- Net income of $16.5 million, or $1.10 per share for the fourth quarter of 2017 compared to net income of $4.9 million, or
$0.32 per share, for the prior year
- Net income during the fourth quarter of 2017 included an estimated tax benefit from reduced corporate tax rates of $9.6
million, or $0.64 per share
- Gross premiums written during 2017 increased 25.2% to $504.7 million compared to $403.0 million during 2016.
- Combined ratio during the fourth quarter of 2017 was 99.3%, compared to 104.5% during the fourth quarter of
2016.
CARMEL, Ind., Feb. 15, 2018 (GLOBE NEWSWIRE) -- Baldwin & Lyons, Inc. (NASDAQ:BWINA) (NASDAQ:BWINB) today
reported results for the fourth quarter and twelve months of 2017. The Company produced fourth quarter net income of $16.5 million,
or $1.10 per share, which compares to net income of $4.9 million, or $0.32 per share, for the prior year’s fourth quarter.
For the full year of 2017, net income totaled $18.3 million, or $1.21 per share, which compares to net income of $28.9 million, or
$1.92 per share, for the prior year.
Net premiums earned for the fourth quarter of 2017 increased 40.4% to $97.1 million compared to the prior year
period. For full year 2017, net premiums earned increased 18.9% to $328.1 million. 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.
Gross premiums written for the fourth quarter of 2017 increased 37.5% to $144.2 million compared to $104.9
million written during the prior year period. Gross premiums written for full year 2017 increased 25.2% to $504.7 million
compared to $403.0 million written during the prior year. 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 investment income for the fourth quarter of 2017 increased 42.2% to $5.7 million compared to $4.0 million in
the prior year period. Full year 2017 net investment income increased 24.9% to $18.1 million, compared to $14.5 million in prior
year. The increase reflects higher interest rates, higher reinvestment yields for core fixed income securities, increased dividends
from equity securities, and an increase in average funds invested resulting from positive cash flow.
Underwriting operations produced a combined ratio of 99.3% during the fourth quarter of 2017 compared to a
combined ratio of 104.5% for the prior year period. The fourth quarter 2017 combined ratio includes $2.7 million (2.8 percentage
points) of unfavorable prior year reserve development, predominately related to legacy business lines which are now in run-off,
compared to unfavorable prior year development of $3.4 million (5.0 percentage points) during the prior year period. The combined
ratio difference between the fourth quarter of 2017 and 2016 reflects adverse development during the fourth quarter of 2016 related
to a number of infrequent, but severe Public Transportation charter bus claims. For full year 2017, the combined ratio was 108.4%
compared to a combined ratio of 98.1% for the prior year with the difference primarily related to reserve strengthening in the
second quarter of 2017. Prior year unfavorable reserve development in 2017 totaled $19.2 million compared to $13.8 million for the
full year 2016.
Book value per share as of December 31, 2017 was $27.83, an increase of $0.90 per share during the fourth
quarter, after the payment of cash dividends to shareholders totaling $0.27 per share. For full year 2017, book value per share
increased $1.02 after the payment of cash dividends to shareholders totaling $1.08 per share. The combination of the year-to-date
increase in book value of $1.02, plus dividends paid to shareholders of $1.08, represents an annualized total value creation of
7.8% on beginning book value for the full year 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 (loss), a non-GAAP financial measure that is a useful tool for investors and analysts in analyzing ongoing
operating trends.
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
December 31 |
|
December 31 |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
Income before federal income taxes |
$ |
10,506 |
|
|
$ |
7,067 |
|
|
$ |
10,122 |
|
|
$ |
43,054 |
|
|
Less: Net realized gains on investments |
|
4,152 |
|
|
|
6,204 |
|
|
|
19,686 |
|
|
|
23,228 |
|
|
Income (loss) from core business
operations |
$ |
6,354 |
|
|
$ |
863 |
|
|
$ |
(9,564 |
) |
|
$ |
19,826 |
|
|
Less: Net investment income |
|
5,661 |
|
|
|
3,982 |
|
|
|
18,095 |
|
|
|
14,483 |
|
|
Underwriting income (loss) |
$ |
693 |
|
|
$ |
(3,119 |
) |
|
$ |
(27,659 |
) |
|
$ |
5,343 |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from core business operations, before federal income taxes, was $6.4 million for the fourth
quarter of 2017 compared to income (loss) from core business operations, before federal income taxes, of $0.9 million during the
fourth quarter of 2016. Income (loss) from core business operations, before federal income tax benefits, was ($9.6 million)
for the full year 2017 compared to income (loss) from core business operations, before federal income taxes, of $19.8 million
during the prior year.
