10-Q 1 form10q.htm form10q.htm


 


 
 SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

Form 10-Q

Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
 
 
                                                                                                                   For Quarter Ended                                                                                                                                                                                                                                                                                                 Commission file number
                                                                                                                   June 30, 2012                                                                                                                                                                                                                                                                                                                        0-5534

BALDWIN & LYONS, INC.
(Exact name of registrant as specified in its charter)

INDIANA
(State or other jurisdiction of
 Incorporation or organization
35-0160330
(I.R.S. Employer
Identification Number)
 
1099 N. Meridian Street, Indianapolis, Indiana
(Address of principal executive offices)
 
46204
(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   ü      No___

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ____    Accelerated filer  ü  Non-accelerated filer ____
Small Reporting Company ____

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of August 1, 2012:

TITLE OF CLASS                                                              NUMBER OF SHARES OUTSTANDING
  Common Stock, No Par Value:
Class A (voting)                                                                                                 2,623,109
Class B (nonvoting)                                                                                         12,244,019


Index to Exhibits located on page 27.

 
- 1 -

 

PART I – FINANCIAL INFORMATION

ITEM 1  FINANCIAL STATEMENTS


Baldwin & Lyons, Inc. and Subsidiaries
           
Unaudited Consolidated Balance Sheets
           
             
(in thousands, except share data)
           
             
   
June 30
   
December 31
 
   
2012
   
2011
 
Assets
           
Investments:
           
   Fixed maturities
  $ 410,648     $ 409,460  
   Equity securities
    101,077       88,085  
   Limited partnerships
    53,280       54,705  
   Short-term
    3,346       3,675  
      568,351       555,925  
                 
Cash and cash equivalents
    87,625       89,726  
Accounts receivable
    71,537       74,094  
Reinsurance recoverable
    128,375       138,404  
Notes receivable from employees
    -       1,302  
Other assets
    38,754       35,370  
Current federal income taxes
    8,755       3,354  
Deferred federal income taxes
    -       7,119  
    $ 903,397     $ 905,294  
                 
Liabilities and shareholders' equity
               
Reserves for losses and loss expenses
  $ 408,380     $ 421,556  
Reserves for unearned premiums
    38,400       39,919  
Short-term borrowings
    10,000       10,000  
Accounts payable and accrued expenses
    112,093       114,758  
Deferred federal income taxes
    3,564       -  
      572,437       586,233  
Shareholders' equity:
               
   Common stock-no par value:
               
   Class A voting -- authorized 3,000,000 shares;
               
      outstanding -- 2012 - 2,623,109; 2011 - 2,623,109
    112       112  
   Class B non-voting -- authorized 20,000,000 shares;
               
      outstanding -- 2012 - 12,244,019; 2011 - 12,225,348
    522       522  
   Additional paid-in capital
    49,187       48,751  
   Unrealized net gains on investments
    29,992       26,592  
   Retained earnings
    251,147       243,084  
      330,960       319,061  
    $ 903,397     $ 905,294  


See notes to condensed consolidated financial statements.

 
- 2 -

 

 
 
Baldwin & Lyons, Inc. and Subsidiaries
                       
Unaudited Consolidated Statements of Operations
                       
                         
(in thousands, except per share data)
                       
                         
   
Three Months Ended
   
Six Months Ended
 
   
June 30
   
June 30
 
   
2012
   
2011
   
2012
   
2011
 
Revenues
                       
Net premiums earned
  $ 59,655     $ 62,344     $ 121,206     $ 119,945  
Net investment income
    2,431       2,644       4,853       5,297  
Commissions and other income
    1,623       1,566       3,128       3,173  
Net realized gains (losses) on investments, excluding
                               
impairment losses
    (5,108 )     (1,845 )     272       (3,314 )
Total other-than-temporary impairment losses on investments
    (345 )     (118 )     (345 )     (118 )
Net realized losses on investments
    (5,453 )     (1,963 )     (73 )     (3,432 )
      58,256       64,591       129,114       124,983  
                                 
Expenses
                               
Losses and loss expenses incurred
    33,739       55,166       68,643       120,839  
Other operating expenses
    19,257       18,117       38,213       36,553  
      52,996       73,283       106,856       157,392  
Income (loss) before federal income taxes
    5,260       (8,692 )     22,258       (32,409 )
Federal income taxes (benefits)
    1,210       (3,188 )     6,702       (11,707 )
Net income (loss)
  $ 4,050     $ (5,504 )   $ 15,556     $ (20,702 )
                                 
Per share data:
                               
Basic and diluted earnings (losses)
  $ .27     $ (.38 )   $ 1.05     $ (1.40 )
                                 
    Dividends paid to shareholders
  $ .25     $ .25     $ .50     $ .50  
                                 
Reconciliation of shares outstanding:
                               
   Average shares outstanding - basic
    14,837       14,819       14,832       14,810  
   Dilutive effect of share equivalents
    23       15       24       21  
   Average shares outstanding - diluted
    14,860       14,834       14,856       14,831  



See notes to condensed consolidated financial statements.


