Baldwin & Lyons, Inc. (NASDAQ:BWINA)
(NASDAQ:BWINB) today reported results for the second quarter and
first six months of 2017. The Company experienced a second
quarter net loss of $12.3 million, or $0.82 per share, which
compares to net income of $6.0 million, or $0.40 per share, for the
prior year’s second quarter. For the first six months of
2017, net loss totaled $5.6 million, or $0.37 per share, which
compares to net income of $20.1 million, or $1.33 per share, for
the prior year period.
Gross premiums written for the current quarter increased 19.0%
to $119.0 million compared to $100.0 million written during the
second quarter of 2016. The increase was primarily driven by
continued growth in the Company’s commercial automobile and
workers’ compensation products as well as growth in the Company’s
programs book of business. Gross premiums written for the six
months of 2017 increased 16.7% to $229.0 million compared to $196.2
million written during the first six months of 2016, with product
group increases and decreases similar to those experienced in the
second quarter.
Net premiums earned for the second quarter of 2017 were $68.0
million, 1.1% lower than last year’s second quarter total.
This decrease in net premiums earned, compared to growth in gross
premiums written, was a function of premium adjustment provisions
in the Company’s historical commercial automobile reinsurance
treaties. This historical reinsurance structure, which was
revised in the Company’s current reinsurance treaty renewal, causes
an adjustment for ceded premiums when the ultimate loss estimate
changes for a reinsurance treaty year. For the first six
months of 2017, net premiums earned increased 4.7% to $142.0
million.
Net investment income increased 32.9% to $4.7 million compared
to $3.5 million in 2016, reflecting an increase in yields on the
Company’s fixed maturity securities and an increase in dividends
from the Company’s equity portfolio. For the six months ended
June 30, 2017, net investment income increased 20.3% to $8.4
million, compared to $7.0 million in 2016, reflecting investment
impacts similar to those experienced during the second quarter.
Underwriting operations produced a combined ratio of 142.9%
during the second quarter of 2017, which compares to a combined
ratio of 92.6% for the 2016 second quarter. The combined
ratio difference reflects a significant reserve strengthening,
predominately for accident years 2015 and prior. For the six
months ended June 30, 2017, the combined ratio was 120.4%, which
compares to a combined ratio of 89.6% for the 2016 period with the
difference due mainly to the 2017 second quarter reserve
strengthening.
Book value per share on June 30, 2017 was $26.50, a decrease of
$0.84 per share during the second quarter, after the payment of
cash dividends to shareholders totaling $0.27 per share. For
the six months ended June 30, 2017, book value per share has
decreased $0.31 after the payment of cash dividends to shareholders
totaling $0.54 per share. The combination of the year-to-date
decrease in book value of $0.31, plus dividends paid to
shareholders of $0.54, represents an annualized total value
creation of 1.7% on beginning book value for the six months ended
June 30, 2017.
The Company's net income (loss), determined in accordance with
U.S. generally accepted accounting principles (GAAP), includes
items that may not be indicative of ongoing operations. The
following table reconciles income (loss) before federal income
taxes (benefits) to underwriting income (loss), a non-GAAP
financial measure that is a useful tool for investors and analysts
in analyzing ongoing operating trends.
|
Three Months Ended |
|
Six Months Ended |
|
June 30 |
|
June 30 |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
Income (loss) |
$ |
(21,180 |
) |
|
$ |
8,915 |
|
$ |
(11,002 |
) |
|
$ |
30,353 |
Less: Net
realized gains on investments |
3,296 |
|
|
280 |
|
9,590 |
|
|
9,292 |
Operating income (loss) |
$ |
(24,476 |
) |
|
$ |
8,635 |
|
$ |
(20,592 |
) |
|
$ |
21,061 |
Less: Investment income |
4,716 |
|
|
3,549 |
|
8,408 |
|
|
6,988 |
Underwriting income
(loss) |
$ |
(29,192 |
) |
|
$ |
5,086 |
|
$ |
(29,000 |
) |
|
$ |
14,073 |
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
2017
Operating LossOperating loss, before federal
income tax benefits, was $24.5 million for the second quarter of
2017 which compares to operating income, before federal income
taxes, of $8.6 million during the second quarter of 2016.
Six months ended June 30,
2017
Operating LossOperating loss, before federal
income tax benefits, was $20.6 million for the six months ended
June 30, 2017 which compares to operating income, before federal
income taxes, of $21.1 million during the 2016 period.
The Company’s management uses the term operating income, a
non-GAAP financial measure, which is defined as income excluding
pre-tax investment gains and losses. This financial measure
is used to evaluate the Company’s performance because the
recognition of investment gains and losses in any given period is
largely discretionary as to timing and could distort the analysis
of trends. The Company believes that the defined term is used
commonly in the property/casualty insurance industry and that
equity analysts exclude gains and losses on investments in their
analysis of the Company’s results for the same reason.
