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, 2005 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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of August 3, 2005:
TITLE OF CLASS NUMBER OF SHARES OUTSTANDING
Common Stock, No Par Value:
Class A (voting) 2,666,666
Class B (nonvoting) 12,069,521
Index to Exhibits located on page 15.
Page 1 of a total of 22 pages
2
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
2005 2004
---------------- -----------------
ASSETS
Investments:
Fixed maturities $ 288,755 $ 331,281
Equity securities 127,888 133,042
Other long-term 32,673 15,989
Short-term 69,930 36,406
---------------- -----------------
519,246 516,718
Cash and cash equivalents 74,390 57,384
Accounts receivable 30,082 33,481
Reinsurance recoverable 216,515 236,466
Notes receivable from employees 2,353 2,514
Other assets 21,652 22,000
---------------- -----------------
$ 864,238 $ 868,563
================ =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Reserves for losses and loss expenses $ 422,503 $ 441,821
Reserves for unearned premiums 34,542 33,233
Notes payable to banks 3,000 6,000
Accounts payable and accrued expenses 57,052 48,224
Current federal income taxes 1,407 660
Deferred federal income taxes 9,583 12,077
---------------- -----------------
528,087 542,015
Shareholders' equity:
Common stock-no par value 629 628
Additional paid-in capital 37,453 37,083
Unrealized net gains on investments 41,172 44,497
Retained earnings 256,897 244,340
---------------- -----------------
336,151 326,548
---------------- -----------------
$ 864,238 $ 868,563
================ =================
See notes to condensed consolidated financial statements.
3
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
------------------------------- ---------------------------------
2005 2004 2005 2004
-------------- ------------- -------------- --------------
REVENUES
Net premiums earned $ 43,473 $ 43,403 $ 90,132 $ 81,900
Net investment income 3,547 3,008 6,855 6,180
Realized net gains on investments 532 2,290 5,468 8,108
Other income 1,803 1,803 3,639 3,709
-------------- ------------- -------------- --------------
49,355 50,504 106,094 99,897
EXPENSES
Losses and loss expenses incurred 27,972 29,735 59,584 54,981
Other operating expenses 10,299 7,720 19,947 15,809
-------------- ------------- -------------- --------------
38,271 37,455 79,531 70,790
-------------- ------------- -------------- --------------
INCOME BEFORE FEDERAL INCOME TAXES 11,084 13,049 26,563 29,107
Federal income taxes 3,611 4,185 8,744 9,344
-------------- ------------- -------------- --------------
NET INCOME $ 7,473 $ 8,864 $ 17,819 $ 19,763
============== ============= ============== ==============
PER SHARE DATA:
DILUTED EARNINGS $ .50 $ .60 $ 1.20 $ 1.34
============== ============= ============== ==============
BASIC EARNINGS $ .51 $ .61 $ 1.21 $ 1.35
============== ============= ============== ==============
DIVIDENDS PAID TO SHAREHOLDERS $ .10 $ .40 $ .35 $ .90
============== ============= ============== ==============
RECONCILIATION OF SHARES OUTSTANDING:
Average shares outstanding - basic 14,728 14,624 14,726 14,614
Dilutive effect of options outstanding 103 171 110 189
-------------- ------------- -------------- --------------
Average shares outstanding - diluted 14,831 14,795 14,836 14,803
============== ============= ============== ==============
See notes to condensed consolidated financial statements.
4
BALDWIN & LYONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
Six Months Ended
June 30
2005 2004
------------- -------------
Net cash provided by operating activities $ 15,800 $ 26,571
Investing activities:
Purchases of long-term investments (54,142) (92,640)
Proceeds from sales or maturities
of long-term investments 97,880 90,574
Net sales (purchases) of short-term investments (33,524) 3,479
Decrease in notes receivable from employees 138 1,364
Other investing activities (1,207) (500)
------------- -------------
Net cash provided by investing activities 9,145 2,277
Financing activities:
Dividends paid to shareholders (5,153) (13,157)
Repayment on notes payable (3,000) -
Proceeds from sales of common stock 214 358
------------- -------------
Net cash used in financing activities (7,939) (12,799)
------------- -------------
Increase in cash and cash equivalents 17,006 16,049
Cash and cash equivalents at beginning of period 57,384 30,078
------------- -------------
Cash and cash equivalents at end of period $74,390 $46,127
============= =============
See notes to condensed consolidated financial statements.
