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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

For the fiscal year ended Commission file number 0-5534
DECEMBER 31, 2001

BALDWIN & LYONS, INC.
(Exact name of registrant as specified in its charter)

INDIANA 35-0160330
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

1099 NORTH MERIDIAN STREET, INDIANAPOLIS, INDIANA46204
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (317) 636-9800

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

(TITLE OF CLASS)
Class A Common Stock, No Par Value
Class B Common Stock, No Par Value

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]

The aggregate market value of Class A and Class B Common Stock held by non-
affiliates of the Registrant as of March 19, 2002, based on the closing trade
prices on that date, was approximately $142,559,000.
The number of shares outstanding of each of the issuer's classes of common stock
as of March 19, 2002:

Common Stock, No Par Value:
Class A (voting) 2,172,715 shares
Class B (nonvoting) 9,512,289 shares

The Index to Exhibits is located on pages 55 and 56.


DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for Annual Meeting of Shareholders to be held
May 7, 2002 are incorporated by reference into Part III.

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PART I

ITEM 1. BUSINESS

Baldwin & Lyons, Inc. was incorporated under the laws of the State of Indiana in
1930. Through its divisions and subsidiaries, Baldwin & Lyons, Inc. (referred
to herein as "B&L") specializes in marketing and underwriting property and
casualty insurance. The Company's subsidiaries are: Protective Insurance
Company (referred to herein as "Protective"), with licenses in all 50 states and
all Canadian provinces; Sagamore Insurance Company (referred to herein as
"Sagamore"), which is currently licensed in 37 states; and B & L Insurance, Ltd.
(referred to herein as "BLI"), which is domiciled and licensed in Bermuda. These
subsidiaries are collectively referred to herein as the "Insurance
Subsidiaries." The "Company", as used herein, refers to Baldwin & Lyons, Inc.
and all its subsidiaries unless the context indicates otherwise.

Approximately 57% of the gross direct premiums written and assumed by the
Insurance Subsidiaries during 2001 was attributable to business produced
directly by B & L. The remaining 43% consists primarily of business written by
Sagamore originating through an extensive network of independent agents.

The Insurance Subsidiaries cede portions of their gross premiums written to
several non-affiliated reinsurers under excess of loss and quota-share treaties
and by facultative placements. Reinsurance is ceded to spread the risk of loss
among several reinsurers. In addition to voluntary reinsurance, described
below, the Insurance Subsidiaries participate in numerous mandatory government-
operated reinsurance pools which require insurance companies to provide
coverages on assigned risks. These assigned risk pools allocate participation
to all insurers based upon each insurer's portion of premium writings on a state
or national level.

The Insurance Subsidiaries serve various specialty markets as follows:

FLEET TRUCKING INSURANCE
- ------------------------

Protective provides coverage for larger customers in the motor carrier industry
which retain substantial amounts of self-insurance as well as for medium-sized
trucking companies on a first dollar or small deductible basis. These trucking
products are marketed almost exclusively by the B&L agency organization directly
to trucking clients although broker or agent intermediaries are used on a
limited basis for smaller accounts. The principal types of insurance marketed
by Protective are:

- Casualty insurance including motor vehicle liability,
physical damage and other liability insurance.
- Workers' compensation insurance.
- Specialized accident (medical and indemnity) insurance.
- Fidelity and surety bonds.
- Inland Marine consisting principally of cargo insurance.
- "Captive" insurance company products, which are provided
through BLI in Bermuda.

B&L also performs a variety of additional services, primarily for Protective's
insureds, including risk surveys and analyses, government compliance assistance,
loss control and cost studies and research, development, and consultation in
connection with new insurance programs including development of computerized
systems to assist in monitoring accident data. Extensive claims services are
also provided, primarily to clients with self-insurance programs.

VOLUNTARY ASSUMPTION REINSURANCE
- --------------------------------

Protective accepts cessions and retrocessions from selected insurance and
reinsurance companies, principally reinsuring against catastrophes. Exposures
under these retrocessions are generally in high upper layers, are spread among
several geographic regions and are limited so that only a major catastrophic
event or series of major events would have a material affect on the Company's
financial position. The events of September 11,

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2001 materially impacted the Company's operating results in 2001. See page 16
and Note E to the consolidated financial statements for further discussion.

PRIVATE PASSENGER AUTOMOBILE INSURANCE
- --------------------------------------

Sagamore markets nonstandard private passenger automobile liability and physical
damage coverages to individuals through a network of independent agents in
fourteen states.

SMALL FLEET TRUCKING INSURANCE
- ------------------------------

Sagamore provides commercial automobile liability, physical damage and cargo
insurance to truck owner-operators with twenty-five or fewer power units. These
products are marketed through independent agents in the majority of the states
in which Sagamore is licensed.

Small Business Workers' Compensation
- ------------------------------------

Sagamore also markets worker's compensation insurance to selected small
businesses in a few midwestern states. This product is marketed through
independent agents.

PROPERTY/CASUALTY LOSSES AND LOSS ADJUSTMENT EXPENSES
- -----------------------------------------------------

The consolidated financial statements include the estimated liability for unpaid
losses and loss adjustment expenses ("LAE") of the Insurance Subsidiaries. The
liabilities for losses and LAE are determined using case basis evaluations and
statistical projections and represent estimates of the ultimate net cost of all
unpaid losses and LAE incurred through December 31 of each year. These
estimates are subject to the effects of trends in claim severity and frequency
and are continually reviewed and, as experience develops and new information
becomes known, the liability is adjusted as necessary. Such adjustments, either
positive or negative, are reflected in current operations.

Reserves for incurred, but not reported, claims are determined on the basis of
actuarial calculations using historical data. The anticipated effect of
inflation is implicitly considered when estimating liabilities for losses and
LAE. In addition, frequency and severity of claims must be projected. The
average severity of claims is influenced by a number of factors that vary with
the individual type of policy written. Future average severities are projected
based on historical trends adjusted for anticipated changes in underwriting
standards, policy provisions, and general economic and social trends. These
anticipated trends are monitored based on actual development and are modified as
new conditions would suggest that changes are necessary.

Loss reserves related to certain permanent total disability (PTD) workers'
compensation claims have been discounted to present value using tables provided
by the National Council on Compensation Insurance which are based upon a pretax
interest rate of 3.5% and adjusted for losses retained by the insured. The loss
and LAE reserves at December 31, 2001 have been reduced by approximately $4.7
million as a result of such discounting. Had the Company not discounted loss
and LAE reserves, pretax income would have been approximately $.4 million higher
for the year ended December 31, 2001.

The maximum amount for which the Protective insures a trucking risk is $10
million although, occasionally, limits above $10 million are provided but are
100% reinsured. Certain coverages, such as workers' compensation, provide
essentially unlimited exposure although the Company protects itself to the
extent believed prudent through the purchase of excess insurance for these
coverages. After giving effect to current treaty reinsurance arrangements, for
the majority of risks insured, Protective's maximum exposure to loss from a
single occurrence is approximately $1 million. Protective has revised its
treaty arrangements several times in prior years in response to changing market
conditions. The current treaty arrangements are effective until June 1, 2002
and cover the entire policy period for all business written through that date.
Treaty renewals are expected to occur annually in the foreseeable future.
During the past ten years, Protective's maximum exposure to a single occurrence
has ranged from zero to approximately $2 million. Because Protective, on
occasion, writes multiple year policies and because losses from trucking
business take years to develop, losses reported in

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the current year may be covered by an older reinsurance treaty with higher or
lower loss retention by Protective than the current treaty.

Certain of the previous reinsurance treaties contained aggregate recovery
limitations. To the extent that losses in these layers, in the aggregate,
exceed these limitations, the Company could be liable for amounts that would
otherwise be covered under these reinsurance treaties. No such aggregate limits
have been exceeded as of
December 31, 2001.

With respect to Sagamore's private passenger automobile and small fleet trucking
business, the Company's maximum net exposure for a single occurrence is $100,000
until January 1, 2003. Sagamore's retention under the workers' compensation
product is $50,000 for a single occurrence. Sagamore's retention on prior
year's business has ranged from the current levels to $250,000 per occurrence.

The following table sets forth a reconciliation of beginning and ending loss and
LAE liability balances, for 2001, 2000 and 1999. That table is presented net of
reinsurance recoverable to correspond with income statement presentation.
However, a reconciliation of these net reserves to those gross of reinsurance
recoverable, as presented in the balance sheet, is also shown. The table on
page 7 shows the development of the estimated liability, net of reinsurance
recoverable, for the ten years prior to 2000.

RECONCILIATION OF LIABILITY FOR LOSSES AND LOSS ADJUSTMENT
EXPENSES (GAAP BASIS)



Year Ended December 31,
-----------------------------------------
2001 2000 1999
----------- ----------- -----------
(IN THOUSANDS)


NET OF REINSURANCE RECOVERABLE:
Liability for losses and LAE at the
Beginning of the year $120,206 $130,702 $143,951

Provision for losses and LAE:
Claims occurring during the current year 82,757 65,577 55,520
Claims occurring during prior years (887) (8,107) (10,609)
---------- ---------- ----------
81,870 57,470 44,911
Losses and LAE payments:
Claims occurring during the current year 33,237 37,671 27,867
Claims occurring during prior years 31,132 30,238 30,215
---------- ---------- ----------
64,369 67,909 58,082

Change in unpaid portion of uncollectible
Amounts due from reinsurers 26 (57) (78)
---------- ---------- ----------
Liability for losses and LAE at end of year 137,733 120,206 130,702

Reinsurance recoverable on unpaid losses
at end of the year 109,410 62,219 42,771
---------- ---------- ----------

Liability for losses and LAE, gross of
reinsurance recoverable, at end of the year $247,143 $182,425 $173,473
========== ========== ==========


The reconciliation above shows a $.9 million (.7%) savings in the liability for
losses and LAE recorded at December 31, 2000. The net savings is reflected in
2001 underwriting income. All major product groups

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produced redundancies during each of the years 2001, 2000 and 1999 with the
exception of reinsurance assumed in 2001 and private passenger automobile in
2000. The decline in reserve redundancy from 2000 and 1999 results in part from
the significantly lower retained loss per occurrence for the Company's large
fleet trucking product. In addition, the 2001 development included
approximately $2.1 million of additional losses from reinsurance assumed
contracts which were not reported to Protective at December 31, 2000.
Approximately $1 million of this loss was offset by reinstatement premiums
recorded in 2001. A more detailed discussion of reserve savings experienced in
recent years is presented below.

The differences between the liability for losses and LAE reported in the
accompanying 2001 consolidated financial statements in accordance with generally
accepted accounting principles ("GAAP") and that reported in the annual
statements filed with state and provincial insurance departments in the United
States and Canada in accordance with statutory accounting practices ("SAP") are
as follows:



(IN THOUSANDS)


Liability reported on a SAP basis - net of reinsurance recoverable $138,766

Add differences:
Reinsurance recoverable on unpaid losses and LAE 109,410
Additional reserve for reinsurance assumed losses not
reported to the Company at the current year end 240
Reclassification of loss reserves ceded attributable to insolvent reinsurers 327

Deduct differences:
Estimated salvage and subrogation recoveries recorded on
a cash basis for SAP and on an accrual basis for GAAP (1,600)
----------
Liability reported on a GAAP basis $247,143
==========


Loss reserves ceded attributable to insolvent reinsurers are treated as a
separate liability for SAP purposes but are classified as an addition to loss
reserves in the GAAP consolidated balance sheets. This classification was used
for GAAP since the uncollectible amounts are, in effect, a reversal of
reinsurance credits taken against gross loss and LAE reserves. Losses incurred,
however, do not include charges for uncollectible reinsurance, nor do the tables
on pages 4 and 7, since the inability to recover these amounts from insolvent
reinsurers is considered to be a credit loss and is not associated with the
Company's reserving process. Accordingly, loss and LAE developments would be
distorted if amounts related to insolvent reinsurance were included.

The table on page 7 presents the development of GAAP balance sheet liabilities
for each year-end 1991 through 2001, net of all reinsurance credits. The top
line of the table shows the estimated liability for unpaid losses and LAE
recorded at the balance sheet date for each of the indicated years. The
liabilities shown on this line for each year-end have been reduced by amounts
relating to loss reserves ceded attributable to insolvent reinsurers, as
discussed in the immediately preceding paragraph. This liability represents the
estimated amount of losses and LAE for claims arising in all prior years that
are unpaid at the balance sheet date, including losses that had been incurred
but not yet reported to the Company.

The upper portion of the table shows the reestimated amount of the previously
recorded liability based on experience as of the end of each succeeding year.
The estimate is increased or decreased as more information becomes known about
the frequency and severity of claims.

The "cumulative redundancy" represents the aggregate change in the estimates
over all prior years. For example, the 1991 liability has developed a $41.5
million redundancy over ten years. That amount has been reflected in income
over the ten years, as shown on the table. The effect on income of changes in
estimates of the liability for losses and LAE during the past three years is
shown in the table on page 4.

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Historically, the Company's loss developments have been favorable. Reserve
developments for all year-ends 1986 through 2000 have produced redundancies as
of December 31, 2001. In addition to improvements in reserving methods, loss
reserve developments since 1985 have been favorably affected by several other
factors. Perhaps the most significant single factor has been the improvement in
safety programs by the trucking industry in general and by the Company's
insureds specifically. Statistics produced by the American Trucking Association
show that driver quality has improved markedly in the past decade resulting in
fewer fatalities and serious accidents. The Company's experience also shows
that improved safety and hiring programs have a dramatic impact on the frequency
and severity of trucking accidents. Higher self-insured retentions also played
a part in reduced insurance losses during the early part of this period. Higher
retentions not only raise the excess insurance entry point but also encourage
trucking company management to focus even more intensely on safety programs.
Further, reserve savings have been achieved by the use of structured settlements
on certain workers' compensation and liability claims of a long-term liability
nature. Recent developments, including raising of speed limits in many states
and the lack of availability of qualified drivers, may reverse some of the
trends noted during the past ten years.

The establishment of reserves requires the use of historical data where
available and generally a minimum of ten years of such data is required to
provide statistically valid samples. As previously mentioned, numerous factors
must be considered in reviewing historical data including inflation, tort reform
(or lack thereof), new coverages provided and trends noted in the current book
of business which are different from those present in the historical data.
Clearly, the Company's book of business in 2001 is different from that which
generated much of the ten-year historical loss data used to establish reserves
in the past few years. Savings realized in recent years upon the closing of
claims, as reflected in the tables on pages 4 and 7, are attributable to the
Company's long-standing policy of reserving for losses realistically and a
willingness to settle claims based upon a seasoned evaluation of the underlying
exposures. The Company and its actuaries will continue to review the trends
noted and, should it appear that such trends are permanent and projectable, they
will be reflected in future reserving method refinements.

