10-Q

 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

                                                                                                                                                                                                                                     September 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 November 1, 2012:

TITLE OF CLASS                                                              NUMBER OF SHARES OUTSTANDING

  Common Stock, No Par Value:

Class A (voting)                                                                                               2,623,109

Class B (nonvoting)                                                                                       12,268,919

Index to Exhibits located on page 27.

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PART I – FINANCIAL INFORMATION

ITEM 1  FINANCIAL STATEMENTS

Baldwin & Lyons, Inc. and Subsidiaries
Unaudited Consolidated Balance Sheets
(in thousands, except share data)
	September 30		December 31
	2012		2011
Assets
Investments:
Fixed maturities	$	443,584	$	409,460
Equity securities		103,882		88,085
Limited partnerships		59,237		54,705
Short-term		3,580		3,675
		610,283		555,925
Cash and cash equivalents		65,231		89,726
Accounts receivable		79,985		74,094
Reinsurance recoverable		135,313		138,404
Other assets		33,816		36,672
Current federal income taxes		10,582		3,354
Deferred federal income taxes		-		7,119
	$	935,210	$	905,294
Liabilities and shareholders' equity
Reserves for losses and loss expenses	$	410,488	$	421,556
Reserves for unearned premiums		37,674		39,919
Short-term borrowings		10,000		10,000
Accounts payable and accrued expenses		124,016		114,758
Deferred federal income taxes		8,674		-
		590,852		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 - 12,268,919; 2011 - 12,225,348		523		522
Additional paid-in capital		49,753		48,751
Unrealized net gains on investments		34,480		26,592
Retained earnings		259,490		243,084
		344,358		319,061
	$	935,210	$	905,294

See notes to condensed consolidated financial statements.

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Baldwin & Lyons, Inc. and Subsidiaries
Unaudited Consolidated Statements of Operations
(in thousands, except per share data)
	Three Months Ended						Nine Months Ended
	September 30						September 30
	2012			2011			2012			2011
Revenues
Net premiums earned	$	54,853		$	60,429		$	176,059		$	180,374
Net investment income		2,343			2,779			7,196			8,076
Commissions and other income		1,263			1,421			4,390			4,594
Net realized gains (losses) on investments, excluding
impairment losses		9,192			(16,084	)		9,465			(19,398	)
Total other-than-temporary impairment losses on investments		(411	)		(1,376	)		(756	)		(1,494	)
Net realized gains (losses) on investments		8,781			(17,460	)		8,709			(20,892	)
		67,240			47,169			196,354			172,152
Expenses
Losses and loss expenses incurred		30,477			48,637			99,119			169,476
Other operating expenses		19,209			18,713			57,423			55,266
		49,686			67,350			156,542			224,742
Income (loss) before federal income taxes		17,554			(20,181	)		39,812			(52,590	)
Federal income taxes (benefits)		5,867			(7,210	)		12,569			(18,917	)
Net income (loss)	$	11,687		$	(12,971	)	$	27,243		$	(33,673	)
Per share data:
Basic and diluted earnings (losses)	$	.78		$	(.87	)	$	1.83		$	(2.27	)
Dividends paid to shareholders	$	.25		$	.25		$	.75		$	.75
Reconciliation of shares outstanding:
Average shares outstanding - basic		14,846			14,826			14,836			14,816
Dilutive effect of share equivalents		21			11			20			19
Average shares outstanding - diluted		14,867			14,837			14,856			14,835

See notes to condensed consolidated financial statements.

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Baldwin & Lyons, Inc. and Subsidiaries
Unaudited Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
	Three Months Ended					Nine Months Ended
	September 30					September 30
	2012		2011			2012		2011
Net income (loss)	$	11,687	$	(12,971	)	$	27,243	$	(33,673	)
Other comprehensive income (loss), net of tax:
Unrealized net gains (losses) on securities:
Unrealized holding net gains (losses) arising during the period		6,104		(17,042	)		9,107		(12,085	)
Less: reclassification adjustment for net gains (losses)
included in net income (loss)		1,617		(909	)		1,220		226
		4,487		(16,133	)		7,887		(12,311	)
Foreign currency translation adjustments		362		(709	)		343		(421	)
Other comprehensive income (loss)		4,849		(16,842	)		8,230		(12,732	)
Comprehensive income (loss)	$	16,536	$	(29,813	)	$	35,473	$	(46,405	)

See notes to condensed consolidated financial statements.

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Baldwin & Lyons, Inc. and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
(in thousands)
	Nine Months Ended
	September 30
	2012			2011
Net cash provided by operating activities	$	24,242		$	44,589
Investing activities:
Purchases of available-for-sale investments		(268,842	)		(258,365	)
Purchases of limited partnership interests		(1,538	)		-
Proceeds from sales or maturities
of available-for-sale investments		230,272			247,322
Net sales (purchases) of short-term investments		95			(919	)
Other investing activities		2,113			(1,565	)
Net cash used in investing activities		(37,900	)		(13,527	)
Financing activities:
Dividends paid to shareholders		(11,180	)		(11,150	)
Repayment on line of credit		-			(5,000	)
Net cash used in financing activities		(11,180	)		(16,150	)
Effect of foreign exchange rates on cash and cash equivalents		343			(421	)
Increase (decrease) in cash and cash equivalents		(24,495	)		14,491
Cash and cash equivalents at beginning of period		89,726			38,223
Cash and cash equivalents at end of period	$	65,231		$	52,714

See notes to condensed consolidated financial statements.

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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 consolidated statements of operations, its proportionate share of the investee’s unrealized as well as realized investment gains or losses.

Other investments, if any, are carried at either fair 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).

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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.

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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 has included the additional disclosures required for fair value measurements in this report.

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.

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Notes to Condensed Unaudited Consolidated Financial Statements (continued)

(2) Investments:

The following is a summary of available-for-sale securities at September 30, 2012 and December 31, 2011:

										Net
			Cost or		Gross		Gross			Unrealized
	Fair		Amortized		Unrealized		Unrealized			Gains
	Value		Cost		Gains		Losses			(Losses)
September 30, 2012:
U.S. government obligations	$	70,686	$	70,640	$	70	$	(24	)	$	46
Residential mortgage-backed securities		16,808		16,403		569		(164	)		405
Commercial mortgage-backed securities		14,717		14,153		698		(134	)		564
States and municipal obligations		195,300		194,211		1,142		(53	)		1,089
Corporate securities		124,240		121,860		3,455		(1,075	)		2,380
Foreign government obligations		21,833		21,466		460		(93	)		367
Total fixed maturities		443,584		438,733		6,394		(1,543	)		4,851
Equity securities:
Financial institutions		11,731		5,699		6,187		(155	)		6,032
Industrial & Miscellaneous		92,151		49,989		43,435		(1,273	)		42,162
Total equity securities		103,882		55,688		49,622		(1,428	)		48,194
Total available-for-sale securities	$	547,466	$	494,421	$	56,016	$	(2,971	)		53,045
							Applicable federal income taxes				(18,565	)
							Net unrealized gains - net of tax			$	34,480
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

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Notes to Condensed Unaudited Consolidated Financial Statements (continued)

The Company has six and three other-than-temporarily impaired fixed maturity securities at September 30, 2012 and December 31, 2011, respectively, of which, three and one of these investments have other-than-temporary impairment losses recognized in accumulated other comprehensive income as of September 30, 2012 and December 31, 2011, respectively.

The following table summarizes, for fixed maturity and equity security investments in an unrealized loss position at September 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.