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION: 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 notes 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, 2005. Interim financial statements
should be read in conjunction with the Company's annual audited financial
statements and other disclosures included in the Company's most recent Form 10K.
5
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) FORWARD-LOOKING STATEMENTS: 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.
(3) REINSURANCE: The following table summarizes the Company's transactions with
reinsurers for the 2005 and 2004 comparative periods.
2005 2004
---------- -----------
Quarter ended June 30:
Premiums ceded to reinsurers $ 9,490 $ 21,637
Losses and loss expenses
ceded to reinsurers 8,674 30,170
Commissions from reinsurers 1,950 5,733
Six months ended June 30:
Premiums ceded to reinsurers 23,088 40,886
Losses and loss expenses
ceded to reinsurers 22,888 48,118
Commissions from reinsurers 5,086 10,936
(4) COMPREHENSIVE INCOME OR LOSS: Total realized and unrealized income for the
quarter ended June 30, 2005 was $11,170 and compares to total realized and
unrealized income of $3,286 for the quarter ended June 30, 2004. For the six
months ended June 30, 2005, total realized and unrealized income was $14,385 and
compares to total realized and unrealized income of $14,509 for the six months
ended June 30, 2004.
6
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) REPORTABLE SEGMENTS - PROFIT OR LOSS: The following table provides certain
profit and loss information for each reportable segment. All amounts presented
are computed based upon generally accepted accounting principles. In addition,
segment profit for fleet trucking includes the direct marketing agency
operations conducted by the parent company and is computed after elimination of
inter-company commissions and, accordingly, segment profit presented here will
not agree with statutory underwriting gains for this segment which may be quoted
elsewhere in the Company's financial statements.
2005 2004
--------------------------------------------- --------------------------------------------
Direct and Net Direct and Net
Assumed Premium Segment Assumed Premium Segment
Premium Earned and Profit Premium Earned and Profit
Written Fee Income (Loss) Written Fee Income (Loss)
------------- ------------ ------------ ------------- ------------ ------------
QUARTER ENDED JUNE 30:
PROTECTIVE PRODUCTS:
Fleet trucking $ 34,859 $ 27,789 $7,795 $ 44,345 $ 25,650 $7,141
Reinsurance assumed 1,927 2,706 1,121 1,918 2,913 1,756
SAGAMORE PRODUCTS:
Personal division 8,418 11,296 899 8,799 11,600 1,820
Commercial division:
Small fleet trucking 4,117 2,289 128 4,338 2,559 136
Workers' compensation 97 837 (146) 3,110 2,125 (441)
------------- ------------ ------------ ------------- ----------- ------------
Total Commercial division 4,214 3,126 (18) 7,448 4,684 (305)
All other 515 262 (235) 379 307 (105)
------------- ------------ ------------ ------------- ----------- ------------
Totals $ 49,933 $ 45,179 $ 9,562 $ 62,889 $ 45,154 $ 10,307
============= ============ ============ ============= =========== ============
SIX MONTHS ENDED JUNE 30:
PROTECTIVE PRODUCTS:
Fleet trucking $ 78,106 $ 58,612 $ 14,608 $ 83,516 $ 46,916 $ 13,462
Reinsurance assumed 4,418 5,228 2,619 4,836 5,988 3,663
SAGAMORE PRODUCTS:
Personal division 23,487 22,325 2,129 23,980 22,828 3,171
Commercial division:
Small fleet trucking 7,634 4,489 250 8,203 5,083 468
Workers' compensation 92 2,222 115 5,898 4,070 (670)
------------- ------------ ------------ ------------- ----------- ------------
Total Commercial division 7,726 6,711 365 14,101 9,153 (202)
All other 793 694 (394) 619 549 (187)
------------- ------------ ------------ ------------- ----------- ------------
Totals $ 114,530 $ 93,570 $ 19,327 $ 127,052 $ 85,434 $ 19,907
============= ============ ============ ============= =========== ============
7
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(6) REPORTABLE SEGMENTS - RECONCILIATION TO CONSOLIDATED REVENUE AND
CONSOLIDATED PROFIT OR LOSS: The following tables are reconciliations of
reportable segment revenues and profit or loss to the Company's consolidated
revenue and income before federal income taxes, respectively.
