Exhibit 99.1
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BALDWIN & LYONS, INC.
PROTECTIVE INSURANCE COMPANY
SAGAMORE INSURANCE COMPANY
B & L INSURANCE, LTD. (BERMUDA)
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1099 North Meridian Street
Indianapolis, IN 46204
(317) 636-9800
Subj: Baldwin & Lyons, Inc. January 27, 2005
Unaudited Preliminary Press Contact: G. Patrick Corydon
Fourth Quarter/Annual Report (317) 636-9800
corydon@baldwinandlyons.com
FOR IMMEDIATE RELEASE
INDIANAPOLIS, INDIANA, JANUARY 27, 2005-- Baldwin & Lyons, Inc. (NASD:
BWINA, BWINB) today announced fourth quarter operating income, defined as net
income excluding capital gains or losses, of $6.0 million, or $.41 per share,
compared to $7.1 million, or $.48 per share, for the fourth quarter of 2003. Net
capital gains of $1.1 million, or $.07 per share, were realized in the 2004
period compared to net capital gains of $.21 per share for the prior year
quarter. Including net capital gains, fourth quarter net income was $7.1
million, or $.48 per share, compared to net income of $10.1 million, or $.69 per
share, for the fourth quarter of 2003.
For the year ended December 31, 2004, operating income was $24.0 million, or
$1.62 per share, compared to $26.6 million, or $1.81 per share, for the prior
year. Net capital gains of $6.4 million, or $.43 per share, were realized in the
2004 period compared to net gains of $.44 per share a year earlier. Net income
for the current year totaled $30.3 million, or $2.05 per share, compared to
$33.1 million, or $2.25 per share, for 2003.
Direct and assumed premiums written of $57.0 million for the fourth quarter were
essentially unchanged from the fourth quarter of 2003. A 4% increase for
Protective Insurance Company was offset by a 12% decline in writings for
Sagamore Insurance Company primarily reflecting the discontinuance of workers'
compensation business effective October 1, 2004 as well as increasingly
competitive conditions in all of the Company's lines. For the year, record
direct and assumed premiums written of $247.1 million are up 9% with
Protective's increase of 13% being partially offset by Sagamore's decrease of
4%. Net premiums earned during the current quarter totaled $45.9 million, an
increase of 15% from the $40.0 million reported for the fourth quarter of 2003.
For the year, 2004 premiums earned increased 18% to $172.1 million. Both the
quarterly and annual premium earned totals represent record production for the
Company.
Pre-tax investment income continues to reflect historically low interest rates
as well as the Company's heavier weighting to tax-exempt bonds, resulting in
declines of 7% and 5% for the quarter and year compared to the 2003 periods.
After-tax yields on new and reinvested funds continue to trail yields on
maturing investments as the portfolio has been shortened in anticipation of
increasing long-term interest rates which have yet to materialize. Strong cash
flow from operations has largely offset the decline in yields during the year
resulting in a net decline in after-tax investment income for the year of only
1%.
The consolidated combined ratio of 96.7% produced an underwriting gain of $1.5
million compared to a combined ratio of 93.2% and an underwriting gain of $2.7
million for the fourth quarter of 2003. The consolidated loss and loss expense
ratio increased from 67.3% in the prior year period to 75.0%. The higher loss
ratio for the fourth quarter is attributable to Protective's fleet trucking
operations. Regarding the increased loss ratio in fleet trucking, Gary Miller,
CEO stated, "The costs of severe accidents continue to increase at levels
outpacing inflation. Previously, we placed more of the risk for severe accidents
with reinsurers. We were paid a commission for such placements, thus fixing our
profits from inception. Now, as we retain more risk, commissions from reinsurers
are lower and, following our philosophy of conservative reserving and in light
of increasing claim costs, much of the premium previously paid to reinsurers is
set aside for potential claim payments in the form of reserves. Ultimately as
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claims are settled, we may find that profits equal to or greater than the
commissions previously earned will be realized, but in the short run, that is
not the case and lower margins result." The consolidated underwriting expense
ratio of 21.7% compares to 25.9% for the 2003 fourth quarter. For the year, the
consolidated combined ratio for 2004 was 97.4% compared to 92.0% for 2003. The
higher combined ratio for the year reflects the increased severity in fleet
trucking, as noted for the fourth quarter, as well as $5 million in Florida
hurricane losses during the third quarter which added three points to the annual
loss and combined ratios.
