-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PS5271kC074OuJOk9FJUQiPYjEXGMlaJEXKarU+yhabJ6cq29tU5U7Lc9/VVxTsP RKhp3pVC94NOlBxeU7/2NQ== 0000009346-96-000003.txt : 19960819 0000009346-96-000003.hdr.sgml : 19960819 ACCESSION NUMBER: 0000009346-96-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960802 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BALDWIN & LYONS INC CENTRAL INDEX KEY: 0000009346 STANDARD INDUSTRIAL CLASSIFICATION: 6411 IRS NUMBER: 350160330 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-05534 FILM NUMBER: 96602837 BUSINESS ADDRESS: STREET 1: 1099 N MERIDIAN ST STREET 2: STE 700 CITY: INDIANAPOLIS STATE: IN ZIP: 46204 BUSINESS PHONE: 3176369800 MAIL ADDRESS: STREET 1: 1099 NORTH MERIDIAN ST STREET 2: STE 700 CITY: INDIANAPOLIS STATE: IN ZIP: 46204 FORMER COMPANY: FORMER CONFORMED NAME: BALDWIN H C AGENCY INC DATE OF NAME CHANGE: 19720309 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act of 1934 ----------------------------------------------------------------------------- For Quarter Ended Commission file number June 30, 1996 0-5534 BALDWIN & LYONS, INC. (Exact name of registrant as specified in its charter) INDIANA 35-0160330 ------------- -------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 1099 North Meridian Street, Indianapolis, Indiana 46204 - - --------------------------------------------------- -------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (317) 636-9800 ------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of August 1, 1996: TITLE OF CLASS NUMBER OF SHARES OUTSTANDING Common Stock, No Par Value: Class A (voting) 2,447,529 Class B (nonvoting) 11,650,645 PART I - FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS - - ---------------------------- BALDWIN & LYONS, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE DATA)
June 30 December 31 1996 1995 --------- --------- ASSETS Investments: Fixed maturities $ 280,346 $ 279,083 Equity securities 98,944 98,428 Short-term and other 41,522 47,322 --------- --------- 420,812 424,833 Cash 2,699 1,369 Accounts receivable 15,867 13,174 Reinsurance recoverable 51,277 54,702 Investments in equity subsidiary and its affiliates 9,932 9,582 Other assets 10,260 8,565 --------- --------- $ 510,847 $ 512,225 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Reserves for losses and loss expenses $ 210,534 $ 211,489 Reserves for unearned premiums 10,941 8,262 Accounts payable and accrued expenses 38,407 43,895 Deferred federal income taxes 1,041 833 Currently payable federal income taxes 1,644 738 --------- --------- 262,567 265,217 Shareholders' equity: Common stock-no par value 752 777 Additional paid-in capital 42,090 43,620 Unrealized net gains on investments 19,648 19,251 Retained earnings 185,790 183,360 --------- --------- 248,280 247,008 --------- --------- $ 510,847 $ 512,225 ========= ========= Number of common and common equivalent shares outstanding 14,233,372 14,716,630 Book value per outstanding share $17.44 $16.78
See notes to condensed consolidated financial statements. BALDWIN & LYONS, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 1996 1995 1996 1995 --------- --------- --------- --------- REVENUES Net premiums earned $ 16,142 $ 15,684 $ 31,436 $ 28,541 Net investment income 4,877 4,710 9,863 9,270 Realized net gains on investments 3,105 2,171 3,684 1,726 Commissions and other income 331 277 659 663 -------- -------- -------- -------- 24,455 22,842 45,642 40,200 EXPENSES Losses and loss expenses incurred 10,224 11,549 19,985 19,928 Other operating expenses 4,993 4,314 10,109 8,174 -------- -------- -------- -------- 15,217 15,863 30,094 28,102 -------- -------- -------- -------- INCOME FROM CONTINUING OPERATIONS BEFORE FEDERAL INCOME TAXES AND EQUITY SUBSIDIARY 9,238 6,979 15,548 12,098 Federal income taxes 2,993 1,930 5,033 3,488 -------- -------- -------- -------- NET INCOME FROM CONTINUING OPERATIONS BEFORE EQUITY SUBSIDIARY 6,245 5,049 10,515 8,610 Income (loss) from equity subsidiary, net of federal income taxes 28 (42) 269 93 -------- -------- -------- -------- NET INCOME FROM CONTINUING OPERATIONS 6,273 5,007 10,784 8,703 Discontinued operations, net of federal income taxes - (239) - 142 -------- -------- -------- -------- NET INCOME $ 6,273 $ 4,768 $ 10,784 $ 8,845 ======== ======== ======== ======== PER SHARE DATA Average number of common and common equivalent shares outstanding 14,336,090 15,070,105 14,466,357 15,073,449 Income before discontinued operations and realized net gains $ .30 $ .25 $ .58 $ .51 Realized net gains on investments .14 .09 .17 .07 Discontinued operations - (.02) - .01 -------- -------- -------- -------- NET INCOME $ .44 $ .32 $ .75 $ .59 ======== ======== ======== ======== Dividends $ .08 $ .08 $ .16 $ .14 ======== ======== ======== ========
See notes to condensed consolidated financial statements. BALDWIN & LYONS, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
Six months ended June 30 1996 1995 -------- -------- Net cash provided by operating activities $ 5,387 $ 9,125 Investing activities: Purchases of long-term investments (117,077) (126,982) Proceeds from sales or maturities 114,626 125,955 of long term investments Net sales (purchases) of short-term investments 7,007 (10,727) Investment in equity subsidiary 2,465 3,666 Other investing activities (1,131) (474) -------- -------- Net cash provided by (used in) investing activities 5,890 (8,562) Financing activities: Dividends paid to shareholders (2,294) (2,086) Cost of treasury stock (7,653) - Proceeds from sales of common stock - 1,199 -------- -------- Net cash used in financing activities (9,947) (887) -------- -------- Increase (decrease) in cash 1,330 (324) Cash at beginning of year 1,369 531 -------- -------- Cash at end of period $ 2,699 $ 207 ========= ========