Three Months Ended Six Months Ended
June 30 June 30
2005 2004 2005 2004
-------------- -------------- ------------- --------------
REVENUE:
Net premium earned and fee income $ 45,179 $ 45,154 $ 93,570 $ 85,434
Net investment income 3,547 3,008 6,855 6,180
Realized net gains on investments 532 2,290 5,468 8,108
Other 97 52 201 175
-------------- -------------- ------------- --------------
Total consolidated revenue $ 49,355 $ 50,504 $ 106,094 $ 99,897
============== ============== ============= ==============
PROFIT:
Segment profit $ 9,562 $ 10,307 $ 19,327 $ 19,907
Net investment income 3,547 3,008 6,855 6,180
Realized net gains on investments 532 2,290 5,468 8,108
Corporate expenses (2,557) (2,556) (5,087) (5,088)
-------------- -------------- ------------- --------------
Income before federal income taxes $ 11,084 $ 13,049 $ 26,563 $ 29,107
============== ============== ============= ==============
(7) LOANS TO EMPLOYEES: In 2000, 2001 and 2002 the Company provided loans to
certain employees for the sole purpose of purchasing the Company's Class B
common stock in the open market. $7,260 of such full-recourse loans were issued
and $2,282 remain outstanding at June 30, 2005 and carry interest rates of
between 4.75% and 6%, payable annually on the loan anniversary date. The
underlying securities serve as collateral for these loans, which must be repaid
no later than 10 years from the date of issue. No additional loans will be made
under this program.
8
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 25% and 35% 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. The Company's cash flow relating to premiums
is significantly affected by reinsurance programs in effect from time-to-time
whereby the Company cedes both premium and risk to other insurance and
reinsurance companies. These programs vary significantly among products and
overall premium ceded rates, net of ceding commission allowances, have generally
decreased since 2001, reflective of the effect of the provisions of reinsurance
agreements currently in place. For the six months ended June 30, 2005, the
Company experienced positive cash flow from operations totaling $15.8 million,
down significantly from the $26.6 million generated during the first half of
2004. The decrease in positive cash flow is due largely to a $14.6 million
increase in net losses paid when compared to the first six months of 2004.
Additionally, the Company returned $2.4 million in deposits held on behalf of
its insureds during the first half of 2005 compared to a $3.1 million increase
in deposits held during the 2004 period corresponding with a decrease in direct
premium written. Although direct premium writings decreased, changes in
reinsurance agreements allowed for a modest increase ($1.4 million) in net
premiums collected when compared to the first six months of 2004. Operating
expense paid, before consideration of ceding commission from reinsurers, also
decreased $6.9 million from the 2004 period commensurate with the decrease in
premium volume.
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 fixed income (bond and short-term
investment) portfolio was approximately 2.2 years at June 30, 2005 representing
a small decrease from the prior year end as significant portions of the proceeds
from maturing investments and new cash flows have been placed in short-term
investments in anticipation of further interest rate increases.
The Company's assets at June 30, 2005 included $74.4 million in investments
classified as short-term or cash equivalents that were readily convertible to
cash without significant market penalty. An additional $111.0 million of fixed
maturity investments will mature within the twelve-month period following June
30, 2005. The Company believes that these liquid investments are more than
sufficient to provide for projected claim payments and operating cost demands
even before consideration of current positive cash flows.