	September 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		129	$	70,996	$	(943	)		206	$	86,470	$	(2,303	)
Greater than 12 months		43		8,701		(600	)		44		11,930		(930	)
Total fixed maturities		172		79,697		(1,543	)		250		98,400		(3,233	)
Equity securities:
12 months or less		11		4,686		(365	)		35		8,317		(1,275	)
Greater than 12 months		23		7,485		(1,063	)		4		216		(30	)
Total equity securities		34		12,171		(1,428	)		39		8,533		(1,305	)
Total fixed maturity and equity securities		206	$	91,868	$	(2,971	)		289	$	106,933	$	(4,538	)

The fair value and the cost or amortized cost of fixed maturity investments, at September 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	$	160,953	$	160,557
Excess of one year to five years		203,862		201,413
Excess of five years to ten years		32,107		31,611
Excess of ten years		3,167		2,990
Total maturities		400,089		396,571
Asset-backed securities		43,495		42,162
	$	443,584	$	438,733

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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 consolidated statements of operations.

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2012			2011			2012			2011
Fixed maturities:
Gross gains	$	1,508		$	1,572		$	2,850		$	3,730
Gross losses		(801	)		(2,048	)		(2,952	)		(3,917	)
Net realized gains (losses)		707			(476	)		(102	)		(187	)
Equity securities:
Gross gains		2,132			272			2,807			2,501
Gross losses		(353	)		(1,195	)		(828	)		(1,968	)
Net realized gains (losses)		1,779			(923	)		1,979			533
Limited partnerships - net gain (loss)		6,295			(16,061	)		6,832			(21,238	)
Totals	$	8,781		$	(17,460	)	$	8,709		$	(20,892	)

Net realized gains (losses) activity for investments, as shown in the previous table, are further detailed as follows:

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2012			2011			2012			2011
Realized net gains on the disposal of securities	$	1,659		$	1,312		$	1,454		$	3,356
Mark-to-market adjustment		456			(1,353	)		144			(1,998	)
Equity in gains (losses) of limited partnership
investments - realized and unrealized		6,295			(16,061	)		6,832			(21,238	)
Impairment:
Write-downs based upon objective criteria		(411	)		(1,376	)		(756	)		(1,494	)
Recovery of prior write-downs
upon sale or disposal		782			18			1,035			482
Totals	$	8,781		$	(17,460	)	$	8,709		$	(20,892	)

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.

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Notes to Condensed Unaudited Consolidated Financial Statements (continued)

The income (loss) from limited partnerships for the quarter and year-to-date periods ending September 30, 2012 includes an estimated $5,642 net unrealized gains and $9,503 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 September 30, 2012 includes approximately $5,336 of net unrealized gains reported to the Company as part of the underlying assets of the various limited partnerships. Shareholders’ equity at September 30, 2012 includes approximately $19,786, 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 September 30:
Premiums ceded to reinsurers	$	27,110	$	21,699
Losses and loss expenses
ceded to reinsurers		21,338		9,509
Commissions from reinsurers		3,550		2,976
Nine months ended September 30:
Premiums ceded to reinsurers		76,329		64,145
Losses and loss expenses
ceded to reinsurers		40,475		35,338
Commissions from reinsurers		10,523		8,291

(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.

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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 September 30:
Property and Casualty Insurance	$	68,072	$	42,972	$	5,089	$	65,419	$	45,833	$	5,522
Reinsurance		13,165		11,881		5,539		15,072		14,596		(7,737	)
Totals	$	81,237	$	54,853	$	10,628	$	80,491	$	60,429	$	(2,215	)
Nine months ended September 30:
Property and Casualty Insurance	$	208,058	$	139,048	$	18,871	$	204,832	$	138,703	$	13,122
Reinsurance		42,085		37,011		17,013		43,821		41,671		(42,956	)
Totals	$	250,143	$	176,059	$	35,884	$	248,653	$	180,374	$	(29,834	)

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

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2012			2011			2012			2011
Profit (Loss):
Segment profit (loss)	$	10,628		$	(2,215	)	$	35,884		$	(29,834	)
Net investment income		2,343			2,779			7,196			8,076
Net gains (losses) on investments		8,781			(17,460	)		8,709			(20,892	)
Corporate expenses		(4,198	)		(3,285	)		(11,977	)		(9,940	)
Income (loss) before federal income taxes	$	17,554		$	(20,181	)	$	39,812		$	(52,590	)

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.

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Notes to Condensed Unaudited Consolidated Financial Statements (continued)

(5) 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 September 30, 2012 and December 31, 2011.  At September 30, 2012, the effective interest rate was 1.12%.  The Company has $20,000 remaining unused under the line of credit at September 30, 2012. 

(6) Taxes:

As of September 30, 2012, the Company’s 2009 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)

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Notes to Condensed Unaudited Consolidated Financial Statements (continued)

(7) 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 September 30, 2012:
Description	Total		Level 1		Level 2		Level 3
U.S. government obligations	$	70,686	$	70,686	$	-	$	-
Residential mortgage-backed securities		16,808		-		16,808		-
Commercial mortgage-backed securities		14,717		-		14,717		-
State and municipal obligations		195,300		-		195,300		-
Corporate securities		122,628		-		108,682		13,946
Options embedded in convertible securities		1,612		-		1,612		-
Foreign government obligations		21,833		-		21,833		-
Total fixed maturities		443,584		70,686		358,952		13,946
Equity securities		103,882		103,882		-		-
Short term		3,580		3,580		-		-
Cash equivalents		62,903		-		62,903		-
	$	613,949	$	178,148	$	421,855	$	13,946

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 1 or Level 2 inputs for the determination of fair value to facilitate fair value measurements and disclosures. U.S. government obligations represent Level 1 securities, while Level 2 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 1 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 nine months ended September 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)		140			387
Purchases		400			6,522
Settlements		(3,644	)		(7,101	)
End of period balance	$	13,946		$	17,050

There were no transfers of assets between Level 1 and Level 2 during the nine months ended September 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 reserves for losses and loss expenses 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 premiums 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 3.

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 September 30, 2012 and December 31, 2011 are as follows:

	Carrying		Fair Value
	Value		Level 1		Level 2		Level 3		Total
September 30, 2012
Assets:   Limited partnerships	$	59,237	$	-	$	-	$	59,237	$	59,237
Liabilities:   Short-term borrowings		10,000		-		10,000		-		10,000
December 31, 2011
Assets:   Limited partnerships		54,705		-		-		54,705		54,705
Liabilities:   Short-term borrowings		10,000		-		10,000		-		10,000

(8) 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)

 (9) 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 nine months of 2012, the Company experienced positive cash flow from operations totaling $24.2 million which compares to positive cash flow from operations of $44.6 million generated during the first nine months of 2011.  The decrease in cash flow from the 2011 period is primarily due to an increased level of gross premiums being ceded resulting from changes in reinsurance programs, increased loss payments associated with the settlement of 2011 catastrophe losses and increased federal income tax estimated payments.

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 3.55 years at September 30, 2012, which is substantially shorter than the average life of the Company’s liabilities.

Financing activity for the first nine months of 2012 included regular dividend payments to shareholders of $11.2 million ($.75 per share).

The Company’s assets at September 30, 2012 included $62.9 million in investments classified as cash equivalents that were readily convertible to cash without significant market penalty.  An additional $162.3 million of fixed maturity investments (at par) will mature within the twelve-month period following September 30, 2012.  The Company believes that these liquid investments are more than sufficient to provide for projected claim payments and operating cost demands.

- 19 -

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 September 30, 2012, $40.5 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 $210.6 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 $7.5 million at September 30, 2012.