The Company’s management uses the term income (loss) from core business operations, a non-GAAP
financial measure, which is defined as income before federal income taxes excluding pre-tax realized 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 equity analysts exclude gains and losses on investments in their analysis of the Company’s results.
The combined ratios and the components, 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 Thursday, February 15, 2018, at 11:00 AM EST to discuss
results for the fourth quarter ended December 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
February 22, 2018 by calling 1-844-512-2921 or 1-412-317-6671 and referencing passcode 13674841. 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 August 15, 2018. The webcast may be accessed directly at:
http://public.viavid.com/index.php?id=127689.
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-K 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.
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.
Baldwin & Lyons, Inc. and Subsidiaries |
|
|
|
|
|
Unaudited Consolidated Balance Sheets |
|
|
|
|
|
(in thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31 |
|
December 31 |
|
|
|
|
2017 |
|
|
2016 |
|
Assets |
|
|
|
|
|
Investments 1: |
|
|
|
|
|
Fixed maturities
($521,017) |
|
$ |
521,853 |
|
$ |
491,904 |
|
Equity securities
($130,751) |
|
|
201,763 |
|
|
119,945 |
|
Limited partnerships, at
equity |
|
|
70,806 |
|
|
76,469 |
|
Short-term 2 |
|
|
1,000 |
|
|
1,500 |
|
|
|
|
795,422 |
|
|
689,818 |
|
Cash and cash equivalents |
|
|
64,680 |
|
|
62,976 |
|
Accounts receivable |
|
|
87,551 |
|
|
64,984 |
|
Reinsurance recoverable |
|
|
318,331 |
|
|
255,024 |
|
Other assets |
|
|
72,691 |
|
|
78,732 |
|
Current federal income taxes |
|
|
6,938 |
|
|
2,603 |
|
|
|
$ |
1,345,613 |
|
$ |
1,154,137 |
|
|
|
|
|
|
|
Liabilities and shareholders' equity |
|
|
|
|
|
Reserves for losses and loss expenses |
|
$ |
680,274 |
|
$ |
576,330 |
|
Reserves for unearned premiums |
|
|
53,085 |
|
|
21,694 |
|
Borrowings under line of credit |
|
|
20,000 |
|
|
20,000 |
|
Accounts payable and other liabilities |
|
|
159,085 |
|
|
120,356 |
|
Deferred federal income taxes |
|
|
14,358 |
|
|
11,412 |
|
|
|
|
926,802 |
|
|
749,792 |
|
Shareholders' equity: |
|
|
|
|
|
Common stock-no par value |
|
|
642 |
|
|
644 |
|
Additional paid-in capital |
|
|
55,078 |
|
|
54,286 |
|
Unrealized net gains on
investments |
|
|
46,700 |
|
|
34,051 |
|
Retained earnings |
|
|
316,391 |
|
|
315,364 |
|
|
|
|
418,811 |
|
|
404,345 |
|
|
|
$ |
1,345,613 |
|
$ |
1,154,137 |
|
|
|
|
|
|
|
Number of common and common |
|
|
|
|
|
equivalent shares outstanding |
|
|
15,047 |
|
|
15,084 |
|
Book value per outstanding share |
|
$ |
27.83 |
|
$ |
26.81 |
|
|
|
|
|
|
|
1 2017 cost in parentheses |
|
|
|
|
|
2 Approximates cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Baldwin & Lyons, Inc. and Subsidiaries |
|
|
|
|
|
|
|
|
Unaudited Consolidated Statements of Operations |
|
|
|
|
|
|
|
|
(in thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
