- Gross premiums written increased 6.2% for the third quarter of 2016 and 4.3% for the nine months ended September 30, 2016, compared to prior year periods.
- Reserve strengthening for both the discontinued reinsurance assumed line of $6.0 million and unallocated loss adjustment expense reserve of $4.1 million increased the consolidated combined ratio to 106.8% for the third quarter and 96.3% for the nine months ended September 30, 2016.
- Excluding the impact of reserve strengthening, Property & Casualty Insurance combined ratio was 91.2% for the third quarter and 90.2% for the nine months ended September 30, 2016.
Net investment income of $3.5 million, reflected an increase of 17% compared to the third quarter of 2015 due to higher average bond yields and increases in average funds invested resulting from positive cash flow. For the nine months ended September 30, 2016, net investment income was $10.5 million, reflecting an increase of 20% compared to the prior year period.Book value per share on September 30, 2016 of $26.98 increased $.18 per share during the third quarter, after the payment of cash dividends to shareholders totaling $.26 per share. For the nine months ended September 30, 2016, book value per share has increased $.73 after the payment of cash dividends to shareholders totaling $.78 per share. The combination of the increase in book value and dividends represents a 5.8% total return on beginning book value for the nine months ended September 30, 2016. The Company's net income, determined in accordance with U.S. generally accepted accounting principles (GAAP), includes items that may not be indicative of ongoing operations. The following table reconciles income before federal income taxes to underwriting income, a non-GAAP financial measure that is a useful tool for investors and analysts in analyzing ongoing operating trends.
|Three Months Ended||Nine Months Ended|
|September 30||September 30|
|Income before federal income taxes||$||5,635||$||11,610||$||35,988||$||29,331|
|Less: Net realized gains (losses) on investments||7,732||(2,086||)||17,024||491|
|Operating income (loss)||$||(2,097||)||$||13,696||$||18,964||$||28,840|
|Less: Investment income||3,513||3,014||10,501||8,727|
|Less: Corporate and other expense (income)||(765||)||150||862||336|
|Underwriting income (loss)||$||(4,845||)||$||10,532||$||7,601||$||19,777|
|Reinsurance underwriting income (loss) in run-off 1||(6,854||)||86||(7,680||)||1,099|
|P&C Insurance underwriting income||$||2,009||$||10,446||$||15,281||$||18,678|
|Unallocated loss adjustment expense reserve strengthening 2||4,100||-||4,100||-|
|P&C Insurance underwriting income before reserve strengthening||$||6,109||$||10,446||$||19,381||$||18,678|
1During 2016, we have encountered adverse loss development in our discontinued assumed reinsurance business. Our actuarial analysis at September 30, 2016 indicated an additional reserve need of $6.0 million related to prior accident years.2In connection with the significant growth in our business, we strengthened our unallocated loss adjustment expense reserve by $4.1 million during the quarter. Note: The Company currently operates within two reportable business segments: Property and Casualty (P&C) Insurance and Reinsurance. Consolidated Operating Income (Loss) Consolidated operating loss was $2.1 million for the third quarter. For the nine months ended September 30, 2016, consolidated operating income was $19.0 million (including the reserve strengthening items). Absent the $10.1 million of reserve strengthening items noted above, the consolidated net operating income was $8.0 million for the third quarter. For the nine months ended September 30, 2016, the consolidated net operating income was $29.1 million (also excluding the reserve strengthening items). Reinsurance Operations (in run-off) Including the reserve strengthening noted above of $6.0 million, Reinsurance Operations produced an underwriting loss of $6.9 million for the third quarter. For the nine months ended September 30, 2016, Reinsurance Operations produced an underwriting loss of $7.7 million. Property & Casualty Insurance Operations Property & Casualty Insurance produced underwriting income of $2.0 million, resulting in a combined ratio for the third quarter of 97.1%. For the nine months ended September 30, 2016, the combined ratio was 92.3% (including reserve strengthening), producing $15.3 million in underwriting income. Absent the $4.1 million unallocated loss adjustment expense reserve strengthening noted above, Property & Casualty Insurance produced underwriting income of $6.1 million, resulting in a combined ratio for the third quarter of 91.2%. For the nine months ended September 30, 2016, the consolidated combined ratio was 90.2% (excluding unallocated loss adjustment expense reserve strengthening), producing $19.4 million in underwriting income.
Conference Call Information:Baldwin & Lyons, Inc. has scheduled its quarterly conference call for Thursday, November 3, 2016, at 11:00 AM ET (New York time) to discuss results for the third quarter ended September 30, 2016. To participate via teleconference, investors may dial 1-888-364-3108 (U.S./Canada) or 1-719-457-2621 (International or local) at least five minutes prior to the beginning of the call. A replay of the call will be available through November 10, 2016 by calling 1-877-870-5176 or 1-858-384-5517 and referencing passcode 6191965. Investors and interested parties may also listen to the call via a live webcast, accessible on the company's web site via a link at the top of the main Investor Relations page. To participate in the webcast, please register at least fifteen minutes prior to the start of the call. The webcast will be archived on this site until April 28, 2017. The webcast may be accessed directly at: http://public.viavid.com/player/index.php?id=120945. Also available on the investor relations section of our web site are complete interim financial statements and copies of our filings with the Securities and Exchange Commission. Forward-looking statements in this report are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve inherent risks and uncertainties. Readers are encouraged to review the Company's annual report for its full statement regarding forward-looking information.
|Financial Highlights (unaudited)|
|Baldwin & Lyons, Inc. and Subsidiaries|
|(In thousands, except per share data)||Three Months Ended||Nine Months Ended|
|September 30||September 30|
|Net investment gains (losses)||7,732||(2,086||)||17,024||491|
|Net operating income (loss)||$||(1,025||)||$||9,136||$||13,016||$||19,422|
|Net investment gains (losses),|
|net of federal income taxes||5,026||(1,356||)||11,066||319|
|Per share data - diluted:|
|Average number of shares||15,084||15,018||15,084||15,019|
|Net operating income (loss)||$||(.06||)||$||.61||$||.86||$||1.29|
|Net investment gains (losses)||.33||(.09||)||.74||.02|
|Dividends paid to shareholders||$||.26||$||.25||$||.78||$||.75|
|Comprehensive income, net of tax|
|Unrealized net gains (losses) on securities||2,736||(15,931||)||(1,514||)||(14,957||)|
|Foreign currency translation adjustments||(145||)||(429||)||398||(1,102||)|
|Comprehensive income (loss)||$||6,592||$||(8,580||)||$||22,966||$||3,682|
|Total Value Creation 1||6.6||%||(8.5||)%||7.7||%||1.2||%|
|Return on average shareholders' equity:|
|Net operating income||(1.1||)%||10.3||%||4.8||%||7.4||%|
|Consolidated combined ratio of|
|insurance subsidiaries (GAAP basis):||106.8||%||83.9||%||96.3||%||90.0||%|
|1 Total Value Creation is the summation of the change in book value plus dividends paid divided by beginning book value.|
Investor Contact: William Vensinvestors@baldwinandlyons.com(317) 429-2554