The lower section of the table on page 7 shows the cumulative amount paid with
respect to the previously recorded liability as of the end of each succeeding
year. For example, as of December 31, 2001, the Company had paid $121.0 million
of losses and LAE that had been incurred, but not paid, as of December 31, 1991;
thus an estimated $36.3 million in losses incurred through 1991 remain unpaid as
of the current financial statement date ($157.3 million incurred less $121.0
million paid).

In evaluating this information, it is important to note that the method of
presentation causes development experience to be duplicated. For example, the
amount of any redundancy or deficiency related to losses settled in 1994, but
incurred in 1991, will be included in the cumulative development amount for
years-end 1991, 1992, and 1993. As such, this table does not present accident
or policy year development data which readers may be more accustomed to
analyzing. Also, conditions and trends that have affected development of the
liability in the past may not necessarily occur in the future. Accordingly, it
may not be appropriate to extrapolate future redundancies or deficiencies based
on this table.

ENVIRONMENTAL MATTERS: The Company's reserves for unpaid losses and loss
expenses at December 31, 2001 included amounts for liability related to
environmental damage claims. Given the Company's principal business is insuring
trucking companies, it does on occasion receive claims involving a trucking
accident which has resulted in the spill of a pollutant. Certain of the
Company's policies cover these situations on the basis that they were caused by
an accident that resulted in the immediate spill of a pollutant. These claims
are typically reported and resolved within a short period of time.

However, the Company has also received a few environmental claims that did not
result from a "sudden and accidental" event. Some of these claims fall under
policies issued in the 1970's primarily to one account which
was involved in the business of hauling and disposing of hazardous waste.
Although the Company had pollution exclusions in its policies during that
period, the courts have ignored similar exclusions in many environmental cases.
During the eight years ended December 31, 2001, the Company recorded a total of
$10.9

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ANALYSIS OF LOSS AND LOSS ADJUSTMENT EXPENSE DEVELOPMENT--GAAP BASIS
(DOLLARS IN THOUSANDS)


YEAR ENDED DECEMBER 31 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------


Liability for Unpaid
Losses and LAE, Net
of Reinsurance
Recoverables * $198,790 $188,189 $175,395 $175,012 $161,001 $154,039 $151,013 $143,515 $130,345 $119,905 $137,406

Liability Reestimated
as of:
One Year Later 185,452 174,269 152,146 169,528 148,756 146,201 140,272 132,906 122,238 119,018
Two Years Later 171,069 153,548 147,577 159,000 140,811 135,125 128,743 124,878 124,540
Three Years Later 155,977 156,271 144,526 153,833 130,540 123,775 122,211 124,367
Four Years Later 160,477 155,104 142,178 148,390 122,792 119,862 122,674
Five Years Later 159,804 153,528 137,876 143,478 120,410 121,445
Six Years Later 158,972 150,531 134,744 142,475 122,060
Seven Years Later 157,976 147,992 134,540 144,077
Eight Years Later 155,830 148,555 135,201
Nine Years Later 156,380 149,490
Ten Years Later 157,323
Cumulative Redundancy $41,467 $38,699 $40,194 $30,935 $38,941 $32,594 $28,339 $19,148 $5,805 $887
======== ======== ======== ======== ======== ======== ======== ======== ======== ========

Cumulative Amount of
Liability Paid Through:
One Year Later $41,958 $38,511 $30,297 $45,005 $27,825 $26,934 $25,088 $30,214 $30,239 $31,132
Two Years Later 68,706 59,494 58,969 67,219 43,016 43,280 43,311 48,416 49,068
Three Years Later 83,413 82,122 71,375 76,248 55,515 55,834 55,180 60,594
Four Years Later 98,331 91,794 77,702 85,096 62,740 63,998 64,370
Five Years Later 104,915 96,617 82,792 90,331 69,747 71,089
Six Years Later 109,174 100,299 87,316 95,924 75,496
Seven Years Later 112,487 104,625 90,441 101,073
Eight Years Later 116,461 107,668 94,737
Nine Years Later 118,884 110,740
Ten Years Later 121,048



* Amounts shown for 1991 through 2001 do not include the unpaid portion of
uncollectible amounts due from insolvent reinsurers which are classified with
loss and LAE reserves for financial statement purposes of $597, $611, $554,
$542, $457, $498, $480, $436, $358, $301 and $327, respectively.

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million in losses incurred with respect to environmental claims. Incurred
losses to date include a reserve for incurred but not reported environmental
losses of $3.9 million at December 31, 2001.

Establishing reserves for environmental claims is subject to uncertainties that
are greater than those represented by other types of claims. Factors
contributing to those uncertainties include a lack of historical data, long
reporting delays, uncertainty as to the number and identity of insureds with
potential exposure, unresolved legal issues regarding policy coverage, and the
extent and timing of any such contractual liability. Courts have reached
different and sometimes inconsistent conclusions as to when the loss occurred
and what policies provide coverage, what claims are covered, whether there is an
insured obligation to defend, how policy limits are determined, how policy
exclusions are applied and interpreted, and whether cleanup costs represent
insured property damage. Management believes that those issues are not likely
to be resolved in the near future.

However, to date, very few environmental claims have been reported to the
Company. In addition, a review of the businesses of our past and current
insureds indicates that exposure to further claims of an environmental nature is
limited because most of the Company's accounts are not currently, and have not
in the past been, involved in the hauling of hazardous substances. Also, the
revision of the pollution exclusion in the Company's policies in 1986 is
expected to further limit exposure to claims from that point forward. In
addition, the Company has never been presented with an environmental claim
relating to asbestos and, based on the types of business the Company has insured
over the years, it is not expected that the Company will have any asbestos
exposure.

MARKETING
- ---------

The Company's primary marketing areas are outlined on pages 2 and 3.

Since the mid-1980's, Protective has focused its marketing efforts on large and
medium trucking fleets. Protective has its largest market share in the larger
trucking fleets (over 150 units). These fleets self-insure a portion of their
risk and such self-insurance plans are a specialty of the Company. The
indemnity contract provided to self-insured customers is designed to cover all
aspects of trucking liability, including third party liability, property damage,
physical damage, cargo and workers' compensation, arising from vehicular
accident or other casualty loss. The self-insured program is supplemented with
large deductible workers' compensation policies in states that do not allow for
self-insurance. Protective also offers accident insurance on a group basis to
independent contractors under contract to a fleet sponsor. Throughout the
1990's, the market for Protective's products grew increasingly competitive,
though this competitive pressure has eased somewhat recently (see comments under
"Competition" following).

Since 1992, Protective has accepted reinsurance cessions and retrocessions,
principally for catastrophe exposures, from selected reinsurers on an
opportunistic basis. Protective is committed to participation in this market
provided pricing remains conducive to profitable results. As the result of less
favorable pricing in the market, Protective's participation in retrocessions
decreased in 1999 and again in 2000 after adjustment for reinstatement premiums
discussed later in the RESULTS OF OPERATIONS. However, based on improved
pricing in the market late in 2000 and 2001, especially after September 11,
2001, the Company recorded an increase in premium from reinsurance assumed
during 2001 and anticipates further increases during 2002.

During 1995, Sagamore entered the private passenger automobile insurance market
for nonstandard risks. This program is currently being marketed in fourteen
midwestern and southern states. Market acceptance to date has been favorable
and approximately $30.1 million of premium was written in this line during 2001.

Sagamore also offers a program of coverages for "small fleet" trucking concerns
(owner-operators with one to twenty-five power units). This program was
limited to a small geographic area composed of Midwestern states through the end
of 1997. However, significant geographic expansion began during 1998 and has
continued through 2001. Future expansion into other states is anticipated
during 2002. Approximately $11.7 million of premium was written in this program
during 2001, an increase in of 18% from the prior year.

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During 1997, Sagamore began marketing a small business workers' compensation
product in Missouri. Through 1999, growth in this product had been slow,
resulting mainly from competitive forces. However, recent developments in the
competitive make-up in the states where Sagamore markets this program resulted
in approximately $4.3 million in premium written during 2001, an increase of 99%
from the prior year.

INVESTMENTS
- -----------

The Company manages its invested assets to provide a high degree of flexibility
to respond to opportunities in the financial markets and to provide necessary
cash flows for operations. The resulting investment strategies emphasize
relatively short-term maturities and high asset quality and are designed to
produce reasonable returns without jeopardizing principal.

At December 31, 2001 the financial statement value of the Company's investment
portfolio was approximately $439 million, including money market instruments
classified as cash equivalents. A comparison of the diversification of the
Company's investment portfolio, using cost as a basis, is as follows:


December 31
---------------------
2001 2000
-------- --------

Corporate and other bonds 24.2% 25.3%
U.S. Government obligations 21.6 10.1
Common stocks 18.7 21.1
Short-term and other investments 14.5 18.7
Municipal bonds 11.7 13.1
Preferred stocks 5.5 6.2
Mortgage-backed securities 3.8 5.5
-------- --------
100.0% 100.0%
======== ========


The Company's concentration of invested assets in relatively short-term
investments provides it with a level of liquidity which is more than adequate to
provide for its anticipated cash flow needs. The structure of the investment
portfolio also provides the Company with the ability to restrict premium
writings during periods of intense competition, which typically result in
inadequate premium rates, and allows the Company to respond to new opportunities
in the marketplace as they arise. The following comparison of the Company's
bond and short-term investment portfolios, using par value as a basis, indicates
the changes in maturities in the portfolio during 2001.



MATURITIES OF BONDS AND SHORT-TERM INVESTMENTS AT DECEMBER 31 (PAR VALUE)

2001 2000
-------- --------

Less than one year 34.7% 41.1%
1 to 5 years 51.4 42.6
5 to 10 years 6.0 8.0
More than 10 years 7.9 8.3
-------- --------
100.0% 100.0%
======== ========

Average life of portfolio (years) 4.0 4.0
======== ========


Approximately $13.1 million of the fixed maturity portfolio (3.0% of total
invested assets) consists of bonds rated as less than investment grade at
December 31, 2001. The unrealized net gain on the fixed maturity

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portfolio was $4.7 million at December 31, 2001, before income taxes, and
compares to a $1.6 million unrealized loss at December 31, 2000.

Equity securities comprise 31% of the financial statement value of the
consolidated investment portfolio at December 31, 2001, down from 36% at the
prior year-end. The unrealized gains on the equity security portfolio decreased
$12.2 million to $45.4 million at December 31, 2001 offsetting similar gains
from a year earlier.

A comparison of consolidated investment yields is as follows:


2001 2000
-------- --------

Before federal tax:
Investment income 5.0% 5.5%
Investment income plus realized
investment gains 6.3 8.7

After federal tax:
Investment income 3.6 3.9
Investment income plus realized
investment gains 4.4 6.1


Because of the structure of the Company's investment portfolio, as previously
described, investment yields during 2001 were negatively impacted by the
repeated interest rate cuts by the Federal Reserve and the depressed equity
security markets.

EMPLOYEES
- ---------

As of March 1, 2002, the Company had 254 employees. The changes from March 1,
2001 are minor.

COMPETITION
- -----------

The insurance brokerage and agency business is highly competitive. B & L
competes with a large number of insurance brokerage and agency firms and
individual brokers and agents throughout the country, many of which are
considerably larger than B & L. B & L also competes with insurance companies
which write insurance directly with their customers.

Insurance underwriting is also highly competitive. The Insurance Subsidiaries
compete with other stock and mutual companies and inter-insurance exchanges
(reciprocals). There are numerous insurance companies offering the lines of
insurance which are currently written or may in the future be written by the
Insurance Subsidiaries. Many of these companies have been in business for
longer periods of time, have significantly larger volumes of business, offer
more diversified lines of insurance coverage and have greater financial
resources than the Company. In many cases, competitors are willing to provide
coverage for rates lower than those charged by the Insurance Subsidiaries. Many
potential clients self-insure workers' compensation and other risks for which
the Company offers coverage, and some concerns have organized "captive"
insurance companies as subsidiaries through which they insure their own
operations. Some states have workers' compensation funds that preclude private
companies from writing this business in those states. Federal law also
authorizes the creation of "Risk Retention Groups" which may write insurance
coverages similar to those offered by the Company.

ITEM 101(B), (C)(1)(I) AND (VII), AND (D) OF REGULATION S-K:

Reference is made to Note J to the consolidated financial statements which
provides information concerning industry segments and is filed herewith under
Item 8, Financial Statements and Supplementary Data.

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ITEM 2. PROPERTIES

The Company leases office space at 1099 North Meridian Street, Indianapolis,
Indiana in the Landmark
Building. This building is located approximately one mile from downtown
Indianapolis. The lease covers approximately 67,000 square feet and expires in
August, 2003, with an option to renew for an additional ten years. The
Company's entire operations, with the exception of Baldwin & Lyons, California,
are conducted from these leased facilities.

The Company owns a small building and the adjacent real estate approximately two
miles from its main office. This building contains approximately 3,300 square
feet of usable space, and is used primarily as a contingent back up and disaster
recovery site for computer operations.

Baldwin & Lyons, California leases approximately 1,900 square feet of office
space in a suburb of Los Angeles, California. All West Coast operations are
conducted from these facilities.

The current facilities are expected to be adequate for the Company's operations
for the foreseeable future.


ITEM 3. LEGAL PROCEEDINGS

In the ordinary, regular and routine course of their business, the Company and
its Insurance Subsidiaries are frequently involved in various matters of
litigation relating principally to claims for insurance coverage provided. No
currently pending matter is deemed by management to be material to the Company.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth
quarter of 2001.

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PART II


ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Class A and Class B common stocks are traded on The Nasdaq Stock
Market[TM] under the symbols BWINA and BWINB, respectively. The Class A and
Class B common shares have identical rights and privileges except that Class B
shares have no voting rights other than on matters for which Indiana law
requires class voting. As of December 31, 2001, there were approximately 400
record holders of Class A Common Stock and approximately 500 record holders of
Class B Common Stock.

The table below sets forth the range of high and low sale prices for the Class A
and Class B Common Stock for 2001 and 2000, as reported by the National
Association of Security Dealers, Inc. and published in the financial press. The
quotations reflect interdealer prices without retail markup, markdown or
commission and do not necessarily represent actual transactions.