December 31 |
|
December 31 |
|
|
|
2017 |
|
|
|
2016 |
|
|
2017 |
|
|
|
2016 |
|
Revenues |
|
|
|
|
|
|
|
|
Net premiums earned |
$ |
97,075 |
|
|
$ |
69,141 |
|
$ |
328,145 |
|
|
$ |
276,011 |
|
Net investment income |
|
5,661 |
|
|
|
3,982 |
|
|
18,095 |
|
|
|
14,483 |
|
Net realized gains on investments |
|
4,152 |
|
|
|
6,204 |
|
|
19,686 |
|
|
|
23,228 |
|
Commissions and other income |
|
1,520 |
|
|
|
1,241 |
|
|
5,308 |
|
|
|
5,275 |
|
|
|
108,408 |
|
|
|
80,568 |
|
|
371,234 |
|
|
|
318,997 |
|
Expenses |
|
|
|
|
|
|
|
|
Losses and loss expenses incurred |
|
66,492 |
|
|
|
48,366 |
|
|
247,518 |
|
|
|
186,481 |
|
Other operating expenses |
|
31,410 |
|
|
|
25,135 |
|
|
113,594 |
|
|
|
89,462 |
|
|
|
97,902 |
|
|
|
73,501 |
|
|
361,112 |
|
|
|
275,943 |
|
Income before federal income taxes
(benefits) |
|
10,506 |
|
|
|
7,067 |
|
|
10,122 |
|
|
|
43,054 |
|
Federal income taxes (benefits) |
|
(5,970 |
) |
|
|
2,203 |
|
|
(8,201 |
) |
|
|
14,109 |
|
Net income |
$ |
16,476 |
|
|
$ |
4,864 |
|
$ |
18,323 |
|
|
$ |
28,945 |
|
|
|
|
|
|
|
|
|
|
Per share data - diluted: |
|
|
|
|
|
|
|
|
Income before net gains on investments |
$ .92 |
|
$ .06 |
|
$ .37 |
|
$ .92 |
|
Net gains on investments |
.18 |
|
.26 |
|
.84 |
|
|
1.00 |
|
Net income |
$ |
1.10 |
|
|
$ .32 |
|
$ |
1.21 |
|
|
$ |
1.92 |
|
|
|
|
|
|
|
|
|
|
Dividends |
$ .27 |
|
$ .26 |
|
$ |
1.08 |
|
|
$ |
1.04 |
|
|
|
|
|
|
|
|
|
|
Reconciliation of shares outstanding: |
|
|
|
|
|
|
|
|
Average shares outstanding - basic |
|
15,010 |
|
|
|
15,084 |
|
|
15,065 |
|
|
|
15,072 |
|
Dilutive effect of share equivalents |
|
35 |
|
|
|
- |
|
|
42 |
|
|
|
12 |
|
Average shares outstanding - diluted |
|
15,045 |
|
|
|
15,084 |
|
|
15,107 |
|
|
|
15,084 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Baldwin & Lyons, Inc. and Subsidiaries |
|
|
|
Unaudited Consolidated Statements of Cash
Flows |
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended |
|
|
December 31 |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
|
|
|
Net cash provided by operating
activities |
$ |
91,865 |
|
|
$ |
32,368 |
|
Investing activities: |
|
|
|
Purchases of available-for-sale
investments |
|
(410,140 |
) |
|
|
(400,670 |
) |
Purchases of
limited partnership interests |
|
(1,097 |
) |
|
|
- |
|
Proceeds from sales or maturities |
|
|
|
of available-for-sale investments |
|
325,086 |
|
|
|
367,254 |
|
Net sales of short-term investments |
|
500 |
|
|
|
11,258 |
|
Distributions from
limited partnerships |
|
19,230 |
|
|
|
1,462 |
|
Other investing activities |
|
(6,080 |
) |
|
|
(6,666 |
) |
Net cash used in investing activities |
|
|
(72,501 |
) |
|
|
(27,362 |
) |
Financing activities: |
|
|
|
Dividends paid to shareholders |
|
(16,302 |
) |
|
|
(15,803 |
) |
Drawings on line of credit |
|
- |
|
|
|
0 |
|
Repayment on line of credit |
|
- |
|
|
|
- |
|
Drawings on margin account |
|
- |
|
|
|
- |
|
Repurchase of common shares |
|
(1,880 |
) |
|
|
- |
|
Proceeds from sales of common stock |
|
- |
|
|
|
- |
|
Net cash used in financing activities |