The Company’s annualized net premium writing to surplus ratio for the first nine months of 2012 was approximately 69%.  Regulatory guidelines generally allow for writings of between 100% and 300% ofsurplus, 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 Third Quarter, 2012 to Third Quarter, 2011

Direct and assumed premiums written during the third quarter of 2012 increased $0.7 million (1.0%) and net premiums earned decreased $5.6 million (9.2%) as compared to the same period of 2011.  The Company’s Property and Casualty Insurance segment reported an increase in premium written of 4.1% but a decrease in earned premiums of 6.2% while the Reinsurance segment reported a decrease in premium written of 12.7% and a decrease in premium earned of 18.6%.  In the Property and Casualty Insurance segment, direct and assumed premiums written were impacted by an ongoing reduction in commercial multi-peril business combined with lower personal automobile premium resulting from rate increases implemented during 2012; however, these decreases were more than 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 September 30 (dollars in thousands):

- 20 -

	Direct and Assumed Premium Written		Net Premium Written		Net Premium Earned
2012
Property & Casualty Insurance	$	68,072	$	41,488	$	42,972
Reinsurance		13,165		12,586		11,881
Totals	$	81,237	$	54,074	$	54,853
2011
Property & Casualty Insurance	$	65,419	$	44,606	$	45,833
Reinsurance		15,072		14,594		14,596
Totals	$	80,491	$	59,200	$	60,429

Premium ceded to reinsurers on insurance business produced by the Property and Casualty Insurance segment averaged 39.1% of premium written for the current quarter compared to 31.8% in the 2011 third quarter, with the increase reflective of changes in treaty structures whereby the Company retains lower amounts of risk and premium as well as the impact of the proportion of new products which are ceded at generally higher proportions than legacy products.  In addition, a single, non-recurring reinsurance transaction related to a retrospectively-rated reinsurance contract added 1.7% to the current quarter ceded rate.

Net investment income, before tax, during the third quarter of 2012 was 15.7% lower than the third quarter of 2011 due primarily to lower available interest rates for bonds.  Pre-tax bond yields averaged 2.4% during the current quarter compared to 2.8% for the prior year period.  Overall after-tax yields decreased from 1.8% to 1.6% while average invested funds, impacted by positive cash flow, were over 2% higher.  The short term nature of the Company’s fixed income portfolio is expected to place downward pressure on investment income for the foreseeable future.

The third quarter 2012 net realized investment gains of $8.8 million resulted primarily from $6.3 million in gains reported by limited partnerships, $1.7 million reported from direct trading and $0.5 million net reversals of mark-to-market adjustments.  Comparative third quarter 2011 overall net realized investment losses were $17.5 million, reflective of unfavorable global market results.  Investment gains and 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 third quarter of 2012 were $18.2 million lower than that experienced during the third 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:

- 21 -

	2012			2011
Property and Casualty Insurance		65.0	%		66.2	%
Reinsurance		21.6			125.3
Total		55.6			80.5

Other operating expenses, for the third quarter of 2012, increased $0.5 million, or 2.7%, from the third quarter of 2011.  The ratio of consolidated other operating expenses to operating revenue was 32.9% during the third quarter of 2012 compared to 29.0% for the 2011 third quarter.

The effective federal tax rate on consolidated income for the third quarter of 2012 was 33.4%.  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 $24.7 million during the third quarter of 2012 as compared to the 2011 period.

Comparison of Nine Months Ended September 30, 2012 to Nine Months Ended September 30, 2011

Direct and assumed premiums written during the first nine months of 2012 increased $1.5 million (0.6%) while net premiums earned decreased $4.3 million (2.4%) 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 1.6% and 0.2%, respectively while the Reinsurance segment reported a decrease in written and earned premium of 4.0% and 11.2%, respectively.  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 nine months ended September 30 (dollars in thousands):

	Direct and Assumed Premium Written		Net Premium Written		Net Premium Earned
2012
Property & Casualty Insurance	$	208,058	$	133,653	$	139,048
Reinsurance		42,085		40,349		37,011
Totals	$	250,143	$	174,002	$	176,059
2011
Property & Casualty Insurance	$	204,832	$	143,536	$	138,703
Reinsurance		43,821		42,387		41,671
Totals	$	248,653	$	185,923	$	180,374

Premium ceded to reinsurers on insurance business produced by the Property and Casualty Insurance segment averaged 35.8% of premium written for the current year period compared to 29.9% 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.

- 22 -

Net investment income, before tax, during the first nine months of 2012 was 10.9% lower than the first nine 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 approximately 5% higher in the 2012 period as the result of positive cash flow.

Net realized investment gains for the first nine months of 2012 were $8.7 million before tax, resulting primarily from $6.8 million in gains reported by limited partnerships and $1.5 million in direct trading gains.  Realized investment losses were $20.9 million for the same period of 2011.

Losses and loss expenses incurred during the first nine months of 2012 were $70.4 million lower than that experienced during the first nine months of 2011 which included $65.1 million in 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	%		69.0	%
Reinsurance		23.7			177.1
Total		56.3			94.0

Other operating expenses, for the first nine months of 2012, increased $2.2 million, or 3.9%, from the 2011 nine-month period.  The ratio of consolidated other operating expenses to operating revenue was 30.6% during the 2012 period compared to 28.6% for the 2011 period.

The effective federal tax rate on consolidated income for the first nine months of 2012 was 31.6%.  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 $60.9 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.

- 23 -

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 September 30, 2012, amounts due from reinsurers on paid and unpaid losses, are estimated to total approximately $129 million.  Of this total, approximately $39 million (30%) 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, absent the inability to collect from reinsurers, such variance would not result in changes in net claim losses incurred by the Company.

At September 30, 2012, limited partnership investments include approximately $40.6 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.

- 24 -

PART II – OTHER INFORMATION

ITEM 5. OTHER INFORMATION

Nothing to report.

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

- 25 -

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 6, 2012                                                                       By /s/ Joseph J. DeVito                                                                                                   

               Joseph J. DeVito, CEO and President

Date     November 6, 2012                                                                       By /s/ G. Patrick Corydon                            

               G. Patrick Corydon,

               Executive Vice President – Finance

               (Principal Financial and

                 Accounting Officer)

- 26 -

BALDWIN & LYONS, INC.

Form 10-Q for the fiscal quarter ended September 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

- 27 -

EX-31.1

Exhibit 31.1

CERTIFICATION

PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Joseph J. DeVito, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Baldwin & Lyons, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

- 28 -

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6, 2012

/s/ Joseph J. DeVito                                                                                                

Joseph J. DeVito

Chief Executive Officer and President

- 29 -

EX-31.2

Exhibit 31.2

CERTIFICATION

PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, G. Patrick Corydon, certify that:

1. I have reviewed this report on Form 10-Q of Baldwin & Lyons, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

- 30 -

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 6, 2012

/s/ G. Patrick Corydon                                 

G. Patrick Corydon

Executive Vice President and Chief Financial Officer

- 31 -

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Baldwin & Lyons, Inc. (the "Company") on Form 10-Q for the quarterly period ending September 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Joseph J. DeVito, Chief Executive Officer and President of the Company, and G. Patrick Corydon, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to our knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

November 6, 2012

/s/ Joseph J. DeVito                              

Joseph J. DeVito

Chief Executive Officer and President

/s/ G. Patrick Corydon                          

G. Patrick Corydon

Executive Vice President and Chief Financial Officer

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Debt (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Debt [Abstract]
Revolving line of credit limit	$ 30,000
Line of credit facility expiration date	Sep. 14, 2014
Outstanding drawings on line of credit	10,000	10,000
Effective interest rate (in hundredths)	1.12%
Remaining unused amount under line of credit	$ 20,000

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Reinsurance

9 Months Ended

Sep. 30, 2012

Reinsurance [Abstract]

Reinsurance

(3) Reinsurance:

The following table summarizes the Company's transactions with reinsurers for the 2012 and 2011 comparative periods.

