8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549 

FORM 8-K 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): August 9, 2017 

Baldwin & Lyons, Inc.

(Exact Name of Registrant as Specified in Charter) 

Indiana	0-5534	35-0160330
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)
111 Congressional Boulevard, Carmel IN		46032
(Address of Principal Executive Offices)		(Zip Code)

Registrant's Telephone Number, Including Area Code317-636-9800

Not Applicable

 (Former Name or Former Address, if Changed Since Last Report) 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.         ☐

Item 2.02 Results of Operations and Financial Condition

The following information, including the Exhibit to this Form 8-K, is being furnished pursuant to Item 2.02 - Results of Operations and Financial Condition of Form 8-K. This information is not deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and is not incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

On August 9, 2017, Baldwin & Lyons, Inc. (the "Company") issued a press release announcing the results of its operations for the second quarter and six months ended June 30, 2017.  The Company also posted the press release, with additional financial and operating information for the quarter and six months ended June 30, 2017, to its website.  A copy of the press release, including such additional financial and operating information, is attached as Exhibit 99.1 to this Form 8-K and incorporated by reference into this Item 2.02 as if fully set forth herein.

Throughout its press release and in the conference call to discuss the results of its operations for the second quarter of 2017, the Company presents and will present its results and operations in the manner it believes will be the most meaningful, which includes some measures that are not based on accounting principles generally accepted in the United States (GAAP).

The Company's management uses the term operating income, a non-GAAP financial measure, which is defined as income excluding pre-tax investment gains and losses.  This financial measure is used to evaluate the Company's performance because the recognition of investment gains and losses in any given period is largely discretionary as to timing and could distort the analysis of trends. The Company believes that the defined term is used commonly in the property/casualty insurance industry and that equity analysts exclude gains and losses on investments in their analysis of the Company's results for the same reason.

The combined ratios and the components thereof, as presented herein, are commonly used in the property/casualty insurance industry and are applied to the Company's GAAP underwriting results.

Item 9.01  Financial Statements and Exhibits

(d) Exhibits.

99.1  Baldwin & Lyons, Inc. press release dated August 9, 2017.

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 hereunto duly authorized.

BALDWIN & LYONS, INC.

August 9, 2017by: /s/ W. Randall Birchfield

                                       W. Randall Birchfield,

                                        Chief Executive Officer & President

EX-99.1

Baldwin & Lyons, Inc.                                                                                                                                                                                                                                                                                                                                          August 9, 2017

Unaudited Second Quarter Financial Statements                                                                                                                                                                                                                                                             Investor Contact:  William Vens

                                                                                                                                                                                                                                                                                                                                                 investors@baldwinandlyons.com                              

                                                                                                                                                                                                                                                                                                                                                                                    (317) 429-2554

BALDWIN & LYONS ANNOUNCES RESULTS FOR THE QUARTER AND SIX MONTHS

● Gross premiums written during the first six months of 2017 increased 16.7% to $229.0 million compared to $196.2 million during the first six months of 2016.

● Net premiums earned during the first six months of 2017 increased 4.7% to $142.0 million, compared to $135.6 million during the first six months of 2016.

● Combined ratio during the second quarter of 2017 was 142.9%, reflecting a significant reserve strengthening, predominately for accident years 2015 and prior.

Carmel, Indiana, August 9, 2017—Baldwin & Lyons, Inc. (NASDAQ: BWINA, BWINB) today reported results for the second quarter and first six months of 2017.  The Company experienced a second quarter net loss of $12.3 million, or $0.82 per share, which compares to net income of $6.0 million, or $0.40 per share, for the prior year's second quarter.  For the first six months of 2017, net loss totaled $5.6 million, or $0.37 per share, which compares to net income of $20.1 million, or $1.33 per share, for the prior year period.

Gross premiums written for the current quarter increased 19.0% to $119.0 million compared to $100.0 million written during the second quarter of 2016.  The increase was primarily driven by continued growth in the Company's commercial automobile and workers' compensation products as well as growth in the Company's programs book of business.  Gross premiums written for the six months of 2017 increased 16.7% to $229.0 million compared to $196.2 million written during the first six months of 2016, with product group increases and decreases similar to those experienced in the second quarter.

