Protective Insurance Corp - FORM 8-K - EX-99.1 - February 16, 2017

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Baldwin & Lyons, Inc.                                                                                                                                                                                                                                                              February 16, 2017
Unaudited Fourth Quarter Financial Statements                                                                                                                                                                                         Investor Contact:  William Vens
                                                                                                                                                                                                                                                                               investors@baldwinandlyons.com                   
                                                                                                                                                                                                                                                                                                           (317) 429-2554
 
 

BALDWIN & LYONS ANNOUNCES RESULTS FOR THE QUARTER AND TWELVE MONTHS OF 2016

●
Gross premiums written during the fourth quarter of 2016 totaled a record $104.9 million, 7.2% higher than the fourth quarter of 2015.


●
Gross premiums written for the year ended December 31, 2016 totaled a record $403.0 million, 5.1% higher than the previous record from 2015.


●
December 31, 2016 net income totaled $28.9 million, or $1.92 per share, an increase of $5.7 million compared to 2015.

Carmel, Indiana, February 16, 2017—Baldwin & Lyons, Inc. (NASDAQ: BWINA, BWINB) today announced fourth quarter net income of $4.9 million, or $.32 per share, which compares to net income of $3.5 million, or $.24 per share, for the prior year's fourth quarter.  Net income for the full year of 2016 totaled $28.9 million, or $1.92 per share, compared to $23.3 million, or $1.55 per share, for the prior year period.
Gross premiums written for the current quarter was a record $104.9 million, 7.2% higher than the $97.8 million written during the fourth quarter of 2015.  The increase was driven by the continued strong performance of the Company's core Fleet Transportation products.  Gross premiums written for the twelve months ended December 31, 2016 totaled a record $403.0 million, 5.1% higher than the previous record $383.6 million written during 2015.
Net premiums earned for the fourth quarter of 2016 was $69.1 million, 4.8% higher than last year's fourth quarter total, driven by a 10.1% increase in premiums earned from Fleet Transportation products, partially offset by planned declines in reinsurance products.  For the twelve months ended December 31, 2016, earned premiums increased 4.8% to a record twelve month total of $276.0 million.
Net investment income of $4.0 million, reflected an increase of 5.6% compared to the fourth quarter of 2015 due to higher bond yields.  For the twelve months ended December 31, 2016, net investment income was $14.5 million, reflecting an increase of 15.9% compared to the prior year period.
Book value per share on December 31, 2016 of $26.81 decreased $.17 per share during the fourth quarter, after the payment of cash dividends to shareholders totaling $.26 per share.  For the twelve months ended December 31, 2016, book value per share increased $.56 after the payment of cash dividends to shareholders totaling $1.04 per share.  The combination of the increase in book value and dividends represents a 6.1% total return on beginning book value for the twelve months ended December 31, 2016.
The Company's net income, determined in accordance with U.S. generally accepted accounting principles (GAAP), includes items that may not be indicative of ongoing operations. The following table reconciles income before federal income taxes to underwriting income, a non-GAAP financial measure that is a useful tool for investors and analysts in analyzing ongoing operating trends.
 
- 1 -

   
Three Months Ended
    
Twelve Months Ended
  
   
December 31
    
December 31
  
   
2016
    
2015
    
2016
    
2015
  
                         
Income before federal income taxes
  
$
7,067
    
$
4,621
    
$
43,054
    
$
33,952
  
Less: Net realized gains (losses) on investments
    
6,204
      
(1,753
)
    
23,228
      
(1,261
)
Operating income, before federal income taxes
  
$
863
    
$
6,374
    
$
19,826
    
$
35,213
  
Less:  Investment income
    
3,982
      
3,771
      
14,483
      
12,498
  
Less:  Corporate and other income (expense)
    
257
      
(395
)
    
1,118
      
(60
)
Underwriting income (loss)
  
$
(3,376
)
  
$
2,998
    
$
4,225
    
$
22,775
  
Less: Reinsurance underwriting income (loss) in run-off
    
(519
)
    
(2,603
)
    
(8,199
)
    
(1,504
)
P&C Insurance underwriting  income
  
$
(2,857
)
  
$
5,601
    
$
12,424
    
$
24,279
  
 
Note: The Company currently operates within two reportable business segments: Property and Casualty (P&C) Insurance and Reinsurance (which is in run-off).

