Protective Insurance (PTVCA) 8-K Baldwin & Lyons Announces Results for the First Quarter of 2017

Baldwin & Lyons, Inc.                                                                                                                                                                                                                                                                                                                                                                                                           May 10, 2017

Unaudited First Quarter Financial Statements                                                                                                                                                                                                                                                                                                                                     Investor Contact:  William Vens

                                                                                                                                                                                                                                                                                                                                                                                                                   investors@baldwinandlyons.com

                                                                                                                                                                                                                                                                                                                                                                                                                                              (317) 429-2554

BALDWIN & LYONS ANNOUNCES RESULTS FOR THE FIRST QUARTER OF 2017

● Gross premiums written during the first quarter of 2017 totaled a record $110.0 million, 14.4% higher than the first quarter of 2016.

● Net premiums earned during the first quarter of 2017 totaled $74.0 million, 10.6% higher than the first quarter of 2016.

● Combined ratio during the first quarter of 2017 was 99.7%, reflecting the challenging commercial auto market.

Carmel, Indiana, May 10, 2017—Baldwin & Lyons, Inc. (NASDAQ: BWINA, BWINB) today announcedfirst quarter net income of $6.8 million, or $0.45 per share, which compares to net income of $14.1 million, or $0.94 per share, for the prior year's first quarter.

Gross premiums written for the current quarter was a record $110.0 million, 14.4% higher than the $96.2 million written during the first quarter of 2016.  The increase was primarily driven by the continued strong performance of the Company's commercial automobile and workers' compensation products.

Net premiums earned for the first quarter of 2017 was $74.0 million, 10.6% higher than last year's first quarter total, primarily driven by increases in premiums earned from the commercial automobile and workers' compensation products.

Net investment income of $3.7 million, reflected an increase of 7.3% compared to the first quarter of 2016 due to higher bond yields.

Underwriting operations produced a combined ratio of 99.7% during the first quarter of 2017, which compares to a combined ratio of 86.5% for the 2016 first quarter.  The combined ratio difference was mainly the result of unusually favorable loss experience during the first quarter of 2016 and unfavorable loss experience during the first quarter of 2017 due in part to a severe charter bus loss.

Book value per share on March 31, 2017 was $27.34, an increase of $0.53 per share during the first quarter, after the payment of cash dividends to shareholders totaling $0.27 per share.  The combination of the increase in book value and dividends represents an 11.9% total return on beginning book value for the three months ended March 31, 2017.

The Company's net income, 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 before federal income taxes to underwriting income, a non-GAAP financial measure that is a useful tool for investors and analysts in analyzing ongoing operating trends.

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	Three Months Ended
	March 31
	2017		2016
Income before federal income taxes	$	10,178	$	21,438
Less: Net realized gains on investments		6,294		9,012
Operating income, before federal income taxes	$	3,884	$	12,426
Less:  Investment income		3,692		3,440
Underwriting income	$	192	$	8,986

Three months ended March 31, 2017

Operating Income

Operating income, before federal income taxes, was $3.9 million for the first quarter of 2017 which compares to operating income, before federal income taxes, of $12.4 million during the first quarter of 2016.

Conference Call Information:

Baldwin & Lyons, Inc. has scheduled its quarterly conference call for Wednesday, May 10, 2017, at 11:00 AM ET (New York City time) to discuss results for the first quarter ended March 31, 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 May 17, 2017 by calling 1-844-512-2921 or 1-412-317-6671 and referencing passcode 13657859.  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 November 10, 2017.  The webcast may be accessed directly at: http://public.viavid.com/player/index.php?id=123410.