The combined ratios and the components thereof, as presented
herein, are commonly used in the property/casualty insurance
industry and are applied to the Company’s GAAP underwriting
results.
Conference Call Information:Baldwin &
Lyons, Inc. has scheduled its quarterly conference call for
Wednesday, August 9, 2017, at 11:00 AM ET (New York time) to
discuss results for the second quarter ended June 30, 2017.
To participate via teleconference, investors may dial
1-877-705-6003 (U.S./Canada) or 1-201-493-6725 (International or
local) at least five minutes prior to the beginning of the
call. A replay of the call will be available through August
16, 2017 by calling 1-844-512-2921 or 1-412-317-6671 and
referencing passcode 13664381. 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
February 9, 2018. The webcast may be accessed directly at:
http://public.viavid.com/player/index.php?id=124929.
Also available on the investor relations section of our web site
are complete interim financial statements and copies of our filings
with the Securities and Exchange Commission.
Forward-looking statements in this report are made pursuant to
the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Investors are cautioned that such
forward-looking statements involve inherent risks and
uncertainties. Readers are encouraged to review the Company's
annual report for its full statement regarding forward-looking
information.
Financial
Highlights (unaudited) |
|
|
|
|
Baldwin & Lyons,
Inc. and Subsidiaries |
|
|
|
|
(In thousands, except
per share data) |
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30 |
|
June 30 |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
Operating
revenue |
|
$ |
74,112 |
|
|
$ |
73,738 |
|
$ |
152,759 |
|
|
$ |
145,451 |
Net realized gains on
investments |
|
3,296 |
|
|
280 |
|
9,590 |
|
|
9,292 |
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
77,408 |
|
|
$ |
74,018 |
|
$ |
162,349 |
|
|
$ |
154,743 |
|
|
|
|
|
|
|
|
|
|
|
Net
operating income (loss) |
|
$ |
(14,485 |
) |
|
$ |
5,787 |
|
$ |
(11,822 |
) |
|
$ |
14,041 |
Net realized gains on
investments, |
|
|
|
|
|
|
|
|
|
|
net of federal
income taxes |
|
2,142 |
|
|
182 |
|
6,234 |
|
|
6,040 |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(12,343 |
) |
|
$ |
5,969 |
|
$ |
(5,588 |
) |
|
$ |
20,081 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share data -
diluted: |
|
|
|
|
|
|
|
|
|
|
Average number of shares |
|
15,122 |
|
|
15,084 |
|
15,122 |
|
|
15,084 |
|
|
|
|
|
|
|
|
|
|
|
Net operating income (loss) |
|
$ |
(.96 |
) |
|
$ |
.39 |
|
$ |
(.78 |
) |
|
$ |
.93 |
Net investment
gains |
|
.14 |
|
|
.01 |
|
.41 |
|
|
.40 |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(.82 |
) |
|
$ |
.40 |
|
$ |
(.37 |
) |
|
$ |
1.33 |
|
|
|
|
|
|
|
|
|
|
|
Dividends paid to
shareholders |
|
$ |
.27 |
|
|
$ |
.26 |
|
$ |
.54 |
|
|
$ |
.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss), net of tax |
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(12,343 |
) |
|
$ |
5,969 |
|
$ |
(5,588 |
) |
|
$ |
20,081 |
Unrealized net gains (losses) on securities |
|
3,480 |
|
|
3,800 |
|
8,815 |
|
|
(4,250) |
Foreign currency translation adjustments |
|
388 |
|
|
124 |
|
453 |
|
|
543 |
Comprehensive income (loss) |
|
$ |
(8,475 |
) |
|
$ |
9,893 |
|
$ |
3,680 |
|
|
$ |
16,374 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annualized: |
|
|
|
|
|
|
|
|
|
|
Total Value Creation 1 |
|
(8.3% |
) |
|
9.8% |
|
1.7% |
|
|
8.2% |
|
|
|
|
|
|
|
|
|
|
|
Return on
average shareholders' equity: |
|
|
|
|
|
|
|
|
|
|
Net operating income (loss) |
|
(15.8% |
) |
|
6.3% |
|
(6.5% |
) |
|
7.7% |
Net
income (loss) |
|
(13.5% |
) |
|
6.5% |
|
(3.1% |
) |
|
11.1% |
|
|
|
|
|
|
|
|
|
|
|
Consolidated combined
ratio of |
|
|
|
|
|
|
|
|
|
|
insurance
subsidiaries (GAAP basis): |
|
142.9% |
|
|
92.6% |
|
120.4% |
|
|
89.6% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Total Value Creation equals: (1) change in book value plus
dividends paid, divided by (2) beginning book value |
|
|
|
|
|
|
|
|
|
|
|
Investor Contact: William Vens
investors@baldwinandlyons.com
(317) 429-2554
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