G. Patrick Corydon Senior Vice President and Chief Financial Officer November 11, 2002 20 -----END PRIVACY-ENHANCED MESSAGE-----