See notes to condensed consolidated financial statements. NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (1) The accompanying unaudited condensed financial statements have been prepared in accordance with the instructions to Form 10Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the year ended December 31, 1996. Interim financial statements should be read in conjunction with the Company's annual audited financial statements. (2) Effective September 30, 1995, the Company sold its subsidiary, Hoosier Insurance Company. Prior period amounts in the enclosed Statements of Income have been restated to remove the operations of Hoosier Insurance Company which are now included under the caption "Discontinued operations". Prior period amounts shown in footnote 4 have also been restated. (3) The effective federal income tax rate is less than the statutory rate for the periods ended June 30, 1996 and June 30, 1995 due primarily to tax-exempt investment income. (4) The following line items from the Statements of Income are presented net of the reinsurance amounts shown below.
1996 1995 --------- --------- Quarter ended June 30: Net premiums earned $ 2,863 $ 4,900 Losses and loss expenses (3,086) 3,040 Other operating expenses (119) (484) Six months ended June 30: Net premiums earned 6,875 8,648 Losses and loss expenses 2,001 11,386 Other operating expenses (610) (840)
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL - - --------------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS - - ----------------------------------- Liquidity and Capital Resources -------------------------------- The Company generally experiences positive cash flow from operations resulting from the fact that premiums are collected on insurance policies in advance of the disbursement of funds in payment of claims. Operating costs of the property/casualty insurance subsidiaries, other than loss and loss expense payments and commissions paid to related agency companies, generally average between 15% and 20% 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. For the six months ended June 30, 1996, positive cash flow from operations totaled $5.4 million, a decrease from $9.1 million generated during the first half of 1995. The cash flow quoted for the 1995 period included the operations of Hoosier Insurance Company which was sold on September 30, 1995. Under applicable accounting standards, previous years' cash flow statements are not restated to reflect discontinued operations. Adjusted for Hoosier's operations, cash flow for the first six months of 1995 was $8.5 million. The decrease from this amount to the 1996 cash flow was primarily the result of reinsurance payments made under contingency provisions of certain treaties. Recent cash flows have, at times, lagged behind those of earlier periods because of declining premium volume in retrospectively rated workers' compensation and fleet trucking liability businesses. Management expects premium revenues from these products to continue trending downward during 1996 as the result of competitive pressures in the trucking insurance markets. This decline in trucking insurance revenues will be mitigated somewhat by continued growth in Company's private passenger automobile program. For several years, the Company's investment philosophy has emphasized the purchase of relatively short-term instruments with maximum quality and liquidity. The average life of the Company's investment portfolio was approximately 3 years at June 30, 1996. The Company's assets at June 30, 1996 included $31.6 million in investments classified as short-term which were readily convertible to cash without significant market penalty. In addition, fixed maturity investments totaling $35.2 million will mature prior to December 31, 1996. The Company believes that these liquid investments are more than sufficient to provide for projected claim payments and operating cost demands even during a period of declining premium volume. Consolidated shareholders' equity totaled $248.3 million at June 30, 1996 and includes $218.0 million representing GAAP shareholder's equity of insurance subsidiaries, of which $32.5 million may be transferred by dividend or loan to the parent company without approval by, or notification to, regulatory authorities. An additional $169.0 million of shareholder's equity of such insurance subsidiaries may be advanced or loaned to the Company with prior notification to, and approval from, regulatory authorities. At June 30, 1996, approximately $1.0 million of the Company's consolidated shareholders' equity represents undistributed earnings of AMLI Realty, Inc. and its affiliates. The Company believes that these restrictions pose no material liquidity concerns to the Company. The financial strength and stability of the subsidiaries would permit ready access by the parent company to short-term and long-term sources of credit, if necessary. In addition, the