CASH
CLASS A CLASS B DIVIDENDS
HIGH LOW HIGH LOW DECLARED
-------- -------- -------- -------- ---------


Year ended December 31:
2001:
FOURTH QUARTER $22.997 $20.241 $26.690 $16.900 $.10
THIRD QUARTER 24.450 19.000 26.500 16.500 .10
SECOND QUARTER 24.900 20.750 26.280 20.500 .10
FIRST QUARTER 22.875 18.750 28.750 20.000 .10

2000:
Fourth Quarter 19.000 19.000 23.875 18.375 $.10
Third Quarter 19.000 15.000 20.250 15.250 .10
Second Quarter 17.500 16.000 19.938 16.000 .10
First Quarter 21.250 16.500 22.125 16.250 .10


The Company expects to continue its policy of paying regular cash dividends
although there is no assurance as to future dividends because they are dependent
on future earnings, capital requirements and financial conditions and are
subject to regulatory restrictions as described in Note G to the consolidated
financial statements.

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ITEM 6. SELECTED FINANCIAL DATA




YEAR ENDED DECEMBER 31
------------------------------------------------------------
2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


NET PREMIUMS WRITTEN $ 82,645 $ 77,214 $ 72,033 $ 71,943 $ 69,575

NET PREMIUMS EARNED 83,138 77,439 69,114 68,862 61,675

NET INVESTMENT INCOME 17,626 19,049 18,891 19,060 18,442

REALIZED NET GAINS ON INVESTMENTS 5,053 12,473 5,625 2,855 17,338

LOSSES AND LOSS EXPENSES INCURRED 81,870 57,470 44,911 42,537 39,854

NET INCOME 5,390 19,750 18,616 16,895 24,446

EARNINGS PER SHARE -- NET INCOME (1) .44 1.57 1.38 1.22 1.75

CASH DIVIDENDS PER SHARE .40 .40 .40 .40 .40

INVESTMENT PORTFOLIO (3) 439,434 442,060 440,797 456,735 475,328

TOTAL ASSETS 601,109 552,164 530,677 544,369 557,015

SHAREHOLDERS' EQUITY 288,360 294,000 284,783 288,592 293,963

BOOK VALUE PER SHARE (1) 23.73 24.01 21.50 20.91 21.23

UNDERWRITING RATIOS (2):

Losses and loss expenses 98.5% 74.2% 65.0% 61.8% 64.6%

Underwriting expenses 24.3% 28.1% 29.6% 32.0% 33.3%

Combined 122.8% 102.3% 94.6% 93.8% 97.9%



(1) Earnings and book value per share are adjusted for the dilutive effect of
stock options outstanding.

(2) Data is for all coverages combined and is presented based upon generally
accepted accounting principles.

(3) Includes money market instruments classified with cash in the Consolidated
Balance Sheets.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------

The primary sources of the Company's liquidity are (1) funds generated from
insurance operations, (2) net investment income and (3) maturing investments.
The Company generally experiences positive cash flow resulting from the fact
that premiums are collected on insurance policies in advance of the disbursement
of funds in payment of claims. Operating costs of the insurance subsidiaries,
other than loss and loss expense payments and commissions paid to the parent
company, generally average less than 30% of premiums earned on a consolidated
basis and the remaining amount is available for investment for varying periods
of time depending on the type of insurance coverage provided. During extended
periods of declining net premium volume, however, operating cash flows may turn
negative as loss settlements exceed net premium revenue and receipts of
investment income.

For several years, the Company's investment philosophy has emphasized the
purchase of short-term bonds with maximum quality and liquidity. As interest
rates have declined and yield curves have not provided a strong incentive to
lengthen maturities in recent years, the Company has maintained its short-term
position with respect to the vast majority of its fixed maturity investments.
The average life of the Company's bond and short-term investment portfolio was
3.8 years and 4.0 years for 2001 and 2000, respectively. The Company also
remains an active participant in the equity securities market. Investments made
by the Company's domestic insurance subsidiaries are regulated by guidelines
promulgated by the National Association of Insurance Commissioners which are
designed to provide protection for both policyholders and shareholders.

The Company's assets at December 31, 2001 included $51.5 million in short-term
investments which are readily convertible to cash without market penalty and an
additional $47.5 million of fixed maturity investments maturing in less than one
year. The Company believes that these liquid investments, plus the expected
cash flow from current operations, are more than sufficient to provide for
projected claim payments and operating cost demands. In addition, the Company's
reinsurance program is structured to avoid serious cash drains that might
accompany catastrophic losses. In the event competitive conditions produce
inadequate rates and the Company chooses to restrict volume, the Company
believes that the liquidity of its investment portfolio would permit it to
continue to pay claims as settlements are reached without requiring the disposal
of investments at a loss, regardless of interest rates in effect at the time.

Net premiums written by the Company's U.S. insurance subsidiaries for 2001
equaled approximately 24% of the combined statutory surplus of these
subsidiaries. Premium writings of 200% to 300% of surplus are generally
considered acceptable by regulatory authorities. Further, the statutory capital
of each of the insurance subsidiaries substantially exceeds minimum risk based
capital requirements set by the National Association of Insurance Commissioners.
Accordingly, the Company has the ability to significantly increase its business
without seeking additional capital to meet statutory guidelines.

Shareholders' equity decreased to $288.4 million at December 31, 2001, from
$294.0 million at December 31, 2000, including the after tax $13.0 million
estimated net loss related to the events of September 11, 2001. The change in
shareholders' equity also included $5.0 million of cash dividends to
shareholders, a $3.9 million decrease in unrealized net gains on investments and
$2.2 million in treasury share purchases. Book value per common share
outstanding decreased 1% to $23.73 at December 31, 2001 from $24.01 per share at
December 31, 2000.

As more fully discussed in Note G to the consolidated financial statements, at
December 31, 2001, $47.6 million, or 16.5% of shareholders' equity, represented
net assets of the Company's insurance subsidiaries

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which, at that time, could not be transferred in the form of dividends, loans
or advances to the parent company due to statutory restrictions on the
allowable transfers. However, management believes that these restrictions
pose no material liquidity concerns for the Company. The financial strength
and stability of the subsidiaries permit ready access by the parent company
to short-term and long-term sources of credit. The parent company had cash
and marketable investments of approximately $17.4 million at December 31,
2001.

RESULTS OF OPERATIONS
- ---------------------

2001 COMPARED TO 2000

Direct premiums written for 2001 totaled $114.3 million, an increase of $17.2
million (18%) from 2000. This increase is primarily attributable to increases
in fleet trucking and independent contractor programs of $13.9 million (52%) and
$4.8 million (21%), respectively, from 2000 levels. Direct premium writings
from the Company's small business workers' compensation and small trucking fleet
programs also increased by $2.2 million and $1.8 million, respectively. These
increases were partially offset by a $5.6 million (16%) decrease in direct
premium written for the Company's private passenger automobile program. Large
trucking fleet and independent contractor volume increases resulted from the
addition of new accounts as well as rate increases on renewed accounts.
Increases in small business workers' compensation and small fleet were due
primarily to geographic expansion, although rates were increased in both
divisions during 2001. The decrease in private passenger automobile premium
resulted from an effort to reunderwrite the program during 2001, including the
implementation of significant rate increases and the termination of producers of
unprofitable business.

Premiums assumed from other reinsurers totaled $5.7 million during 2001, an
increase of $1.5 million (35%) from 2000. Premiums assumed for 2001 and 2000
included $1.0 million and $1.7 million, respectively, of reinstatement premiums
attributable to losses occurring in late 1999. Without these reinstatement
premiums, reinsurance assumed volume would have increased 85% from the prior
year. Pricing in this market began to improve toward the end of 2000 and
throughout 2001, and the Company's participation increased as a result.
Management anticipates increased participation during 2002.

Premiums ceded to reinsurers increased $13.5 million (56%) during 2001 to $37.7
million. The percentage of premiums ceded to direct premiums written increased
to 33% for 2001 from 25% for 2000 consistent with the increase in direct
premiums written for the more heavily reinsured large trucking fleet program
discussed above.

After giving effect to changes in unearned premiums, net premiums earned
increased 7% to $83.1 million for 2001 from $77.4 million for 2000. Net
premiums earned from all trucking-related insurance products increased by $8.3
million (25%). Net premiums earned from the Company's small workers'
compensation and voluntary reinsurance assumed programs increased $1.7 million
(155%) and $1.1 million (25%), respectively. These increases were partially
offset by a $5.7 million (15%) decrease in premiums earned from private
passenger automobile.

Net investment income decreased $1.4 million (7.5%) during 2001 reflecting
lower overall pre-tax yields on slightly higher average invested assets. The
average pre-tax yield on invested assets was 5.0% and 5.5% for 2001 and 2000,
respectively. After-tax yields were 3.6% and 3.9% for 2001 and 2000,
respectively.

Realized net capital gains were $5.1 million in 2001 compared to $12.5 million
for 2000. The current year's net gain consisted of gains on equity securities
of $7.3 million and losses on fixed maturities and other investments of $2.2
million. Realized net gains for 2001 and 2000 included other than temporary
writedowns totaling $2.1 million and $5.0 million, respectively.

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16

Losses and loss expenses incurred during 2001 increased $24.4 million (42%) to
$81.9 million, including a $20 million loss related to the events of September
11, 2001. The 2001 consolidated loss and loss expense ratio was 98.5% compared
to 74.2% for 2000. Adjusted for the September 11, 2001 loss, the consolidated
loss and loss expense ratio was 74.4%. While the adjusted consolidated loss
ratio remained virtually unchanged, individual product lines varied from
year-to-year as less favorable loss development in the Company's large fleet
trucking product was offset by significant improvement in the Company's private
passenger automobile division. The loss and loss expense ratio for private
passenger automobile dropped from 94.5% during 2000 to 69.5% during 2001. As
previously discussed, improved underwriting selection and rate increases are
directly responsible for the improved private passenger automobile results.
Because of the high limits provided by the Company to its large trucking fleet
insureds, the length of time required to settle larger, more complex claims and
the volatility of the trucking liability insurance business, the Company
believes
it is important to have a high degree of conservatism in its reserving process.
As claims are settled in years subsequent to their occurrence, the Company's
claim handling process has, historically, tended to produce savings from the
reserves provided. The Company believes that favorable loss developments are
attributable to the Company's long-standing policy of reserving for losses
realistically and a willingness to settle claims based upon a seasoned
evaluation of its exposures. However, due to the aforementioned changes in the
Company's reinsurance structure for its large trucking fleets, whereby a smaller
portion of the risk is retained, the impact of future loss developments on the
loss and loss expense ratios may not be consistent with prior years.

Other operating expenses for 2001, before credits for allowances from
reinsurers, decreased $.3 million (1%) to $34.4 million despite the increase in
premium volume described above. Personnel related expenses, including amounts
allocated to loss expenses and investment income, increased less than 1% as
staff reductions occasioned by the increased use of technology substantially
offset wage increases and higher employee benefit expenses. Direct commission
expense decreased $.4 million (5%) primarily as the result of lower direct
premiums from the Company's private passenger automobile product which carries
higher commission rates than the Company's remaining products. Substantially
all large fleet trucking business is produced by direct sales efforts of Baldwin
& Lyons, Inc. employees and, accordingly, this business does not incur
commission expense on a consolidated basis. Ceding commission allowances from
reinsurers increased $4.1 million (47%), resulting from increased premium volume
ceded under reinsurance agreements covering Protective's fleet trucking
business. The ratio of net operating expenses of the insurance subsidiaries to
net premiums earned was 24.3% during 2001 compared to 28.0% for 2000, reflecting
the higher ceding commission received from reinsurers. Including the agency
operations, the ratio of other operating expenses to total revenue, adjusted to
remove net realized gains, was 20.6% for 2001 compared with 26.0% for 2000.

The effective federal tax rate for consolidated operations for 2001 was 16.3%.
This rate is lower than the statutory rate primarily because of tax-exempt
investment income.

As a result of the factors mentioned above, net income from consolidated
operations for 2001 was $5.4 million compared to $19.8 million for 2000.
Diluted earnings per share decreased to $.44 in 2001 from $1.57 in 2000 due
primarily to the losses related to the events of September 11, 2001. Diluted
earnings per share from operations before realized gains on investments was $.17
in 2001 compared to $.93 in 2000.

2000 COMPARED TO 1999

Direct premiums written for 2000 totaled $97.1 million, an increase of $11.0
million (13%) from 1999. This increase is primarily attributable to increases
in fleet trucking's large trucking fleet and independent contractor programs of
$3.9 million (22%) and $1.6 million (8%), respectively, from 1999 levels.
Direct premium writings from the Company's private passenger automobile, small
trucking fleet and small business workers' compensation programs also increased
by $2.4 million, $2.2 million and $1.2 million, respectively. Large

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17

trucking fleet volume increases resulted primarily from the addition of new
accounts. Increases in independent contractor premiums resulted from the
addition of new accounts and volume increases on existing accounts, while
increases in private passenger automobile, small fleet and small workers'
compensation were due primarily to geographic expansion.

Premiums assumed from other reinsurers of $4.2 million during 2000 were
relatively unchanged from 1999 although 2000's premium included $1.7 million of
reinstatement premium attributable to losses occurring in late 1999. Without
this premium, reinsurance assumed volume would have decreased 37% from the prior
year. Pricing in this market began to firm up toward the end of 2000.

Premiums ceded to reinsurers increased $5.8 million (32%) during 2000 to $24.2
million. The percentage of premiums ceded to direct premiums written increased
to 24.9% for 2000 from 21.3% for 1999 consistent with the increase in direct
premiums written for the more heavily reinsured large trucking fleet program
discussed above.

After giving effect to changes in unearned premiums, net premiums earned
increased 12% to $77.4 million for 2000 from $69.1 million for 1999. Premiums
earned from private passenger automobile increased by $6.6 million. Net
premiums earned from all trucking-related insurance products increased by $1.7
million (5%), including $1.9 million (32%) for small fleet trucking.
Net investment income increased by $.2 million (1%) during 2000 reflecting
higher overall pre-tax yields on slightly lower average invested assets. The
average pre-tax yield on invested assets was 5.5% and 5.0% for 2000 and 1999,
respectively. After-tax yields were 3.9% and 3.6% for 2000 and 1999,
respectively.

Realized net capital gains were $12.5 million in 2000 compared to $5.6 million
for 1999. The current year net gain consisted of gains on equity securities of
$16.0 million and losses on fixed maturities and other investments of $3.5
million.

Losses and loss expenses incurred during 2000 increased $12.6 million (28%) to
$57.5 million. The 2000 consolidated loss and loss expense ratio was 74.2%
compared to 65.0% for 1999. The increase in the loss and loss expense ratio is
primarily attributable to adverse loss development and an increased frequency
and severity of claims in the Company's personal automobile division. Changes
in the Company's remaining products were generally favorable.