Net premiums earned for the second quarter of 2017 were $68.0 million, 1.1% lower than last year's second quarter total.  This decrease in net premiums earned, compared to growth in gross premiums written, was a function of premium adjustment provisions in the Company's historical commercial automobile reinsurance treaties.  This historical reinsurance structure, which was revised in the Company's current reinsurance treaty renewal, causes an adjustment for ceded premiums when the ultimate loss estimate changes for a reinsurance treaty year.  For the first six months of 2017, net premiums earned increased 4.7% to $142.0 million.

Net investment income increased 32.9% to $4.7 million compared to $3.5 million in 2016, reflecting an increase in yields on the Company's fixed maturity securities and an increase in dividends from the Company's equity portfolio.  For the six months ended June 30, 2017, net investment income increased 20.3% to $8.4 million, compared to $7.0 million in 2016, reflecting investment impacts similar to those experienced during the second quarter.

Underwriting operations produced a combined ratio of 142.9% during the second quarter of 2017, which compares to a combined ratio of 92.6% for the 2016 second quarter.  The combined ratio difference reflects a significant reserve strengthening, predominately for accident years 2015 and prior.  For the six months ended June 30, 2017, the combined ratio was 120.4%, which compares to a combined ratio of 89.6% for the 2016 period with the difference due mainly to the 2017 second quarter reserve strengthening.

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Book value per share on June 30, 2017 was $26.50, a decrease of $0.84 per share during the second quarter, after the payment of cash dividends to shareholders totaling $0.27 per share.  For the six months ended June 30, 2017, book value per share has decreased $0.31 after the payment of cash dividends to shareholders totaling $0.54 per share.  The combination of the year-to-date decrease in book value of $0.31, plus dividends paid to shareholders of $0.54, represents an annualized total value creation of 1.7% on beginning book value for the six months ended June 30, 2017.

The Company's net income (loss), determined in accordance with U.S. generally accepted accounting principles (GAAP), includes items that may not be indicative of ongoing operations. The following table reconciles income (loss) before federal income taxes (benefits) to underwriting income (loss), a non-GAAP financial measure that is a useful tool for investors and analysts in analyzing ongoing operating trends.

	Three Months Ended					Six Months Ended
	June 30					June 30
	2017			2016		2017			2016
Income (loss)	$	(21,180	)	$	8,915	$	(11,002	)	$	30,353
Less: Net realized gains on investments		3,296			280		9,590			9,292
Operating income (loss)	$	(24,476	)	$	8,635	$	(20,592	)	$	21,061
Less:  Investment income		4,716			3,549		8,408			6,988
Underwriting income (loss)	$	(29,192	)	$	5,086	$	(29,000	)	$	14,073

Three months ended June 30, 2017

Operating Loss

Operating loss, before federal income tax benefits, was $24.5 million for the second quarter of 2017 which compares to operating income, before federal income taxes, of $8.6 million during the second quarter of 2016.

Six months ended June 30, 2017

Operating Loss

Operating loss, before federal income tax benefits, was $20.6 million for the six months ended June 30, 2017 which compares to operating income, before federal income taxes, of $21.1 million during the 2016 period.

The Company's management uses the term operating income, a non-GAAP financial measure, which is defined as income excluding pre-tax investment gains and losses.  This financial measure is used to evaluate the Company's performance because the recognition of investment gains and losses in any given period is largely discretionary as to timing and could distort the analysis of trends. The Company believes that the defined term is used commonly in the property/casualty insurance industry and that equity analysts exclude gains and losses on investments in their analysis of the Company's results for the same reason.

The combined ratios and the components thereof, as presented herein, are commonly used in the property/casualty insurance industry and are applied to the Company's GAAP underwriting results.

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Conference Call Information:

Baldwin & Lyons, Inc. has scheduled its quarterly conference call for Wednesday, August 9, 2017, at 11:00 AM ET (New York time) to discuss results for the second quarter ended June 30, 2017.

