SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
---------
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
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For Quarter Ended Commission file number
June 30, 1997 0-5534
BALDWIN & LYONS, INC.
(Exact name of registrant as specified in its charter)
INDIANA 35-0160330
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1099 North Meridian Street, Indianapolis, Indiana 46204
- ------------------------------------------------- ------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (317) 636-9800
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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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of August 1, 1997:
TITLE OF CLASS NUMBER OF SHARES OUTSTANDING
Common Stock, No Par Value:
Class A (voting) 2,419,579
Class B (nonvoting) 11,373,345
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
- ----------------------------
<TABLE>
BALDWIN & LYONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
JUNE 30 December 31
1997 1996
------------- ------------
<C> <C>
<S>
ASSETS
Investments:
Fixed maturities $ 278,247 $ 273,828
Equity securities 132,094 147,196
Short-term and other 23,055 22,223
--------- ---------
433,396 443,247
Cash and cash equivalents 26,655 12,117
Accounts receivable 17,088 13,967
Reinsurance recoverable 45,064 43,829
Current federal income taxes - 568
Other assets 11,486 12,732
--------- ---------
$ 533,689 $ 526,460
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Reserves for losses and loss expenses $ 197,641 $ 196,939
Reserves for unearned premiums 15,890 10,835
Accounts payable and accrued expenses 30,389 34,830
Deferred federal income taxes 10,677 10,734
Currently payable federal income taxes 2,017 -
--------- ---------
256,614 253,338
Shareholders' equity:
Common stock-no par value 736 744
Additional paid-in capital 41,622 42,100
Unrealized net gains on investments 35,461 38,472
Retained earnings 199,256 191,806
--------- ---------
277,075 273,122
--------- ---------
$ 533,689 $ 526,460
========= =========
Number of common and common
equivalent shares outstanding 13,949,245 14,034,248
Book value per outstanding share $19.86 $19.46
See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
BALDWIN & LYONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------------ ------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<C> <C> <C> <C>
<S>
REVENUES
Net premiums earned $ 14,987 $ 16,142 $ 28,309 $ 31,436
Net investment income 4,664 4,877 9,275 9,863
Realized net gains on investments 3,887 3,105 9,331 3,684
Commissions and other income 441 331 819 659
--------- --------- --------- ---------
23,979 24,455 47,734 45,642
EXPENSES
Losses and loss expenses incurred 9,486 10,224 18,349 19,985
Other operating expenses 5,421 4,993 10,623 10,109
--------- --------- --------- ---------
14,907 15,217 28,972 30,094
INCOME FROM CONTINUING OPERATIONS
BEFORE FEDERAL INCOME TAXES 9,072 9,238 18,762 15,548
Federal income taxes 2,833 2,993 5,950 5,033
--------- --------- --------- ---------
NET INCOME FROM CONTINUING OPERATIONS 6,239 6,245 12,812 10,515
Discontinued operations,
net of federal income taxes - 28 - 269
--------- --------- --------- ---------
NET INCOME $ 6,239 $ 6,273 $ 12,812 $ 10,784
========= ========= ========= =========
PER SHARE DATA
Average number of common and common
equivalent shares outstanding 14,011,556 14,336,090 14,033,576 14,466,357
Income before discontinued
operations and realized net gains $ .26 $ .30 $ .48 $ .56
Realized net gains on investments .18 .14 .43 .17
Discontinued operations - - - .02
--------- --------- --------- ---------
NET INCOME $ .44 $ .44 $ .91 $ .75
========= ========= ========= =========
Dividends $ .10 $ .08 $ .20 $ .16
========= ========= ========= =========
See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
BALDWIN & LYONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<CAPTION>
SIX MONTHS ENDED
JUNE 30
1997 1996
---------- ----------
<C> <C>
<S>
Net cash provided by operating activities $ 6,863 $ 1,187
Investing activities:
Purchases of long-term investments (113,595) (117,077)
Proceeds from sales or maturities
of long-term investments 127,556 114,626
Net sales of short-term investments 629 9,074
Other investing activities (1,060) 1,334
---------- ----------
Net cash provided by investing activities 13,530 7,957
Financing activities:
Dividends paid to shareholders (2,768) (2,294)
Cost of treasury stock (3,088) (7,653)
Proceeds from sales of common stock 1 -
---------- ----------
Net cash used in financing activities (5,855) (9,947)
---------- ----------
Increase (decrease) in cash and cash equivalents 14,538 (803)
Cash and cash equivalents at beginning of year 12,117 18,014
---------- ----------
Cash and cash equivalents at end of period $ 26,655 $ 17,211
========== ==========
See notes to condensed consolidated financial statements.