Other operating expenses for 2000, before credits for allowances from
reinsurers, increased $2.9 million (9%) to $34.7 million. Personnel related
expenses, including amounts allocated to loss expenses and investment income,
increased 7% and accounted for approximately 40% of the total operating expense
increase, reflecting the fully-employed labor market from which the Company
draws. Direct commission expense increased $.9 million (13%) as the result of
higher direct premiums from all of the Company's products. Ceding commission
allowances from reinsurers increased $1.9 million (28%), resulting from
increased premium volume covered under the reinsurance agreements covering
Protective's fleet trucking business. The ratio of net operating expenses of
the insurance subsidiaries to net premiums earned was 28.1% during 2000 compared
to 29.6% for 1999. Including the agency operations, the ratio of other
operating expenses to total revenue, adjusted to remove net realized gains, was
26.0% for 2000 compared with 27.5% for 1999. Expenses for 1999 included
expenditures in preparation for Year 2000 (Y2K) compliance that were not present
in the year 2000.

The effective federal tax rate for consolidated operations for 2000 was 31.8%.
This rate is lower than the statutory rate primarily because of tax-exempt
investment income.

As a result of the factors mentioned above, net income from consolidated
operations for 2000 was $19.7 million compared to $18.6 million for 1999.
Diluted earnings per share increased to $1.57 in 2000 from $1.38 in 1999

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due primarily to the increase in realized gains on investments. Diluted
earnings per share from operations before realized gains on investments was $.93
in 2000 compared to $1.11 in 1999.

CRITICAL ACCOUNTING POLICIES
- ----------------------------

The Company's significant accounting policies are discussed in Note A to the
Consolidated Financial Statements. The following discussion is provided to
highlight areas of the Company's accounting policies which are both material and
subject to significant degrees of estimation.

INVESTMENT VALUATION

Over 73% of the Company's assets are composed of investments at December 31,
2001. Less than 1% of these investments, consisting of limited partnerships, do
not have readily determinable market values. For these investments, we estimate
fair value by reference to the underlying assets of the limited partnerships.
All marketable securities are included in the Company's balance sheet at current
market value. In determining if and when a decline in market value below cost
is other than temporary, we evaluate the market conditions, trends of earnings,
price multiples and other key measures for our bonds and common and preferred
stocks. When such a decline is considered to be other than temporary, we
recognize an impairment loss in the current period operating results to the
extent of the decline. Declines which are considered to be temporary are
recorded as a reduction in shareholders' equity, net of related federal income
tax credits.

REINSURANCE RECOVERABLE

Amounts recoverable under the terms of reinsurance contracts comprise almost 19%
of total Company assets as of December 31, 2001. In order to be able to provide
the high limits required by the Company's trucking company insureds, we share a
significant amount of the insurance risk of the underlying contracts with
various insurance entities through the use of reinsurance contracts. Some
reinsurance contracts provide that a loss be shared among the Company and its
reinsurers on a predetermined pro-rata basis ("quota-share") while other
contracts provide that the Company keep a fixed amount of the loss, similar to a
deductible, with reinsurers taking all losses above this fixed amount ("excess
of loss"). Some losses are covered by a combination of quota-share and excess
of loss contracts. The computation of amounts due from reinsurers is based
upon the terms of the various contracts and follows the underlying estimation
process for loss and loss expense reserves, as described below. Accordingly,
the uncertainties inherent in the loss and loss expense reserving process also
affect the amounts recorded as recoverable from reinsurers. Estimation
uncertainties are greatest for claims which have occurred but which have not yet
been reported to the Company. Further, the high limits provided by the
Company's insurance policies for trucking liability and workers' compensation,
provide more variability in the estimation process than lines of business with
lower coverage limits.

It should be noted, however, that a change in the estimate of amounts due from
reinsurers on unpaid claims will not, in itself, result in charges or credits to
losses incurred. This is because any change in estimated recovery follows the
estimate of the underlying loss. Thus, it is the computation of the underlying
loss that is critical.

As with any receivable, credit risk exists in the recoverability of reinsurance.
This is even more pronounced than in normal receivable situations since
recoverable amounts will not be due until the loss is settled which, in some
cases, may be many years after the contract was written. If a reinsurer is
unable, in the future, to meet the reinsurer's financial commitments under the
terms of the contracts, the Company would be responsible for its portion of the
loss. The financial strength of each of the Company's reinsurers is reviewed on
a continual basis and, should impairment in the ability of a reinsurer be
determined to exist, current year operations would be charged in amounts
sufficient to provide for the Company's additional liability.

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LOSS AND LOSS EXPENSE RESERVES

The Company's reserves for losses and loss expenses ("reserves") are determined
based on complex estimation processes using historical experience, current
economic information and, when necessary, available industry statistics. Our
reserves are evaluated in three basic categories (1)"case basis", (2)"incurred
but not reported" and (3)"loss adjustment expense" reserves. Case basis
reserves are established for specific known loss occurrences at amounts
dependent upon various criteria such as type of coverage, severity and the
underlying policy limits, as examples. Case basis reserves are generally
estimated by experienced claims adjusters using established Company guidelines
and are subject to review by claims management. Incurred but not reported
reserves, which are established for those losses which have occurred, but have
not yet been reported to the Company, are not linked to specific claims but are
computed on a "bulk" basis. Common actuarial methods are used in the
establishment of incurred but not reported loss reserves using company
historical loss data, consideration of changes in the Company's business and
study of current economic trends affecting ultimate claims costs. Loss
adjustment expense reserves, or reserves for the costs associated with the
investigation and settlement of a claim, are also bulk reserves representing the
Company's estimate of the costs associated with the claims handling process.
Loss adjustment expense reserves include amounts ultimately allocable to
individual claims as well as amounts required for the general overhead of the
claims handling operation that are not specifically allocable to individual
claims. Historical analyses of the ratio of loss adjusting expenses to losses
paid on prior closed claims and study of current economic trends affecting loss
settlement costs are used to estimate the loss adjustment reserve needs related
to the established loss reserves. Each of these reserve categories contain
elements of uncertainty that guaranty variability when compared to the ultimate
costs to settle the underlying claims for which the reserves are established.

The reserving process requires us to continuously monitor and evaluate the life
cycle of claims based on the class of business and the nature of claims. Our
claims range from the very routine private passenger automobile "fender bender"
to the highly complex and costly third party bodily injury claim. Reserving for
each class of claims requires a set of assumptions based upon historical
experience, knowledge of current industry trends and seasoned judgment. The
high limits provided in the Company's trucking liability policies provide for
greater variation in the reserving process for more serious claims. Court
rulings, tort reform (or lack thereof) and trends in jury awards also play a
significant role in the estimation process of larger claims. The Company
continuously reviews and evaluates loss developments subsequent to each
measurement date and adjusts its reserve estimation assumptions, as necessary,
in an effort to achieve the best possible estimate of the ultimate remaining
loss costs at any point in time.

MARKET RISK
- -----------

The Company operates solely within the property and casualty insurance industry
and, accordingly, has significant invested assets which are exposed to various
market risks. These market risks relate to interest rate fluctuations, foreign
currency translation and equities market prices. All of the Company's invested
assets are classified as available for sale and are listed as such in Note B to
the consolidated financial statements.

The most significant of the three identified market risks relates to prices in
the equities market. Though not the largest category of the Company's invested
assets, equity securities have the greatest potential for short-term price
fluctuation. The market value of the Company's equity positions at December 31,
2001 was $136.4 million or approximately 31% of invested assets, including money
market instruments classified as cash. Funds invested in the equities market
are not considered to be assets necessary for the Company to conduct its daily
operations and, therefore, can be committed for extended periods of time. The
long-term nature of the Company's equity investments allows it to invest in
positions where ultimate value, and not short-term market fluctuations, are the
most important feature.

The Company's fixed maturity portfolio totaled $246.6 million at December 31,
2001. Over half of this portfolio is made up of U. S. government and government
agency obligations and state and municipal debt

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securities, 86% of the portfolio matures within 5 years and the average life of
the Company's fixed maturity investments is approximately 3.8 years. Although
the Company is exposed to interest rate risk on its fixed maturity investments,
given the anticipated duration of the Company's liabilities (principally
insurance loss and loss expense reserves) relative to maturities, even a 100 to
200 basis point increase in interest rates would not have a significant impact
on the Company's ability to conduct daily operations or to meet its obligations.

The Company's exposure to foreign currency risk is not material.

FORWARD-LOOKING INFORMATION
- ---------------------------

Any forward-looking statements in this report, including without limitation,
statements relating to the Company's plans, strategies, objectives,
expectations, intentions and adequacy of resources, 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 risks and
uncertainties including without limitation the following: (i) the Company's
plans, strategies, objectives, expectations and intentions are subject to change
at any time at the discretion of the Company; (ii) the Company's business is
highly competitive and the entrance of new competitors into or the expansion of
the operations by existing competitors in the Company's markets and other
changes in the market for insurance products could adversely affect the
Company's plans and results of operations; and (iii) other risks and
uncertainties indicated from time to time in the Company's filings with the
Securities and Exchange Commission.

FEDERAL INCOME TAX CONSIDERATIONS
- ---------------------------------

The liability method is used in accounting for federal income taxes. Using this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. The provision for deferred federal income
tax was based on items of income and expense that were reported in different
years in the financial statements and tax returns and were measured at the tax
rate in effect in the year the difference originated. Net deferred tax
liabilities of $9.9 million and $12.5 million were recorded at December 31, 2001
and 2000, respectively. The net deferred tax liability at December 31, 2001
included $4.3 million in special tax deposits covered under Section 847 of the
Internal Revenue Code, as explained in the following paragraph, which compares
to $4.2 million in special tax deposits at December 31, 2000. Adjusted for the
special deposits, a net deferred tax liability of $14.2 million was recorded at
December 31, 2001 compared to a net deferred tax liability of $16.7 million at
December 31, 2000. The decrease in deferred federal taxes payable is primarily
attributable to changes in unrealized capital gains in the investment portfolio.

A provision in the Technical and Miscellaneous Revenue Act of 1988 created a
mechanism which would allow for a recognizable deferred tax asset specifically
for property and casualty loss reserves discounted for tax purposes. Adopted as
Section 847 of the Internal Revenue Code, this provision allows an insurer to
take a special tax deduction equal to the discount on post 1986 accident year
loss and loss expense reserves while making "special estimated tax payments"
equal to the amount of the tax benefit derived from the special deduction. The
"special estimated tax payments" can be carried forward for fifteen years to
offset taxes arising from decreases in the special deduction and can be treated
as regular estimated payments or refunded at the end of the carryforward period.
Based upon the concerns regarding the recognition of deferred tax assets, the
Company adopted the provisions of Section 847 for all tax years 1987 and
subsequent and has taken deductions for the entire amount of discount on post-
1986 loss reserves. As mentioned above, special Section 847 estimated tax
deposits totaling $4.3 million have been paid in connection with this election.

20

21

IMPACT OF INFLATION
- -------------------

To the extent possible, the Company attempts to recover the costs of inflation
by increasing the premiums it charges. A majority of the Company's premiums are
charged as a percentage of an insured's gross revenue or payroll. As these
charging bases increase with inflation, so does premium. The remaining premium
rates charged are adjustable only at periodic intervals and often require state
regulatory approval. Such periodic increases in premium rates may lag far
behind cost increases.

To the extent inflation influences yields on investments, the Company is also
affected. The Company maintains a sizable portion of its investment portfolio
in short-term instruments and changes in current market interest rates
correspondingly affect yields on these investments. Further, as inflation
affects current market rates of return, previously committed investments may
rise or decline in value depending on the type and maturity of investment.

Inflation must also be considered by the Company in the creation and review of
loss and loss adjustment expense reserves since portions of these reserves are
expected to be paid over extended periods of time. The anticipated effect of
inflation is implicitly considered when estimating liabilities for losses and
loss adjustment expenses.

21

22

ANNUAL REPORT ON FORM 10-K





ITEM 8--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA









YEAR ENDED DECEMBER 31, 2001

BALDWIN & LYONS, INC.

INDIANAPOLIS, INDIANA

22

23

YEAR ENDED DECEMBER 31, 2001

BALDWIN & LYONS, INC.

INDIANAPOLIS, INDIANA


REPORT OF INDEPENDENT AUDITORS


Shareholders and Board of Directors
Baldwin & Lyons, Inc.

We have audited the accompanying consolidated balance sheets of Baldwin & Lyons,
Inc. and subsidiaries as of December 31, 2001 and 2000, and the related
consolidated statements of income, changes in equity other than capital, and
cash flows for each of the three years in the period ended December 31, 2001.
Our audits also included the financial statement schedules listed in the Index
at Item 14(a). These financial statements and schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and schedules based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Baldwin
& Lyons, Inc. and subsidiaries at December 31, 2001 and 2000, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material respects,
the information set forth therein.



/s/ ERNST & YOUNG LLP

Indianapolis, Indiana
February 22, 2002

23

24
CONSOLIDATED BALANCE SHEETS
Baldwin & Lyons, Inc. and Subsidiaries



December 31
--------------------------
2001 2000
----------- -----------
(DOLLARS IN THOUSANDS)


ASSETS
Investments:
Fixed maturities $ 246,632 $ 211,810
Equity securities 136,399 157,951
Short-term and other 27,584 40,176
---------- ----------
410,615 409,937

Cash and cash equivalents 31,840 32,814
Accounts receivable--less allowance
(2001, $1,143; 2000, $1,229) 25,151 25,279
Accrued investment income 3,875 3,724
Reinsurance recoverable 111,585 64,690
Deferred policy acquisition costs 3,523 3,674
Current federal income taxes 2,590 -
Property and equipment--less accumulated depreciation
(2001, $8,354; 2000, $6,224) 7,442 8,456
Notes receivable from employees 2,257 1,709
Other assets 2,231 1,881
---------- ----------
$ 601,109 $ 552,164
========== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
Reserves:
Losses and loss expenses $ 247,143 $ 182,425
Unearned premiums 23,914 24,441
---------- ----------
271,057 206,866

Reinsurance payable 5,260 7,349
Accounts payable and other liabilities 26,523 30,399
Deferred federal income taxes 9,909 12,547
Current federal income taxes - 1,003
---------- ----------
312,749 258,164
Shareholders' equity:
Common stock, no par value:
Class A -- authorized 3,000,000 shares;
outstanding -- 2001, 2,277,905 shares;
2000, 2,300,785 shares 121 123
Class B -- authorized 20,000,000 shares;
outstanding -- 2001, 9,801,932 shares;
2000, 9,870,082 shares 523 526
Additional paid-in capital 36,272 36,416
Unrealized net gains on investments 32,377 36,237
Retained earnings 219,067 220,698
---------- ----------
288,360 294,000
---------- ----------
$ 601,109 $ 552,164
========== ==========


See notes to consolidated financial statements.

