Baldwin & Lyons, Inc. Announces Fourth Quarter and Full Year Results
16 February 2018 - 1:00AM
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. |
|
Investor Contact: William
Vensinvestors@baldwinandlyons.com (317) 429-2554
Baldwin & Lyons (NASDAQ:BWINA)
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Baldwin & Lyons (NASDAQ:BWINA)
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From Jul 2023 to Jul 2024