</TABLE>
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10Q and do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
fair presentation have been included. Operating results for the interim periods
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1997. Interim financial statements should be read in
conjunction with the Company's annual audited financial statements.
(2) Certain prior year balances have been reclassified to conform to the
current period presentation.
(3) The effective federal income tax rate is less than the statutory rate for
the periods ended June 30, 1997 and June 30, 1996 due primarily to tax-exempt
investment income.
(4) The following line items from the Statements of Income are presented net of
the ceded reinsurance amounts shown below.
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<C> <C>
<S>
Quarter ended June 30:
Net premiums earned $ 1,914 $ 2,863
Losses and loss expenses 5,269 (3,086)
Other operating expenses (120) (119)
Six months ended June 30:
Net premiums earned 3,869 6,875
Losses and loss expenses 2,353 2,001
Other operating expenses (329) (610)
</TABLE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- -------------------------------------------------------------------
AND RESULTS OF OPERATIONS
- -------------------------
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company generally experiences positive cash flow from operations 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
property/casualty insurance subsidiaries, other than loss and loss expense
payments and commissions paid to related agency companies, generally average
between 15% and 30% of premiums earned and the remaining amount is available for
investment for varying periods of time pending the settlement of claims relating
to the insurance coverage provided. For the six months ended June 30, 1997,
positive cash flow from operations totaled $6.9 million, an increase from $1.2
million generated during the first half of 1996. The 1996 period included
approximately $6.5 million of reinsurance payments made under contingency
provisions of certain treaties. Recent cash flows have, at times, lagged behind
those of earlier periods because of declining premium volume in retrospectively
rated workers' compensation and fleet trucking liability businesses. Management
expects premium revenues from these products to continue trending downward
during 1997 as the result of competitive pressures in the trucking insurance
markets. This decline in trucking insurance revenues will be mitigated somewhat
by continued growth in Company's personal automobile program.
For several years, the Company's investment philosophy has emphasized the
purchase of relatively short-term instruments with maximum quality and
liquidity. The average life of the Company's investment portfolio was
approximately 3 years at June 30, 1997. The Company would benefit from
increasing interest rates since a large portion of its investment portfolio is
available for reinvestment.
The Company's assets at June 30, 1997 included $32.6 million in investments
classified as short-term or cash equivalents which were readily convertible to
cash without significant market penalty. In addition, fixed maturity
investments totaling $46.9 million will mature prior to December 31, 1997. The
Company believes that these liquid investments are more than sufficient to
provide for projected claim payments and operating cost demands even during a
period of declining premium volume.
Consolidated shareholders' equity totaled $277.1 million at June 30, 1997 and
includes $250.7 million representing GAAP shareholder's equity of insurance
subsidiaries, of which $39.7 million may be transferred by dividend or loan to
the parent company without approval by, or notification to, regulatory
authorities. An additional $190.7 million 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. The Company
believes that these restrictions pose no material liquidity concerns to the
Company. The financial strength and stability of the subsidiaries would permit
ready access by the parent company to short-term and long-term sources of
credit, if necessary. In addition, the parent company had cash and marketable
securities valued at $54.3 million at June 30, 1997.