 


 
- 3 -

 



Baldwin & Lyons, Inc. and Subsidiaries
                       
Unaudited Consolidated Statements of Comprehensive Income (Loss)
                       
                         
(in thousands, except per share data)
                       
                         
   
Three Months Ended
   
Six Months Ended
 
   
June 30
   
June 30
 
   
2012
   
2011
   
2012
   
2011
 
                         
Net income (loss)
  $ 4,050     $ (5,504 )   $ 15,556     $ (20,702 )
                                 
Other comprehensive income, net of tax:
                               
Unrealized net gains (losses) on securities:
                               
Unrealized holding net gains (losses) arising during the period
    (4,635 )     1,030       3,003       4,956  
Less: reclassification adjustment for net gains (losses)
                               
included in net income (loss)
    (370 )     1,089       (397 )     1,134  
      (4,265 )     (59 )     3,400       3,822  
                                 
Foreign currency translation adjustments
    (223 )     61       (19 )     288  
                                 
Other comprehensive income (loss)
    (4,488 )     2       3,381       4,110  
                                 
Comprehensive income (loss)
  $ (438 )   $ (5,502 )   $ 18,937     $ (16,592 )


 
See notes to condensed consolidated financial statements.

 


 
- 4 -

 


Baldwin & Lyons, Inc. and Subsidiaries
           
Unaudited Consolidated Statements of Cash Flows
           
             
(in thousands)
           
             
   
Six Months Ended
 
   
June 30
 
   
2012
   
2011
 
             
Net cash provided by operating activities
  $ 22,445     $ 26,769  
Investing activities:
               
   Purchases of available-for-sale investments
    (165,890 )     (182,133 )
   Purchases of limited partnership interests
    (1,538 )     -  
   Proceeds from sales or maturities
               
       of available-for-sale investments
    147,345       188,102  
   Net sales (purchases) of short-term investments
    329       (83 )
   Other investing activities
    2,701       (868 )
Net cash provided by (used in) investing activities
    (17,053 )     5,018  
Financing activities:
               
   Dividends paid to shareholders
    (7,474 )     (7,454 )
   Repayment on line of credit
    -       (5,000 )
Net cash used in financing activities
    (7,474 )     (12,454 )
                 
   Effect of foreign exchange rates on cash and cash equivalents
    (19 )     288  
                 
Increase (decrease) in cash and cash equivalents
    (2,101 )     19,621  
Cash and cash equivalents at beginning of period
    89,726       38,223  
Cash and cash equivalents at end of period
  $ 87,625     $ 57,844  



See notes to condensed consolidated financial statements.

 
- 5 -

 

Notes to Condensed Unaudited Consolidated Financial Statements
 
(All dollar amounts presented in these notes are in thousands, except per share data)
 

 
(1) Summary of Significant Accounting Policies

Basis of Presentation: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and notes required by U.S. generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included.  Operating results for the interim periods are not necessarily indicative of the results that may be expected for the year ended December 31, 2012.  Interim financial statements should be read in conjunction with the Company’s annual audited financial statements and other disclosures included in the Company’s most recent Form 10-K.

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

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

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


 
- 6 -

 

Notes to Condensed Unaudited Consolidated Financial Statements (continued)

With respect to other–than-temporary impairment of investments, if a fixed maturity security is in an unrealized loss position and the Company has the intent to sell the fixed maturity security, or it is more likely than not that the Company will have to sell the fixed maturity security before recovery of its amortized cost basis, the decline in value is deemed to be other-than-temporary and is recorded to net realized losses on investments in the consolidated statements of operations.   For impaired fixed maturity securities that the Company does not intend to sell or it is more likely than not that the Company will not have to sell such securities, but the Company expects that it will not fully recover the amortized cost basis, the credit component of the other-than-temporary impairment is recognized in net realized losses on investments in the consolidated statements of operations and the non-credit component of the other-than-temporary impairment is recognized directly in shareholders’ equity (accumulated other comprehensive income).

The credit component of an other-than-temporary impairment is determined by comparing the net present value of projected future cash flows with the amortized cost basis of the fixed maturity security.  Furthermore, unrealized losses caused by non-credit related factors related to fixed maturity securities for which the Company expects to fully recover the amortized cost basis continue to be recognized in accumulated other comprehensive income.
 
The unrealized net gains or losses (net of applicable tax effect) related to equity securities are reflected directly in shareholders’ equity, unless a decline in value is determined to be other-than-temporary, in which case the loss is charged to income.  In determining if and when a decline in market value below cost is other-than-temporary, an objective analysis is made of each individual security where current market value is less than cost.  For any equity security where the unrealized loss exceeds 20% of original or adjusted cost, and where that decline has existed for a period of at least six months, the decline is treated as an other-than-temporary impairment, subject to an evaluation as to possible future recovery.  Additionally, the Company takes into account any known subjective information in evaluating for impairment without consideration to the Company’s quantitative criteria defined above.

Newly Effective Accounting Standards:  In October 2010, the FASB issued updated guidance to address the diversity in practice for the accounting for costs associated with acquiring or renewing insurance contracts. This guidance modifies the definition of acquisition costs to specify that a cost must be directly related to the successful acquisition of a new or renewal insurance contract in order to be deferred. If application of this guidance would result in the capitalization of acquisition costs that had not previously been capitalized by a reporting entity, the entity may elect not to capitalize those costs. The Company had no adjustments upon the adoption of the guidance which was effective January 1, 2012.

 
- 7 -

 

Notes to Condensed Unaudited Consolidated Financial Statements (continued)

In May 2011, the FASB issued updated accounting guidance that changes the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements to ensure consistency between GAAP and International Financial Reporting Standards.  The guidance also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs.  The Company adopted the provisions of Accounting Standards Updates 2011-04 effective January 1, 2012, and have included the additional disclosures required for fair value measurements in Note 8 for the quarterly period ended June 30, 2012. 