parent company had cash and marketable securities of $44.1 million at June 30, 1996. Results of Operations ---------------------- Comparisons of Second Quarter, 1996 to Second Quarter, 1995 ------------------------------------------------------------ Net premiums earned increased $.5 million during the second quarter of 1996 as compared to the same period of 1995. The increased premium volume is primarily attributable to increases in premiums from the Company's private passenger automobile and workers' compensation products of $2.1 million and $1.0 million, respectively. The increase in workers' compensation premium includes $.6 million attributable to loss development on retrospectively rated policies written in prior years. Premiums from the Company's independent contractor and small fleet programs also increased $.8 million and $.3 million, respectively. These increases were partially offset by decreases in the Company's large and medium fleet trucking products of $2.5 million and $.3 million, respectively. Premiums from voluntary and involuntary reinsurance assumed each decreased $.4 million from the 1995 quarter. Trucking insurance markets continue to be increasingly competitive and, as a result, premium volume is expected to be lower over the near term. Net investment income increased $.2 million (3.5%) during the second quarter of 1996 as increases in invested assets were partially offset by decreases in yields. Overall pretax yields decreased from 5.6% during the second quarter of 1995 to 5.3% for the current quarter while after tax yields decreased from 3.9% during the second quarter of 1995 to 3.8% for the second quarter of 1996. The second quarter 1996 net realized gain of $3.1 million consists of net gains on equity securities of $3.4 million and net losses of $.3 million on other securities. Losses and loss expenses incurred during the second quarter of 1996 decreased $1.3 million from that experienced during the second quarter of 1995. The decrease is due primarily to favorable experience in the Company's medium fleet trucking product and voluntary reinsurance assumed business which decreased $2.2 million and $1.7 million, respectively. The Company also experienced decreased loss activity in involuntary reinsurance assumed and its small fleet product. These decreases were partially offset by an increase in losses from the Company's fleet trucking business, exclusive of medium fleet, of $2.1 million. In addition, losses from the Company's private passenger automobile product increased $1.3 million due to continued growth. Loss and loss expense ratios for the comparative second quarters were as follows:
1996 1995 ------ ------ Fleet trucking 72.9% 67.8% Voluntary reinsurance assumed 37.7 76.7 Small fleet trucking 30.4 149.0 Private passenger automobile 66.7 87.1 Residual market, assigned risk and all other (37.7) 107.7 All lines 63.3 73.6
Other operating expenses for the second quarter of 1996 increased $.7 million from the second quarter of 1995. The consolidated expense ratio of the Company's insurance subsidiaries was 24.6% for the second quarter of 1996 compared to 28.9% for the second quarter of 1995 due to lower commission rates on most trucking insurance products effective in 1996 and cost reductions resulting from departmental restructurings completed during the last half of 1995. The ratio of consolidated other operating expenses to total revenue (adjusted for realized gains) increased to 23.4% during the second quarter of 1996 compared to 20.9% for the 1995 second quarter due largely to new product development costs incurred by the parent company. The effective federal tax rate for consolidated operations for the second quarter of 1996 was 32.4% and is less than the statutory rate primarily because of tax exempt investment income. As a result of the factors mentioned above, income from consolidated operations increased $1.2 million (23.7%) during 1996 compared with the 1995 second quarter. The Company's ownership of Amli Realty Inc. remained at 38% during the second quarter of 1996. The Company's share of Amli's net operating income was $28,000 for the second quarter of 1996 compared to loss of $41,000 for the second quarter of 1995. Comparisons of Six Months Ended June 30, 1996 to ------------------------------------------------- Six Months Ended June 30, 1995 ------------------------------- Net premiums earned increased $2.9 million (10.1%) during the first six months of 1996 as compared to the same period of 1995. This increase is due primarily to growth in the Company's private passenger automobile product of $3.6 million In addition, premiums from the Company's independent contractor and small fleet programs increased $1.0 million and $.7 million, respectively. Premiums from workers' compensation products also increased $2.3 million, $1.4 million of which is attributable to loss development on retrospectively rated policies written in prior years. These increases were offset by a $4.0 million decrease in trucking premiums, primarily from large fleet, and a combined $.8 million decrease in premiums from voluntary and involuntary reinsurance assumed business. The fleet trucking premium decreases result from the non-renewal of certain accounts as well as premium reductions and lower net retentions on accounts renewed during 1996. Net investment income