10-Q 1 r10q093005.txt THRID QUARTER 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, 2005 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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [ X ] No[ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock as of November 4, 2005: TITLE OF CLASS NUMBER OF SHARES OUTSTANDING Common Stock, No Par Value: Class A (voting) 2,666,666 Class B (nonvoting) 12,120,521 Index to Exhibits located on page 15. 2 PART I - FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS
BALDWIN & LYONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) SEPTEMBER 30 December 31 2005 2004 ------------------ ------------------ ASSETS Investments: Fixed maturities $ 273,809 $ 331,281 Equity securities 133,732 133,042 Other long-term 40,330 15,989 Short-term 67,130 36,406 ------------------ ------------------ 515,001 516,718 Cash and cash equivalents 90,495 57,384 Accounts receivable 28,417 33,481 Reinsurance recoverable 213,730 236,466 Notes receivable from employees 2,334 2,514 Other assets 17,701 22,000 ------------------ ------------------ $ 867,678 $ 868,563 ================== ================== LIABILITIES AND SHAREHOLDERS' EQUITY Reserves for losses and loss expenses $ 442,281 $ 441,821 Reserves for unearned premiums 32,315 33,233 Notes payable to banks - 6,000 Accounts payable and accrued expenses 38,315 48,224 Current federal income taxes 2,027 660 Deferred federal income taxes 12,596 12,077 ------------------ ------------------ 527,534 542,015 Shareholders' equity: Common stock-no par value 631 628 Additional paid-in capital 38,563 37,083 Unrealized net gains on investments 47,747 44,497 Retained earnings 253,203 244,340 ------------------ ------------------ 340,144 326,548 ------------------ ------------------ $ 867,678 $ 868,563 ================== ================== 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) Three Months Ended Nine Months Ended September 30 September 30 ------------------------------ ------------------------------- 2005 2004 2005 2004 ------------- ------------- -------------- ------------- REVENUES Net premiums earned $ 49,848 $ 44,384 $139,981 $126,284 Net investment income 3,734 2,958 10,589 9,138 Realized net gains on investments 2,962 27 8,430 8,135 Other income 1,645 1,752 5,284 5,461 ------------- ------------- -------------- ------------- 58,189 49,121 164,283 149,018 EXPENSES Losses and loss expenses incurred 46,827 36,923 106,412 91,904 Other operating expenses 9,902 7,286 29,849 23,095 ------------- ------------- -------------- ------------- 56,729 44,209 136,260 114,999 ------------- ------------- -------------- ------------- INCOME BEFORE FEDERAL INCOME TAXES 1,460 4,912 28,023 34,019 Federal income taxes 308 1,452 9,052 10,796 ------------- ------------- -------------- ------------- NET INCOME $ 1,152 $ 3,460 $ 18,971 $ 23,223 ============= ============= ============== ============= PER SHARE DATA: BASIC EARNINGS $ .08 $ .24 $ 1.29 $ 1.59 ============= ============= ============== ============= DILUTED EARNINGS $ .08 $ .23 $ 1.28 $ 1.57 ============= ============= ============== ============= DIVIDENDS PAID TO SHAREHOLDERS $ .35 $ .15 $ .70 $ 1.05 ============= ============= ============== ============= RECONCILIATION OF SHARES OUTSTANDING: Average shares outstanding - basic 14,764 14,641 14,739 14,623 Dilutive effect of options outstanding 109 144 115 172 ------------- ------------- -------------- ------------- Average shares outstanding - diluted 14,873 14,785 14,854 14,795 ============= ============= ============== ============= See notes to condensed consolidated financial statements.
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BALDWIN & LYONS, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) Nine Months Ended September 30 2005 2004 ------------- ------------- Net cash provided by operating activities $ 37,620 $ 47,177 Investing activities: Purchases of long-term investments (110,125) (132,928) Proceeds from sales or maturities of long-term investments 152,664 129,901 Net purchases of short-term investments (30,724) (8,019) Decrease in notes receivable from employees 169 1,533 Other investing activities (1,470) (627) ------------- ------------- Net cash provided by (used in) investing activities 10,514 (10,140) Financing activities: Dividends paid to shareholders (10,329) (15,354) Repayment on notes payable (6,000) - Proceeds from sales of common stock 1,306 384 ------------- ------------- Net cash used in financing activities (15,023) (14,970) ------------- ------------- Increase in cash and cash equivalents 33,111 22,067 Cash and cash equivalents at beginning of period 57,384 30,078 ------------- ------------- Cash and cash equivalents at end of period $90,495 $52,145 ============= ============= 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 notes 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, 2005. 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 10K. 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 2005 and 2004 comparative periods.