Three months ended December 31, 2016

Operating Income
Operating income, before federal income taxes, was $0.9 million for the fourth quarter of 2016 which compares to operating income, before federal income taxes, of $6.4 million during the fourth quarter of 2015.
Reinsurance Operations (in run-off)
Reinsurance Operations produced an underwriting loss of $0.5 million for the fourth quarter of 2016 which compares to an underwriting loss of $2.6 million during the 2015 fourth quarter.
Property & Casualty Insurance Operations
Property & Casualty Insurance produced an underwriting loss of $2.9 million, resulting in a combined ratio for the fourth quarter of 104.3%.  The fourth quarter of 2016 was negatively impacted by adverse development related to a limited number of infrequent, but severe, Public Transportation charter bus claims.  This compares to underwriting income of $5.6 million and a combined ratio of 91.1% during the fourth quarter of 2015.

Twelve months ended December 31, 2016

Operating Income
For the twelve months ended December 31, 2016, operating income, before federal income taxes, was $19.8 million.  This compares to operating income, before federal income taxes, of $35.2 million during 2015.
Reinsurance Operations (in run-off)
Reinsurance Operations produced an underwriting loss of $8.2 million for 2016 which compares to an underwriting loss of $1.5 million during 2015.
Property & Casualty Insurance Operations
For the twelve months ended December 31, 2016, Property & Casualty Insurance produced underwriting income of $12.4 million resulting in a combined ratio for 2016 of 95.3%.  This compares to Property & Casualty Insurance underwriting income of $24.3 million and a combined ratio of 89.9% during 2015.
- 2 -
Conference Call Information:
Baldwin & Lyons, Inc. has scheduled its quarterly conference call for Thursday February 16, 2017, at 11:00 AM ET (New York City time) to discuss results for the fourth quarter ended December 31, 2016.
To participate via teleconference, investors may dial 1-877-705-6003 (U.S./Canada) or 1-201-493-6725 (International or local) at least five minutes prior to the beginning of the call.  A replay of the call will be available through February 23, 2017 by calling 1-844-512-2921 or 1-412-317-6671 and referencing passcode 13653203.  Investors and interested parties may also listen to the call via a live webcast, accessible on the company's web site via a link at the top of the main Investor Relations page.  To participate in the webcast, please register at least fifteen minutes prior to the start of the call.  The webcast will be archived on this site until July 28, 2017.  The webcast may be accessed directly at: http://public.viavid.com/player/index.php?id=122564.
Also available on the investor relations section of our web site are complete interim financial statements and copies of our filings with the Securities and Exchange Commission.
Forward-looking statements in this report are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Investors are cautioned that such forward-looking statements involve inherent risks and uncertainties.  Readers are encouraged to review the Company's annual report for its full statement regarding forward-looking information.
- 3 -


Financial Highlights (unaudited)
                        
Baldwin & Lyons, Inc. and Subsidiaries
                        
(In thousands, except per share data)
  
Three Months Ended
    
Twelve Months Ended
  
   
December 31
    
December 31
  
   
2016
    
2015
    
2016
    
2015
  
                         
Operating revenue
  
$
74,364
    
$
71,500
    
$
295,769
    
$
281,536
  
Net realized gains (losses) on investments
    
6,204
      
(1,753
)
    
23,228
      
(1,261
)
                                 
Total revenue
  
$
80,568
    
$
69,747
    
$
318,997
    
$
280,275
  
                                 
Net operating income
  
$
831
    
$
4,680
    
$
13,847
    
$
24,103
  
Net realized gains (losses) on investments,
                                
   net of federal income taxes
    
4,033
      
(1,139
)
    
15,098
      
(820
)
                                 