24

25
CONSOLIDATED STATEMENTS OF INCOME
Baldwin & Lyons, Inc. and Subsidiaries




Year Ended December 31
------------------------------------------
2001 2000 1999
------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


REVENUE:
Net premiums earned $ 83,138 $ 77,439 $ 69,114
Net investment income 17,626 19,049 18,891
Realized net gains on investments 5,053 12,473 5,625
Commissions, service fees and other income 4,063 3,512 2,772
---------- ---------- ----------
109,880 112,473 96,402
EXPENSES:
Losses and loss expenses incurred 81,870 57,470 44,911
Other operating expenses 21,572 26,039 24,985
---------- ---------- ----------
103,442 83,509 69,896
---------- ---------- ----------
INCOME BEFORE FEDERAL INCOME TAXES 6,438 28,964 26,506

Federal income taxes 1,048 9,214 7,890
---------- ---------- ----------
NET INCOME $ 5,390 $ 19,750 $ 18,616
========== ========== ==========

PER SHARE DATA:
DILUTED EARNINGS:
Income before realized net gains $ .17 $ .93 $ 1.11
Realized net gains on investments .27 .64 .27
---------- ---------- ----------
NET INCOME $ .44 $ 1.57 $ 1.38
========== ========== ==========

BASIC EARNINGS:
Income before realized net gains $ .17 $ .93 $ 1.12
Realized net gains on investments .27 .65 .27
---------- ---------- ----------
NET INCOME $ .44 $ 1.58 $ 1.39
========== ========== ==========

DIVIDENDS $ .40 $ .40 $ .40
========== ========== ==========



See notes to consolidated financial statements.

25
26
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY OTHER THAN CAPITAL
Baldwin & Lyons, Inc. and Subsidiaries




2001 2000 1999
------------ ------------ ------------
(DOLLARS IN THOUSANDS)


BALANCES AT BEGINNING OF YEAR:
Retained earnings $ 220,698 $ 219,707 $ 216,223
Unrealized gains on investments 36,237 24,711 30,311
---------- ---------- ----------
256,935 244,418 246,534

CHANGES ARISING FROM INCOME-PRODUCING ACTIVITIES:
Net income 5,390 19,750 18,616

Gains (losses) on investments:
Holding gains (losses) arising during period,
before federal income taxes (886) 30,205 (2,991)
Federal income taxes (310) 10,572 (1,047)
---------- ---------- ----------
(576) 19,633 (1,944)

Gains realized during period included in net income,
before federal income taxes (5,053) (12,473) (5,625)
Federal income taxes (1,769) (4,366) (1,969)
---------- ---------- ----------
(3,284) (8,107) (3,656)
---------- ---------- ----------

Change in unrealized gains on investments (3,860) 11,526 (5,600)

Foreign exhange adjustment (300) (193) 179
---------- ---------- ----------
TOTAL REALIZED AND UNREALIZED INCOME 1,230 31,083 13,195

OTHER CHANGES AFFECTING RETAINED EARNINGS:
Cash dividends paid to shareholders (4,850) (4,994) (5,365)
Cost of treasury shares in excess of original issue proceeds (1,871) (13,572) (9,946)
---------- ---------- ----------
(6,721) (18,566) (15,311)
---------- ---------- ----------
TOTAL CHANGES (5,491) 12,517 (2,116)
---------- ---------- ----------

BALANCES AT END OF YEAR:
Retained earnings 219,067 220,698 219,707
Unrealized gains on investments 32,377 36,237 24,711
---------- ---------- ----------
$ 251,444 $ 256,935 $ 244,418
========== ========== ==========


See notes to consolidated financial statements.

26
27

CONSOLIDATED STATEMENTS OF CASH FLOWS
Baldwin & Lyons, Inc. and Subsidiaries




Year Ended December 31
------------------------------------------
2001 2000 1999
------------ ------------ ------------
(DOLLARS IN THOUSANDS)


OPERATING ACTIVITIES
Net income $ 5,390 $ 19,750 $ 18,616
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Change in accounts receivable and unearned premium (399) (279) (2,711)
Change in accrued investment income (151) (27) 371
Change in loss and loss expense reserves
and reinsurance recoverable 17,823 (10,913) (13,030)
Change in other assets, other liabilities
and current income taxes (3,732) (380) 2,237
Amortization of net policy acquisition costs (3,141) 1,031 1,716
Net policy acquisition costs deferred 3,293 (854) (2,323)
Provision for deferred income taxes (559) (1,359) 530
Bond amortization 578 227 384
Loss on sale of property 8 57 19
Depreciation 2,604 2,318 1,845
Net realized gain on investments (5,668) (13,524) (5,771)
Compensation expense related to discounted stock options 131 136 140
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 16,177 (3,817) 2,023

INVESTING ACTIVITIES
Purchases of fixed maturities and equity securities (163,996) (132,874) (143,309)
Proceeds from maturities 74,029 44,185 55,746
Proceeds from sales of fixed maturities 11,921 35,779 23,485
Proceeds from sales of equity securities 61,328 108,063 84,441
Net sales (purchases) of short-term investments 4,213 (9,671) (8,263)
Distributions from limited partnerships 9,896 1,799 157
Net increase in principal balance of notes receivable
from employees (532) (1,709) -
Purchases of property and equipment (1,727) (4,121) (2,836)
Proceeds from disposals of property and equipment 129 184 332
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (4,739) 41,635 9,753

FINANCING ACTIVITIES
Dividends paid to shareholders (4,850) (4,994) (5,365)
Proceeds from sale of common stock 3 10 15
Drawing on line of credit - 5,411 8,528
Repayment on line of credit (5,411) (8,528) -
Cost of treasury shares (2,154) (17,018) (11,794)
---------- ---------- ----------
NET CASH USED IN FINANCING ACTIVITIES (12,412) (25,119) (8,616)
---------- ---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (974) 12,699 3,160
Cash and cash equivalents at beginning of year 32,814 20,115 16,955
---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 31,840 $ 32,814 $ 20,115
========== ========== ==========



See notes to consolidated financial statements.

27
28

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Baldwin & Lyons, Inc. and Subsidiaries
(DOLLARS IN THOUSANDS)

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The consolidated financial statements include the
accounts of Baldwin & Lyons, Inc. and its wholly owned subsidiaries (the
Company). All significant intercompany transactions and accounts have been
eliminated in consolidation.

USE OF ESTIMATES: Preparation of the consolidated financial statements requires
management to make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes. Actual results
could differ from those estimates.

CASH AND CASH EQUIVALENTS: The Company considers investments in money market
funds to be cash equivalents. Carrying amounts for these instruments
approximate their fair values.

INVESTMENTS: Carrying amounts for fixed maturity securities (bonds, notes and
redeemable preferred stocks) represent fair value and are based on quoted market
prices, where available, or broker/dealer quotes for specific securities where
quoted market prices are not available. Equity securities (nonredeemable
preferred stocks and common stocks) are carried at quoted market prices (fair
value). Other investments are carried at either market value, cost or cost
adjusted for operations of limited partnerships, depending on the nature of the
investment. All fixed maturity and equity securities are considered to be
available for sale; the related unrealized net gains or losses (net of
applicable tax effect) are reflected directly in shareholders' equity unless a
decline in value is determined to be other than temporary, in which case, the
loss is charged to income. Although the Company has classified fixed maturity
investments as available for sale, it has the ability to hold its fixed maturity
investments to maturity. Short-term investments are carried at cost which
approximates their fair values. Realized gains and losses on disposals of
investments are determined by specific identification of cost of investments
sold and are included in income.

PROPERTY AND EQUIPMENT: Property and equipment is carried at cost.
Depreciation is computed principally by the straight-line method.

RESERVES FOR LOSSES AND LOSS EXPENSES: The reserves for losses and loss
expenses, certain of which are discounted, are determined using case basis
evaluations and statistical analyses and represent estimates of the ultimate
cost of all reported and unreported losses which are unpaid at year end. These
reserves include estimates of future trends in claim severity and frequency and
other factors which could vary as the losses are ultimately settled. Although
it is not possible to measure the degree of variability inherent in such
estimates, management believes that the reserves for losses and loss expenses
are adequate. The estimates are continually reviewed and as adjustments to
these reserves become necessary, such adjustments are reflected in current
operations.

RECOGNITION OF REVENUE AND COSTS: Premiums are earned over the period for which
insurance protection is provided. A reserve for unearned premiums, computed by
the daily pro-rata method, is established to reflect amounts applicable to
subsequent accounting periods. Commissions to unaffiliated companies and other
acquisition costs applicable to unearned premiums are deferred and expensed as
the related premiums are earned. Anticipated investment income is considered in
determining recoverability of deferred acquisition costs.

Reinsurance premiums, commissions, expense reimbursements and reserves related
to reinsured business are accounted for on bases consistent with those used in
accounting for the original policies issued and the terms of the reinsurance
contracts. Premiums ceded to other insurers have been reported as a reduction
of premium income. Amounts applicable to reinsurance ceded for unearned premium
and claim loss reserves have been reported as reinsurance recoverable assets.
Certain reinsurance contracts provide for additional or return premiums and
commissions based upon profits or losses to the reinsurer over prescribed
periods. Estimates of additional or return premiums and commissions are
adjusted quarterly to recognize actual loss experience to date as well as
projected loss experience applicable to the various contract periods.

28

29

STOCK-BASED COMPENSATION: Accounting Principles Board Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related Interpretations are used
in accounting for stock options, stock purchases and equity appreciation rights
which are, from time to time, granted to employees and outside directors.

FEDERAL INCOME TAXES: A consolidated federal income tax return is filed by the
Company and includes all wholly owned subsidiaries.

EARNINGS PER SHARE: Diluted earnings per share of common stock are based on the
average number of shares of Class A and Class B common stock outstanding during
the year, adjusted for the effect, if any, of options outstanding. Basic
earnings per share are presented exclusive of the effect of options outstanding.
See note I.

COMPREHENSIVE INCOME: The Company records accumulated other comprehensive
income from unrealized gains and losses on available-for-sale securities as a
separate component of shareholders' equity. Foreign exchange adjustments are
immaterial and the Company has no defined benefit pension plan.

The enclosed STATEMENT OF CHANGES IN EQUITY OTHER THAN CAPITAL refers to
comprehensive income as TOTAL REALIZED AND UNREALIZED INCOME. Items of other
comprehensive income included in this statement are referred to as CHANGE IN
UNREALIZED GAINS (LOSSES) ON INVESTMENTS and FOREIGN EXCHANGE ADJUSTMENT. A
reclassification adjustment to other comprehensive income is made for GAINS
REALIZED DURING PERIOD INCLUDED IN NET INCOME.

RECLASSIFICATION: Certain prior year balances have been reclassified to conform
to the current year presentation.

29

30

NOTE B - INVESTMENTS
The following is a summary of available-for-sale securities at December 31:




COST OR GROSS GROSS NET
FAIR AMORTIZED UNREALIZED UNREALIZED UNREALIZED
VALUE COST GAINS LOSSES GAINS
------------ ------------ ------------ ------------ ------------


2001:
U. S. government obligations $ 85,459 $ 84,181 $ 1,289 $ (11) $ 1,278
Mortgage-backed securities 15,075 14,644 431 - 431
Obligations of states and political subdivisions 46,503 45,708 851 (56) 795
Corporate securities 99,595 97,428 2,972 (805) 2,167
---------- ---------- ---------- ---------- ----------
Total fixed maturities 246,632 241,961 5,543 (872) 4,671
Equity securities 136,399 91,030 54,214 (8,845) 45,369
Short-term and other 27,584 27,813 - (229) (229)
---------- ---------- ---------- ---------- ----------
Total available-for-sale securities $ 410,615 $ 360,804 $ 59,757 $ (9,946) 49,811
========== ========== ========== ==========

Applicable federal income taxes (17,434)
----------

Net unrealized gains - net of tax $ 32,377
==========
2000:
U. S. government obligations $ 38,789 $ 38,911 $ 58 $ (180) $ (122)
Mortgage-backed securities 21,430 21,385 128 (83) 45
Obligations of states and political subdivisions 50,856 50,470 425 (39) 386
Corporate securities 100,735 102,676 878 (2,819) (1,941)
---------- ---------- ---------- ---------- ----------
Total fixed maturities 211,810 213,442 1,489 (3,121) (1,632)
Equity securities 157,951 100,387 66,301 (8,737) 57,564
Short-term and other 40,176 40,358 - (182) (182)
---------- ---------- ---------- ---------- ----------
Total available-for-sale securities $ 409,937 $ 354,187 $ 67,790 $ (12,040) 55,750
========== ========== ========== ==========
Applicable federal income taxes (19,513)
----------

Net unrealized gains - net of tax $ 36,237
==========


30

31

NOTE B - INVESTMENTS (CONTINUED)
Gross realized gains and losses on investments for the years ended December 31
are summarized below:




2001 2000 1999
------------ ------------ ------------


Fixed maturities:
Gains $ 82 $ 666 $ 220
Losses (2,218) (1,209) (2,564)
---------- ---------- ----------
Net gains (losses) (2,136) (543) (2,344)

Equity securities:
Gains 15,591 22,861 17,747
Losses (8,305) (6,866) (9,953)
---------- ---------- ----------
Net gains 7,286 15,995 7,794

Short-term and other - net gain (loss) (97) (2,979) 175
---------- ---------- ----------
TOTAL NET GAINS $ 5,053 $ 12,473 $ 5,625
========== ========== ==========

Gross realized losses in the above table included other than temporary write-
downs of $2,081 and $5,000 in 2001 and 2000, respectively.

The fair value and the cost or amortized cost of fixed maturity investments at
December 31, 2001, by contractual maturity, are shown below. Actual maturities
may differ from contractual maturities because borrowers have, in some cases,
the right to call or prepay obligations with or without call or prepayment
penalties.