RESULTS OF OPERATIONS
---------------------
COMPARISONS OF SECOND QUARTER, 1997 TO SECOND QUARTER, 1996
-----------------------------------------------------------
Net premiums earned decreased $1.2 million during the second quarter of 1997 as
compared to the same period of 1996. This change is primarily attributable to
decreases in premiums from the Company's large and medium fleet trucking
products totaling $1.6 million. In addition, premiums from the Company's
workers' compensation products decreased by $1.1 million. All of these
decreases are attributable to the non-renewal of business and lower rates on
policies renewed resulting from the intense competition in the large fleet
trucking insurance market during 1996 and continuing into 1997. Substantially
offsetting these decreases was the continued growth of the Company's private
passenger automobile program. Premiums earned from this program totaled $4.0
million for the quarter, an increase of 79% from the prior year. Premiums
written for this program have increased each quarter since its inception in
1995.
Net investment income decreased $.2 million (4.4%) during the second quarter of
1997 due to lower pre-tax investment yields resulting from increases in the
Company's municipal bond and equity security portfolios as compared to the
second quarter of 1996. Overall pretax yields decreased from 5.3% during the
second quarter of 1996 to 5.0% for the current quarter while after tax yields
decreased from 3.8% during the second quarter of 1996 to 3.6% for the second
quarter of 1997.
The second quarter 1997 net realized gain of $3.9 million consists of net gains
on equity securities of $4.1 million and net losses of $.2 million on other
securities.
Losses and loss expenses incurred during the second quarter of 1997 decreased
$.7 million from that experienced during the second quarter of 1996. The
decrease is generally in line with declines in premium volume in the Company's
large fleet trucking products offset by increases in losses from the Company's
private passenger automobile business. Losses from reinsurance assumed also
increased during the second quarter of 1997 as the result of approximately $1.0
million of adverse development on an excess of loss treaty with the Company's
former subsidiary, Hoosier Insurance Company. Loss and loss expense ratios for
the comparative second quarters were as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<C> <C>
<S>
Fleet trucking 52.5% 72.9%
Voluntary reinsurance assumed 79.8 37.7
Small fleet trucking 35.4 30.4
Private passenger automobile 76.5 66.7
Residual market, assigned risk
and all other * *
All lines 63.3 63.3
* Premium and loss amounts for this category are insignificant.
</TABLE>
Other operating expenses for the second quarter of 1997 increased $.4 million
from the second quarter of 1996. The consolidated expense ratio of the
Company's insurance subsidiaries was 32.2% for the second quarter of 1997
compared to 24.6% for the second quarter of 1996. The increase in the
consolidated expense ratio reflects a decline in trucking premium relative to
fixed costs and insufficient volume to minimize ratios in the Company's new
product lines. Average commission ratios on reinsurance assumed from catastrophe
and property pools also increased during the 1997 period. The ratio of
consolidated other operating expenses to total revenue (adjusted for realized
gains) was 27.0% during the second quarter of 1997 compared to 23.4% for the
1996 second quarter.
The effective federal tax rate for consolidated operations for the second
quarter of 1997 was 31.2% and is less than the statutory rate primarily because
of tax exempt investment income.
As a result of the factors mentioned above, income from consolidated operations
during the second quarter of 1997 was level with the 1996 second quarter.
COMPARISONS OF SIX MONTHS ENDED JUNE 30, 1997 TO
------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1996
------------------------------
Net premiums earned decreased $3.1 million (9.9%) during the first six months of
1997 as compared to the same period of 1996. As mentioned in the quarterly
comparison above, intense competition in the trucking insurance markets has
resulted in declines of $2.9 million and $2.6 million in the Company's trucking
liability and workers' compensation products from the same period last year.
The majority of the decline in volume is attributable to the non-renewal of
policies and the use of facultative reinsurance. Both of these factors serve to
reduce the Company's risk of loss in line with the decline in premium volume.
Substantially offsetting these decreases was a $3.5 million (94%) increase in
premiums earned from the Company's private passenger automobile product.