In June 2011, the FASB issued revised accounting guidance that eliminates the option to present the components of other comprehensive income as part of the statement of shareholders' equity. Instead, comprehensive income must be reported in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements.  A statement complying with these requirements is included in this report.  The Company elected to present the components of comprehensive income in two separate but consecutive financial statements, which is illustrated in the “Consolidated Statements of Comprehensive Income (Loss).”

Reclassification:  Certain prior period balances have been reclassified to conform to the current period presentation.
 

 

 
- 8 -

 

Notes to Condensed Unaudited Consolidated Financial Statements (continued)

(2) Investments:
 
The following is a summary of available-for-sale securities at June 30, 2012 and December 31, 2011:
 
                           
Net
 
         
Cost or
   
Gross
   
Gross
   
Unrealized
 
   
Fair
   
Amortized
   
Unrealized
   
Unrealized
   
Gains
 
   
Value
   
Cost
   
Gains
   
Losses
   
(Losses)
 
June 30, 2012:
                             
   U.S. government obligations
  $ 69,433     $ 69,433     $ 52     $ (52 )   $ -  
   Residential mortgage-backed securities
    18,165       18,347       533       (715 )     (182 )
   Commercial mortgage-backed securities
    15,153       14,821       490       (158 )     332  
   States and municipal obligations
    174,216       173,165       1,092       (41 )     1,051  
   Corporate securities
    112,182       111,368       1,844       (1,030 )     814  
   Foreign government obligations
    21,499       21,650       161       (312 )     (151 )
      Total fixed maturities
    410,648       408,784       4,172       (2,308 )     1,864  
   Equity securities:
                                       
   Financial institutions
    10,121       5,012       5,260       (151 )     5,109  
   Industrial & Miscellaneous
    90,956       51,787       41,184       (2,015 )     39,169  
      Total equity securities
    101,077       56,799       46,444       (2,166 )     44,278  
      Total available-for-sale securities
  $ 511,725     $ 465,583     $ 50,616     $ (4,474 )     46,142  
                                         
                           
Applicable federal income taxes
      (16,150 )
                                         
                           
Net unrealized gains - net of tax
    $ 29,992  
                                         
December 31, 2011:
                                       
   U.S. government obligations
  $ 73,137     $ 73,009     $ 139     $ (11 )   $ 128  
   Government sponsored entities
    349       345       4       -       4  
   Residential mortgage-backed securities
    21,872       21,778       619       (525 )     94  
   Commercial mortgage-backed securities
    11,300       11,388       116       (204 )     (88 )
   States and municipal obligations
    190,035       188,991       1,275       (231 )     1,044  
   Corporate securities
    91,646       91,949       1,429       (1,732 )     (303 )
   Foreign government obligations
    21,121       21,483       168       (530 )     (362 )
      Total fixed maturities
    409,460       408,943       3,750       (3,233 )     517  
   Equity securities:
                                       
   Financial institutions
    9,428       4,955       4,778       (305 )     4,473  
   Industrial & Miscellaneous
    78,657       42,736       36,921       (1,000 )     35,921  
      Total equity securities
    88,085       47,691       41,699       (1,305 )     40,394  
      Total available-for-sale securities
  $ 497,545     $ 456,634     $ 45,449     $ (4,538 )     40,911  
                                         
                           
Applicable federal income taxes
      (14,319 )
                                         
                           
Net unrealized gains - net of tax
    $ 26,592  

 
 
- 9 -

 
 
Notes to Condensed Unaudited Consolidated Financial Statements (continued)

The Company has five other-than-temporarily impaired fixed maturity securities at June 30, 2012.  The Company has three and one other-than-temporary impairment losses relating to fixed maturity securities recognized in accumulated other comprehensive income as of June 30, 2012 and December 31, 2011, respectively.

The following table summarizes, for fixed maturity and equity security investments in an unrealized loss position at June 30, 2012 and December 31, 2011, respectively, the aggregate fair value and gross unrealized loss categorized by the duration those securities have been continuously in an unrealized loss position.

 
   
June 30, 2012
   
December 31, 2011
 
   
Number of Securities
   
Fair Value
   
Gross Unrealized Loss
   
Number of Securities
   
Fair Value
   
Gross Unrealized Loss
 
Fixed maturity securities:
                                   
12 months or less
    204     $ 98,248     $ (1,978 )     206     $ 86,470     $ (2,303 )
Greater than 12 months
    35       14,548       (330 )     44       11,930       (930 )
Total fixed maturities
    239       112,796       (2,308 )     250       98,400       (3,233 )
Equity securities:
                                               
12 months or less
    33       11,244       (1,785 )     35       8,317       (1,275 )
Greater than 12 months
    10       3,460       (381 )     4       216       (30 )
Total equity securities
    43       14,704       (2,166 )     39       8,533       (1,305 )
Total fixed maturity and equity securities
    282     $ 127,500     $ (4,474 )     289     $ 106,933     $ (4,538 )

 
The fair value and the cost or amortized cost of fixed maturity investments, at June 30, 2012, by contractual maturity, are shown below.  Actual maturities may ultimately differ from contractual maturities because borrowers have, in some cases, the right to call or prepay obligations with or without call or prepayment penalties. Pre-refunded municipal bonds are classified based on their pre-refunded call dates.