	2012		2011
Quarter ended September 30:
Premiums ceded to reinsurers	$	27,110	$	21,699
Losses and loss expenses
ceded to reinsurers		21,338		9,509
Commissions from reinsurers		3,550		2,976
Nine months ended September 30:
Premiums ceded to reinsurers		76,329		64,145
Losses and loss expenses
ceded to reinsurers		40,475		35,338
Commissions from reinsurers		10,523		8,291

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Investments

9 Months Ended

Sep. 30, 2012

Investments [Abstract]

Investments

(2) Investments:

The following is a summary of available-for-sale securities at September 30, 2012 and December 31, 2011:

										Net
			Cost or		Gross		Gross			Unrealized
	Fair		Amortized		Unrealized		Unrealized			Gains
	Value		Cost		Gains		Losses			(Losses)
September 30, 2012:
U.S. government obligations	$	70,686	$	70,640	$	70	$	(24	)	$	46
Residential mortgage-backed securities		16,808		16,403		569		(164	)		405
Commercial mortgage-backed securities		14,717		14,153		698		(134	)		564
States and municipal obligations		195,300		194,211		1,142		(53	)		1,089
Corporate securities		124,240		121,860		3,455		(1,075	)		2,380
Foreign government obligations		21,833		21,466		460		(93	)		367
Total fixed maturities		443,584		438,733		6,394		(1,543	)		4,851
Equity securities:
Financial institutions		11,731		5,699		6,187		(155	)		6,032
Industrial & Miscellaneous		92,151		49,989		43,435		(1,273	)		42,162
Total equity securities		103,882		55,688		49,622		(1,428	)		48,194
Total available-for-sale securities	$	547,466	$	494,421	$	56,016	$	(2,971	)		53,045
							Applicable federal income taxes				(18,565	)
							Net unrealized gains - net of tax			$	34,480
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

The Company has six and three other-than-temporarily impaired fixed maturity securities at September 30, 2012 and December 31, 2011, respectively, of which, three and one of these investments have other-than-temporary impairment losses recognized in accumulated other comprehensive income as of September 30, 2012 and December 31, 2011, respectively.

The following table summarizes, for fixed maturity and equity security investments in an unrealized loss position at September 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.

	September 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		129	$	70,996	$	(943	)		206	$	86,470	$	(2,303	)
Greater than 12 months		43		8,701		(600	)		44		11,930		(930	)
Total fixed maturities		172		79,697		(1,543	)		250		98,400		(3,233	)
Equity securities:
12 months or less		11		4,686		(365	)		35		8,317		(1,275	)
Greater than 12 months		23		7,485		(1,063	)		4		216		(30	)
Total equity securities		34		12,171		(1,428	)		39		8,533		(1,305	)
Total fixed maturity and equity securities		206	$	91,868	$	(2,971	)		289	$	106,933	$	(4,538	)

The fair value and the cost or amortized cost of fixed maturity investments, at September 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	$	160,953	$	160,557
Excess of one year to five years		203,862		201,413
Excess of five years to ten years		32,107		31,611
Excess of ten years		3,167		2,990
Total maturities		400,089		396,571
Asset-backed securities		43,495		42,162
	$	443,584	$	438,733

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

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2012			2011			2012			2011
Fixed maturities:
Gross gains	$	1,508		$	1,572		$	2,850		$	3,730
Gross losses		(801	)		(2,048	)		(2,952	)		(3,917	)
Net realized gains (losses)		707			(476	)		(102	)		(187	)
Equity securities:
Gross gains		2,132			272			2,807			2,501
Gross losses		(353	)		(1,195	)		(828	)		(1,968	)
Net realized gains (losses)		1,779			(923	)		1,979			533
Limited partnerships - net gain (loss)		6,295			(16,061	)		6,832			(21,238	)
Totals	$	8,781		$	(17,460	)	$	8,709		$	(20,892	)

Net realized gains (losses) activity for investments, as shown in the previous table, are further detailed as follows:

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2012			2011			2012			2011
Realized net gains on the disposal of securities	$	1,659		$	1,312		$	1,454		$	3,356
Mark-to-market adjustment		456			(1,353	)		144			(1,998	)
Equity in gains (losses) of limited partnership
investments - realized and unrealized		6,295			(16,061	)		6,832			(21,238	)
Impairment:
Write-downs based upon objective criteria		(411	)		(1,376	)		(756	)		(1,494	)
Recovery of prior write-downs
upon sale or disposal		782			18			1,035			482
Totals	$	8,781		$	(17,460	)	$	8,709		$	(20,892	)

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.

Notes to Condensed Unaudited Consolidated Financial Statements (continued)

The income (loss) from limited partnerships for the quarter and year-to-date periods ending September 30, 2012 includes an estimated $5,642 net unrealized gains and $9,503 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 September 30, 2012 includes approximately $5,336 of net unrealized gains reported to the Company as part of the underlying assets of the various limited partnerships. Shareholders' equity at September 30, 2012 includes approximately $19,786, net of deferred federal income taxes, of earnings undistributed by limited partnerships.

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Unaudited Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Investments:
Fixed maturities	$ 443,584	$ 409,460
Equity securities	103,882	88,085
Limited partnerships	59,237	54,705
Short-term	3,580	3,675
Total Investments	610,283	555,925
Cash and cash equivalents	65,231	89,726
Accounts receivable	79,985	74,094
Reinsurance recoverable	135,313	138,404
Other assets	33,816	36,672
Current federal income taxes	10,582	3,354
Deferred federal income taxes	0	7,119
Total Assets	935,210	905,294
Liabilities and shareholders' equity
Reserves for losses and loss expenses	410,488	421,556
Reserves for unearned premiums	37,674	39,919
Short-term borrowings	10,000	10,000
Accounts payable and accrued expenses	124,016	114,758
Deferred federal income taxes	8,674	0
Total Liablities	590,852	586,233
Shareholders' equity:
Additional paid-in capital	49,753	48,751
Unrealized net gains on investments	34,480	26,592
Retained earnings	259,490	243,084
Shareholders' equity	344,358	319,061
Total liabilities and shareholders' equity	935,210	905,294
Class A voting [Member]
Shareholders' equity:
Common stock	112	112
Class B non-voting [Member]
Shareholders' equity:
Common stock	$ 523	$ 522

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Unaudited Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Unaudited Consolidated Statements of Cash Flows [Abstract]
Net cash provided by operating activities	$ 24,242	$ 44,589
Investing activities:
Purchases of available-for-sale investments	(268,842)	(258,365)
Purchases of limited partnership interests	(1,538)	0
Proceeds from sales or maturities of available-for-sale investments	230,272	247,322
Net sales (purchases) of short-term investments	95	(919)
Other investing activities	2,113	(1,565)
Net cash used in investing activities	(37,900)	(13,527)
Financing activities:
Dividends paid to shareholders	(11,180)	(11,150)
Repayment on line of credit	0	(5,000)
Net cash used in financing activities	(11,180)	(16,150)
Effect of foreign exchange rates on cash and cash equivalents	343	(421)
Increase (decrease) in cash and cash equivalents	(24,495)	14,491
Cash and cash equivalents at beginning of period	89,726	38,223
Cash and cash equivalents at end of period	$ 65,231	$ 52,714