Net investment income decreased by $.6 million (6.0%) during the first six
months of 1997 compared to the same period in 1996 for the same reasons
mentioned above for the quarterly comparison. Overall pretax yields decreased
to 5.0% from 5.4% a year earlier while after tax yields decreased from 3.8%
during the first half of 1996 to 3.5% for the first six months of 1997.
The net realized gain on investments of $9.3 million for the first six months of
1997 consists of net gains on equity securities of $9.7 million and net losses
of $.4 million on other investments.
Losses and loss expenses incurred during the first six months of 1997 decreased
$1.6 million from the first six months of 1996 for the same reasons provided for
the quarterly comparison above. Loss and loss expense ratios for the
comparative six month periods were as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<C> <C>
<S>
Fleet trucking 60.1% 67.0%
Voluntary reinsurance assumed 62.9 41.5
Small fleet trucking 46.0 80.0
Private passenger automobile 75.5 74.0
Residual market, assigned risk
and all other * *
All lines 64.8 63.6
* Premium and loss amounts for this category are insignificant.
</TABLE>
Other operating expenses increased $.5 million (5.1%) during the first six
months of 1997 compared to the same period of 1996. The consolidated expense
ratio of the Company's insurance subsidiaries was 31.8% for 1997 compared to
25.1% for 1996 for the same reasons provided above for the quarterly comparison.
The ratio of other operating expenses to total revenue (adjusted for realized
gains) was 27.7% for 1997 compared to 24.1% for 1996.
The effective federal tax rate for consolidated operations for the first six
months of 1997 was 31.7% and is less than the statutory rate primarily because
of tax exempt investment income.
As a result of the factors mentioned above, income from continuing operations
for the first six months of 1997 was $12.8 million, up 21.9% from the comparable
1996 period.
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; (iii) other risks and
uncertainties indicated from time to time in the Company's filings with the
Securities and Exchange Commission; and (iv) other risks and factors which may
be beyond the control or foresight of the Company.
EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS
---------------------------------------
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. No material impact is expected on primary
earnings per share for the quarter and six months ended June 30, 1997 and June
30, 1996 as a result of the adoption of Statement 128. The impact of Statement
128 on the calculation of fully diluted earnings per share for these quarters is
also not expected to be material.
PART II - OTHER INFORMATION
ITEM 5 OTHER INFORMATION
- -------------------------
In accordance with the Company's by-laws (as amended to increase the number of
directors to 14), the Board of Directors appointed five directors on June 16,
1997 to fill existing vacancies, as follows: John Piggot, former president of
Anixter Corp. and former director of ITEL Corp., now Anixter International;
Robert Shapiro, president of Emlin Cosmetics; John Weil, president of Clayton
Management Company; Joseph DeVito, vice president of Baldwin & Lyons, Inc. and
executive vice president of its subsidiary, Sagamore Insurance Company; and
James Good, vice president of Baldwin & Lyons, Inc. and executive vice president
of its subsidiary, Protective Insurance Company.
The Board also elected Gary Miller to be its chairman in addition to his present
positions as president and chief executive officer.
ITEM 6(a) EXHIBITS
- --------------------
Number and caption from Exhibit
Table of Regulation S-K Item 601 Exhibit No.
- -------------------------------- ---------------------------
(3)(ii) By-laws EXHIBIT 3(ii) --
By-laws as amended
June 16, 1997
(11) Statement regarding computation EXHIBIT 11 --
of per share earnings Computation of Per Share
Earnings
ITEM 6(b) REPORTS ON FORM 8-K
- -------------------------------
No reports on Form 8-K have been filed by the registrant during the three months
ended June 30, 1997.
SIGNATURES
Pursuant to the requirements 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.
Date August 4, 1997 By /s/ Gary W. Miller
--------------------- ---------------------------------
Gary W. Miller, Chairman and
Chief Executive Officer
Date August 4, 1997 By /s/ G. Patrick Corydon
--------------------- ---------------------------------
G. Patrick Corydon,
Vice President - Finance
(Principal Financial and
Accounting Officer)
BALDWIN & LYONS, INC.