   
Fair Value
   
Cost or Amortized Cost
 
             
One year or less
  $ 129,753     $ 129,659  
Excess of one year to five years
    211,721       210,120  
Excess of five years to ten years
    22,174       22,204  
Excess of ten years
    3,155       3,036  
   Total maturities
    366,803       365,019  
Asset-backed securities
    43,845       43,765  
    $ 410,648     $ 408,784  


 
- 10 -

 

Notes to Condensed Unaudited Consolidated Financial Statements (continued)

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


   
Three Months Ended
   
Six Months Ended
 
   
June 30
   
June 30
 
   
2012
   
2011
   
2012
   
2011
 
Fixed maturities:
                       
   Gross gains
  $ 792     $ 1,161     $ 1,342     $ 2,158  
   Gross losses
    (1,181 )     (402 )     (2,152 )     (1,869 )
      Net gains (losses)
    (389 )     759       (810 )     289  
                                 
Equity securities:
                               
   Gross gains
    152       1,198       675       2,229  
   Gross losses
    (333 )     (283 )     (475 )     (773 )
      Net gains (losses)
    (181 )     915       200       1,456  
                                 
Limited partnerships - net gain (loss)
    (4,883 )     (3,637 )     537       (5,177 )
                                 
                                 
      Total net losses
  $ (5,453 )   $ (1,963 )   $ (73 )   $ (3,432 )

 
Gains and losses activity for investments, as shown in the previous table, are further detailed as follows:


   
Three Months Ended
   
Six Months Ended
 
   
June 30
   
June 30
 
   
2012
   
2011
   
2012
   
2011
 
                         
Realized net gains (losses) on the disposal of securities
  $ (109 )   $ 1,636     $ (205 )   $ 2,044  
Mark-to-market adjustment
    (369 )     156       (313 )     (645 )
Equity in gains (losses) of limited partnership
                               
  investments - realized and unrealized
    (4,883 )     (3,637 )     537       (5,177 )
Impairment:
                               
  Write-downs based upon objective criteria
    (345 )     (118 )     (345 )     (118 )
  Recovery of prior write-downs
                               
    upon sale or disposal
    253       -       253       464  
                                 
Totals
  $ (5,453 )   $ (1,963 )   $ (73 )   $ (3,432 )


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


 
- 11 -

 

Notes to Condensed Unaudited Consolidated Financial Statements (continued)

The income (loss) from limited partnerships for the quarter and year-to-date periods ending June 30, 2012 includes an estimated $1,670 net unrealized losses and $3,861 of net unrealized gains, respectively, reported to the Company as part of the underlying assets of the various limited partnerships.  The value of limited partnerships at June 30, 2012 includes approximately $306 of net unrealized losses reported to the Company as part of the underlying assets of the various limited partnerships. Shareholders’ equity at June 30, 2012 includes approximately $15,877, net of deferred federal income taxes, of earnings undistributed by limited partnerships.
 
(3) Reinsurance:
 
The following table summarizes the Company’s transactions with reinsurers for the 2012 and 2011 comparative periods.
 

   
2012
   
2011
 
Quarter ended June 30:
           
   Premiums ceded to reinsurers
  $ 24,472     $ 21,438  
   Losses and loss expenses
               
      ceded to reinsurers
    11,333       14,376  
   Commissions from reinsurers
    3,137       2,597  
                 
Six months ended June 30:
               
   Premiums ceded to reinsurers
    49,220       42,445  
   Losses and loss expenses
               
      ceded to reinsurers
    19,137       25,829  
   Commissions from reinsurers
    6,973       5,315  


(4) Reportable Segments:
 
The Company has two reportable business segments in its operations:  Property and Casualty Insurance and Reinsurance.

The Property and Casualty Insurance segment provides multiple line insurance coverage primarily to fleet transportation companies as well as to independent contractors who contract with fleet transportation companies.  In addition, the Company provides private passenger automobile products to individuals, and commercial multi-peril and professional liability products on a selective basis.

The Reinsurance segment accepts property and casualty cessions from other insurance companies as well as retrocessions from selected reinsurance companies, principally reinsuring against catastrophes.  In addition, the Reinsurance segment accepts selected professional liability cessions from other insurance companies.



 
- 12 -

 

Notes to Condensed Unaudited Consolidated Financial Statements (continued)

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


   
2012
   
2011
 
   
Direct and Assumed Premium Written
   
Net Premium Earned
   
Segment Profit
   
Direct and Assumed Premium Written
   
Net Premium Earned
   
Segment Profit (Loss)
 
                                     
Three months ended June 30:
                                   
                                     
Property and Casualty Insurance
  $ 64,760     $ 48,167     $ 6,872     $ 67,309     $ 47,352     $ 6,147  
Reinsurance
    14,094       11,488       5,314       15,722       14,992       (12,470 )
                                                 
Totals
  $ 78,854     $ 59,655     $ 12,186     $ 83,031     $ 62,344     $ (6,323 )
                                                 
Six months ended June 30:
                                               
                                                 
Property and Casualty Insurance
  $ 139,986     $ 96,076     $ 13,795     $ 139,413     $ 92,870     $ 7,600  
Reinsurance
    28,920       25,130       11,461       28,749       27,075       (35,219 )
                                                 
Totals
  $ 168,906     $ 121,206     $ 25,256     $ 168,162     $ 119,945     $ (27,619 )


The following table reconciles reportable segment income (loss) to the Company’s consolidated income (loss) before federal income taxes.


