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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. February 5, 2007
Preliminary and Unaudited Press Contact: G. Patrick Corydon
Fourth Quarter/Annual (317) 636-9800
Earnings Report corydon@baldwinandlyons.com
BALDWIN & LYONS ANNOUNCES RECORD NET INCOME FOR QUARTER AND YEAR
INDIANAPOLIS, INDIANA, FEBRUARY 5, 2007--Baldwin & Lyons, Inc. (Nasdaq:
BWINA, BWINB) today announced fourth quarter operating income, defined as net
income before investment gains or losses, of $6.0 million, or $.40 per share,
compared to operating income of $5.8 million, or $.39 per share, reported in
2005. Investment gains totaled $5.3 million, or $.35 per share, during the
current quarter and compare to investment gains of $4.2 million, or $.28 per
share, in the prior year quarter. Including investment gains, net income was a
fourth quarter record of $11.3 million, or $.75 per share, compared to $10.0
million, or $.67 per share, for the fourth quarter of 2005.
For the year ended December 31, 2006, operating income totaled $27.1 million, or
$1.80 per share, compared to $19.3 million, or $1.30 per share, reported a year
earlier. The 2005 period was adversely impacted by losses from hurricanes
Katrina and Rita. Investment gains totaled $11.1 million, or $.74 per share, in
2006 compared to gains of $14.9 million a year earlier. Including investment
gains, net income for the current year totaled a record $38.2 million, or $2.54
per share, compared to the previous record of $34.2 million, or $2.30 per share,
for the year ended December 31, 2005.
Net premium earned by the Company's insurance subsidiaries declined by 9% from
$46.2 million during the fourth quarter of 2005 to $42.1 million for the fourth
quarter of 2006. For the year, 2006 net premium earned also decreased by 9% to
$169.8 million. Net premium earned was 1% lower than the third quarter as the
Company's two largest products, fleet trucking and non-standard automobile,
continue to experience pricing pressure.
The Company's quarterly consolidated combined ratio increased to 99.3%,
producing underwriting profits of $.3 million, compared to last year's fourth
quarter ratio of 96.1% and an underwriting gain of $1.8 million. Year-to-date,
the consolidated combined ratio for 2006 was 92.9% compared to 97.5%, including
pre-tax hurricane losses of $15.6 million which added 8.4 points to the loss
ratio, for 2005. Each of the quarterly and annual combined ratios shown above
are computed without regard to fee income earned by the insurance subsidiaries
which is accounted for as other operating income. The impact of including fee
income would be decreases in the combined ratios for the 2006 and 2005 fourth
quarters of 2.4 and 2.0 percentage points, respectively, and 2.5 and 2.2
percentage points for the years 2006 and 2005, respectively.
Investment income again compared favorably to prior periods. Pretax investment
income was 20% higher for the fourth quarter and 32% higher for the year. After
tax investment income improved even more for the quarter and year by 31% and
36%, respectively, as more of the fixed income portfolio has been allocated to
municipal bonds this year. After tax investment income also improved over 4%
from the third quarter this year even after the payment of record dividends
during the year. Net investment gains before tax were $8.2 million for the
current quarter compared to $6.5 million for the 2005 quarter. Year-to-date, net
investment gains were $17.1 million compared to
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$23.0 million for 2005 with the difference attributable to extraordinarily
favorable performance by our limited partnership investments during 2005.
Shareholders' equity increased by $6.6 million during the quarter and has
increased $10.9 million (3.2%) from December 31, 2005 after regular and extra
dividend payouts for the year-to-date totaling $38.4 million, or $2.55 per
share. The book value per share of the Company's stock was $23.60 on December
31, 2006, an increase of $.29 after dividends from December 31, 2005.
CONFERENCE CALL INFORMATION:
Baldwin & Lyons, Inc. has scheduled a conference call for February 5, 2007 at
11:00 AM (New York time) to discuss results for the fourth quarter ended
December 31, 2006. To gain access to the webcast of this call, please log on to
HTTP://VIAVID.NET/DCE.ASPX?SID=0000397D 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 May 5, 2007. 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 800-819-9193 (U.S./Canada)
or 913-981-4911 (International or local) at least five minutes prior to the
beginning of the call. A replay of the call will be available through February
12, 2007 by calling 888-203-1112 or 719-457-0820 and referencing passcode
5288488.
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.
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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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2006 2005 2006 2005
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Operating revenue $48,726 $52,070 $196,005 $207,923
Net investment gains 8,227 6,511 17,064 22,981
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TOTAL REVENUE $56,953 $58,581 $213,069 $230,904
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Operating income $ 5,976 $ 5,793 $ 27,094 $ 19,285
Net investment gains,
net of federal income taxes 5,347 4,233 11,091 14,938
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NET INCOME $11,323 $10,026 $ 38,185 $ 34,223
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Per share data - diluted:
Average number of shares 15,145 14,888 15,047 14,863
Operating income $ .40 $ .39 $ 1.80 $ 1.30
Net investment gains .35 .28 .74 1.00
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NET INCOME $ .75 $ .67 $ 2.54 $ 2.30
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Dividends paid to shareholders $ .45 $ .25 $ 2.55 $ .95
Annualized return on average shareholders' equity:
Operating income 7.8% 7.7% 8.8% 6.6%
Net income 14.7% 13.3% 12.4% 11.7%
Consolidated combined ratio of
insurance subsidiaries (GAAP basis):
Without fee income 99.3% 96.1% 92.9% 97.5%
With fee income 96.9% 94.1% 90.4% 95.3%
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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.