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
	March 31
	2017			2016
Operating revenue	$	78,647		$	71,713
Net realized gains on investments		6,294			9,012
Total revenue	$	84,941		$	80,725
Net operating income	$	2,665		$	8,254
Net realized gains on investments,
net of federal income taxes		4,091			5,858
Net income	$	6,756		$	14,112
Per share data - diluted:
Average number of shares		15,104			15,076
Net operating income	$	.18		$	.55
Net investment gains		.27			.39
Net income	$	.45		$	.94
Dividends paid to shareholders	$	.27		$	.26
Comprehensive income, net of tax
Net income	$	6,756		$	14,112
Unrealized net gains (losses) on securities		5,335			(8,050	)
Foreign currency translation adjustments		65			419
Comprehensive income	$	12,156		$	6,481
Annualized:
Total Value Creation 1		11.9	%		6.4	%
Return on average shareholders' equity:
Net operating income		2.9	%		9.1	%
Net income		7.3	%		15.6	%
Consolidated combined ratio of
insurance subsidiaries (GAAP basis):		99.7	%		86.5	%
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)
	March 31		December 31
	2017		2016
Assets
Investments 1:
Fixed maturities ($507,952)	$	508,802	$	491,904
Equity securities ($75,770)		135,514		119,945
Limited partnerships, at equity		65,739		76,469
Short-term 2		1,500		1,500
		711,555		689,818
Cash and cash equivalents		61,761		62,976
Accounts receivable		67,303		64,984
Reinsurance recoverable		262,423		255,024
Other assets		75,148		78,732
Current federal income taxes		-		2,603
	$	1,178,190	$	1,154,137
Liabilities and shareholders' equity
Reserves for losses and loss expenses	$	578,841	$	576,330
Reserves for unearned premiums		25,968		21,694
Borrowings under line of credit		20,000		20,000
Accounts payable and other liabilities		125,375		120,356
Current federal income taxes		946		-
Deferred federal income taxes		14,158		11,412
		765,288		749,792
Shareholders' equity:
Common stock-no par value		645		644
Additional paid-in capital		54,766		54,286
Unrealized net gains on investments		39,386		34,051
Retained earnings		318,105		315,364
		412,902		404,345
	$	1,178,190	$	1,154,137
Number of common and common
equivalent shares outstanding		15,104		15,084
Book value per outstanding share	$	27.34	$	26.81
1 2016 cost in parentheses
2 Approximates cost

	March 31		December 31
Selected Financial Data:	2017		2016
Net GAAP loss and loss expense reserves	$	322,044	$	324,767
Net statutory loss and loss expense reserves		325,775		328,404
Consolidated statutory surplus		404,568		399,314

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Baldwin & Lyons, Inc. and Subsidiaries
Unaudited Consolidated Statements of Operations
(in thousands, except per share data)
	Three Months Ended
	March 31
	2017		2016
Revenues
Net premiums earned	$	73,974	$	66,909
Net investment income		3,692		3,440
Net realized gains on investments		6,294		9,012
Commissions and other income		981		1,364
		84,941		80,725
Expenses
Losses and loss expenses incurred		48,599		38,623
Other operating expenses		26,164		20,664
		74,763		59,287
Income before federal income taxes		10,178		21,438
Federal income taxes		3,422		7,326
Net income	$	6,756	$	14,112
Per share data - diluted:
Income before net gains on investments	$	.18	$	.55
Net gains on investments		.27		.39
Net income	$	.45	$	.94
Dividends	$	.27	$	.26
Reconciliation of shares outstanding:
Average shares outstanding - basic		15,096		15,044
Dilutive effect of share equivalents		8		32
Average shares outstanding - diluted		15,104		15,076

Non-GAAP Financial Information:
	Three Months Ended
	March 31
	2017			2016
Gross premiums written	$	110,028		$	96,153
Net premiums written		77,530			64,565
Loss and LAE ratio		65.7	%		57.7	%
Expense ratio		34.0	%		28.8	%
Combined ratio 1		99.7	%		86.5	%
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.

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Baldwin & Lyons, Inc. and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
(in thousands)
	Three Months Ended
	March 31
	2017			2016
Net cash provided by operating activities	$	6,398		$	1,973
Investing activities:
Purchases of available-for-sale investments		(115,947	)		(112,301	)
Proceeds from sales or maturities
of available-for-sale investments		105,282			89,042
Net (purchases) sales of short-term investments		(7,290	)		5
Other investing activities		14,357			(1,154	)
Net cash used in investing activities		(3,598	)		(24,408	)
Financing activities:
Dividends paid to shareholders		(4,080	)		(3,977	)
Net cash used in financing activities		(4,080	)		(3,977	)
Effect of Foreign exchange rates on cash and cash equivalents		65			419
Decrease in cash and cash equivalents		(1,215	)		(25,993	)
Cash and cash equivalents at beginning of period		62,976			73,538
Cash and cash equivalents at end of period	$	61,761		$	47,545

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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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