Consolidated shareholders' equity is composed largely of GAAP shareholder's
equity of the insurance subsidiaries. As such, there are statutory restrictions
on the transfer of portions of this equity to the parent holding company. At
June 30, 2005, $49.3 million may be transferred by dividend or loan to the
parent company without approval by, or notification to, regulatory authorities.
An additional $201.8 million of shareholder's equity of the insurance
subsidiaries may be advanced or loaned to the parent holding 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.
9
The Company's annualized premium writing to surplus ratio for the first half of
2005 was approximately 44%. Regulatory guidelines generally allow for writings
of 200% of surplus. Accordingly, the Company can increase premium writings
significantly with no need to raise additional capital. Further, the Insurance
Subsidiaries' individual capital levels are several times higher than the
minimum amounts designated by the National Association of Insurance
Commissioners.
RESULTS OF OPERATIONS
---------------------
COMPARISONS OF SECOND QUARTER, 2005 TO SECOND QUARTER, 2004
-----------------------------------------------------------
Net premium earned during the second quarter of 2005 was essentially level with
the second quarter of 2004. A 9% increase in premiums from the Company's fleet
trucking program was offset by decreases in the remainder of the Company's
products. In particular, premiums from the Company's small business workers'
compensation program decreased 60% due to its discontinuance late in 2004. The
small fleet trucking and private passenger automobile programs decreased 11% and
3%, respectively, due primarily to competitive pressures in the marketplace.
Direct premiums written and assumed during the second quarter of 2005 totaled
$49.9 million, a 21% decrease from the $62.9 million reported a year earlier.
This decrease is due largely to a $9.5 million (21%) decrease in direct premiums
written from the Company's fleet trucking program. Included in this decrease is
a return premium adjustment on experience-rated policies within the Company's
Independent Contractor program of approximately $4.1 million which was
significantly higher than the $.4 million return recorded in the second quarter
of 2004 and the average of $1.2 million per quarter for the year 2004. The
remainder of the decrease for fleet trucking is due to competitive pressures in
a softening market. In addition, direct premiums written for the Company's
discontinued small business workers' compensation product dropped $3.0 million
(97%) from the prior year period. Decreases in premium writings for the
Company's private passenger automobile and small fleet trucking programs of $.4
million (4%) and $.2 million (5%), respectively, contributed to the decline from
the prior year period.
Premium ceded to reinsurers averaged 19.8% of direct premium production for the
current quarter compared to 35.8% a year earlier reflecting changes in
reinsurance agreements whereby the Company is retaining a larger portion of
risks underwritten. This reduction in premium ceded was instrumental in allowing
for net premium earned to remain level for the quarter despite the decline in
gross production.
Net investment income, before tax, during the second quarter of 2005 was 18%
higher than the second quarter of 2004 due to increases in both average invested
assets and in yields on bonds and short-term investments. Pre-tax yields on
short-term investments quadrupled from the prior year period. Overall after tax
yields posted similar increases.
The second quarter 2005 net realized gain of $.5 million consisted of net gains
on equity securities of $2.8 million and a decrease in impairment charges on
fixed maturity investments of $.2 million. The above gains were partially offset
by a net loss from investments in limited partnerships investments.
10
Losses and loss expenses incurred during the second quarter of 2005 decreased
$1.8 million from that experienced during the second quarter of 2004. Loss
ratios for each of the Company's major product lines were as follows:
2005 2004
------ ------
Fleet trucking 65.5% 78.4%
Private passenger automobile 65.0 56.7
Small fleet trucking 54.7 60.7
Voluntary reinsurance assumed 40.2 17.8
Small business workers' compensation 101.9 87.8
All lines 64.3 68.5
The decrease in the fleet trucking ratio is due to the reserve savings on claims
related to the experience-rated policies previously mentioned and a return to
historical levels of frequency and severity. The Company's large policy limits
and net retention of risk in its fleet trucking products may result in
significant variation in loss activity from period to period.
