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
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