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Investments (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Schedule of Available-For-Sale Securities [Line Items]
Applicable federal income taxes			$ (18,565)		$ (14,319)
Net unrealized gains - net of tax			34,480		26,592
Number of other than temporarily impaired securities	6	3	6	3
Number of other than temporarily impaired securities loss recognized in accumulated other comprehensive income	3	1	3	1
Available-for-sale securities continuous unrealized loss position [Abstract]
Number of Securities, total	206		206		289
Available-for-sale securities continuous unrealized loss position, Fair Value [Abstract]
Fair value, total	91,868		91,868		106,933
Available-for-sale securities continuous unrealized loss position, aggregate losses [Abstract]
Gross unrealized loss, total	(2,971)		(2,971)		(4,538)
Available-for-sale securities debt maturities fair value [Abstract]
One year or less, Fair Value	160,953		160,953
Excess of one year to five years, Fair Value	203,862		203,862
Excess of five years to ten years, Fair Value	32,107		32,107
Excess of ten years, Fair Value	3,167		3,167
Total maturities, Fair Value	400,089		400,089
Asset-backed securities	43,495		43,495
Available-for-sale securities debt securities current	443,584		443,584
Available-for-sale securities debt maturities amortized cost basis [Abstract]
One year or less, Amortized Cost Basis	160,557		160,557
Excess of one year to five years, Amortized Cost Basis	201,413		201,413
Excess of five years to ten years, Amortized Cost Basis	31,611		31,611
Excess of ten years, Amortized Cost Basis	2,990		2,990
Total maturities, Amortized Cost Basis	396,571		396,571
Asset-backed securities	42,162		42,162
Available-for-sale securities debt maturities amortized cost basis, Total	438,733		438,733
Available-for-sale Securities, Gross Realized Gain (Loss) [Abstract]
Limited partnerships - net gain (loss)	6,295	(16,061)	6,832	(21,238)
Totals	8,781	(17,460)	8,709	(20,892)
Available for sale securities gain loss activity [Abstract]
Realized net gains on the disposal of securities	1,659	1,312	1,454	3,356
Mark-to-market adjustment	456	(1,353)	144	(1,998)
Equity in gains (losses) of limited partnership investments - realized and unrealized	6,295	(16,061)	6,832	(21,238)
Write-downs based upon objective criteria	(411)	(1,376)	(756)	(1,494)
Recovery of prior write-downs upon sale or disposal	782	18	1,035	482
Totals	8,781	(17,460)	8,709	(20,892)
Net unrealized gain (loss) on investments	5,642		9,503
Unrealized losses in limited partnership			5,336
Undistributed earnings of limited partnership, net of taxes	19,786		19,786
U.S. government obligations [Member]
Schedule of Available-For-Sale Securities [Line Items]
Fair Value	70,686		70,686		73,137
Cost or Amortized Cost	70,640		70,640		73,009
Gross Unrealized Gains	70		70		139
Gross Unrealized Losses	(24)		(24)		(11)
Net Unrealized Gains (losses)	46		46		128
Government sponsored entities [Member]
Schedule of Available-For-Sale Securities [Line Items]
Fair Value					349
Cost or Amortized Cost					345
Gross Unrealized Gains					4
Gross Unrealized Losses					0
Net Unrealized Gains (losses)					4
Residential mortgage-backed securities [Member]
Schedule of Available-For-Sale Securities [Line Items]
Fair Value	16,808		16,808		21,872
Cost or Amortized Cost	16,403		16,403		21,778
Gross Unrealized Gains	569		569		619
Gross Unrealized Losses	(164)		(164)		(525)
Net Unrealized Gains (losses)	405		405		94
Commercial mortgage-backed securities [Member]
Schedule of Available-For-Sale Securities [Line Items]
Fair Value	14,717		14,717		11,300
Cost or Amortized Cost	14,153		14,153		11,388
Gross Unrealized Gains	698		698		116
Gross Unrealized Losses	(134)		(134)		(204)
Net Unrealized Gains (losses)	564		564		(88)
States and municipal obligations [Member]
Schedule of Available-For-Sale Securities [Line Items]
Fair Value	195,300		195,300		190,035
Cost or Amortized Cost	194,211		194,211		188,991
Gross Unrealized Gains	1,142		1,142		1,275
Gross Unrealized Losses	(53)		(53)		(231)
Net Unrealized Gains (losses)	1,089		1,089		1,044
Corporate securities [Member]
Schedule of Available-For-Sale Securities [Line Items]
Fair Value	124,240		124,240		91,646
Cost or Amortized Cost	121,860		121,860		91,949
Gross Unrealized Gains	3,455		3,455		1,429
Gross Unrealized Losses	(1,075)		(1,075)		(1,732)
Net Unrealized Gains (losses)	2,380		2,380		(303)
Foreign government obligations [Member]
Schedule of Available-For-Sale Securities [Line Items]
Fair Value	21,833		21,833		21,121
Cost or Amortized Cost	21,466		21,466		21,483
Gross Unrealized Gains	460		460		168
Gross Unrealized Losses	(93)		(93)		(530)
Net Unrealized Gains (losses)	367		367		(362)
Total fixed maturities [Member]
Schedule of Available-For-Sale Securities [Line Items]
Fair Value	443,584		443,584		409,460
Cost or Amortized Cost	438,733		438,733		408,943
Gross Unrealized Gains	6,394		6,394		3,750
Gross Unrealized Losses	(1,543)		(1,543)		(3,233)
Net Unrealized Gains (losses)	4,851		4,851		517
Available-for-sale securities continuous unrealized loss position [Abstract]
Number of Securities Less than 12 months	129		129		206
Number of Securities More than 12 months	43		43		44
Number of Securities, total	172		172		250
Available-for-sale securities continuous unrealized loss position, Fair Value [Abstract]
Fair value, 12 months or less	70,996		70,996		86,470
Fair value, 12 months or longer	8,701		8,701		11,930
Fair value, total	79,697		79,697		98,400
Available-for-sale securities continuous unrealized loss position, aggregate losses [Abstract]
Gross unrealized loss, less than 12 months	(943)		(943)		(2,303)
Gross unrealized loss, 12 months or longer	(600)		(600)		(930)
Gross unrealized loss, total	(1,543)		(1,543)		(3,233)
Available-for-sale Securities, Gross Realized Gain (Loss) [Abstract]
Gross gains	1,508	1,572	2,850	3,730
Gross losses	(801)	(2,048)	(2,952)	(3,917)
Net realized gains (losses)	707	(476)	(102)	(187)
Financial institutions [Member]
Schedule of Available-For-Sale Securities [Line Items]
Fair Value	11,731		11,731		9,428
Cost or Amortized Cost	5,699		5,699		4,955
Gross Unrealized Gains	6,187		6,187		4,778
Gross Unrealized Losses	(155)		(155)		(305)
Net Unrealized Gains (losses)	6,032		6,032		4,473
Industrial & Miscellaneous [Member]
Schedule of Available-For-Sale Securities [Line Items]
Fair Value	92,151		92,151		78,657
Cost or Amortized Cost	49,989		49,989		42,736
Gross Unrealized Gains	43,435		43,435		36,921
Gross Unrealized Losses	(1,273)		(1,273)		(1,000)
Net Unrealized Gains (losses)	42,162		42,162		35,921
Total equity securities [Member]
Schedule of Available-For-Sale Securities [Line Items]
Fair Value	103,882		103,882		88,085
Cost or Amortized Cost	55,688		55,688		47,691
Gross Unrealized Gains	49,622		49,622		41,699
Gross Unrealized Losses	(1,428)		(1,428)		(1,305)
Net Unrealized Gains (losses)	48,194		48,194		40,394
Available-for-sale securities continuous unrealized loss position [Abstract]
Number of Securities Less than 12 months	11		11		35
Number of Securities More than 12 months	23		23		4
Number of Securities, total	34		34		39
Available-for-sale securities continuous unrealized loss position, Fair Value [Abstract]
Fair value, 12 months or less	4,686		4,686		8,317
Fair value, 12 months or longer	7,485		7,485		216
Fair value, total	12,171		12,171		8,533
Available-for-sale securities continuous unrealized loss position, aggregate losses [Abstract]
Gross unrealized loss, less than 12 months	(365)		(365)		(1,275)
Gross unrealized loss, 12 months or longer	(1,063)		(1,063)		(30)
Gross unrealized loss, total	(1,428)		(1,428)		(1,305)
Available-for-sale Securities, Gross Realized Gain (Loss) [Abstract]
Gross gains	2,132	272	2,807	2,501
Gross losses	(353)	(1,195)	(828)	(1,968)
Net realized gains (losses)	1,779	(923)	1,979	533
Total Available-for-Sale Securities [Member]
Schedule of Available-For-Sale Securities [Line Items]
Fair Value	547,466		547,466		497,545
Cost or Amortized Cost	494,421		494,421		456,634
Gross Unrealized Gains	56,016		56,016		45,449
Gross Unrealized Losses	(2,971)		(2,971)		(4,538)
Net Unrealized Gains (losses)	$ 53,045		$ 53,045		$ 40,911