Other operating expenses for the second quarter of 2005 increased 33% from the
second quarter of 2004. Adjusted for ceding allowances, operating expenses
decreased 9% from the second quarter of 2004 and compares favorably with level
premiums earned for the quarter as many of the Company's expenses do not vary
directly with premium volume. Ceding allowances as a percentage of direct
expenses have declined due to changes in the Company's reinsurance structure
whereby the Company now retains a greater percentage of the risk compared to
prior periods, particularly within the Large and Medium Fleet trucking products.
Ceding allowances totaled $2.0 million for the 2005 quarter compared to
$5.7million for the 2004 quarter. The ratio of consolidated other operating
expenses to operating revenue was 21.1% during the second quarter of 2005
compared to 16.0% for the 2004 second quarter.
The effective federal tax rate for consolidated operations for the second
quarter of 2005 was 33.2% and is less than the statutory rate primarily because
of tax exempt investment income.
As a result of the factors mentioned above, net income decreased $1.4 million
(16%) during the second quarter of 2005 as compared with the 2004 second
quarter.
COMPARISONS OF SIX MONTHS ENDED JUNE 30, 2005 TO
------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2004
------------------------------
Net premiums earned increased $8.2 million (10%) during the first six months of
2005 as compared to the same period of 2004. The increased premium volume is
primarily attributable to a 26% increase in the Company's fleet trucking
product. The Company experienced decreases in the remainder of its products,
primarily from the discontinued small business workers' compensation product
which posted a 44% decline. In addition, net premiums earned for the voluntary
reinsurance assumed, small fleet and private passenger automobile products
decreased 14%, 11% and 3%, respectively.
Direct premiums written and assumed during the first half of 2005 totaled $114.5
million, a 10% decrease from the $127.1 million reported a year earlier. All
products experienced a decline in direct premium volume for reasons cited in the
comparison of the second quarters. The most significant decrease was in the
discontinued small business workers' compensation product, at $5.8 million.
Premium ceded to reinsurers averaged 21.0% of direct premium production for the
current period compared to 33.7% a year earlier.
11
Net investment income during the first half of 2005 was 11% higher than the 2004
period for the same reasons as indicated in the quarterly comparison above.
After tax investment income was also 11% higher than 2004 levels. Overall
pre-tax and after tax yields were higher during the current period while average
invested funds increased 4% from the prior year, resulting from positive cash
flow.
The net realized gain on investments of $5.5 million for the first six months of
2005 consists of net gains on equity securities and limited partnership
investments of $5.0 million and $.6 million, respectively, and was partially
offset by $.1 million in losses on fixed maturity investments, after
consideration of impairment changes during the period.
Losses and loss expenses incurred during the first six months of 2005 increased
$4.6 million from the first six months of 2004, consistent with the increased
premium volume previously discussed. Loss and loss expense ratios for the
comparative six-month periods were as follows:
2005 2004
------ ------
Fleet trucking 70.1% 77.1%
Private passenger automobile 62.8 58.3
Small fleet trucking 54.7 59.2
Voluntary reinsurance assumed 34.4 14.7
Small business workers' compensation 73.3 85.2
All lines 66.1 67.1
Other operating expenses increased $4.1 million (26%) during the first six
months of 2005 compared to the same period of 2004. Ceding commission allowances
included in net expenses were $5.1 million for the 2005 period compared to $10.9
million in the prior year period, while expenses before consideration of ceding
allowances actually decreased $1.7 million despite the 10% increase in premium
earned. The ratio of other operating expenses to total operating revenue
(adjusted for realized gains) was 19.8% for 2005 compared to 17.2% for 2004 for
reasons mentioned in the quarterly comparison.
The effective federal tax rate for consolidated operations for the first six
months of 2005 was 32.9% and is less than the statutory rate primarily because
of tax exempt investment income.
As a result of the factors mentioned above, net income decreased $1.9 million
(9.8%) during the first half of 2005 as compared with the 2004 period.
12
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.