COST OR
AMORITZED
FAIR VALUE COST
------------ ------------

One year or less $ 51,831 $ 50,994
Excess of one year to five years 146,193 142,567
Excess of five years to ten years 15,149 14,741
Excess of ten years 16,081 16,079
---------- ----------
Total maturities 229,254 224,381
Mortgage-backed securities 15,075 14,644
Redeemable preferred stock 2,303 2,936
---------- ----------
$ 246,632 $ 241,961
========== ==========


Major categories of investment income for the years ended December 31 are
summarized as follows:


2001 2000 1999
------------ ------------ ------------

Fixed maturities $ 13,287 $ 13,951 $ 15,785
Equity securities 2,739 3,327 2,608
Money market funds 1,522 1,778 1,089
Short-term and other 1,785 1,674 565
---------- ---------- ----------
19,333 20,730 20,047
Investment expenses (1,707) (1,681) (1,156)

NET INVESTMENT INCOME $ 17,626 $ 19,049 $ 18,891
========== ========== ==========


Approximately 31% of purchases and 52% of sales of investments during the three
years ended December 31, 2001 were made through securities broker-dealers in
which certain directors of the Company were officers, directors or owners. Fees
earned by affiliated investment advisors were $1,110, $1,499 and $614 in 2001,
2000 and 1999, respectively.

31

32

The Company has holdings in money-market accounts which were managed by or
purchased through companies affiliated with certain directors of the Company.

NOTE C - LOSS AND LOSS EXPENSE RESERVES
Activity in the reserves for losses and loss expenses is summarized as follows.
All amounts are shown net of reinsurance recoverable.



Year Ended December 31,
2001 2000 1999
------------ ------------ ------------


Reserves at the beginning of the year $120,206 $130,702 $143,951

Provision for losses and loss expenses:
Claims occurring during the current year 82,757 65,577 55,520
Claims occurring during prior years (887) (8,107) (10,609)
---------- ---------- ----------
Total incurred 81,870 57,470 44,911

Loss and loss expense payments:
Claims occurring during the current year 33,237 37,671 27,867
Claims occurring during prior years 31,132 30,238 30,215
---------- ---------- ----------
Total paid 64,369 67,909 58,082

Change in unpaid portion of uncollectible
amounts due from reinsurers 26 (57) (78)
---------- ---------- ----------
Reserves at the end of the year 137,733 120,206 130,702

Reinsurance recoverable on
reserves at the end of the year 109,410 62,219 42,771
---------- ---------- ----------
Reserves, gross of reinsurance
recoverables, at the end of the year $247,143 $182,425 $173,473
========== ========== ==========




The reserves for losses and loss expenses, net of related reinsurance
recoverables, at December 31, 2000, 1999 and 1998 were decreased by $887, $8,107
and $10,609, respectively, for claims that had occurred on or prior to those
dates. These decreases are the result of the settlement of claims at amounts
lower than previously reserved and changes in estimates of losses incurred but
not reported as part of the normal reserving process. Development during 2001
and 2000, on reserves outstanding at December 31, 2000 and 1999 was
insignificant for incurred losses and loss expenses related to environmental
damage claims. Reported cases to date relate primarily to policies issued in
the 1970's to one account which was involved in the business of hauling and
disposing of hazardous waste. Reserves for incurred but not reported
environmental losses were $3,900 at December 31, 2001 and 2000. Development
during 2001 included $2.1 million of incurred losses and loss expenses on
reinsurance assumed reserves outstanding at December 31, 2000 which was
partially offset by reinstatement premiums of $1.0 million. Adjusted for
reinsurance assumed, management believes that the favorable experience is
attributable to the Company's long-standing policy of reserving for losses
realistically and a willingness to settle claims based upon a seasoned
evaluation of its exposures. The decline in favorable loss developments from
1999 to 2001 is due in part to the significantly lower retained loss per
occurrence for the Company's large fleet trucking product. Under terms of
reinsurance agreements effective June 1, 1998, the Company's exposure on large
fleet trucking losses dropped from $1,000 to $100 per occurrence. These trends
were considered in the establishment of the Company's reserves at December 31,
2001.

The Company participates in mandatory residual market pools in various states.
The Company records the results from participation in these pools as reported
and records an additional provision in the financial statements for operating
periods unreported by the pools.

Loss reserves on certain permanent total disability workers' compensation
reserves have been discounted to present value at pre-tax rates not exceeding
3.5%. At December 31, 2001 and 2000, loss reserves have been reduced by
approximately $4,724 and $5,096, respectively. Discounting is applied to these
claims since the amount of periodic payments to be made during the lifetime of
claimants is fixed and determinable.

32

33

Loss reserves have been reduced by estimated salvage and subrogation recoverable
of approximately $2,717 and $2,698 at December 31, 2001 and 2000, respectively.

NOTE D - EMPLOYEE BENEFIT PLANS
The Company maintains a defined contribution 401(k) Employee Savings and Profit
Sharing Plan ("the Plan") which covers all employees who have completed one year
of service. The Company's contributions to the Plan for 2001, 2000 and 1999
were $736, $657 and $620, respectively.

NOTE E - INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities as of December 31 are as
follows:



2001 2000
------------ ------------

DEFERRED TAX LIABILITIES:
Unrealized gain on investments $ 17,434 $ 19,513
Deferred acquisition costs 1,255 1,315
Salvage and subrogation 560 560
Other 468 848
---------- ----------
Total deferred tax liabilities 19,717 22,236
---------- ----------

DEFERRED TAX ASSETS:
Discounts of loss and loss expense reserves 4,298 4,154
Deferred compensation 2,391 2,928
Unearned premiums 1,657 1,692
Other 1,462 915
---------- ----------
Total deferred tax assets 9,808 9,689
---------- ----------
NET DEFERRED TAX LIABILITIES $ 9,909 $ 12,547
========== ==========



A summary of the difference between federal income tax expense computed at the
statutory rate and that reported in the consolidated financial statements is as
follows:



2001 2000 1999
------------ ------------ ------------


Statutory federal income rate applied to
pretax income from operations $ 2,253 $ 10,137 $ 9,277
Tax effect of (deduction):
Tax-exempt investment income (1,241) (1,390) (1,337)
Other 36 467 (50)
---------- ---------- ----------
Federal income tax expense $ 1,048 $ 9,214 $ 7,890
========== ========== ==========

Federal income tax expense consists of the following:




2001 2000 1999
------------ ------------ ------------


Taxes (credits) on income from operations:
Current $ 1,607 $ 10,573 $ 7,360
Deferred (559) (1,359) 530
---------- ---------- ----------
$ 1,048 $ 9,214 $ 7,890
========== ========== ==========


33

34

NOTE E - INCOME TAXES (CONTINUED)
Cash flows related to federal income taxes paid, net of refunds received, for
2001, 2000 and 1999 were $5,200, $8,807 and $7,367, respectively, including
Section 847 special tax deposits. Future tax benefits on approximately $4,298
of deferred tax assets at December 31, 2001 arising from loss reserve
discounting are assured based on Section 847 of the Internal Revenue Code.

NOTE F - REINSURANCE
The insurance subsidiaries cede portions of their gross premiums written to
certain other insurers under excess and quota share treaties and by facultative
placements. Risks are reinsured with other companies to permit the recovery of
a portion of related direct losses. The Company also serves as an assuming
reinsurer under retrocessions from certain other reinsurers. These
retrocessions include individual risks as well as aggregate catastrophe
treaties. Accordingly, the occurrence of a major catastrophic event can have a
significant impact on the Company's operating income. In addition, the
insurance subsidiaries participate in certain involuntary reinsurance pools
which require insurance companies to provide coverages on assigned risks. The
assigned risk pools allocate participation to all insurers based upon each
insurer's portion of premium writings on a state or national level.

Net premiums earned for 2001, 2000 and 1999 have been reduced by reinsurance
ceded premiums of approximately $37,706, $23,943 and $19,037, respectively. Net
losses and loss expenses incurred for 2001 and 2000 have been reduced by ceded
reinsurance recoveries of approximately $72,701 and $40,586, respectively. Net
losses and loss expenses incurred for 1999 have been increased by net savings on
reinsured claims of $771. Ceded reinsurance premiums and loss recoveries for
catastrophe reinsurance contracts were not material. The Company remains liable
to the extent the reinsuring companies are unable to meet their obligations
under reinsurance contracts.

Net premiums earned for 2001, 2000 and 1999 include approximately $5,931, $4,678
and $4,981, respectively, relating to the assumption of reinsurance from other
companies and from reinsurance pools. Losses and loss expenses incurred for
2001 included an estimated $20,000 for the Company's exposure from reinsurance
assumed treaties related to the events of September 11, 2001.

Components of reinsurance recoverable at December 31 are as follows:



2001 2000
------------ ------------

Paid losses and loss expenses $ 1,935 $ 2,197
Unpaid losses and loss expenses 109,410 62,219
Unearned premiums 240 274
---------- ----------
$ 111,585 $ 64,690
========== ==========



34

35

NOTE G - SHAREHOLDERS' EQUITY
Changes in common stock outstanding and additional paid-in capital are as
follows:



ADDITIONAL
CLASS A CLASS B PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
------------ ------------ ------------ ------------ ------------


Balance at January 1, 1999 2,388,454 $ 127 11,302,496 $ 603 $ 41,328
Discounted stock options issued - - - - 139
Discounted stock options exercised - - 45,297 2 13
Treasury shares purchased (62,900) (3) (510,400) (27) (1,817)
---------- ---------- ---------- ---------- ----------
Balance at December 31, 1999 2,325,554 124 10,837,393 578 39,663
Discounted stock options issued - - - - 136
Discounted stock options exercised - - 17,889 1 9
Treasury shares purchased (24,769) (1) (985,200) (53) (3,392)
---------- ---------- ---------- ---------- ----------
Balance at December 31, 2000 2,300,785 123 9,870,082 526 36,416
Discounted stock options issued - - - - 130
Discounted stock options exercised - - 6,650 1 3
Treasury shares purchased (22,880) (2) (74,800) (4) (277)
---------- ---------- ---------- ---------- ----------
Balance at December 31, 2001 2,277,905 $ 121 9,801,932 $ 523 $ 36,272
========== ========== ========== ========== ==========




The Company's Class A and Class B common stock has a stated value of
approximately $.05 per share.

Shareholders' equity at December 31, 2001 includes $278,249 representing GAAP
shareholder's equity of insurance subsidiaries, of which $40,815 may be
transferred by dividend or loan to the parent company without approval by, or
notification to, regulatory authorities. An additional $189,859 of
shareholder's equity of such insurance subsidiaries may be advanced or loaned to
the Company with prior notification to and approval from regulatory authorities.

Net income of the insurance subsidiaries, as determined in accordance with
statutory accounting practices, was $5,660, $24,309 and $18,212 for 2001, 2000
and 1999, respectively. Consolidated statutory shareholder's equity for these
subsidiaries was $273,072 and $291,371 at December 31, 2001 and 2000,
respectively.


NOTE H - OTHER OPERATING EXPENSES
Details of other operating expenses for the years ended December 31:



2001 2000 1999
------------ ------------ ------------


Amortization of deferred policy acquisition costs $ 9,692 $ 9,740 $ 8,538
Other underwriting expenses 12,878 13,103 12,162
Expense allowances from reinsurers (12,833) (8,709) (6,822)
---------- ---------- ----------
TOTAL UNDERWRITING EXPENSES 9,737 14,134 13,878
Operating expenses of non-insurance companies 11,835 11,905 11,107
---------- ---------- ----------
TOTAL OTHER OPERATING EXPENSES $ 21,572 $ 26,039 $ 24,985
========== ========== ==========


35

36

NOTE I - EARNINGS PER SHARE
The following is a reconciliation of the denominators used in the calculations
of basic and diluted earnings per share for the years ended December 31:



2001 2000 1999
------------ ------------ ------------


Average shares outstanding
for basic earnings per share 12,122,862 12,466,510 13,393,357

Dilutive effect of options 84,083 88,612 127,615
----------- ----------- -----------
Average shares outstanding
for diluted earnings per share 12,206,945 12,555,122 13,520,972
=========== =========== ===========


No effect on net income was considered to result from the presumed exercise of
the options used in calculating diluted earnings per share. The market value
options, discussed in Note K, were not included in the computation of diluted
earnings per share because the exercise price was greater than the average
market price of the Company's stock.


NOTE J - REPORTABLE SEGMENTS

The Company and its consolidated subsidiaries market and underwrite casualty
insurance in three major specialty areas (reportable segments): (1) fleet
trucking, (2) non-standard private passenger automobile and (3) the assumption
of reinsurance. The fleet trucking segment provides multiple line insurance
coverage to large trucking fleets which generally retain substantial amounts of
self-insurance and to medium-sized trucking fleets on a first dollar or small
deductible basis. The non-standard private passenger automobile segment
provides motor vehicle liability and physical damage coverage to individuals.
The reinsurance assumed segment accepts retrocessions from selected reinsurance
companies, principally reinsuring against catastrophes.

The Company's reportable segments are business units that operate in the
property/casualty insurance industry and each offers products to different
classes of customers. The reportable segments are managed separately due to the
differences in underwriting criteria used to market products to each class of
customer and the methods of distribution of the products each reportable segment
provides. Segment information shown in the table below as "all other" includes
products marketed and underwritten by the Company in other specialty areas and
the runoff of discontinued product lines.

The Company evaluates performance and allocates resources based on gain or loss
from insurance underwriting operations before income taxes. Underwriting gain
or loss does not include net investment income nor does it include realized
gains or losses on the Company's investment portfolio. All investment-related
revenues are managed at the corporate level. Underwriting gain or loss for the
fleet trucking segment includes revenue and expense from the Company's agency
operations since the agency operations serve solely as a direct marketing
facility for this segment. Underwriting gain or loss also includes fee income
generated by each segment in the course of its underwriting operations.
Management does not identify or allocate assets to reportable segments when
evaluating segment performance and depreciation expense is not material for any
of the reportable segments. The accounting policies of each reportable segment
are the same as those described in the summary of significant accounting
policies.

36

37

NOTE J - REPORTABLE SEGMENTS (CONTINUED)
The following table provides certain profit and loss information for each
reportable segment for the years ended December 31:



NON-STANDARD
PRIVATE VOLUNTARY
FLEET PASSENGER REINSURANCE
TRUCKING AUTOMOBILE ASSUMED ALL OTHER TOTALS
------------ ------------ ------------ ------------ ------------


2001:
Direct and assumed premium written $ 68,154 $ 30,094 $ 5,668 $ 16,392 $ 120,308
Net premium earned and fee income 34,824 33,800 5,636 12,686 86,946
Underwriting gain (loss) 11,116 436 (19,429) (729) (8,606)

2000:
Direct and assumed premium written 49,258 35,713 4,203 12,216 101,390
Net premium earned and fee income 27,842 39,476 4,521 9,067 80,906
Underwriting gain (loss) 12,582 (9,498) 2,083 262 5,429

1999:
Direct and assumed premium written 44,013 33,339 4,015 9,009 90,376
Net premium earned and fee income 27,734 32,467 4,751 6,872 71,824
Underwriting gain (loss) 9,211 (284) 1,647 (1,041) 9,533


The following tables are reconciliations of reportable segment revenues and
profits to the Company's consolidated revenue and income before federal income
taxes, respectively.