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Reportable Segments (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Segment Reporting Information [Line Items]
Direct and Assumed Premium Written	$ 81,237	$ 80,491	$ 250,143	$ 248,653
Net Premiums Earned	54,853	60,429	176,059	180,374
Segment Profit (Loss)	10,628	(2,215)	35,884	(29,834)
Reconciliation from segment totals to consolidated [Abstract]
Segment Profit (Loss)	10,628	(2,215)	35,884	(29,834)
Net investment income	2,343	2,779	7,196	8,076
Net gains (losses) on investments	8,781	(17,460)	8,709	(20,892)
Corporate expenses	(4,198)	(3,285)	(11,977)	(9,940)
Income (loss) before federal income taxes	17,554	(20,181)	39,812	(52,590)
Property and Casualty Insurance [Member]
Segment Reporting Information [Line Items]
Direct and Assumed Premium Written	68,072	65,419	208,058	204,832
Net Premiums Earned	42,972	45,833	139,048	138,703
Segment Profit (Loss)	5,089	5,522	18,871	13,122
Reconciliation from segment totals to consolidated [Abstract]
Segment Profit (Loss)	5,089	5,522	18,871	13,122
Reinsurance [Member]
Segment Reporting Information [Line Items]
Direct and Assumed Premium Written	13,165	15,072	42,085	43,821
Net Premiums Earned	11,881	14,596	37,011	41,671
Segment Profit (Loss)	5,539	(7,737)	17,013	(42,956)
Reconciliation from segment totals to consolidated [Abstract]
Segment Profit (Loss)	$ 5,539	$ (7,737)	$ 17,013	$ (42,956)

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2012

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

(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 consolidated statements of operations, its proportionate share of the investee's unrealized as well as realized investment gains or losses.

Other investments, if any, are carried at either fair 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).

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.

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 has included the additional disclosures required for fair value measurements in this report.

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.

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Unaudited Consolidated Balance Sheets (Parenthetical) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Class A voting [Member]
Shareholders' equity:
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	3,000,000	3,000,000
Common stock, shares outstanding (in shares)	2,623,109	2,623,109
Class B non-voting [Member]
Shareholders' equity:
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	20,000,000	20,000,000
Common stock, shares outstanding (in shares)	12,268,919	12,225,348

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Investments (Tables)

9 Months Ended

Sep. 30, 2012

Investments [Abstract]

Summary of available for sale securities

The following is a summary of available-for-sale securities at September 30, 2012 and December 31, 2011:

										Net
			Cost or		Gross		Gross			Unrealized
	Fair		Amortized		Unrealized		Unrealized			Gains
	Value		Cost		Gains		Losses			(Losses)
September 30, 2012:
U.S. government obligations	$	70,686	$	70,640	$	70	$	(24	)	$	46
Residential mortgage-backed securities		16,808		16,403		569		(164	)		405
Commercial mortgage-backed securities		14,717		14,153		698		(134	)		564
States and municipal obligations		195,300		194,211		1,142		(53	)		1,089
Corporate securities		124,240		121,860		3,455		(1,075	)		2,380
Foreign government obligations		21,833		21,466		460		(93	)		367
Total fixed maturities		443,584		438,733		6,394		(1,543	)		4,851
Equity securities:
Financial institutions		11,731		5,699		6,187		(155	)		6,032
Industrial & Miscellaneous		92,151		49,989		43,435		(1,273	)		42,162
Total equity securities		103,882		55,688		49,622		(1,428	)		48,194
Total available-for-sale securities	$	547,466	$	494,421	$	56,016	$	(2,971	)		53,045
							Applicable federal income taxes				(18,565	)
							Net unrealized gains - net of tax			$	34,480
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

Schedule of unrealized loss on investments

The following table summarizes, for fixed maturity and equity security investments in an unrealized loss position at September 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.

	September 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		129	$	70,996	$	(943	)		206	$	86,470	$	(2,303	)
Greater than 12 months		43		8,701		(600	)		44		11,930		(930	)
Total fixed maturities		172		79,697		(1,543	)		250		98,400		(3,233	)
Equity securities:
12 months or less		11		4,686		(365	)		35		8,317		(1,275	)
Greater than 12 months		23		7,485		(1,063	)		4		216		(30	)
Total equity securities		34		12,171		(1,428	)		39		8,533		(1,305	)
Total fixed maturity and equity securities		206	$	91,868	$	(2,971	)		289	$	106,933	$	(4,538	)

Investments classified by contractual maturity date

The fair value and the cost or amortized cost of fixed maturity investments, at September 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	$	160,953	$	160,557
Excess of one year to five years		203,862		201,413
Excess of five years to ten years		32,107		31,611
Excess of ten years		3,167		2,990
Total maturities		400,089		396,571
Asset-backed securities		43,495		42,162
	$	443,584	$	438,733

Realized gain (Loss) on investments

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

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2012			2011			2012			2011
Fixed maturities:
Gross gains	$	1,508		$	1,572		$	2,850		$	3,730
Gross losses		(801	)		(2,048	)		(2,952	)		(3,917	)
Net realized gains (losses)		707			(476	)		(102	)		(187	)
Equity securities:
Gross gains		2,132			272			2,807			2,501
Gross losses		(353	)		(1,195	)		(828	)		(1,968	)
Net realized gains (losses)		1,779			(923	)		1,979			533
Limited partnerships - net gain (loss)		6,295			(16,061	)		6,832			(21,238	)
Totals	$	8,781		$	(17,460	)	$	8,709		$	(20,892	)

Schedule of realized gain (Loss)

Net realized gains (losses) activity for investments, as shown in the previous table, are further detailed as follows:

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2012			2011			2012			2011
Realized net gains on the disposal of securities	$	1,659		$	1,312		$	1,454		$	3,356
Mark-to-market adjustment		456			(1,353	)		144			(1,998	)
Equity in gains (losses) of limited partnership
investments - realized and unrealized		6,295			(16,061	)		6,832			(21,238	)
Impairment:
Write-downs based upon objective criteria		(411	)		(1,376	)		(756	)		(1,494	)
Recovery of prior write-downs
upon sale or disposal		782			18			1,035			482
Totals	$	8,781		$	(17,460	)	$	8,709		$	(20,892	)

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.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Nov. 01, 2012 Common Class A [Member]	Nov. 01, 2012 Common Class B [Member]
Entity Information [Line Items]
Entity Registrant Name	BALDWIN & LYONS INC
Entity Central Index Key	0000009346
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		2,623,109	12,268,919
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2012

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Reinsurance (Tables)

9 Months Ended

Sep. 30, 2012

Reinsurance [Abstract]

Reinsurance

The following table summarizes the Company's transactions with reinsurers for the 2012 and 2011 comparative periods.