   
Three Months Ended
   
Six Months Ended
 
   
June 30
   
June 30
 
   
2012
   
2011
   
2012
   
2011
 
Profit (Loss):
                       
Segment profit (loss)
  $ 12,186     $ (6,323 )   $ 25,256     $ (27,619 )
Net investment income
    2,431       2,644       4,853       5,297  
Net losses on investments
    (5,453 )     (1,963 )     (73 )     (3,432 )
Corporate expenses
    (3,904 )     (3,050 )     (7,778 )     (6,655 )
Income (loss) before federal income taxes
  $ 5,260     $ (8,692 )   $ 22,258     $ (32,409 )


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

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

 

 
- 13 -

 


Notes to Condensed Unaudited Consolidated Financial Statements (continued)

(5) Loans to Employees:
 
Through 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.  The underlying securities served as collateral for these loans.  All employee loans have been paid in full as of June 30, 2012.  No additional loans will be made under this program.

(6) Debt:
 
The Company maintains a revolving line of credit with a $30,000 limit and an expiration date of September 23, 2014.  Interest on this line of credit is referenced to LIBOR and can be fixed for periods of up to one year at the Company’s option.  Outstanding drawings on this line of credit were $10,000 as of June 30, 2012 and December 31, 2011.  At June 30, 2012, the effective interest rate was 1.15%.  The Company has $20,000 remaining unused under the line of credit at June 30, 2012.  The current outstanding borrowings were used principally for treasury stock repurchases and extra dividend payments.

(7) Taxes:
 
As of June 30, 2012, the Company’s 2008 and subsequent tax years remain subject to examination by the IRS.  The effective rate differs from the normal statutory rate primarily as a result of tax-exempt investment income.











(Space Intentionally Left Blank)





 
 




 
- 14 -

 

Notes to Condensed Unaudited Consolidated Financial Statements (continued)

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

As of June 30, 2012:
                       
                         
Description
 
Total
   
Level 1
   
Level 2
   
Level 3
 
                         
U.S. government obligations
  $ 69,433     $ 69,433     $ -     $ -  
Residential mortgage-backed securities
    18,165       -       18,165       -  
Commercial mortgage-backed securities
    15,153       -       15,153       -  
State and municipal obligations
    174,216       -       174,216       -  
Corporate securities
    110,802       -       97,161       13,641  
Options embedded in convertible securities
    1,380       -       1,380       -  
Foreign government obligations
    21,499       -       21,499       -  
      Total fixed maturities
    410,648       69,433       327,574       13,641  
Equity securities
    101,077       101,077       -       -  
Short term
    3,346       3,225       121       -  
Cash equivalents
    85,098       -       85,098       -  
    $ 600,169     $ 173,735     $ 412,793     $ 13,641  


As of December 31, 2011:
                       
                         
Description
 
Total
   
Level 1
   
Level 2
   
Level 3
 
                         
U.S. government obligations
  $ 73,137     $ 73,137     $ -     $ -  
Government sponsored entities
    349       -       349       -  
Residential mortgage-backed securities
    21,872       -       21,872       -  
Commercial mortgage-backed securities
    11,300       -       11,300       -  
State and municipal obligations
    190,035       -       190,035       -  
Corporate securities
    90,141       -       73,091       17,050  
Options embedded in convertible securities
    1,505       -       1,505       -  
Foreign government obligations
    21,121       -       21,121       -  
      Total fixed maturities
    409,460       73,137       319,273       17,050  
Equity securities
    88,085       88,085       -       -  
Short term
    3,675       2,982       693       -  
Cash equivalents
    81,756       -       81,756       -  
    $ 582,976     $ 164,204     $ 401,722     $ 17,050  


 
- 15 -

 

Notes to Condensed Unaudited Consolidated Financial Statements (continued)

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

Level Input:
  
Input Definition:
     
Level 1
  
Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
     
Level 2
  
Inputs other than quoted prices included in Level 1 that are observable for the asset or liability through corroboration with market data at the measurement date.
     
Level 3
  
Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.


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

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

Fixed maturities: Fair values of fixed maturities are based on quoted market prices, where available. These fair values are obtained primarily from third party pricing services, which generally use Level I or Level II inputs for the determination of fair value to facilitate fair value measurements and disclosures. U.S. government obligations represent Level I securities, while Level II securities primarily include corporate securities, states and municipal obligations, foreign government obligations, and mortgage-backed securities. For securities not actively traded, the third party pricing services may use quoted market prices of comparable instruments or discounted cash flow analyses, incorporating inputs that are currently observable in the markets for similar securities. Inputs that are often used in the valuation methodologies include, but are not limited to, broker quotes, benchmark yields, credit spreads, default rates and prepayment speeds.

Equity securities: Fair values of equity securities are designated as Level I and are based on quoted market prices.
 