increased by $.6 million (6.4%) during the first six months of 1995 compared to the same period in 1995 for the same reasons mentioned above for the quarterly comparison. Overall pretax yields decreased to 5.4% from 5.6% a year earlier while after tax yields decreased from 3.9% during the first half of 1995 to 3.8% for the first six months of 1996. The net realized gain on investments of $3.7 million for the first six months of 1996 consists predominantly of net gains on equity securities. The change in losses and loss expenses incurred during the first six months of 1996 compared to the same period of 1995 was insignificant. Growth in the Company's private passenger automobile program was almost entirely offset by decreases in losses from voluntary reinsurance assumed. Loss and loss expense ratios for the comparative six month periods were as follows:
1996 1995 ------ ------ Fleet trucking 67.0% 67.9% Voluntary reinsurance assumed 41.5 66.0 Small fleet trucking 80.0 123.0 Private passenger automobile 74.0 86.1 Residual market, assigned risk and all other 24.5 109.9 All lines 63.6 69.8
Other operating expenses increased $1.9 million (23.7%) during the first six months of 1996 compared to the same period of 1995. The consolidated expense ratio of the Company's insurance subsidiaries was 25.1% for 1996 compared to 29.4% for 1995 due to lower commission rates on most trucking insurance products effective in 1996 and cost reductions resulting from departmental restructurings completed during the last half of 1995. The ratio of other operating expenses to total revenue (adjusted for realized gains) was 24.1% for 1996 compared to 21.2% for 1995 due largely to new product development costs incurred by the parent company. The effective federal tax rate for consolidated operations for the first six months of 1996 was 32.4% and is less than the statutory rate primarily because of tax exempt investment income. As a result of the factors mentioned above, income from consolidated operations for the first six months of 1996 was $10.5 million, up 22.1% from the comparable 1995 period. The Company's share of Amli's net operating income, combined with losses from its stock transactions, was a net $269,000 in income for the first six months of 1996 compared to net income of $93,000 for the same period of 1995. PART II - OTHER INFORMATION ITEM 6 (a) EXHIBITS - - --------------------- Number and caption from Exhibit Table of Regulation S-K Item 601 Exhibit No. - - --------------------------------- ------------- (11) Statement regarding computation EXHIBIT 11 -- of per share earnings Computation of Per Share Earnings (27) Financial Data Schedules EXHIBIT 27 Item 6 (b) REPORTS ON FORM 8-K - - ---------- ------------------- No reports on Form 8-K have been filed by the registrant during the three months ended June 30, 1996. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BALDWIN & LYONS, INC. Date August 2, 1996 By /s/ Gary W. Miller ------------------ ------------------------------- Gary W. Miller, President and Chief Operating Officer Date August 2, 1996 By /s/ G. Patrick Corydon ------------------ ------------------------------- G. Patrick Corydon, Vice President - Finance (Principal Financial and Accounting Officer) BALDWIN & LYONS, INC. Form 10-Q for the fiscal quarter ended June 30, 1996 INDEX TO EXHIBITS
EXHIBIT 11 Computation of per share Filed herewith electronically earnings EXHIBIT 27 Financial Data Schedules Filed herewith electronically
BALDWIN & LYONS, INC. FORM 10-Q, EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE Three Months Ended Six Months Ended June 30 June 30 1996 1995 1996 1995 ----------- ----------- ----------- ----------- PRIMARY: Average number of shares outstanding 14,170,712 14,927,974 14,301,617 14,871,106 Dilutive stock options--based on treasury stock method using average market price 165,378 142,131 164,740 202,343 ---------- ---------- ---------- ---------- Totals 14,336,090 15,070,105 14,466,357 15,073,449 ========== ========== ========== ========== Net Income $ 6,272,998 $ 4,768,484 $10,783,678 $ 8,845,461 =========== =========== =========== =========== Per share amount $ .44 $ .32 $ .75 $ .59 ======= ======= ======= ======= Fully Diluted: Average number of shares outstanding 14,170,712 14,927,974 14,301,617 14,871,106 Dilutive stock options--based on treasury stock method using average market price 166,420 142,131 165,261 202,343 ---------- ---------- ---------- ---------- Totals 14,337,132 15,070,105 14,466,878 15,073,449 ========== ========== ========== ========== Net Income $ 6,272,998 $ 4,768,484 $10,783,678 $ 8,845,461 =========== =========== =========== =========== Per share amount $ .44 $ .32 $ .75 $ .59 ======= ======= ======= =======
EX-27 2
7 This schedule contains summary financial information extracted from the consolidated balance sheets and consolidated statements of operations enclosed herein electronically in Form 10Q for the year-to-date, and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 280,346 0 0 98,944 0 0 420,812 2,699 10,105 1,294 510,847 210,534 10,941 34 8,134 0 0 0 752 0 510,847 31,436 9,863 3,684 659 19,985 2,835 2,136 15,548 5,033 10,515 0 0 0 10,784 .75 .75 161,458 23,426 (3,441) 4,548 13,920 162,975 0 All loss data is presented net of applicable reinsurance recoverable.
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