CRITICAL ACCOUNTING POLICIES
----------------------------
There have been no changes in the Company's critical accounting policies as
disclosed in the Form 10K filed for the year ended December 31, 2004.
CONCENTRATIONS OF CREDIT RISK
-----------------------------
The insurance subsidiaries cede portions of their gross premiums to numerous
reinsurers under quota share and excess of loss treaties as well as facultative
placements. These reinsurers assume commensurate portions of the risk of loss
covered by the contracts. As losses are reported and reserved, portions of the
gross losses attributable to reinsurers are established as receivable assets and
losses incurred are reduced. At June 30, 2005, amounts due from reinsurers on
paid and unpaid losses total approximately $217 million. Included in this total
are known losses of approximately $22 million due from Converium Insurance
(North America) Inc., approximately $5 million due from PMA Re and approximately
$.7 million from Trenwick Re., each of which have reported substantial reserve
strengthening and/or impairment of assets which have negatively affected their
reported financial positions. All amounts due from these reinsurers on paid
claims are current and the Company has no information at this time to indicate
that all obligations of these reinsurers will not be met.
At June 30, 2005, other long-term investments includes approximately $23.8
million consisting of three limited partnerships which are managed by
organizations in which two of the Company's directors are officers, directors,
general partners or owners. Certain of these investments contain profit sharing
agreements to the affiliated organizations.
ITEM 4. CONTROLS AND PROCEDURES
- -------------------------------
(a) The Corporation's Chief Executive Officer and Chief Financial Officer
evaluated the disclosure controls and procedures (as defined under Rules
13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as
of the end of the period covered by this report. Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer have concluded that the
Corporation's disclosure controls and procedures are effective.
(b) There were no significant changes in the Corporation's internal control over
financial reporting identified in connection with the foregoing evaluation that
occurred during the
13
Corporation's last fiscal quarter that have affected, or are
reasonably likely to materially affect, the Corporation's internal control over
financial reporting.
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
(31.1) Certification of CEO EXHIBIT 31.1
pursuant to Section 302 of the Certification of CEO
Sarbanes-Oxley Act of 2002
(31.2) Certification of CFO EXHIBIT 31.2
pursuant to Section 302 of the Certification of CFO
Sarbanes-Oxley Act of 2002
(32.1) Certification of CEO EXHIBIT 32.1
pursuant to 18 U.S.C. 1350, as Certification of CEO
adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
(32.2) Certification of CFO EXHIBIT 32.2
pursuant to 18 U.S.C. 1350, as Certification of CFO
adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
ITEM 6 (b) REPORTS ON FORM 8-K
- -------------------------------
A Form 8-K was filed by the registrant on April 27, 2005 regarding its earnings
announcement for the first quarter of 2005.
14
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 3, 2005 By /s/ GARY W. MILLER
----------------------- --------------------------------
Gary W. Miller, Chairman and CEO
Date AUGUST 3, 2005 By /s/ G. PATRICK CORYDON
----------------------- --------------------------------
G. Patrick Corydon,
Senior Vice President - Finance
(Principal Financial and
Accounting Officer)
15
BALDWIN & LYONS, INC.
Form 10-Q for the fiscal quarter
ended June 30, 2005
INDEX TO EXHIBITS
BEGINS ON SEQUENTIAL
PAGE NUMBER OF FORM
EXHIBIT NUMBER 10-Q
-------------- -----------------------------
EXHIBIT 11 16
Computation of per share earnings
EXHIBIT 31.1 17
Certification of CEO
pursuant to Section 302 of the
Sarbanes-Oxley Act
EXHIBIT 31.2 19
Certification of CFO
pursuant to Section 302 of the
Sarbanes-Oxley Act
EXHIBIT 32.1 21
Certification of CEO
pursuant to 18 U.S.C. 1350,
as adopted pursuant to Section
906 of the Sarbanes-Oxley Act
EXHIBIT 32.2 22
Certification of CFO
pursuant to 18 U.S.C. 1350,
as adopted pursuant to Section
906 of the Sarbanes-Oxley Act