	2012		2011
Quarter ended September 30:
Premiums ceded to reinsurers	$	27,110	$	21,699
Losses and loss expenses
ceded to reinsurers		21,338		9,509
Commissions from reinsurers		3,550		2,976
Nine months ended September 30:
Premiums ceded to reinsurers		76,329		64,145
Losses and loss expenses
ceded to reinsurers		40,475		35,338
Commissions from reinsurers		10,523		8,291

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Unaudited Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Revenues
Net premiums earned	$ 54,853	$ 60,429	$ 176,059	$ 180,374
Net investment income	2,343	2,779	7,196	8,076
Commissions and other income	1,263	1,421	4,390	4,594
Net realized gains (losses) on investments, excluding impairment losses	9,192	(16,084)	9,465	(19,398)
Total other-than-temporary impairment losses on investments	(411)	(1,376)	(756)	(1,494)
Net realized gains (losses) on investments	8,781	(17,460)	8,709	(20,892)
Total revenue	67,240	47,169	196,354	172,152
Expenses
Losses and loss expenses incurred	30,477	48,637	99,119	169,476
Other operating expenses	19,209	18,713	57,423	55,266
Total expenses	49,686	67,350	156,542	224,742
Income (loss) before federal income taxes	17,554	(20,181)	39,812	(52,590)
Federal income taxes (benefits)	5,867	(7,210)	12,569	(18,917)
Net income (loss)	$ 11,687	$ (12,971)	$ 27,243	$ (33,673)
Per share data:
Basic and diluted earnings (losses) (in dollars per share)	$ 0.78	$ (0.87)	$ 1.83	$ (2.27)
Dividends paid to shareholders (in dollars per share)	$ 0.25	$ 0.25	$ 0.75	$ 0.75
Reconciliation of shares outstanding:
Average shares outstanding - basic (in shares)	14,846	14,826	14,836	14,816
Dilutive effect of share equivalents (in shares)	21	11	20	19
Average shares outstanding - diluted (in shares)	14,867	14,837	14,856	14,835

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Taxes

9 Months Ended

Sep. 30, 2012

Taxes [Abstract]

Taxes

(6) Taxes:

As of September 30, 2012, the Company's 2009 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)

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Debt

9 Months Ended

Sep. 30, 2012

Debt [Abstract]

Debt

(5) 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 September 30, 2012 and December 31, 2011. At September 30, 2012, the effective interest rate was 1.12%. The Company has $20,000 remaining unused under the line of credit at September 30, 2012.

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Reinsurance (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Reinsurance [Abstract]
Premiums ceded to reinsurers	$ 27,110	$ 21,699	$ 76,329	$ 64,145
Losses and loss expenses ceded to reinsurers	21,338	9,509	40,475	35,338
Commissions from reinsurers	$ 3,550	$ 2,976	$ 10,523	$ 8,291

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Reportable Segments (Tables)

9 Months Ended

Sep. 30, 2012

Reportable Segments [Abstract]

Schedule of segment reporting information by segment

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 September 30:
Property and Casualty Insurance	$	68,072	$	42,972	$	5,089	$	65,419	$	45,833	$	5,522
Reinsurance		13,165		11,881		5,539		15,072		14,596		(7,737	)
Totals	$	81,237	$	54,853	$	10,628	$	80,491	$	60,429	$	(2,215	)
Nine months ended September 30:
Property and Casualty Insurance	$	208,058	$	139,048	$	18,871	$	204,832	$	138,703	$	13,122
Reinsurance		42,085		37,011		17,013		43,821		41,671		(42,956	)
Totals	$	250,143	$	176,059	$	35,884	$	248,653	$	180,374	$	(29,834	)

Reconciliation of operating profit (Loss) from segments to consolidated

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

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2012			2011			2012			2011
Profit (Loss):
Segment profit (loss)	$	10,628		$	(2,215	)	$	35,884		$	(29,834	)
Net investment income		2,343			2,779			7,196			8,076
Net gains (losses) on investments		8,781			(17,460	)		8,709			(20,892	)
Corporate expenses		(4,198	)		(3,285	)		(11,977	)		(9,940	)
Income (loss) before federal income taxes	$	17,554		$	(20,181	)	$	39,812		$	(52,590	)

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Subsequent Events

9 Months Ended

Sep. 30, 2012

Subsequent Events [Abstract]

Subsequent Events

(9) 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.

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Fair Value

9 Months Ended

Sep. 30, 2012

Fair Value [Abstract]

Fair Value

(7) 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 September 30, 2012:
Description	Total		Level 1		Level 2		Level 3
U.S. government obligations	$	70,686	$	70,686	$	-	$	-
Residential mortgage-backed securities		16,808		-		16,808		-
Commercial mortgage-backed securities		14,717		-		14,717		-
State and municipal obligations		195,300		-		195,300		-
Corporate securities		122,628		-		108,682		13,946
Options embedded in convertible securities		1,612		-		1,612		-
Foreign government obligations		21,833		-		21,833		-
Total fixed maturities		443,584		70,686		358,952		13,946
Equity securities		103,882		103,882		-		-
Short term		3,580		3,580		-		-
Cash equivalents		62,903		-		62,903		-
	$	613,949	$	178,148	$	421,855	$	13,946

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

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 1 or Level 2 inputs for the determination of fair value to facilitate fair value measurements and disclosures. U.S. government obligations represent Level 1 securities, while Level 2 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 1 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 nine months ended September 30, 2012 and for the year ended December 31, 2011:

	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)		140			387
Purchases		400			6,522
Settlements		(3,644	)		(7,101	)
End of period balance	$	13,946		$	17,050

There were no transfers of assets between Level 1 and Level 2 during the nine months ended September 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 reserves for losses and loss expenses 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 premiums 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 3.

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.

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 September 30, 2012 and December 31, 2011 are as follows:

	Carrying		Fair Value
	Value		Level 1		Level 2		Level 3		Total
September 30, 2012
Assets: Limited partnerships	$	59,237	$	-	$	-	$	59,237	$	59,237
Liabilities: Short-term borrowings		10,000		-		10,000		-		10,000
December 31, 2011
Assets: Limited partnerships		54,705		-		-		54,705		54,705
Liabilities: Short-term borrowings		10,000		-		10,000		-		10,000

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Restricted Stock

9 Months Ended

Sep. 30, 2012

Restricted Stock [Abstract]

Restricted Stock

(8) 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.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2012

Summary of Significant Accounting Policies [Abstract]

Basis of Presentation

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

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 consolidated statements of operations, its proportionate share of the investee's unrealized as well as realized investment gains or losses.

Other investments, if any, are carried at either fair 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).

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

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.

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 has included the additional disclosures required for fair value measurements in this report.