To participate via teleconference, investors may dial 1-877-705-6003 (U.S./Canada) or 1-201-493-6725 (International or local) at least five minutes prior to the beginning of the call.  A replay of the call will be available through August 16, 2017 by calling 1-844-512-2921 or 1-412-317-6671 and referencing passcode 13664381.  Investors and interested parties may also listen to the call via a live webcast, accessible on the company's web site via a link at the top of the main Investor Relations page.  To participate in the webcast, please register at least fifteen minutes prior to the start of the call.  The webcast will be archived on this site until February 9, 2018.  The webcast may be accessed directly at: http://public.viavid.com/player/index.php?id=124929.

Also available on the investor relations section of our web site are complete interim financial statements and copies of our filings with the Securities and Exchange Commission.

Forward-looking statements in this report are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Investors are cautioned that such forward-looking statements involve inherent risks and uncertainties.  Readers are encouraged to review the Company's annual report for its full statement regarding forward-looking information.

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Financial Highlights (unaudited)
Baldwin & Lyons, Inc. and Subsidiaries
(In thousands, except per share data)	Three Months Ended						Six Months Ended
	June 30						June 30
	2017			2016			2017			2016
Operating revenue	$	74,112		$	73,738		$	152,759		$	145,451
Net realized gains on investments		3,296			280			9,590			9,292
Total revenue	$	77,408		$	74,018		$	162,349		$	154,743
Net operating income (loss)	$	(14,485	)	$	5,787		$	(11,822	)	$	14,041
Net realized gains on investments,
net of federal income taxes		2,142			182			6,234			6,040
Net income (loss)	$	(12,343	)	$	5,969		$	(5,588	)	$	20,081
Per share data - diluted:
Average number of shares		15,122			15,084			15,122			15,084
Net operating income (loss)	$	(.96	)	$	.39		$	(.78	)	$	.93
Net investment gains		.14			.01			.41			.40
Net income (loss)	$	(.82	)	$	.40		$	(.37	)	$	1.33
Dividends paid to shareholders	$	.27		$	.26		$	.54		$	.52
Comprehensive income (loss), net of tax
Net income (loss)	$	(12,343	)	$	5,969		$	(5,588	)	$	20,081
Unrealized net gains (losses) on securities		3,480			3,800			8,815			(4,250	)
Foreign currency translation adjustments		388			124			453			543
Comprehensive income (loss)	$	(8,475	)	$	9,893		$	3,680		$	16,374
Annualized:
Total Value Creation 1		(8.3	%)		9.8	%		1.7	%		8.2	%
Return on average shareholders' equity:
Net operating income (loss)		(15.8	%)		6.3	%		(6.5	%)		7.7	%
Net income (loss)		(13.5	%)		6.5	%		(3.1	%)		11.1	%
Consolidated combined ratio of
insurance subsidiaries (GAAP basis):		142.9	%		92.6	%		120.4	%		89.6	%
1 Total Value Creation equals: (1) change in book value plus dividends paid, divided by (2) beginning book value

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Baldwin & Lyons, Inc. and Subsidiaries
Unaudited Consolidated Balance Sheets
(in thousands, except per share data)
	June 30		December 31
	2017		2016
Assets
Investments 1:
Fixed maturities ($465,713)	$	469,015	$	491,904
Equity securities ($125,272)		187,917		119,945
Limited partnerships, at equity		67,087		76,469
Short-term 2		1,500		1,500
		725,519		689,818
Cash and cash equivalents		81,080		62,976
Accounts receivable		70,339		64,984
Reinsurance recoverable		299,380		255,024
Other assets		69,979		78,732
Current federal income taxes		9,995		2,603
	$	1,256,292	$	1,154,137
Liabilities and shareholders' equity
Reserves for losses and loss expenses	$	627,725	$	576,330
Reserves for unearned premiums		31,660		21,694
Borrowings under line of credit		20,000		20,000
Accounts payable and other liabilities		162,000		120,356
Deferred federal income taxes		14,136		11,412
		855,521		749,792
Shareholders' equity:
Common stock-no par value		645		644
Additional paid-in capital		55,205		54,286
Unrealized net gains on investments		42,866		34,051
Retained earnings		302,055		315,364
		400,771		404,345
	$	1,256,292	$	1,154,137
Number of common and common
equivalent shares outstanding		15,122		15,084
Book value per outstanding share	$	26.50	$	26.81
1 2017 cost in parentheses
2 Approximates cost