2005 2004 ---------- ----------- Quarter ended September 30: Premiums ceded to reinsurers $ 8,225 $ 21,803 Losses and loss expenses ceded to reinsurers 19,620 23,465 Commissions from reinsurers 1,482 5,665 Nine months ended September 30: Premiums ceded to reinsurers 31,313 62,688 Losses and loss expenses ceded to reinsurers 42,508 71,583 Commissions from reinsurers 6,568 16,601
(4) COMPREHENSIVE INCOME OR LOSS: Total realized and unrealized income for the quarter ended September 30, 2005 was $8,056 and compares to total realized and unrealized income of $2,426 for the quarter ended September 30, 2004. For the nine months ended September 30, 2005, total realized and unrealized income was $22,441 and compares to total realized and unrealized income of $16,935 for the nine months ended September 30, 2004. 6 NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (5) REPORTABLE SEGMENTS - PROFIT OR 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, segment profit for fleet trucking includes the direct marketing agency operations conducted by the parent company and is computed after elimination of inter-company commissions and, accordingly, segment profit presented here will not agree with statutory underwriting gains for this segment which may be quoted elsewhere in the Company's financial statements.
2005 2004 ------------------------------------------- ----------------------------------------- NET NET DIRECT AND PREMIUM DIRECT AND PREMIUM ASSUMED EARNED SEGMENT ASSUMED EARNED SEGMENT PREMIUM AND FEE PROFIT PREMIUM AND FEE PROFIT WRITTEN INCOME (LOSS) WRITTEN INCOME (LOSS) ------------ ----------- ------------ ------------ ----------- ----------- THREE MONTHS ENDED SEPTEMBER 30: PROTECTIVE PRODUCTS: Fleet trucking $ 39,296 $ 33,262 $ 6,013 $ 46,688 $ 27,689 $ 7,334 Reinsurance assumed 4,498 4,367 (10,534) 1,842 2,195 (2,934) SAGAMORE PRODUCTS: Personal division 7,651 10,602 1,607 8,441 11,208 1,549 Commercial division: Small fleet trucking 4,045 2,379 8 3,970 2,644 (33) Workers' compensation 48 404 (15) 1,790 2,055 (1,440) ------------ ----------- ------------ ------------ ----------- ----------- Total Commercial division 4,093 2,783 (7) 5,760 4,699 (1,473) All other 304 410 102 294 280 (227) ------------ ----------- ------------ ------------ ----------- ----------- Totals $ 55,842 $ 51,424 $ (2,819) $ 63,025 $ 46,071 $ 4,249 ============ =========== ============ ============ =========== =========== NINE MONTHS ENDED SEPTEMBER 30: PROTECTIVE PRODUCTS: Fleet trucking $117,402 $ 91,875 $ 20,621 $130,204 $ 74,606 $ 20,796 Reinsurance assumed 8,916 9,596 (7,914) 6,678 8,183 729 SAGAMORE PRODUCTS: Personal division 31,138 32,927 3,737 32,420 34,037 4,720 Commercial division: Small fleet trucking 11,679 6,868 258 12,173 7,727 436 Workers' compensation 140 2,625 100 7,689 6,124 (2,110) ------------ ----------- ------------ ------------ ----------- ---------- Total Commercial division 11,819 9,493 358 19,862 13,851 (1,674) All other 1,096 1,102 (295) 912 829 (414) ------------ ----------- ------------ ------------ ----------- ---------- Totals $170,371 $144,993 $16,507 $190,076 $131,506 $ 24,157 ============ =========== ============ ============ =========== ==========
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 before federal income taxes, respectively.