2001 2000 1999
------------ ------------ ------------


REVENUE:
Net premium earned and fee income $ 86,946 $ 80,906 $ 71,824
Net investment income 17,626 19,049 18,891
Realized net gains on investments 5,053 12,473 5,625
Other income 255 45 62
---------- ---------- ----------
Total consolidated revenue $ 109,880 $ 112,473 $ 96,402
========== ========== ==========





2001 2000 1999
------------ ------------ ------------


PROFIT:
Underwriting gain (loss) $ (8,606) $ 5,429 $ 9,533
Net investment income 17,626 19,049 18,891
Realized net gains on investments 5,053 12,473 5,625
Corporate expenses (7,635) (7,987) (7,543)
---------- ---------- ----------
Income before federal income taxes $ 6,438 $ 28,964 $ 26,506
========== ========== ==========


The Company, through its subsidiaries, is licensed to do business in all 50
states of the United States, all Canadian provinces and Bermuda. Canadian and
Bermuda operations are currently not significant.

One customer of the fleet trucking segment represents approximately $28,864,
$23,739 and $22,301 of the Company's consolidated revenue in 2001, 2000 and
1999, respectively.

37

38

NOTE K - STOCK PURCHASE AND OPTION PLANS

In accordance with the terms of the 1981 Stock Purchase Plan (1981 Plan), the
Company is obligated to repurchase shares issued under the 1981 Plan, at a price
equal to 90% of the book value of the shares at the end of the quarter
immediately preceding the date of repurchase. No shares were repurchased during
2001, 2000 or 1999. At December 31, 2001 there were 136,179 shares (Class A)
and 375,766 shares (Class B) outstanding which are eligible for repurchase by
the Company.

The Company maintains stock option plans and has reserved an aggregate of
1,050,000 shares of Class B common stock for the granting of stock options to
employees and directors. Discounted options granted to employees are generally
exercisable immediately while discounted options granted to directors are
generally not exercisable for one year from the date of grant. All options
expire ten years after the date of grant. All of the Company's option plans
have received shareholder approval. Approximately 273,000 of such options are
available for future grants.

A summary of the Company's stock option activity and related information for the
years ended December 31 follows:



2001 2000 1999
-------------------------- -------------------------- --------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
----------- ----------- ----------- ----------- ----------- -----------


Outstanding at beginning of year 551,201 $ 21.848 572,248 $ 21.543 631,974 $ 20.376

Granted at exercise prices below market 6,738 1.000 7,842 1.000 6,571 1.000
Exercised 6,650 .522 17,889 .548 45,297 .333

Forfeited - - 11,000 25.750 21,000 25.750
---------- ---------- ----------
Outstanding at end of year 551,289 21.851 551,201 21.848 572,248 21.543
========== ========== ==========

Exercisable at end of year 544,551 22.109 543,359 22.149 407,010 20.235

Weighted average fair value
of options granted during the year
at exercise prices below market 6,738 19.386 7,842 17.411 6,571 21.242


The fair value of market value options granted during 1997 was determined using
a Black Scholes option pricing model with the following assumptions: risk-free
interest rate of 5.8%; dividend yield of 1.8%; volatility factor of the expected
market price of the Company's common stock of .21; and an expected life of the
option of 10 years. If the Company had followed Financial Accounting Standards
Board Statement No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, 2000 net
income and earnings per share would have been reduced by $918 and $.07,
respectively, related to the issuance of 1997 market value options. Similarly,
1999 net income and earnings per share would have been reduced by $975 and $.07,
respectively, related to these options. There would have been no impact on 2001
net income or earnings per share related to these options.

Exercise prices for options outstanding as of December 31, 2001 were $.33, $1.00
or $25.75. The weighted-average remaining contractual life of options
exercisable at either $.33 or $1.00 is 4.9 years with a weighted-average
exercise price of $.83. The remaining contractual life of options exercisable
at $25.75 is 6 years. The compensation cost that has been charged against
income for all stock-based compensation plans, consisting of directors' fees
only, was $130, $136 and $139 for 2001, 2000 and 1999, respectively.

During 2001 and 2000, the Company offered loans to certain key employees for the
sole purpose of purchasing the Company's Class B common stock in the open
market. $2,257 and $1,709 of such full-recourse loans were issued and
outstanding at December 31, 2001 and 2000, respectively, and carry an interest
rate of 6%, payable annually on the loan anniversary date. The underlying
securities serve as collateral for these loans, which must be repaid no later
than 10 years from the date of issue.

38

39

NOTE L - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Quarterly results of operations are as follows:



RESULTS BY QUARTER
---------------------------------------------------------------------------------------
2001 2000
-------------------------------------------- ---------------------------------------
1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH
--------- --------- --------- --------- --------- --------- --------- ---------


Net premiums earned $19,037 $21,531 $20,657 $21,913 $19,669 $18,576 $20,417 $18,777
Net investment income 4,566 4,413 4,144 4,503 4,937 4,727 4,461 4,924
Realized net gains (losses) on investments 6,538 (1,557) 2,728 (2,656) 4,466 3,828 1,722 2,457
Losses and loss expenses incurred 14,360 16,18135,435 FN1 15,894 13,255 14,418 16,234 13,563

Net income (loss) 7,176 2,644(7,173)FN1 2,743 6,275 4,637 3,289 5,549

Per share - diluted:
Income (loss) before realized
net gains (losses) on investments $ .24 $ .30 $ (.73)FN1 $ .36 $ .26 $ .17 $ .18 $ .32
Realized net gains (losses)
on investments .35 (.08) .14 (.14) .22 .20 .09 .13
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss) $ .59 $ .22 $ (.59)FN1 $ .22 $ .48 $ .37 $ .27 $ .45
======== ======== ======== ======== ======== ======== ======== ========

1
Third quarter, 2001 results were impacted by the Company's exposure, under
certain reinsurance assumed treaties, to the events of September 11, 2001.
Losses and loss expenses incurred were increased by $20,000, net loss was
increased by $13,000 and earnings per share were reduced by $1.07 as the result
of this event.
1

NOTE M - SUBSEQUENT EVENT
During February, 2002, a large block of the Company's Class A and Class B common
shares became available from a group of shareholders who recently received the
shares via a distribution from a trust which was a major shareholder. The
Company repurchased 97,190 and 269,331 of the Class A and Class B shares,
respectively, for an aggregate of approximately $7.3 million. In addition,
certain executive officers and employees of the Company purchased an aggregate
of 251,800 Class B common shares for approximately $5.0 million, funding for
which was provided by loans from the Company. The loans bear interest at the
current prime rate with principal due no later than ten years from the date of
issuance. The Company borrowed $10 million under its bank line of credit in
connection with the share purchases.

39

40

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

No response to this item is required.


PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information with respect to the directors of the Registrant to be provided
under this item is omitted from this Report because the Registrant will file
with the Commission a definitive proxy statement pursuant to Regulation 14A
involving the election of directors not later than 120 days after the close of
its fiscal year.

The information required by Item 10 of this Report with respect to directors
which will appear in the definitive proxy statement is incorporated by reference
herein.

The executive officers of the Company will serve until the next annual meeting
of the Board of Directors and until their respective successors are elected and
qualified. Except as otherwise indicated, the occupation of each officer during
the past five years has been in his current position with the Company.

The following summary sets forth certain information concerning the Company's
executive officers:



SERVED IN
SUCH CAPACITY
NAME AGE TITLE SINCE
- ------------------------- ----- -------------------------------- -------------


Gary W. Miller 61 Chairman, President and CEO 1983 (1)
Joseph J. DeVito 49 Executive Vice President 1986 (2)
James W. Good 57 Executive Vice President 1980 (2)
G. Patrick Corydon 53 Senior Vice President and CFO 1979 (3)
James E. Kirschner 55 Senior Vice President and Secretary 1977 (3) (4)

(1) Mr. Miller was elected Chairman and CEO of the Company in 1997.
(2) Mr. DeVito and Mr. Good were each elected Executive Vice President in
2001.
(3) Mr. Corydon and Mr. Kirschner were each elected Senior Vice President
in 2001.
(4) Mr. Kirschner was elected Secretary of the Company in 1985.



ITEM 11. EXECUTIVE COMPENSATION *


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT *


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS *

* The information to be provided under Items 11, 12 and 13 is omitted from this
Report because the Registrant will file with the Commission a definitive proxy
statement pursuant to Regulation 14A involving the election of directors not
later than 120 days after the close of its fiscal year. The information
required by these items of this Report which will appear in the definitive proxy
statement is incorporated by reference herein.

40

41

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) 1. List of Financial Statements--The following consolidated financial
statements of the registrant and its subsidiaries (including the
Report of Independent Auditors) are submitted in Item 8 of this
report.

Consolidated Balance Sheets - December 31, 2001 and 2000

Consolidated Statements of Income and Retained Earnings - Years ended
December 31, 2001, 2000 and 1999

Consolidated Statements of Changes in Equity Other Than Capital -
Years ended December 31, 2001, 2000 and 1999

Consolidated Statements of Cash Flows - Years ended December 31,
2001, 2000 and 1999

Notes to Consolidated Financial Statements

2. List of Financial Statement Schedules--The following consolidated
financial statement schedules of Baldwin & Lyons, Inc. and
subsidiaries are included in Item 14(d):

Pursuant to Article 7:

Schedule I--Summary of Investments--Other than Investments
in Related Parties

Schedule II--Condensed Financial Information of the Registrant

Schedule III--Supplementary Insurance Information

Schedule IV--Reinsurance

Schedule V--Valuation and Qualifying Accounts

Schedule VI--Supplemental Information Concerning Property/Casualty
Insurance Operations


All other schedules to the consolidated financial statements required by Article
7 and Article 5 of Regulation S-X are not required under the related
instructions or are inapplicable and therefore have been omitted.

41

42

3. Listing of Exhibits:

NUMBER & CAPTION
FROM EXHIBIT TABLE OF
ITEM 601 OF REGULATION
S-K EXHIBIT NUMBER AND DESCRIPTION
- ----------------------- ---------------------------------------------------

(3) EXHIBIT 3(i)--
(Articles of Incorpor- Articles of Incorporation of Baldwin & Lyons, Inc.,
ation & By Laws) as amended (Incorporated as an exhibit by reference
to Exhibit 3(a) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1986)


EXHIBIT 3(ii)--
By-Laws of Baldwin & Lyons, Inc., as restated
(Incorporated as an exhibit by reference to Exhibit
3 to the Company's Annual Report on Form 10-K
for the year ended December 31, 2000)


(10) EXHIBIT 10(a)--
(Material Contracts) 1981 Employee Stock Purchase Plan (Incorporated
as an exhibit by reference to Exhibit A to the
Company's definitive Proxy Statement for its Annual
Meeting held May 5, 1981)


EXHIBIT 10(b)--
Baldwin & Lyons, Inc. Employee Discounted Stock
Option Plan (Incorporated as an exhibit by reference
to Appendix A to the Company's definitive Proxy
Statement for its Annual Meeting held May 2, 1989)


EXHIBIT 10(c)--
Baldwin & Lyons, Inc. Deferred Directors Fee Option
Plan (Incorporated as an exhibit by reference to
Exhibit 10(f) to the Company's Annual Report on Form
10-K for the year ended December 31, 1989)


EXHIBIT 10(d)--
Baldwin & Lyons, Inc. Amended Employee Discounted Stock
Option Plan (Incorporated as an exhibit by reference to
Exhibit 10(f) to the Company's Annual Report on Form
10-K for the year ended December 31, 1992)


42

43


NUMBER & CAPTION
FROM EXHIBIT TABLE OF
ITEM 601 OF REGULATION
S-K EXHIBIT NUMBER AND DESCRIPTION
- ----------------------- -----------------------------------------------------

EXHIBIT 10(e)--
Baldwin & Lyons, Inc. Restated Employee Discounted
Stock Option Plan. (Incorporated as an exhibit by
reference to Exhibit 10(f) to the Company's Annual
Report on Form 10-K for the year ended December 31,
1997)


(11) EXHIBIT 11--
(Statement regarding Computation of Per Share Earnings
computation of per
share earnings)


(21) EXHIBIT 21--
(Subsidiaries of the Subsidiaries of Baldwin & Lyons, Inc.
registrant)


(23) EXHIBIT 23--
(Consents of experts Consent of Ernst & Young LLP
and counsel)


(24) EXHIBIT 24--
(Powers of Attorney) Powers of Attorney for certain Officers and Directors



(b) No reports on Form 8-K were filed by the Company in the fourth quarter of
2001.


(c) Exhibits. The response to this portion of Item 14 is submitted as a
separate section of this report.


(d) Financial Statement Schedules. The response to this portion of Item 14 is
submitted on pages 44 through 50 of this report.


43

44

SCHEDULE I -- SUMMARY OF INVESTMENTS-
OTHER THAN INVESTMENTS IN RELATED PARTIES

FORM 10-K - YEAR ENDED DECEMBER 31, 2001

BALDWIN & LYONS, INC. AND SUBSIDIARIES




- --------------------------------------------------------------------------------
- ------------------
COLUMN A COLUMN B COLUMN C COLUMN D
- --------------------------------------------------------------------------------
- ------------------
(DOLLARS IN THOUSANDS)
AMOUNT AT
WHICH SHOWN
FAIR IN THE BALANCE
TYPE OF INVESTMENT COST VALUE SHEET (A)
- ---------------------------------- -------------- -------------- --------------


Fixed Maturities:
Bonds:
United States government and
government agencies and
authorities $ 84,181 $ 85,459 $ 85,459
Mortgage backed securities 14,645 15,075 15,075
States, municipalities and
political subdivisions 45,708 46,503 46,503
Public utilities 20,921 21,713 21,713
All other corporate bonds 73,571 75,579 75,579
Redeemable preferred stock 2,936 2,303 2,303
----------- ----------- -----------
Total fixed maturities 241,962 246,632 246,632

Equity Securities:
Common Stocks:
Public Utilities 1,192 1,115 1,115
Banks, trust and insurance
companies 13,745 24,797 24,797
Industrial, miscellaneous
and all other 57,810 92,032 92,032
Nonredeemable preferred stocks 18,283 18,455 18,455
----------- ----------- -----------
Total equity securities 91,030 136,399 136,399

Short-term and Other:
Certificates of deposit 1,807 1,807 1,807
Commercial paper 20,917 20,917 20,917
Other long-term investments 5,089 4,860 4,860
----------- ----------- -----------
Total short-term and other 27,813 27,584 27,584
----------- ----------- -----------
Total investments $ 360,805 $ 410,615 $ 410,615
=========== =========== ===========



(A) All securities listed are considered available-for-sale and, accordingly,
are presented at fair value in the financial statements.