 
The Level 3 assets consist of an investment portfolio of insurance-linked securities.  The insurance-linked securities are valued using the average of estimated market quotes from multiple insurance-linked securities brokers.  The broker quotes include Level 3 inputs which are significant to the valuation of the insurance-linked securities and vary by 0-3% from each other. There were no Level 3 sales, no transfers into Level 3 and no transfers out of Level 3 during 2012 or 2011.  A reconciliation of the beginning and ending balances of assets measured at fair value on a recurring basis using Level 3 inputs is as follows for the six months ended June 30, 2012 and for the year ended December 31, 2011:

 

 
- 16 -

 


Notes to Condensed Unaudited Consolidated Financial Statements (continued)


   
2012
   
2011
 
Beginning of period balance
  $ 17,050     $ 17,242  
Total gain or losses (realized or unrealized)
               
included in earnings (or changes in net assets)
    (165 )     387  
Purchases
    400       6,522  
Settlements
    (3,644 )     (7,101 )
End of period balance
  $ 13,641     $ 17,050  
 

There were no transfers of assets between Level 1 and Level 2 during the six months ended June 30, 2012 and 2011.  Transfers between levels, if any, are recorded as of the beginning of the reporting period.

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

Non-financial instruments such as real estate, property and equipment, other assets, deferred income taxes and intangible assets, and certain financial instruments such as policy reserve liabilities are excluded from the fair value disclosures.  Therefore, the fair value amounts cannot be aggregated to determine the Company’s underlying economic value.

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

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

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

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

 
- 17 -

 

Notes to Condensed Unaudited Consolidated Financial Statements (continued)

 
A summary of the carrying value and fair value by level of financial instruments not recorded at fair value on the Company’s consolidated balance sheet at June 30, 2012 is as follows:
 

   
Carrying
   
Fair Value
 
   
Value
   
Level 1
   
Level II
   
Level III
   
Total
 
Assets:
                             
   Limited partnerships
  $ 53,280     $ -     $ -     $ 53,280     $ 53,280  
                                         
Liabilities:
                                       
   Short-term borrowings
    10,000       -       10,000       -       10,000  

 
A summary of the carrying value and fair value of financial instruments not recorded at fair value on the Company’s consolidated balance sheet at December 31, 2011 is as follows:
 

   
Carrying
   
Fair
 
   
Value
   
Value
 
Assets:
           
   Limited partnerships
  $ 54,705     $ 54,705  
                 
Liabilities:
               
   Short-term borrowings
    10,000       10,000  


(9) Restricted Stock:
 
Effective May 10, 2011, the Company issued a total of 19,558 shares of class B restricted stock to the Company’s outside directors.  These restricted shares became fully vested on May 10, 2012.  These shares represent the annual retainer compensation for outside directors for the period July 1, 2011 through June 30, 2012.  Each share was valued at $22.50 per share representing a total value of $440.  Compensation expense related to the above stock grant was recognized over the period in which the directors rendered the services.

Effective May 8, 2012, the Company issued a total of 20,119 shares of class B restricted stock to the Company’s outside directors.  These restricted shares represent the annual retainer compensation for outside directors for the period July 1, 2012 through June 30, 2013 and will vest on May 8, 2013.  Vesting will be accelerated only on the condition of death, disability, or change in control of the Company.  Each restricted share is valued at $21.87 per share representing a total value of $440.  Compensation expense related to the above stock grant is to be recognized over the period in which the directors render the services which will also coincide with the vesting period.


 
- 18 -

 

Notes to Condensed Unaudited Consolidated Financial Statements (continued)
 

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


ITEM 2  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
              AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

The Company generally experiences positive cash flow from operations resulting from the fact that premiums are collected on insurance policies in advance of the disbursement of funds in payment of claims.  Operating costs of the property/casualty insurance subsidiaries, other than loss and loss expense payments and commissions paid to related agency companies, generally average less than 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. 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. For the first six months of 2012, the Company experienced positive cash flow from operations totaling $22.4 million which compares to positive cash flow from operations of $26.8 million generated during the first six months of 2011.  The $4.4 million decrease in cash flow from the 2011 period is primarily due to higher loss payments associated with the settlement of 2011 catastrophe losses, partially offset by higher net premiums.

The Company's investment philosophy has emphasized the purchase of relatively short-term instruments with maximum quality and liquidity.  The average life of the Company's fixed income (bond and short-term investment) portfolio, using contractual maturities applied to par value, was 3.35 years at June 30, 2012, which is substantially shorter than the average life of the Company’s liabilities.

Financing activity for the first six months of 2012 included regular dividend payments to shareholders of $7.5 million ($.50 per share).

The Company’s assets at June 30, 2012 included $85.1 million in investments classified as cash equivalents that were readily convertible to cash without significant market penalty.  An additional $131.8 million of fixed maturity investments will mature within the twelve-month period following June 30, 2012.   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 largely of GAAP shareholders’ equity of the insurance subsidiaries.  As such, there are statutory restrictions on the transfer of substantial portions of this equity to the parent company.  At June 30, 2012, $44.0 million may be transferred by dividend or loan to the parent company during the remainder of 2012 without approval by, or prior notification to, regulatory authorities.  An additional $195.8 million of shareholder’s equity of the insurance subsidiaries could, theoretically, be advanced or loaned to the parent company with prior notification to, and approval from, regulatory authorities, although it is unlikely that transfers of this size would be practical.  The Company believes that these restrictions pose no material liquidity concerns to the Company.  The Company also believes that the financial strength and stability of the subsidiaries would permit ready access by the parent company to short-term and long-term sources of credit.  The parent company had cash and marketable securities valued at $12.5 million at June 30, 2012.
 