On an individual company level, Protective produced a combined ratio from
current products of 94.7% for the fourth quarter and 96.0% for the year
including almost four and one half points attributable to the September
hurricanes. Sagamore produced a combined ratio of 95.0% for the quarter before
fees and 90.7% after fees resulting in a record fourth quarter for this
subsidiary. For the year, Sagamore produced a 98.0% combined ratio before fees
and 93.0% after fees. The small business workers' compensation business, which
was placed in run-off effective October 1, 2004, added over four points to
Sagamore's combined ratio for the year.
Shareholders' equity increased $2.0 million (.6%) from December 31, 2003, after
dividend payouts during the year totaling $30.1 million ($2.05 per share).
Continued excellent operating earnings and results from equity investment
activity, including after-tax realized and unrealized gains of $6.0 million,
contributed to the book value per common share outstanding of $22.04 at December
31, 2004, an increase of $.04 from year end 2003. Including the regular and
special cash dividends paid, shareholders enjoyed a combined return of 9.5% for
the year on book value.
CONFERENCE CALL INFORMATION:
Baldwin & Lyons, Inc. has scheduled a conference call for January 28, 2005 at
11:00 AM (EST) to discuss results for the fourth quarter and year ended December
31, 2004. To gain access to the webcast of this call, please log on to
http://viavid.net/dce.aspx?sid=0000213D at least 15 minutes prior to the call to
register and to download the necessary audio software. The webcast will be
archived on the site until April 28, 2005. You may also access the webcast
through a link on our investor relations page at www.baldwinandlyons.com.
To participate via teleconference, investors may dial 800-822-4794 (U.S./Canada)
or 913-981-4912 (International or local) at least five minutes prior to the
beginning of the call. A replay of the call will be available through February
5, 2005 by calling 888-203-1112 or 719-457-0820 and referencing passcode 122405.
Also available on our investor relations page are complete interim financial
statements, information regarding our business segments, and copies of our
filings with the Securities and Exchange Commission.
The company plans to file its annual report on Form 10-K with the Securities and
Exchange Commission on March 14, 2005 and to mail its 2004 Annual Report to
shareholders on April 1, 2005.
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FINANCIAL HIGHLIGHTS (UNAUDITED)
Baldwin & Lyons, Inc. and Subsidiaries
(In thousands, except per share data) Three Months Ended Twelve Months Ended
December 31 December 31
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2004 2003 2004 2003
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Operating revenue $50,680 $45,108 $191,563 $165,258
Realized gains 1,635 4,655 9,770 9,990
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TOTAL REVENUE $52,315 $49,763 $201,333 $175,248
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Income before realized capital transactions $ 6,021 $ 7,094 $23,956 $26,581
Realized net gains on investments,
net of federal income taxes 1,062 3,026 6,350 6,494
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NET INCOME $ 7,083 $ 10,120 $30,306 $33,075
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Per share data - diluted:
Average number of shares 14,829 14,762 14,789 14,698
Income before realized capital transactions $ .41 $ .48 $ 1.62 $ 1.81
Realized net gains on investments .07 .21 .43 .44
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NET INCOME $ .48 $ .69 $ 2.05 $ 2.25
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Dividends paid to shareholders $1.00 $ .35 $ 2.05 $ .65
Annualized return on average shareholders' equity:
Operating income 8.4% 10.2% 8.5% 9.9%
Net income 9.9% 14.6% 10.8% 12.4%
Consolidated combined ratio of
insurance subsidiaries (GAAP basis) 96.7% 93.2% 97.4% 92.0%
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NOTE: ALL DATA PRESENTED HAS BEEN RESTATED TO REFLECT A FIVE-FOR-FOUR STOCK
SPLIT ISSUED IN FEBRUARY, 2003.
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.