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

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

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Summary of Significant Accounting Policies (Details)	9 Months Ended
	Sep. 30, 2012
Summary of Significant Accounting Policies [Abstract]
Percentage of original or adjusted cost exceeding unrealized loss (in hundredths)	20.00%

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Fair Value (Details) (USD $) In Thousands, unless otherwise specified					9 Months Ended
	Sep. 30, 2012 Carrying Value [Member]	Dec. 31, 2011 Carrying Value [Member]	Sep. 30, 2012 Fair Value [Member]	Dec. 31, 2011 Fair Value [Member]	Sep. 30, 2012 Insurance Linked Securities [Member]	Sep. 30, 2011 Insurance Linked Securities [Member]	Sep. 30, 2012 Insurance Linked Securities [Member] Maximum [Member]	Sep. 30, 2012 Insurance Linked Securities [Member] Minimum [Member]	Sep. 30, 2012 Level 1 [Member] Fair Value [Member]	Dec. 31, 2011 Level 1 [Member] Fair Value [Member]	Sep. 30, 2012 Level 2 [Member] Fair Value [Member]	Dec. 31, 2011 Level 2 [Member] Fair Value [Member]	Sep. 30, 2012 Level 3 [Member] Fair Value [Member]	Dec. 31, 2011 Level 3 [Member] Fair Value [Member]	Sep. 30, 2012 Recurring [Member]	Dec. 31, 2011 Recurring [Member]	Sep. 30, 2012 Recurring [Member] Level 1 [Member]	Dec. 31, 2011 Recurring [Member] Level 1 [Member]	Sep. 30, 2012 Recurring [Member] Level 2 [Member]	Dec. 31, 2011 Recurring [Member] Level 2 [Member]	Sep. 30, 2012 Recurring [Member] Level 3 [Member]	Dec. 31, 2011 Recurring [Member] Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
US government obligations															$ 70,686	$ 73,137	$ 70,686	$ 73,137	$ 0	$ 0	$ 0	$ 0
Government sponsored entities																349		0		349		0
Residential mortgage-backed securities															16,808	21,872	0	0	16,808	21,872	0	0
Commercial mortgage-backed securities															14,717	11,300	0	0	14,717	11,300	0	0
State and municipal obligations															195,300	190,035	0	0	195,300	190,035	0	0
Corporate securities															122,628	90,141	0	0	108,682	73,091	13,946	17,050
Options embedded in convertible securities															1,612	1,505	0	0	1,612	1,505	0	0
Foreign government obligations															21,833	21,121	0	0	21,833	21,121	0	0
Total fixed maturities															443,584	409,460	70,686	73,137	358,952	319,273	13,946	17,050
Equity securities															103,882	88,085	103,882	88,085	0	0	0	0
Short term															3,580	3,675	3,580	2,982	0	693	0	0
Cash equivalents															62,903	81,756	0	0	62,903	81,756	0	0
Total fair value															613,949	582,976	178,148	164,204	421,855	401,722	13,946	17,050
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Sales					0	0
Transfers into Level 3					0	0
Transfers out of Level 3					0	0
Percentage of variance in values of securities (in hundredths)							3.00%	0.00%
Fair value assets measured on recurring basis unobservable input reconciliation calculation [Roll Forward]
Beginning of period balance					17,050	17,242
Total gain or losses (realized or unrealized) included in earnings (or changes in net assets)					140	387
Purchases					400	6,522
Settlements					(3,644)	(7,101)
End of period balance					13,946	17,050
Assets [Abstract]
Limited partnerships	59,237	54,705	59,237	54,705					0	0	0	0	59,237	54,705
Liabilities [Abstract]
Short-term borrowings	$ 10,000	$ 10,000	$ 10,000	$ 10,000					$ 0	$ 0	$ 10,000	$ 10,000	$ 0	$ 0

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Unaudited Consolidated Statements of Comprehensive Income (Loss) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Unaudited Consolidated Statements of Comprehensive Income (Loss) [Abstract]
Net income (loss)	$ 11,687	$ (12,971)	$ 27,243	$ (33,673)
Unrealized net gains (losses) on securities:
Unrealized holding net gains (losses) arising during the period	6,104	(17,042)	9,107	(12,085)
Less: reclassification adjustment for net gains (losses) included in net income (loss)	1,617	(909)	1,220	226
Unrealized net gains (losses) on securities	4,487	(16,133)	7,887	(12,311)
Foreign currency translation adjustments	362	(709)	343	(421)
Other comprehensive income (loss)	4,849	(16,842)	8,230	(12,732)
Comprehensive income (loss)	$ 16,536	$ (29,813)	$ 35,473	$ (46,405)

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Reportable Segments

9 Months Ended

Sep. 30, 2012

Reportable Segments [Abstract]

Reportable Segments

(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.

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 September 30:
Property and Casualty Insurance	$	68,072	$	42,972	$	5,089	$	65,419	$	45,833	$	5,522
Reinsurance		13,165		11,881		5,539		15,072		14,596		(7,737	)
Totals	$	81,237	$	54,853	$	10,628	$	80,491	$	60,429	$	(2,215	)
Nine months ended September 30:
Property and Casualty Insurance	$	208,058	$	139,048	$	18,871	$	204,832	$	138,703	$	13,122
Reinsurance		42,085		37,011		17,013		43,821		41,671		(42,956	)
Totals	$	250,143	$	176,059	$	35,884	$	248,653	$	180,374	$	(29,834	)

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

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2012			2011			2012			2011
Profit (Loss):
Segment profit (loss)	$	10,628		$	(2,215	)	$	35,884		$	(29,834	)
Net investment income		2,343			2,779			7,196			8,076
Net gains (losses) on investments		8,781			(17,460	)		8,709			(20,892	)
Corporate expenses		(4,198	)		(3,285	)		(11,977	)		(9,940	)
Income (loss) before federal income taxes	$	17,554		$	(20,181	)	$	39,812		$	(52,590	)

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.

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Restricted Stock (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Restricted Stock [Abstract]
Shares of class B restricted stock issued (in shares)	20,119	19,558
Value per share of class B restricted stock issued (in dollars per share)	$ 21.87	$ 22.50
Total value of shares issued	$ 440	$ 440

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Fair Value (Tables)

9 Months Ended

Sep. 30, 2012

Fair Value [Abstract]

Fair value assets measured at fair value on a recurring basis

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 September 30, 2012:
Description	Total		Level 1		Level 2		Level 3
U.S. government obligations	$	70,686	$	70,686	$	-	$	-
Residential mortgage-backed securities		16,808		-		16,808		-
Commercial mortgage-backed securities		14,717		-		14,717		-
State and municipal obligations		195,300		-		195,300		-
Corporate securities		122,628		-		108,682		13,946
Options embedded in convertible securities		1,612		-		1,612		-
Foreign government obligations		21,833		-		21,833		-
Total fixed maturities		443,584		70,686		358,952		13,946
Equity securities		103,882		103,882		-		-
Short term		3,580		3,580		-		-
Cash equivalents		62,903		-		62,903		-
	$	613,949	$	178,148	$	421,855	$	13,946

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

Fair value assets measured on recurring basis unobservable input reconciliation

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 nine months ended September 30, 2012 and for the year ended December 31, 2011:

	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)		140			387
Purchases		400			6,522
Settlements		(3,644	)		(7,101	)
End of period balance	$	13,946		$	17,050

Summary of carrying value and fair value by level of financial instruments

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 September 30, 2012 and December 31, 2011 are as follows:

	Carrying		Fair Value
	Value		Level 1		Level 2		Level 3		Total
September 30, 2012
Assets: Limited partnerships	$	59,237	$	-	$	-	$	59,237	$	59,237
Liabilities: Short-term borrowings		10,000		-		10,000		-		10,000
December 31, 2011
Assets: Limited partnerships		54,705		-		-		54,705		54,705
Liabilities: Short-term borrowings		10,000		-		10,000		-		10,000