BWINB Protective Ins Corp (MM)

Baldwin & Lyons, Inc. (NASDAQ:BWINA) (NASDAQ:BWINB) today reported results for the third quarter and first nine months of 2017.  The Company produced third quarter net income of $7.4 million, or $0.49 per share, which compares to net income of $4.0 million, or $0.27 per share, for the prior year’s third quarter.  For the first nine months of 2017, net income totaled $1.8 million, or $0.12 per share, which compares to net income of $24.1 million, or $1.60 per share, for the prior year period. 

Gross premiums written for the current quarter increased 29.0% to $131.5 million compared to $101.9 million written during the third quarter of 2016.  Gross premiums written for the nine months of 2017 increased 20.9% to $360.6 million compared to $298.1 million written during the first nine months of 2016.  The increases were primarily driven by continued growth in the Company’s commercial automobile and workers’ compensation products as well as growth in the Company’s programs book of business. 

Net premiums earned for the third quarter of 2017 were $89.1 million, 25.1% higher than last year’s third quarter total.  The continued growth in the Company’s commercial automobile and workers’ compensation products as well as growth in the Company’s programs book of business contributed to the increase in premiums earned.  For the first nine months of 2017, net premiums earned increased 11.7% to $231.1 million.

Net investment income for the third quarter of 2017 increased 14.6% to $4.0 million compared to $3.5 million in 2016, reflecting higher interest rates leading to higher reinvestment yields for short-duration fixed income securities, increased dividends from equity securities and a 3.0% increase in average funds invested resulting from positive cash flow.  For the nine months ended September 30, 2017, net investment income increased 18.4% to $12.4 million, compared to $10.5 million in 2016, reflecting investment impacts similar to those experienced during the third quarter.

Underwriting operations produced a combined ratio of 99.3% during the third quarter of 2017, which compares to a combined ratio of 107.9% for the third quarter of 2016.  The combined ratio difference reflects a $10.1 million reserve strengthening that occurred during the third quarter of 2016.  For the nine months ended September 30, 2017, the combined ratio was 112.2%, which compares to a combined ratio of 95.9% for the 2016 period with the difference primarily related to reserve strengthening in the second quarter of 2017.    

During the third quarter of 2017, the Company repurchased 84,960 shares of its Class B common stock at an average price per share of $22.12.

Book value per share as of September 30, 2017 was $26.93, an increase of $0.43 per share during the third quarter, after the payment of cash dividends to shareholders totaling $0.27 per share.  For the nine months ended September 30, 2017, book value per share increased $0.12 after the payment of cash dividends to shareholders totaling $0.81 per share.  The combination of the year-to-date increase in book value of $0.12, plus dividends paid to shareholders of $0.81, represents an annualized total value creation of 4.6% on beginning book value for the nine months ended September 30, 2017. 

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

	Three Months Ended								Nine Months Ended
	September 30								September 30
		2017				2016				2017				2016
Income (loss)	$	10,618			$	5,635			$	(384	)		$	35,988
Less: Net realized gains on investments		5,944				7,732				15,534				17,024
Operating income (loss)	$	4,674			$	(2,097	)		$	(15,918	)		$	18,964
Less:  Investment income		4,027				3,513				12,434				10,501
Underwriting income (loss)	$	647			$	(5,610	)		$	(28,352	)		$	8,463

Three months ended September 30, 2017

Operating Income (Loss)Operating income, before federal income taxes, was $4.7 million for the third quarter of 2017 compared to operating loss, before federal income tax benefits, of $2.1 million during the third quarter of 2016. 

Nine months ended September 30, 2017

Operating Income (Loss)Operating loss, before federal income tax benefits, was $15.9 million for the nine months ended September 30, 2017 compared to operating income, before federal income taxes, of $19.0 million during the 2016 period. 

The Company’s management uses the term operating income, a non-GAAP financial measure, which is defined as income excluding pre-tax investment gains and losses.  This financial measure is used to evaluate the Company’s performance because the recognition of investment gains and losses in any given period is largely discretionary as to timing and could distort the analysis of trends. The Company believes that the defined term is used commonly in the property/casualty insurance industry and that equity analysts exclude gains and losses on investments in their analysis of the Company’s results for the same reason.

The combined ratios and the components thereof, as presented herein, are commonly used in the property/casualty insurance industry and are applied to the Company’s GAAP underwriting results.

Conference Call Information:Baldwin & Lyons, Inc. has scheduled its quarterly conference call for Wednesday, November 8, 2017, at 11:00 AM ET (New York time) to discuss results for the third quarter ended September 30, 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 November 15, 2017 by calling 1-844-512-2921 or 1-412-317-6671 and referencing passcode 13670839.  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 May 8, 2018.  The webcast may be accessed directly at: http://public.viavid.com/player/index.php?id=126325.

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.

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.

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. 

Financial Highlights (unaudited)
Baldwin & Lyons, Inc. and Subsidiaries
(In thousands, except per share data)		Three Months Ended								Nine Months Ended
		September 30								September 30
			2017				2016				2017				2016
Operating revenue		$	94,534			$	75,955			$	247,293			$	221,406
Net realized gains on investments			5,944				7,732				15,534				17,024
Total revenue		$	100,478			$	83,687			$	262,827			$	238,430
Net operating income (loss)		$	3,570			$	(1,025	)		$	(8,250	)		$	13,016
Net realized gains on investments,
net of federal income taxes			3,864				5,026				10,097				11,066
Net income		$	7,434			$	4,001			$	1,847			$	24,082
Per share data - diluted:
Average number of shares			15,118				15,084				15,124				15,084
Net operating income (loss)		$	.24			$	(.06	)		$	(.55	)		$	.86
Net investment gains			.25				.33				.67				.74
Net income		$	.49			$	.27			$	.12			$	1.60
Dividends paid to shareholders		$	.27			$	.26			$	.81			$	.78
Comprehensive income, net of tax
Net income		$	7,434			$	4,001			$	1,847			$	24,082
Unrealized net gains (losses) on securities			2,622				2,736				11,437				(1,514	)
Foreign currency translation adjustments			57				(145	)			510				398
Comprehensive income		$	10,113			$	6,592			$	13,794			$	22,966
Annualized:
Total Value Creation 1			10.6	%			6.6	%			4.6	%			7.7	%
Return on average shareholders' equity:
Net operating income (loss)			4.0	%			-1.1	%			(3.0	%)			4.8	%
Net income			8.3	%			4.3	%			0.7	%			8.9	%
Consolidated combined ratio of
insurance subsidiaries (GAAP basis):			99.3	%			107.9	%			112.2	%			95.9	%
1 Total Value Creation equals: (1) change in book value plus dividends paid, divided by (2) beginning book value

Investor Contact: William Vens investors@baldwinandlyons.com (317) 429-2554