Net income
  
$
4,864
    
$
3,541
    
$
28,945
    
$
23,283
  
                                 
                                 
Per share data - diluted:
                                
   Average number of shares
    
15,084
      
15,024
      
15,084
      
15,022
  
                                 
   Net operating income
  
$
.06
    
$
.31
    
$
.92
    
$
1.60
  
   Net investment gains (losses)
    
.26
      
(.07
)
    
1.00
      
(.05
)
                                 
Net income
  
$
.32
    
$
.24
    
$
1.92
    
$
1.55
  
                                 
Dividends paid to shareholders
  
$
.26
    
$
.25
    
$
1.04
    
$
1.00
  
                                 
                                 
                                 
Comprehensive income, net of tax
                                
Net income
  
$
4,864
    
$
3,541
    
$
28,945
    
$
23,283
  
Unrealized net gains (losses) on securities
    
(3,359
)
    
2,041
      
(4,873
)
    
(12,916
)
Foreign currency translation adjustments
    
(163
)
    
(354
)
    
235
      
(1,456
)
Comprehensive income
  
$
1,342
    
$
5,228
    
$
24,307
    
$
8,911
  
 
                                
                                 
Annualized:
                                
Total Value Creation 1
    
1.3
%
    
5.2
%
    
6.1
%
    
2.2
%
                                 
Return on average shareholders' equity:
                                
Net operating income
    
0.9
%
    
5.3
%
    
3.8
%
    
6.9
%
Net income
    
5.3
%
    
4.0
%
    
8.0
%
    
6.6
%
                                 
Consolidated combined ratio of
                                
   insurance subsidiaries (GAAP basis):
    
104.9
%
    
95.5
%
    
98.5
%
    
91.4
%
                                 
                                 
1 Total Value Creation equals: (1) change in book value plus dividends paid, divided by (2) beginning book value
  


- 4 -
 
Baldwin & Lyons, Inc. and Subsidiaries
            
Unaudited Consolidated Balance Sheets
            
             
(in thousands, except per share data)
            
             
             
             
   
December 31
    
December 31
  
   
2016
    
2015
  
Assets
            
Investments 1:
            
   Fixed maturities ($494,561)
  
$
491,904
    
$
437,184
  
   Equity securities ($64,902)
    
119,945
      
145,498
  
   Limited partnerships, at equity
    
76,469
      
75,458
  
   Short-term 2
    
1,500
      
2,220
  
     
689,818
      
660,360
  
Cash and cash equivalents
    
62,976
      
73,538
  
Accounts receivable
    
64,984
      
66,522
  
Reinsurance recoverable
    
255,024
      
215,888
  
Other assets
    
78,732
      
65,761
  
Current federal income taxes
    
2,603
      
3,702
  
   
$
1,154,137
    
$
1,085,771
  
                 
Liabilities and shareholders' equity
                
Reserves for losses and loss expenses
  
$
576,330
    
$
513,596
  
Reserves for unearned premiums
    
21,694
      
25,291
  
Borrowings under line of credit
    
20,000
      
20,000
  
Accounts payable and accrued expenses
    
120,356
      
121,188
  
Deferred federal income taxes
    
11,412
      
11,198
  
     
749,792
      
691,273
  
Shareholders' equity:
                
   Common stock-no par value
    
644
      
641
  
   Additional paid-in capital
    
54,286
      
52,946
  
   Unrealized net gains on investments
    
34,051
      
38,924
  
   Retained earnings
    
315,364
      
301,987
  
     
404,345
      
394,498
  
   
$
1,154,137
    
$
1,085,771
  
                 
Number of common and common
                
    equivalent shares outstanding
    
15,084
      
15,026
  
Book value per outstanding share
  
$
26.81
    
$
26.25
  
                 
1 2016 cost in parentheses
                
2 Approximates cost
                
- 5 -


Baldwin & Lyons, Inc. and Subsidiaries
                        
Unaudited Consolidated Statements of Operations
                        
                         
(in thousands, except per share data)
                        