 
 
- 19 -

 

The Company’s annualized net premium writing to surplus ratio for the first six months of 2012 was approximately 74%.  Regulatory guidelines generally allow for writings of between 100% and 300% of surplus, depending on the line of business.  Accordingly, the Company could increase net 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

Comparison of Second Quarter, 2012 to Second Quarter, 2011

Direct and assumed premiums written during the second quarter of 2012 decreased $4.2 million (5.0%) and net premiums earned decreased $2.7 million (4.3%) as compared to the same period of 2011.  The Company’s Property and Casualty Insurance segment reported a decrease in premium written of 3.8% but an increase in earned premiums of 1.7% while the Reinsurance segment reported a decrease in premium written of 10.4% as well as a decrease in premium earned of 23.4%.  In the Property and Casualty Insurance segment,  a planned reduction in commercial multi-peril business combined with lower personal automobile premium resulting from rate increases implemented during 2012 were offset by increased premium from fleet transportation business resulting from higher activity-sensitive premium on existing accounts and the addition of new business.  The Company’s property reinsurance program was the main driver of the decrease to the Reinsurance segment, as a strategic reduction in global catastrophe risk was implemented effective January 1, 2012.  The following table provides information regarding premiums written and earned for each segment for the quarter ended June 30 (dollars in thousands):
 
 
 
- 20 -

 


   
Direct and Assumed Premium Written
   
Net Premium Written
   
Net Premium Earned
 
2012
                 
                   
Property & Casualty Insurance
  $ 64,760     $ 42,458     $ 48,167  
Reinsurance
    14,094       13,515       11,488  
                         
Totals
  $ 78,854     $ 55,973     $ 59,655  
                         
2011
                       
                         
Property & Casualty Insurance
  $ 67,309     $ 49,247     $ 47,352  
Reinsurance
    15,722       15,244       14,992  
                         
Totals
  $ 83,031     $ 64,491     $ 62,344  


Premium ceded to reinsurers on insurance business produced by the Property and Casualty Insurance segment averaged 34.4% of premium written for the current quarter compared to 32.8% in the 2011 second quarter, with the increase reflective of minor changes in treaty structures as well as the impact of the proportion of new products which are ceded at generally higher proportions than legacy products.

Net investment income, before tax, during the second quarter of 2012 was 8.1% lower than the second quarter of 2011 due primarily to lower available interest rates for bonds.  Pre-tax bond yields averaged 2.3% during the current quarter compared to 2.7% for the prior year period.  Overall after-tax yields decreased from 1.8% to 1.5% while average invested funds, impacted by positive cash flow, were over 7% higher.  The short term nature of the Company’s fixed income portfolio causes changes in available yields to be quickly reflected in investment income.

The second quarter 2012 net realized investment losses of $5.5 million resulted primarily from $4.9 million in losses reported by limited partnerships and $0.4 million in mark-to-market adjustments.  Comparative second quarter 2011 overall investment losses were $2.0 million.  Investment losses result from decisions regarding the sale of individual securities and the change in total value of limited partnerships and, as such, are not expected to be consistent from period to period.

Losses and loss expenses incurred during the second quarter of 2012 were $21.4 million lower than that experienced during the second quarter of 2011 due primarily to the impact of the unprecedented level of catastrophe losses during the prior year period.  The loss ratios for each segment were as follows:

 
2012
 
2011
Property and Casualty Insurance
64.5%
 
66.2%
Reinsurance
23.1
 
 159.0
Total
56.5
 
88.5

 
 
- 21 -

 
 
Other operating expenses, for the second quarter of 2012, increased $1.1 million, or 6.3%, from the second quarter of 2011.  The majority of this increase relates to increased salary and salary related expenses which were depressed in 2011as the result of catastrophic losses.  The ratio of consolidated other operating expenses to operating revenue was 30.2% during the second quarter of 2012 compared to 27.2% for the 2011 second quarter.

The effective federal tax rate on consolidated income for the second quarter of 2012 was 23%.  The effective rate differs from the normal statutory rate primarily as a result of tax-exempt investment income.

As a result of the factors mentioned above, net income increased $9.6 million during the second quarter of 2012 as compared to the 2011 period.

Comparison of Six Months Ended June 30, 2012 to Six Months Ended June 30, 2011

Direct and assumed premiums written during the first six months of 2012 increased $.7 million (0.4%) and net premiums earned increased $1.3 million (1.1%) as compared to the same period of 2011.  The Company’s Property and Casualty Insurance segment reported an increase in written and earned premiums of .4% and 3.5%, respectively while the Reinsurance segment reported a decrease in earned premium of 7.2%.  The reasons for the segment fluctuations are similar to those detailed in the quarterly comparison, preceding.  The following table provides information regarding premiums written and earned for each segment for the six months ended June 30 (dollars in thousands):


   
Direct and Assumed Premium Written
   
Net Premium Written
   
Net Premium Earned
 
2012
                 
                   
Property & Casualty Insurance
  $ 139,986     $ 92,165     $ 96,076  
Reinsurance
    28,920       27,763       25,130  
                         
Totals
  $ 168,906     $ 119,928     $ 121,206  
                         
2011
                       
                         
Property & Casualty Insurance
  $ 139,413     $ 98,929     $ 92,870  
Reinsurance
    28,749       27,793       27,075  
                         
Totals
  $ 168,162     $ 126,722     $ 119,945  


Premium ceded to reinsurers on insurance business produced by the Property and Casualty Insurance segment averaged 34.2% of premium written for the current year period compared to 29.0% a year earlier with the increase reflective of changes in treaty structures as well as the impact of new products which are ceded at generally higher proportions than legacy products.