|
|
(18,182 |
) |
|
|
(15,803 |
) |
|
|
|
|
|
Effect of foreign exchange rates on cash and cash equivalents |
|
|
522 |
|
|
|
235 |
|
|
|
|
|
|
Increase (decrease) in cash and cash
equivalents |
|
|
1,704 |
|
|
|
(10,562 |
) |
Cash and cash equivalents at beginning of period |
|
62,976 |
|
|
|
73,538 |
|
Cash and cash equivalents at end of period |
$ |
64,680 |
|
|
$ |
62,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Highlights (unaudited) |
|
|
|
|
|
|
|
|
Baldwin & Lyons, Inc. and Subsidiaries |
|
|
|
|
|
|
|
|
(In thousands, except per share data) |
|
Three Months Ended |
|
Twelve Months Ended |
|
|
December 31 |
|
December 31 |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
Annualized |
|
|
|
|
|
|
|
|
Book value per share beginning of period |
|
$ |
26.93 |
|
|
$ |
26.98 |
|
|
$ |
26.81 |
|
|
$ |
26.25 |
|
Book value per share end of period |
|
|
27.83 |
|
|
|
26.81 |
|
|
|
27.83 |
|
|
|
26.81 |
|
Change in book value per share |
|
$ |
0.90 |
|
|
$ |
(0.17 |
) |
|
$ |
1.02 |
|
|
$ |
0.56 |
|
Dividends paid |
|
|
0.27 |
|
|
|
0.26 |
|
|
|
1.08 |
|
|
|
1.04 |
|
Total value creation
1 |
|
|
17.4 |
% |
|
|
1.3 |
% |
|
|
7.8 |
% |
|
|
6.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average shareholders' equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income |
|
|
15.1 |
% |
|
|
0.9 |
% |
|
|
1.5 |
% |
|
|
3.8 |
% |
|
|
|
|
|
|
|
|
|
Net income |
|
|
18.0 |
% |
|
|
5.3 |
% |
|
|
4.9 |
% |
|
|
8.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and LAE expenses incurred |
|
$ |
66,492 |
|
|
$ |
48,366 |
|
|
$ |
247,518 |
|
|
$ |
186,481 |
|
Net premiums earned |
|
|
97,075 |
|
|
|
69,141 |
|
|
|
328,145 |
|
|
|
276,011 |
|
Loss and LAE ratio |
|
|
68.5 |
% |
|
|
70.0 |
% |
|
|
75.4 |
% |
|
|
67.6 |
% |
|
|
|
|
|
|
|
|
|
Other operating expenses |
|
$ |
31,410 |
|
|
$ |
25,135 |
|
|
$ |
113,594 |
|
|
$ |
89,462 |
|
Less: Commissions and other income |
|
|
1,520 |
|
|
|
1,241 |
|
|
|
5,308 |
|
|
|
5,275 |
|
Other operating expenses, less commission and other income |
|
$ |
29,890 |
|
|
$ |
23,894 |
|
|
$ |
108,286 |
|
|
$ |
84,187 |
|
Net premiums earned |
|
|
97,075 |
|
|
|
69,141 |
|
|
|
328,145 |
|
|
|
276,011 |
|
Expense ratio |
|
|
30.8 |
% |
|
|
34.5 |
% |
|
|
33.0 |
% |
|
|
30.5 |
% |
|
|
|
|
|
|
|
|
|
Combined ratio
2 |
|
|
99.3 |
% |
|
|
104.5 |
% |
|
|
108.4 |
% |
|
|
98.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross premiums written |
|
$ |
144,179 |
|
|
$ |
104,884 |
|
|
$ |
504,737 |
|
|
$ |
403,004 |
|
Net premiums written |
|
|
106,930 |
|
|
|
68,988 |
|
|
|
353,389 |
|
|
|
271,752 |
|
|
|
|
|
|
|
|
|
|
1 Total Value Creation equals
change in book value plus dividends paid, divided by beginning book value. Quarterly amounts have been annualized |
2 The combined ratio is
calculated as ratio of losses and loss expenses incurred, plus other operating expenses, less commission and other income to
net premiums earned. |
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Investor Contact: William Vens
investors@baldwinandlyons.com
(317) 429-2554