                         
   
Three Months Ended
    
Twelve Months Ended
  
   
December 31
    
December 31
  
   
2016
    
2015
    
2016
    
2015
  
Revenues
                        
Net premiums earned
  
$
69,141
    
$
65,995
    
$
276,011
    
$
263,335
  
Net investment income
    
3,982
      
3,771
      
14,483
      
12,498
  
Net realized gains (losses) on investments
    
6,204
      
(1,753
)
    
23,228
      
(1,261
)
Commissions and other income
    
1,241
      
1,734
      
5,275
      
5,703
  
     
80,568
      
69,747
      
318,997
      
280,275
  
Expenses
                                
Losses and loss expenses incurred
    
48,366
      
41,860
      
186,481
      
155,750
  
Other operating expenses
    
25,135
      
23,266
      
89,462
      
90,573
  
     
73,501
      
65,126
      
275,943
      
246,323
  
Income before federal income taxes
    
7,067
      
4,621
      
43,054
      
33,952
  
Federal income taxes
    
2,203
      
1,080
      
14,109
      
10,669
  
Net income
  
$
4,864
    
$
3,541
    
$
28,945
    
$
23,283
  
                                 
Per share data - diluted:
                                
Income before net gains (losses) on investments
  
$
.06
    
$
.31
    
$
.92
    
$
1.60
  
Net gains (losses) on investments
    
.26
      
(.07
)
    
1.00
      
(.05
)
Net income
  
$
.32
    
$
.24
    
$
1.92
    
$
1.55
  
                                 
Dividends
  
$
.26
    
$
.25
    
$
1.04
    
$
1.00
  
                                 
Reconciliation of shares outstanding:
                                
Average shares outstanding - basic
    
15,084
      
15,016
      
15,072
      
15,011
  
Dilutive effect of share equivalents
    
-
      
8
      
12
      
11
  
Average shares outstanding - diluted
    
15,084
      
15,024
      
15,084
      
15,022
  

- 6 -


Baldwin & Lyons, Inc. and Subsidiaries
            
Unaudited Consolidated Statements of Cash Flows
            
             
(in thousands)
            
             
   
Twelve Months Ended
  
   
December 31
  
   
2016
    
2015
  
             
Net cash provided by operating activities
  
$
32,368
    
$
38,197
  
Investing activities:
                
   Purchases of available-for-sale investments
    
(344,466
)
    
(342,592
)
   Purchases of limited partnership interests
    
-
      
(409
)
   Proceeds from sales or maturities
                
       of available-for-sale investments
    
311,050
      
332,313
  
   Net sales of short-term investments
    
11,258
      
746
  
   Other investing activities
    
(5,204
)
    
(2,890
)
Net cash used in investing activities
    
(27,362
)
    
(12,832
)
Financing activities:
                
   Dividends paid to shareholders
    
(15,803
)
    
(15,003
)
Net cash used in financing activities
    
(15,803
)
    
(15,003
)
                 
Effect of Foreign exchange rates on cash and cash equivalents
    
235
      
(1,456
)
                 
Increase (decrease) in cash and cash equivalents
    
(10,562
)
    
8,906
  
Cash and cash equivalents at beginning of period
    
73,538
      
64,632
  
Cash and cash equivalents at end of period
  
$
62,976
    
$
73,538
  

- 7 -
 
Baldwin & Lyons, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements


(1)
The accompanying unaudited condensed financial statements have been prepared in accordance with the instructions to Form 10-K but do not include all of the information and footnotes as disclosed in the Company's annual audited financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included.

(2)
Forward-looking statements in this report are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Investors are cautioned that such forward-looking statements involve inherent risks and uncertainties.  Readers are encouraged to review the Company's annual report for its full statement regarding forward-looking information.