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Baldwin & Lyons, Inc. and Subsidiaries
Unaudited Consolidated Statements of Operations
(in thousands, except per share data)
	Three Months Ended					Six Months Ended
	June 30					June 30
	2017			2016		2017			2016
Revenues
Net premiums earned	$	67,996		$	68,726	$	141,971		$	135,635
Net investment income		4,716			3,549		8,408			6,988
Net realized gains on investments		3,296			280		9,590			9,292
Commissions and other income		1,400			1,463		2,380			2,828
		77,408			74,018		162,349			154,743
Expenses
Losses and loss expenses incurred		71,754			42,666		120,353			81,289
Other operating expenses		26,834			22,437		52,998			43,101
		98,588			65,103		173,351			124,390
Income (loss) before federal income taxes (benefits)		(21,180	)		8,915		(11,002	)		30,353
Federal income taxes (benefits)		(8,837	)		2,946		(5,414	)		10,272
Net income (loss)	$	(12,343	)	$	5,969	$	(5,588	)	$	20,081
Per share data - diluted:
Net income (loss)	$	(.82	)	$	.40	$	(.37	)	$	1.33
Dividends	$	.27		$	.26	$	.54		$	.52
Reconciliation of shares outstanding:
Average shares outstanding - basic		15,122			15,075		15,122			15,060
Dilutive effect of share equivalents		-			9		-			24
Average shares outstanding - diluted		15,122			15,084		15,122			15,084

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Baldwin & Lyons, Inc. and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
(in thousands)
	Six Months Ended
	June 30
	2017			2016
Net cash provided by operating activities	$	23,164		$	22,741
Investing activities:
Purchases of available-for-sale investments		(231,601	)		(215,228	)
Proceeds from sales or maturities
of available-for-sale investments		221,818			188,245
Net sales of short-term investments		-			720
Other investing activities		12,444			(1,112	)
Net cash provided by (used in) investing activities		2,661			(27,375	)
Financing activities:
Dividends paid to shareholders		(8,174	)		(7,902	)
Net cash used in financing activities		(8,174	)		(7,902	)
Effect of Foreign exchange rates on cash and cash equivalents		453			543
Increase (decrease) in cash and cash equivalents		18,104			(11,993	)
Cash and cash equivalents at beginning of period		62,976			73,538
Cash and cash equivalents at end of period	$	81,080		$	61,545

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Non-GAAP Financial Information:
	Three Months Ended						Six Months Ended
	June 30						June 30
	2017			2016			2017			2016
Gross premiums written	$	119,007		$	100,046		$	229,035		$	196,199
Net premiums written		72,707			67,669			150,237			132,234
Loss and LAE ratio		105.5	%		62.1	%		84.8	%		59.9	%
Expense ratio		37.4	%		30.5	%		35.7	%		29.7	%
Combined ratio 1		142.9	%		92.6	%		120.4	%		89.6	%
1 The combined ratio is calculated as ratio of (A) losses and loss expenses incurred, plus other operating expenses, less commission and other income to (B) net premiums earned.

Baldwin & Lyons, Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(1) The accompanying unaudited condensed financial statements have been prepared in accordance with the instructions to Form 10-Q but do not include all of the information and footnotes as disclosed in the Company's annual audited 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, 2017.  Interim financial statements should be read in conjunction with the Company's annual audited financial statements.

(2) Forward-looking statements in this report are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Investors are cautioned that such forward-looking statements involve inherent risks and uncertainties.  Readers are encouraged to review the Company's annual report for its full statement regarding forward-looking information.

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