-----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, HQ8zZ16abwOaEaLEbp/oAE+VM5mBt1i1KciH+KyGUvm8+q2p1bzgHccPvklvc3W/ mxpQYjs7khosmq9071z+Kg== 0000009346-97-000007.txt : 19970514 0000009346-97-000007.hdr.sgml : 19970514 ACCESSION NUMBER: 0000009346-97-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970513 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BALDWIN & LYONS INC CENTRAL INDEX KEY: 0000009346 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [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: 97601720 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 March 31, 1997 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 May 9, 1997: TITLE OF CLASS NUMBER OF SHARES OUTSTANDING Common Stock, No Par Value: Class A (voting) 2,436,379 Class B (nonvoting) 11,396,059 PART I - FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS BALDWIN & LYONS, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE DATA)
MARCH 31 December 31 1997 1996 ----------- ----------- ASSETS Investments: Fixed maturities $ 270,105 $ 273,828 Equity securities 122,504 147,196 Short-term and other 21,671 22,223 --------- --------- 414,280 443,247 Cash and cash equivalents 27,170 12,117 Accounts receivable 15,134 13,967 Reinsurance recoverable 40,315 43,829 Current federal income taxes - 568 Other assets 11,036 12,732 --------- --------- $ 507,935 $ 526,460 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Reserves for losses and loss expenses $ 194,321 $ 196,939 Reserves for unearned premiums 12,425 10,835 Accounts payable and accrued expenses 30,912 34,830 Deferred federal income taxes 5,749 10,734 Currently payable federal income taxes 868 - --------- --------- 244,275 253,338 Shareholders' equity: Common stock-no par value 738 744 Additional paid-in capital 41,709 42,100 Unrealized net gains on investments 26,092 38,472 Retained earnings 195,121 191,806 --------- --------- 263,660 273,122 --------- --------- $ 507,935 $ 526,460 ========= ========= Number of common and common equivalent shares outstanding 13,998,312 14,034,248 Book value per outstanding share $18.84 $19.46
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 MARCH 31 1997 1996 ----------- ----------- REVENUES Net premiums earned $ 13,322 $ 15,294 Net investment income 4,611 4,986 Realized net gains on investments 5,444 579 Commissions and other income 378 328 --------- --------- 23,755 21,187 EXPENSES Losses and loss expenses incurred 8,863 9,761 Other operating expenses 5,202 5,116 --------- --------- 14,065 14,877 INCOME FROM CONTINUING OPERATIONS BEFORE FEDERAL INCOME TAXES 9,690 6,310 Federal income taxes 3,117 2,040 --------- --------- NET INCOME FROM CONTINUING OPERATIONS 6,573 4,270 Discontinued operations, net of federal income taxes - 241 --------- --------- NET INCOME $ 6,573 $ 4,511 ========= ========= PER SHARE DATA Average number of common and common equivalent shares outstanding 14,063,048 14,596,622 Income before discontinued operations and realized net gains $ .22 $ .26 Realized net gains on investments .25 .03 Discontinued operations - .02 --------- --------- NET INCOME $ .47 $ .31 ========= ========= Dividends $ .10 $ .08 ========= =========
See notes to condensed consolidated financial statements. BALDWIN & LYONS, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
Three months ended March 31 1997 1996 ----------- ----------- Net cash provided by operating activities $ 3,555 $ 4,784 Investing activities: Purchases of long-term investments (61,770) (63,975) Proceeds from sales or maturities of long term investments 75,603 58,588 Net sales of short-term investments 2,011 3,455 Distributions from limited partnerships 130 2,427 Other investing activities (845) (326) --------- --------- Net cash provided by investing activities 15,129 169 Financing activities: Dividends paid to shareholders (1,386) (1,163) Cost of treasury stock (2,246) (4,803) Proceeds from sales of common stock 1 - --------- --------- Net cash used in financing activities (3,631) (5,966) --------- --------- Increase (decrease) in cash and cash equivalents 15,053 (1,013) Cash and cash equivalents at beginning of year 12,117 18,014 --------- --------- Cash and cash equivalents at end of period $ 27,170 $ 17,001 ========= =========
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, 1997. Interim financial statements should be read in conjunction with the Company's annual audited financial statements. (2) Certain prior year balances have been reclassified to conform to the current period presentation. (3) The effective federal income tax rate is less than the statutory rate for the periods ended March 31, 1997 and March 31, 1996 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.