44

45

SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF REGISTRANT

FORM 10-K - YEAR ENDED DECEMBER 31, 2001


BALDWIN & LYONS, INC.

CONDENSED BALANCE SHEETS



DECEMBER 31
---------------------------
2001 2000
------------ ------------

ASSETS
Investment in subsidiaries $ 276,606 $ 281,712
Due from affiliates 3,268 3,101
Investments other than subsidiaries:
Fixed maturities 6,237 4,817
Short-term and other 4,605 13,538
10,842 18,355
Cash and cash equivalents 11,140 4,556
Other assets 12,152 11,763
----------- -----------
TOTAL ASSETS $ 314,009 $ 319,488
=========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES:
Deposits from insureds $ 10,164 $ 6,369
Other liabilities 15,485 19,119
----------- -----------
25,649 25,488

SHAREHOLDERS' EQUITY:
Common stock:
Class A 121 123
Class B 523 526
Additional paid-in capital 36,272 36,416
Unrealized net gains on investments 32,377 36,237
Retained earnings 219,067 220,698
----------- -----------
288,360 294,000
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 314,009 $ 319,488
=========== ===========



See notes to condensed financial statements

45

46

SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF REGISTRANT

FORM 10-K - YEAR ENDED DECEMBER 31, 2001


BALDWIN & LYONS, INC.

CONDENSED STATEMENTS OF INCOME



YEAR ENDED DECEMBER 31
------------------------------------------
2001 2000 1999
------------ ------------ ------------


REVENUE:
Commissions $ 10,385 $ 7,340 $ 6,447
Dividends from subsidiaries 3,750 5,000 4,000
Net investment income 1,478 1,265 764
Realized net gains (losses) on investments (183) (2,665) 3,195
Other 1,513 1,083 841
---------- ---------- ----------
16,943 12,023 15,246

EXPENSES:
Salary and related items 6,631 7,037 5,774
Other 4,851 4,497 4,669
---------- ---------- ----------
11,482 11,534 10,443
---------- ---------- ----------
INCOME BEFORE FEDERAL INCOME TAXES
AND EQUITY IN UNDISTRIBUTED
INCOME OF SUBSIDIARIES 5,461 489 4,804
Federal income taxes 390 (1,552) 76
---------- ---------- ----------
5,071 2,041 4,728
Equity in undistributed income
of subsidiaries 319 17,709 13,888
---------- ---------- ----------
NET INCOME $ 5,390 $ 19,750 $ 18,616
========== ========== ==========




See notes to condensed financial statements

46

47

SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF REGISTRANT

FORM 10-K - YEAR ENDED DECEMBER 31, 2001


BALDWIN & LYONS, INC.

CONDENSED STATEMENTS OF CASH FLOWS



Year Ended December 31
------------------------------------------
2001 2000 1999
------------ ------------ ------------


NET CASH PROVIDED BY OPERATING ACTIVITIES $ 11,566 $ 9,616 $ 3,828

INVESTING ACTIVITIES:
Purchases of long-term investments (3,757) (1,836) (1,982)
Sales or maturities of long-term investments 2,348 1,800 10,751
Distributions from limited partnerships 9,844 1,799 157
Net purchases of property and equipment (1,727) (2,183) (2,837)
Other (494) (2,275) (628)
---------- --------- ----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 6,214 (2,695) 5,462

FINANCING ACTIVITIES:
Cost of treasury shares (528) (431) (11,794)
Dividends paid to shareholders (5,260) (5,257) (5,365)
Drawing on line of credit - 5,411 8,528
Repayment on line of credit (5,411) (8,528) -
Other 3 10 15
---------- ---------- ----------
NET CASH USED IN FINANCING ACTIVITIES (11,196) (8,796) (8,616)
---------- ---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,583 (1,875) 673
Cash and cash equivalents at begininng of year 4,556 6,432 5,759
---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 11,140 $ 4,556 $ 6,432
========== ========== ==========


See notes to condensed financial statements


NOTE TO CONDENSED FINANCIAL STATEMENTS--BASIS OF PRESENTATION
The Company's investment in subsidiaries is stated at cost plus equity in the
undistributed earnings of subsidiaries since the date of acquisition. The
Company's share of net income of its subsidiaries is included in income using
the equity method. These financial statements should be read in conjunction
with the Company's consolidated financial statements.

47

48




SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION

FORM 10-K - YEAR ENDED DECEMBER 31, 2001

BALDWIN & LYONS, INC. AND SUBSIDIARIES

(DOLLARS IN THOUSANDS)

- --------------------------------------------------------------------------------
- ---------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G COLUMN H COLUMN I COLUMN J COLUMN K
- --------------------------------------------------------------------------------
- ---------------------------------------------------

AS OF DECEMBER 31, YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------------------
Reserves
for Unpaid Other Benefits, Amortization
DeferredClaims Policy Claims, of Deferred
Policy and Claim Claims and Net Net Losses and Policy Other Net
Acquisition Adjustment Unearned Benefits Premium Investment SettlementAcquisition Operating Premiums
Segment Costs Expenses Premiums Payable Earned Income Expenses Costs Expenses Written
- ---------------------------- -------------------------------------------- -------------------------------------------- -----------
(A) (A) (A) (B)


Property/Casualty
Insurance

2001 $ 3,523 $ 247,143 $ 23,914 --- $ 83,138 $ 17,626 $ 81,870 $ 9,692 $ 45 $ 82,645
2000 3,674 182,425 24,441 --- 77,439 19,049 57,470 9,740 4,394 77,214

1999 3,851 173,473 24,432 --- 69,114 18,891 44,911 8,538 5,340 72,033


(A) Allocations of certain expenses have been made to investment income,
settlement expenses and other operating expenses and are based on a number of
assumptions and estimates. Results among these catagories would change if
different methods were applied.

(B) Commissions paid to the Parent Company have been eliminated for this
presentation. Commission allowances resulting from reinsurance transactions are
offset against other operating expenses. These allowances account for the
decreases from year-to-year.

48


49




SCHEDULE IV -- REINSURANCE

FORM 10-K - YEAR ENDED DECEMBER 31, 2001

BALDWIN & LYONS, INC. AND SUBSIDIARIES

(DOLLARS IN THOUSANDS)


- --------------------------------------------------------------------------------
- ---------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- --------------------------------------------------------------------------------
- ---------------------------
% OF
CEDED ASSUMED AMOUNT
DIRECT TO OTHER FROM OTHER NET ASSUMED TO
PREMIUMS COMPANIES COMPANIES AMOUNT NET
------------ ------------ ------------ ------------ ------------


Premiums Earned -
Property/casualty insurance:

Years Ended December 31:

2001 $ 114,913 $ 37,706 $ 5,931 $ 83,138 7.1

2000 96,702 23,943 4,680 77,439 6.0

1999 83,170 19,037 4,981 69,114 7.2



49

50




SCHEDULE V--VALUATION AND QUALIFYING ACCOUNTS

FORM 10-K - YEAR ENDED DECEMBER 31, 2001

BALDWIN & LYONS, INC. AND SUBSIDIARIES

(DOLLARS IN THOUSANDS)


- --------------------------------------------------------------------------------
- ----------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- --------------------------------------------------------------------------------
- ----------------
ADDITIONS
--------------------------
(1) (2)
CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE
BEGINNING COST AND ACCOUNTS- DEDUCTIONS- AT END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE (A) PERIOD
- ----------------------- ----------- ----------- ----------- ----------- -----------


Allowance for doubtful
accounts:
Years ended December 31:

2001 $ 1,229 $ 1,120 $ - $ 1,206 $ 1,143

2000 1,072 1,663 - 1,506 1,229

1999 943 896 - 767 1,072



(A) Bad debts written off during the year net of recoveries of previously
written off amounts, if any.

50

51



SCHEDULE VI--SUPPLEMENTAL INFORMATION
CONCERNING PROPERTY/CASUALTY INSURANCE OPERATIONS

FORM 10-K - YEAR ENDED DECEMBER 31, 2001

BALDWIN & LYONS, INC. AND SUBSIDIARIES

(DOLLARS IN THOUSANDS)

- --------------------------------------------------------------------------------
- --------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G COLUMN H COLUMN I COLUMN J COLUMN K
- --------------------------------------------------------------------------------
- --------------------------------------------------
AS OF DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------------------- ------------------------------------------------------------------------

Claims and Claim
Reserves Adjustment Expenses Amortiza-
for Unpaid Discount, Incurred Related to tion of
Deferred Claims if any -------------------- Deferred Paid Claims
AFFILIATION Policy and Claim Deducted Net (1) (2) Policy and Claim Net
WITH Acquisi- Adjustment in Unearned Earned Investment Current Prior Acquisition Adjustment Premiums
REGISTRANT tion Costs Expenses Column C Premiums Premiums Income Year Years Costs Expenses Written
---------------------- ----------- --------- --------- --------- ---------- ---------- -------------------- ---------- ----------
(A)



Consolidated Property/Casualty Subsidiaries:

2001 $3,523 $247,143 $4,724 $23,914 $83,138 $17,626 $82,757 ($887) $9,692 $64,369 $82,645
2000 3,674 182,425 5,096 24,441 77,439 19,049 65,557 (8,107) 9,740 67,909 77,214
1999 3,851 173,473 5,553 24,432 69,114 18,891 55,520 (10,609) 8,538 58,082 72,033


(A) Loss reserves on certain reinsurance assumed and permanent total disability
worker's compensation claims have been discounted
to present value using pretax interest rates not exceeding 3.5%.



51
52

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

BALDWIN & LYONS, INC.


March 28, 2002 By /s/ Gary W. Miller
------------------------------
Gary W. Miller,
Chairman and CEO
(Chief Operating Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.


March 28, 2002 By /s/ Gary W. Miller
------------------------------
Gary W. Miller, Chairman
and CEO; Director



March 28, 2002 By /s/ G. Patrick Corydon
------------------------------
G. Patrick Corydon, Senior Vice
President - Finance and CFO
(Principal Financial Officer and
Principal Accounting Officer)



March 28, 2002 By /s/ Joseph DeVito
------------------------------
Joseph DeVito, Director and
ExecutiveVice President



March 28, 2002 By /s/ James Good
------------------------------
James Good, Director and
Executive Vice President



March 28, 2002 By /s/ Stuart D. Bilton
------------------------------ (*)
Stuart D. Bilton, Director



March 28, 2002 By /s/ Otto N. Frenzel III
------------------------------ (*)
Otto N. Frenzel III, Director


52

53

SIGNATURES (CONTINUED)



March 28, 2002 By /s/ John M. O'Mara
------------------------------ (*)
John M. O'Mara, Director



March 28, 2002 By /s/ Thomas H. Patrick
------------------------------ (*)
Thomas H. Patrick, Director



March 28, 2002 By /s/ Nathan Shapiro
------------------------------ (*)
Nathan Shapiro, Director


March 28, 2002 By /s/ Norton Shapiro
------------------------------ (*)
Norton Shapiro, Director


March 28, 2002 By /s/ John D. Weil
------------------------------ (*)
John D. Weil, Director



March 28, 2002 By /s/ Robert Shapiro
------------------------------ (*)
Robert Shapiro, Director


March 28, 2002 By /s/ John Pigott
------------------------------ (*)
John Pigott, Director



(*) By Gary W. Miller, Attorney-in-Fact


53

54


ANNUAL REPORT ON FORM 10-K





ITEM 14(c)--CERTAIN EXHIBITS



YEAR ENDED DECEMBER 31, 2001

BALDWIN & LYONS, INC.

INDIANAPOLIS, INDIANA

54

55

BALDWIN & LYONS, INC.
Form 10-K for the Fiscal Year
Ended December 31, 2001


INDEX TO EXHIBITS



BEGINS ON SEQUENTIAL PAGE
EXHIBIT NO. NUMBER OF FORM 10-K
- --------------------------------------------- -------------------------

EXHIBIT 3(i)--
Articles of Incorporation of
Baldwin & Lyons, Inc. as amended
(Incorporated as an exhibit by
reference to Exhibit 3(a) to the
Company's Annual Report on Form
10-K for the year ended December
31, 1986) N/A

EXHIBIT 3(ii)--
By-Laws of Baldwin & Lyons, Inc.,
as restated (Incorporated as an exhibit by
reference to Exhibit 3 to the
Company's Annual Report on Form
10-K for the year ended December
31, 2000) N/A

EXHIBIT 10(a)--
1981 Employees Stock Purchase Plan
(Incorporated as an exhibit by
reference to Exhibit A to the
Company's definitive Proxy
Statement for its Annual Meeting
held May 5, 1981) N/A

EXHIBIT 10(b)--
Baldwin & Lyons, Inc. Employee
Discounted Stock Option Plan
(Incorporated as an exhibit by reference
to Appendix A to the Company's definitive
Proxy Statement for its Annual Meeting
held May 2, 1989) N/A

EXHIBIT 10(c)--
Baldwin & Lyons, Inc. Deferred Directors
Fee Option Plan (Incorporated as an
exhibit by reference to Exhibit 10(f) to the
Company's Annual Report on Form 10-K
for the year ended December 31, 1989) N/A

55

56

INDEX TO EXHIBITS (CONTINUED)



BEGINS ON SEQUENTIAL PAGE
EXHIBIT NO. NUMBER OF FORM 10-K
- --------------------------------------------- -------------------------

EXHIBIT 10(d)--
Baldwin & Lyons, Inc. Amended Employee
Discounted Stock Option Plan (Incorporated
as an exhibit by reference to Exhibit 10(f) to
the Company's Annual Report on Form 10-K
for the year ended December 31, 1989) N/A

EXHIBIT 10(e)--
Baldwin & Lyons, Inc. Restated Employee
Discounted Stock Option Plan (Incorporated
as an exhibit by reference to Exhibit 10(f) to
the Company's Annual Report on Form 10-K
for the year ended December 31, 1997) N/A

EXHIBIT 11--
Computation of Per Share Earnings p. 57

EXHIBIT 21--
Subsidiaries of Baldwin & Lyons, Inc. p. 58

EXHIBIT 23--
Consent of Ernst & Young LLP p. 59

EXHIBIT 24--
Powers of Attorney for certain
Officers and Directors p. 60


56