Three Months Ended Nine Months Ended September 30 September 30 2005 2004 2005 2004 ------------- ------------- -------------- ------------- REVENUE: Net premium earned and fee income $51,424 $46,071 $144,993 $131,506 Net investment income 3,734 2,958 10,589 9,138 Realized net gains on investments 2,962 27 8,430 8,135 Other 69 65 271 239 ------------- ------------- -------------- ------------- Total consolidated revenue $58,189 $49,121 $164,283 $149,018 ============= ============= ============== ============= PROFIT: Segment profit $ (2,819) $4,249 $16,507 $24,157 Net investment income 3,734 2,958 10,589 9,138 Realized net gains on investments 2,962 27 8,430 8,135 Corporate expenses (2,417) (2,322) (7,503) (7,411) ------------- ------------- -------------- ------------- Income before federal income taxes $1,460 $4,912 $28,023 $34,019 ============= ============= ============== =============
(7) LOANS TO EMPLOYEES: In 2000, 2001 and 2002 the Company provided loans to certain employees for the sole purpose of purchasing the Company's Class B common stock in the open market. $7,260 of such full-recourse loans were issued and $2,266 remain outstanding at September 30, 2005 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. 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 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 overall premium ceded rates, net of ceding commission allowances, have generally decreased since 2001, as Protective Insurance Company has accepted more net risk under the terms of annual reinsurance treaty renewals. For the nine months ended September 30, 2005, the Company experienced positive cash flow from operations totaling $37.6 million, down from the $47.2 million generated during the first nine months of 2004. The decrease in positive cash flow is due largely to an $18.6 million increase in net losses paid when compared to the first nine months of 2004. Additionally, collateral deposits held by the Company on its trucking accounts decreased $4.9 million during the first nine months of 2005 compared to a $2.6 million increase in deposits held during the 2004 period corresponding with a decrease in direct premium written. Although direct premium writings decreased, changes in reinsurance agreements allowed for an increase of $5.8 million in net premiums collected when compared to the first nine months of 2004. 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 2.2 years at September 30, 2005 representing a small decrease from the prior year end as significant portions of the proceeds from maturing investments and new cash flows have been placed in short-term investments in anticipation of further interest rate increases. The Company's assets at September 30, 2005 included $90.5 million in investments classified as short-term or cash equivalents that were readily convertible to cash without significant market penalty. An additional $105.9 million of fixed maturity investments will mature within the twelve-month period following September 30, 2005. The Company believes that these liquid investments are more than sufficient to provide for projected claim payments and operating cost demands even before consideration of current positive cash flows. Consolidated shareholders' equity is composed largely 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, 2005, $50.3 million may be transferred by dividend or loan to the parent company without approval by, or notification to, regulatory authorities. An additional $204.9 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 sources of credit. The Company's annualized premium writing to surplus ratio for the first nine months of 2005 was approximately 44%. Regulatory guidelines generally allow for writings of 200% of surplus. 9 Accordingly, the Company can increase premium writings significantly with no need to raise additional capital. 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 --------------------- COMPARISONS OF THIRD QUARTER, 2005 TO THIRD QUARTER, 2004 --------------------------------------------------------- Net premium earned during the third quarter of 2005 increased $5.5 million (12%) as compared to the third quarter of 2004. A 21% increase in premiums from the Company's fleet trucking program was partially offset by decreases in the remainder of the Company's directly written products. In particular, premiums from the Company's small business workers' compensation program decreased 81% due to its discontinuance late in 2004. The small fleet trucking and private passenger automobile programs decreased 11% and 6%, respectively, due primarily to competitive pressures in the marketplace. Premium assumed from property catastrophe pools included approximately $1.8 million in reinstatement premium during the quarter resulting from Hurricane Katrina exposure. Direct premiums written and assumed during the third quarter of 2005 totaled $55.8 million, an 11% decrease from the $63.0 million reported a year earlier. This decrease is due largely to a $7.4 million (16%) decrease in direct premiums written from the Company's fleet trucking program. This decrease is due to competitive pressures in a softening market. In addition, direct premiums written for the Company's discontinued small business workers' compensation product dropped $1.7 million (97%) from the prior year period. These decreases were partially offset by a $2.7 million increase in premiums from property catastrophe