- 8 -


   
Gross Premiums Written
    
Net Premiums Written
    
Net Premiums Earned
    
Loss & LAE Ratio
    
Expense Ratio
    
Combined Ratio
  
Underwriting Operations:
                                    
Quarter ended December 31, 2016
                                    
                                     
Property & Casualty Insurance
  
$
103,696
    
$
67,800
    
$
66,783
      
69.5
%
    
34.8
%
    
104.3
%
Reinsurance
    
1,188
      
1,188
      
2,358
      
83.5
%
    
38.5
%
    
122.0
%
                                                 
Totals
  
$
104,884
    
$
68,988
    
$
69,141
      
70.0
%
    
34.9
%
    
104.9
%
                                                 
Quarter ended December 31, 2015
                                                
                                                 
Property & Casualty Insurance
  
$
94,408
    
$
61,239
    
$
62,212
      
59.7
%
    
31.4
%
    
91.1
%
Reinsurance
    
3,418
      
3,374
      
3,783
      
126.7
%
    
42.1
%
    
168.8
%
                                                 
Totals
  
$
97,826
    
$
64,613
    
$
65,995
      
63.5
%
    
32.0
%
    
95.5
%
                                                 
Twelve months ended December 31, 2016
                                                
                                                 
Property & Casualty Insurance
  
$
395,625
    
$
264,459
    
$
264,753
      
64.9
%
    
30.4
%
    
95.3
%
Reinsurance
    
7,379
      
7,293
      
11,258
      
131.0
%
    
41.8
%
    
172.8
%
                                                 
Totals
  
$
403,004
    
$
271,752
    
$
276,011
      
67.6
%
    
30.9
%
    
98.5
%
                                                 
Twelve months ended December 31, 2015
                                                
                                                 
Property & Casualty Insurance
  
$
366,668
    
$
238,330
    
$
242,364
      
58.6
%
    
31.3
%
    
89.9
%
Reinsurance
    
16,885
      
16,323
      
20,971
      
64.3
%
    
42.8
%
    
107.1
%
                                                 
Totals
  
$
383,553
    
$
254,653
    
$
263,335
      
59.2
%
    
32.2
%
    
91.4
%



- 9 -

   
Gross Premiums Written
    
Net Premiums Written
    
Net Premiums Earned
    
Loss & LAE Ratio
  
Selected Product Data:
                        
Quarter ended December 31, 2016
                        
  Property & Casualty Insurance:
                        
Fleet Transportation
  
$
98,336
    
$
63,570
    
$
64,336
      
68.2
%
All Other
    
5,360
      
4,230
      
2,447
      
104.0
%
        Total
  
$
103,696
    
$
67,800
    
$
66,783
      
69.5
%
                                 
                                 
Quarter ended December 31, 2015
                                
  Property & Casualty Insurance:
                                
Fleet Transportation
  
$
90,433
    
$
58,257
    
$
58,421
      
56.9
%
All Other
    
3,975
      
2,982
      
3,791
      
100.7
%
        Total
  
$
94,408
    
$
61,239
    
$
62,212
      
59.7
%
                                 
                                 
                                 
Twelve months ended December 31, 2016
                                
Property & Casualty Insurance:
                                
Fleet Transportation
  
$
379,004
    
$
253,462
    
$
252,780
      
63.4
%
All Other
    
16,621
      
10,997
      
11,973
      
95.5
%
       Total
  
$
395,625
    
$
264,459
    
$
264,753
      
64.9
%
                                 
                                 
Twelve months ended December 31, 2015
                                
Property & Casualty Insurance:
                                
Fleet Transportation
  
$
346,695
    
$
222,945
    
$
224,730
      
55.7
%
All Other
    
19,973
      
15,385
      
17,634
      
96.4
%
       Total
  
$
366,668
    
$
238,330
    
$
242,364
      
58.6
%
                                 
                                 
                   
December
    
December
  
Selected Financial Data:
                    
2016
      
2015
  
                                 
Net GAAP loss and loss expense reserves
                  
$
324,767
    
$
301,753
  
Net statutory loss and loss expense reserves
                    
328,404
      
308,718
  
Consolidated statutory surplus
                    
400,372
      
390,774
  



 
 

 
 
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