Quarter Ending March 31 1997 1996 --------- --------- Net premiums earned $ 1,955 $ 4,012 Losses and loss expenses (2,915) 5,086 Other operating expenses (209) (491)
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 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. For the three months ended March 31, 1997, positive cash flow from operations totaled $3.6 million, a decrease from $4.8 million generated during the first quarter of 1996, due primarily to the decline in the Company's premium volume. Recent cash flows have, at times, lagged behind those of earlier periods because of declining premium volume in retrospectively rated workers' compensation and large fleet trucking liability businesses. Management expects premium revenues to continue trending downward during 1997 as the result of competitive pressures in the trucking insurance markets. This decline in trucking insurance revenues is expected to be mitigated somewhat by continued growth in Company's personal 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 March 31, 1997. The Company would benefit from increasing interest rates since a large portion of its investment portfolio is available for reinvestment. The Company's assets at March 31, 1997 included $35.1 million in investments classified as short-term or cash equivalents which were readily convertible to cash without significant market penalty. In addition, fixed maturity investments totaling $69.5 million will mature prior to December 31, 1997. 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 $263.7 million at March 31, 1997 and includes $235.1 million representing GAAP shareholder's equity of insurance subsidiaries, of which $43.0 million may be transferred by dividend or loan to the parent company without approval by, or notification to, regulatory authorities. An additional $173.9 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. 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 valued at $51.2 million at March 31, 1997. RESULTS OF OPERATIONS --------------------- COMPARISONS OF FIRST QUARTER, 1997 TO FIRST QUARTER, 1996 --------------------------------------------------------- Net premiums earned decreased $2.0 million during the first quarter of 1997 as compared to the same period of 1996. The decreased premium volume is primary attributable to decreases in premiums from the Company's large and medium fleet trucking products totaling $2.3 million. In addition, premiums from the Company's workers' compensation products decreased by $1.2 million. All of these decreases are attributable to the non-renewal of business and lower rates on policies renewed resulting from the intense competition in the large fleet trucking insurance market during 1996 and continuing into 1997. These decreases were partially offset by an increase in premiums from the Company's private passenger automobile product of $1.7 million or more than double the premium earned in the first quarter of 1996. Net investment income decreased $.4 million (7.5%) during the first quarter of 1997, as compared to the first quarter of 1996, due to decreases in yields in nearly all investment categories. Overall pretax yields decreased from 5.4% during the first quarter of 1996 to 5.0% for the current quarter while after tax yields decreased from 3.8% during the first quarter of 1996 to 3.5% for the first quarter of 1997. The first quarter 1997 net realized gain of $5.4 million consists of net gains on equity securities of $5.5 million and net losses on short-term investments of $.1 million. Losses and loss expenses incurred during the first quarter of 1997 decreased $.9 million from that experienced during the first quarter of 1996. The decrease is due primarily to declines in premium volume in the Company's large fleet trucking products. The large fleet trucking decreases were partially offset by increases, due to continued growth, in losses from the Company's private passenger automobile business. Loss and loss expense ratios for the comparative first quarters were as follows:
1997 1996 -------- -------- Large and medium fleet trucking 68.4% 60.9% Voluntary reinsurance assumed 45.5 45.0 Private passenger automobile 74.2 84.8 Small fleet trucking 57.5 134.7 Residual market and assigned risk - 55.7 All lines 66.5 63.8
Other operating expenses for the first quarter of 1997 were level with that of the first quarter of 1996. The consolidated expense ratio of the Company's insurance subsidiaries, however, was 31.5% for the first quarter of 1997 compared to 25.6% for the first quarter of 1996. The increase in the consolidated expense ratio reflects a decline in trucking premium relative to fixed costs and startup expenses, with insufficient volume to minimize ratios, in the Company's new product lines. The ratio of consolidated other operating expenses to total revenue (adjusted for realized gains) increased to 28.4% during the first quarter of 1997 compared to 24.8% for the 1996 first quarter. The effective federal tax rate for consolidated operations for the first quarter of 1997 was 32.2% 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 $2.3 million (54.0%) during 1997 compared with the 1996 first quarter. 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. EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS --------------------------------------- In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. No material impact is expected on primary earnings per share for the first quarter ended March 31, 1997 and March 31, 1996 as a result of the adoption of Statement 128. The impact of Statement 128 on the calculation of fully diluted earnings per share for these quarters is also not expected to be material. 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 Schedule EXHIBIT 27 -- Financial Data Schedule 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 March 31, 1997. 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 May 13, 1997 By /s/ Gary W. Miller --------------- ----------------------------- Gary W. Miller, President and Chief Executive Officer Date May 13, 1997 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 March 31, 1997 INDEX TO EXHIBITS Exhibit Number Method of Filing -------------- ---------------- EXHIBIT 11 Filed herewith electronically Computation of per share earnings EXHIBIT 27 Financial Data Schedule Filed herewith electronically BALDWIN & LYONS, INC. FORM 10-Q, EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE
Three Months Ended March 31 ----------------------------- 1997 1996 ----------- ----------- PRIMARY: Average number of shares outstanding 13,874,171 14,432,521 Dilutive stock options--based on treasury stock method using average market price 188,877 164,101 ---------- ---------- Totals 14,063,048 14,596,622 ========== ========== Net Income $6,572,869 $4,510,680 ========== ========== Per share amount $ .47 $ .31 ========== ========== FULLY DILUTED: Average number of shares outstanding 13,874,171 14,432,521 Dilutive stock options--based on treasury stock method using average market price 188,877 164,101 ---------- ---------- Totals 14,063,048 14,596,622 ========== ========== Net Income $6,572,869 $4,510,680 ========== ========== Per share amount $ .47 $ .31 ========== ==========
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 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 270,105 0 0 122,504 0 0 414,280 27,170 7,194 1,674 507,935 194,321 12,425 0 6,755 0 0 0 738 0 507,935 13,322 4,611 5,444 378 8,863 1,813 839 9,690 3,117 6,573 0 0 0 6,573 .47 .47 154,537 11,116 (3,441) 2,538 5,923 154,939 0 Cash includes cash equivalents. All loss data is presented net of applicable reinsurance recoverable.
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