pools, including the aforementioned reinstatement premium. Premium ceded to reinsurers averaged 17.9% of direct premium production for the current quarter compared to 35.8% a year earlier reflecting changes in reinsurance agreements whereby Protective Insurance Company is retaining a larger portion of risks underwritten. This reduction in premium ceded was instrumental in allowing for the increase in net premium earned for the quarter despite the decline in gross production. Net investment income, before tax, during the third quarter of 2005 was 26% higher than the third quarter of 2004 due to increases in both average invested assets and in yields on bonds and short-term investments. Pre-tax yields on short-term investments nearly tripled from the prior year period. Overall after tax yields posted similar increases. The third quarter 2005 net realized gain of $3.0 million consisted of net gains on limited partnerships, which are largely involved in the trading of securities and, to a lesser extent, small venture capital investments, of $1.9 million and net gains on direct equity trading of $1.1 million. 10 Losses and loss expenses incurred during the third quarter of 2005 increased $9.9 million from that experienced during the third quarter of 2004 due primarily to an estimated $14.8 million in losses sustained from Hurricanes Katrina and Rita. Hurricane losses in the third quarter of 2004 were approximately $5.0 million. Loss ratios for each of the Company's major product lines were as follows:
2005 2004 -------- -------- Fleet trucking 75.2% 78.8% Private passenger automobile 56.8 58.2 Small fleet trucking 64.7 67.9 Voluntary reinsurance assumed 339.4 215.4 Small business workers' compensation 59.2 136.6 All lines 93.9 83.2
Other operating expenses for the third quarter of 2005 increased 36% from the third quarter of 2004. Adjusted for ceding allowances, operating expenses decreased 12% from the third quarter of 2004 and compares favorably with the increase in premiums earned for the quarter as many of the Company's expenses do not vary directly with premium volume. Ceding allowances as a percentage of direct expenses have declined due to changes in the Company's reinsurance structure whereby the Company now retains a greater percentage of the risk compared to prior periods, particularly within the Large and Medium Fleet trucking products. Ceding allowances totaled $1.5 million for the 2005 quarter compared to $5.7 million for the 2004 quarter. The ratio of consolidated other operating expenses to operating revenue was 17.9% during the third quarter of 2005 compared to 14.8% for the 2004 third quarter, with the loss of ceding commission adding 9 points to the current year total. The effective federal tax rate for consolidated operations for the third quarter of 2005 was 21.1% and is less than the statutory rate primarily because of tax exempt investment income. The effect of tax exempt investment income was much greater this quarter because of the lower net taxable underwriting income resulting from the hurricane losses during the quarter. As a result of the factors mentioned above, net income decreased $2.3 million (67%) during the third quarter of 2005 as compared with the 2004 third quarter. COMPARISONS OF NINE MONTHS ENDED SEPTEMBER 30, 2005 TO ------------------------------------------------------ NINE MONTHS ENDED SEPTEMBER 30, 2004 ------------------------------------ Net premiums earned increased $13.7 million (11%) during the first nine months of 2005 as compared to the same period of 2004. The increased premium volume is primarily attributable to a 24% increase in the Company's fleet trucking product. The Company experienced decreases in the remainder of its directly written products, primarily from the discontinued small business workers' compensation product which posted a 57% decline. In addition, net premiums earned for the small fleet and private passenger automobile products decreased 11% and 4%, respectively. Premium assumed from property catastrophe pools increased 21% due solely to the $1.8 million reinstatement premium resulting from Hurricane Katrina exposure. Direct premiums written and assumed during the first nine of 2005 totaled $170.4 million, a 10% decrease from the $190.1 million reported a year earlier. All directly-written products experienced a decline in direct premium volume for reasons cited in the comparison of the third quarters. The most significant decreases were $12.8 million and $7.5 million in the fleet trucking program and the discontinued small business workers' compensation product, respectively. Premium ceded to reinsurers averaged 19.4% of direct premium production for the current period compared to 34.4% a year earlier. 11 Net investment income during the first nine months of 2005 was 16% higher than the 2004 period for the same reasons as indicated in the quarterly comparison above. After tax investment income was 14% higher than 2004 levels. Overall pre-tax and after tax yields were higher during the current period while average invested funds increased 6% from the prior year, resulting from positive cash flow. The net realized gain on investments of $8.4 million for the first nine months of 2005 consists of net gains on equity securities and limited partnership investments of $6.2 million and $2.4 million, respectively, partially offset by $.3 million in losses on fixed maturity investments, after consideration of impairment changes during the period. Losses and loss expenses incurred during the first nine months of 2005 increased $14.5 million from the first nine months of 2004, due primarily to the higher hurricane losses sustained in 2005 ($9.8 million). Loss and loss expense ratios for the comparative nine-month periods were as follows:
2005 2004 -------- -------- Fleet trucking 72.0% 77.8% Private passenger automobile 60.9 58.3 Small fleet trucking 58.1 62.2 Voluntary reinsurance assumed 173.2 68.5 Small business workers' compensation 71.2 102.7 All lines 76.0 72.8
Other operating expenses increased $6.8 million (29%) during the first nine months of 2005 compared to the same period of 2004. Ceding commission allowances included in net expenses were $6.6 million for the 2005 period compared to $16.6 million in the prior year period, while expenses before consideration of ceding allowances actually decreased $3.3 million despite the 11% increase in premium earned. The ratio of other operating expenses to total operating revenue (adjusted for realized gains) was 19.2% for 2005 compared to 16.4% for 2004, with the loss of ceding commissions adding over 7 points to the current year ratio. The effective federal tax rate for consolidated operations for the first nine months of 2005 was 32.3% 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 $4.3 million (18.3%) during the first nine months of 2005 as compared with the 2004 period. 12 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. CRITICAL ACCOUNTING POLICIES ---------------------------- There have been no changes in the Company's critical accounting policies as disclosed in the Form 10K filed for the year ended December 31, 2004. 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 September 30, 2005, amounts due from reinsurers on paid and unpaid losses, including provisions for incurred but not reported losses, are estimated to total approximately $214 million. Included in this total are case basis losses (before consideration of incurred but not reported losses) of approximately $13 million due from Converium Insurance (North America) Inc., approximately $4 million due from PMA Re and approximately $.6 million from Trenwick Re., each of which have reported substantial reserve strengthening and/or impairment of assets which have negatively affected their reported financial positions. All amounts due from these reinsurers on paid claims are current and the Company has no information at this time to indicate that all obligations of these reinsurers will not be met. At September 30, 2005, other long-term investments includes approximately $26.8 million consisting of three limited partnerships which are managed by organizations in which two of the Company's directors are officers, directors, general partners or owners. Certain of these investments contain profit sharing agreements to the affiliated organizations. ITEM 4. CONTROLS AND PROCEDURES ------------------------------- (a) The Corporation's Chief Executive Officer and Chief Financial Officer evaluated the disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Corporation's disclosure controls and procedures are effective. 13 (b) There were no significant changes in the Corporation's internal control over financial reporting identified in connection with the foregoing evaluation that occurred during the Corporation's last fiscal quarter that have affected, or are reasonably likely to materially affect, the Corporation's internal control over financial reporting. 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 - Computation of of per share earnings Per Share Earnings (31.1) Certification of CEO EXHIBIT 31.1 pursuant to Section 302 of the Certification of CEO Sarbanes-Oxley Act of 2002 (31.2) Certification of CFO EXHIBIT 31.2 pursuant to Section 302 of the Certification of CFO Sarbanes-Oxley Act of 2002 (32.1) Certification of CEO EXHIBIT 32.1 pursuant to 18 U.S.C. 1350, as Certification of CEO adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (32.2) Certification of CFO EXHIBIT 32.2 pursuant to 18 U.S.C. 1350, as Certification of CFO adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ITEM 6 (b) REPORTS ON FORM 8-K ------------------------------- A Form 8-K was filed by the registrant on July 29, 2005 regarding its earnings announcement for the second quarter of 2005. A Form 8-K was filed by the registrant on September 21, 2005 regarding the Company's estimate of losses sustained as the result of Hurricane Katrina. 14 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 4, 2005 By /s/ GARY W. MILLER ------------------ -------------------------------- Gary W. Miller, Chairman and CEO Date November 4, 2005 By /S/ G. PATRICK CORYDON ------------------ -------------------------------- G. Patrick Corydon, Senior Vice President - Finance (Principal Financial and Accounting Officer) 15 BALDWIN & LYONS, INC. Form 10-Q for the fiscal quarter ended September 30, 2005 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 31.1 Filed herewith electronically Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act EXHIBIT 31.2 Filed herewith electronically Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act EXHIBIT 32.1 Filed herewith electronically Certification of CEO pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act EXHIBIT 32.2 Filed herewith electronically Certification of CFO pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act