Net investment income, before tax, during the first six months of 2012 was 8.4% lower than the first six months of 2011 for the same reasons noted in the quarterly comparison.  Overall pre-tax yields averaged 2.0% during the current period compared to 2.4% for the prior year period.  Overall after-tax yields decreased from 1.8% to 1.6%.  Average funds invested were nearly 7% higher in the 2012 period as the result of positive cash flow.
 
 
 
- 22 -

 

Net realized investment losses for the first six months of 2012 were less than $.1 million before tax, resulting primarily from $.2 million in losses reported by direct trading securities and $.3 million mark-to-market adjustment, partially offset by a $.5 million gain reported by limited partnerships.  Realized investment losses were $3.4 million for the same period of 2011.

Losses and loss expenses incurred during the first six months of 2012 were $52.2 million lower than that experienced during the first six months of 2011 which included an unprecedented level of catastrophe losses.  The lower loss ratio for the Property and Casualty segment was attributable to improvements in most product groupings.  The loss ratios for each segment were as follows:

 
 
2012
 
2011
Property and Casualty Insurance
65.0%
 
70.3%
Reinsurance
24.7
 
 205.1
Total
56.6
 
100.7

Other operating expenses, for the first six months of 2012, increased $1.7 million, or 4.5%, from the 2011 six-month period.  The majority of this increase relates to the lower salary and salary related expenses during 2011, as noted in the quarterly comparison.  The ratio of consolidated other operating expenses to operating revenue was 29.6% during the 2012 period compared to 28.5% for the 2011 period.

The effective federal tax rate on consolidated income for the first six months of 2012 was 30.1%.  The effective rate differs from the normal statutory rate primarily as a result of tax-exempt investment income.

As a result of the factors mentioned above, net income increased $36.3 million as compared to the 2011 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.  Readers are     encouraged to review the Company’s annual report for its full statement regarding forward-looking information.
 
 
 
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Critical Accounting Policies

There have been no changes in the Company's critical accounting policies as disclosed in the Form 10-K filed for the year ended December 31, 2011.


Concentrations of Credit Risk

The insurance subsidiaries cede portions of their gross premiums to numerous reinsurers under quota share and excess of loss treaties as well as facultative placements.  These reinsurers assume commensurate portions of the risk of loss covered by the contracts.  As losses are reported and reserved, portions of the gross losses attributable to reinsurers are established as receivable assets and losses incurred are reduced.  At June 30, 2012, amounts due from reinsurers on paid and unpaid losses, are estimated to total approximately $122 million.  Of this total, approximately $46 million (38%) represents the Company’s provision for incurred but not reported losses and loss adjustment expenses attributable to reinsurers.  Because of the large policy limits reinsured by the Company, the ultimate amount of incurred but not reported losses and loss adjustment expenses attributable to reinsurers could vary significantly from the estimate provided; however, such variance would not result in changes in net claim losses incurred by the Company.

At June 30, 2012, limited partnership investments include approximately $36.5 million consisting of three partnerships which are managed by organizations in which certain of the Company’s directors are officers, directors, general partners or owners.  Each of these investments contains profit sharing agreements to the affiliated organizations.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our exposure to market risk since the disclosure in our Form 10-K for the year ended December 31, 2011.


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.

(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.

 
 
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PART II – OTHER INFORMATION


ITEM 5. OTHER INFORMATION

At our Annual Meeting of Shareholders held on May 8, 2012, shareholders voted on the following proposals:

         
WITHHOLD
 
 
 FOR
 
AGAINST
 
 (ABSTAIN)
 
Advisory vote to approve executive compensation
      2,196,857
 
           779
 
                2,939
 
To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2011
      2,109,234
 
                91,341
 
                  0
 

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

Each of the above matters submitted to a vote of shareholders was described in greater detail in the definitive proxy soliciting materials which were sent to shareholders and were filed with the Commission on April 2, 2012.


ITEM 6 (a)  EXHIBITS

Number and caption from Exhibit

Table of Regulation S-K Item 601                                                                                                 Exhibit No.


(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)           Certification of CEO and CFO                                                                           EXHIBIT 32
pursuant to 18 U.S.C. 1350, as                                                                           Certification of CEO and CFO
adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002

 
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SIGNATURES



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






 BALDWIN & LYONS, INC.





Date     August 7, 2012                                                                By  /s/ Joseph J. DeVito                           
Joseph J. DeVito, CEO and President






Date     August 7, 2012                                                                By  /s/ G. Patrick Corydon
G. Patrick Corydon,
Executive Vice President – Finance
(Principal Financial and
  Accounting Officer)


 






 
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                                                                             BALDWIN & LYONS, INC.

                                                          Form 10-Q for the fiscal quarter ended June 30, 2012



                                                                                INDEX TO EXHIBITS




Begins on sequential
page number of Form
Exhibit Number                                                                                 10-Q           _


EXHIBIT 31.1                                                                                 28
Certification of CEO
pursuant to Section 302 of the
Sarbanes-Oxley Act

EXHIBIT 31.2                                                                                 30
Certification of CFO
pursuant to Section 302 of the
Sarbanes-Oxley Act

EXHIBIT 32                                                                                  32
Certification of CEO and CFO
pursuant to 18 U.S.C. 1350,
as adopted pursuant to Section
906 of the Sarbanes-Oxley Act

 
 
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