Form 10-Q for the fiscal quarter
ended June 30, 1997
INDEX TO EXHIBITS
Exhibit Number Method of Filing
-------------- --------------------
EXHIBIT 3(ii)
By Laws File herewith electronically
EXHIBIT 11
Computation of per share earnings File herewith electronically
EXHIBIT 27
Financial Data Schedule Filed herewith electronically
BALDWIN & LYONS, INC.
Form 10Q, Exhibit 3(ii)
By-Laws
CODE OF BY-LAWS
---------------
OF
--
BALDWIN & LYONS, INC.
---------------------
(As amended 6-16-97)
ARTICLE I
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CAPITAL STOCK
--------------
Section 1. Stock Certificates
--------------------------------
As provided by law, each holder of shares of the corporation shall be
entitled to a stock certificate signed by the president or vice president and
attested by the secretary or an assistant secretary, certifying the number of
shares owned by such shareholder and such other information as may be required
by law. The form of such certificate shall be prescribed by resolution of the
Board of Directors.
Section 2. Lost or Destroyed Certificates
-----------------------------------------
When the stock certificate of any shareholder is lost or destroyed, a new
stock certificate may be issued to replace such lost or destroyed certificate.
Unless waived by the Board of Directors, the shareholder shall make an affidavit
or affirmation of the fact that his certificate is lost or destroyed, shall
advertise the same in such manner as the Board of Directors may require, and
shall give the corporation a bond of indemnity in the amount and form which the
Board of Directors may prescribe.
Section 3. Transfer of Shares
------------------------------
Shares of the corporation shall be transferable only on the books of the
corporation upon the surrender of the certificate representing the same, either
duly endorsed with signature guaranteed or accompanied by a separate document
containing a written assignment of such certificate duly executed with signature
guaranteed. The requirement for such guaranteeing may be waived by the
president or secretary of the corporation.
Section 4. Recognition of Shareholders
---------------------------------------
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, notwithstanding any equitable or other claim to, or
interest in, such shares on the part of any other person.
ARTICLE II
----------
MEETINGS OF SHAREHOLDERS
------------------------
Section 1. Place of Meetings
-----------------------------
As provided in the Articles of Incorporation, meetings of the shareholders
of the corporation shall be held at such place, either within or without the
State of Indiana, as may be specified in the respective calls, notice or waivers
of notice thereof.
Section 2. Annual Meetings
---------------------------
The annual meeting of the shareholders of the corporation shall be held at
10:00 a.m. on the first Tuesday in May of each year, or on such other date five
(5) business days prior to or following this date as may be designated by the
Board of Directors.
Section 3. Special Meetings
----------------------------
Special meetings of the shareholders may be called by the President, by the
Board of Directors, or by shareholders who hold not less than one-fourth of all
outstanding shares which may be voted on the business proposed to be transacted
thereat.
Section 4. Notice of Meetings
------------------------------
Written notice stating the place, day and hour of any meeting of
shareholders and, in the case of special meetings or when otherwise required by
law, the purpose for which any such meeting is called, shall be delivered or
mailed by the Secretary of the corporation to each shareholder of record
entitled to vote at such meeting, at such address as appears upon the records of
the corporation and at least ten (10) days before the date of such meeting, on
being notified of the place, day and hour thereof by the officers or persons
calling the meeting.
Section 5. Waiver of Notice
----------------------------
Notice of any meeting may be waived in writing by any shareholder if the
waiver sets forth in reasonable detail the time and place of the meeting and the
purposes thereof. Attendance at any meeting, in person or by proxy, if the
proxy sets forth in reasonable detail the purposes of such meeting, shall
constitute a waiver of notice of such meeting.
Section 6. Voting Rights
-------------------------
Each holder of shares of the corporation shall have such voting rights as
are specified in The Articles of Incorporation of the corporation.
Section 7. Date of Determination of Voting Rights
--------------------------------------------------
The Board of Directors may fix a stock record date, not exceeding fifty
(50) days prior to the date appointed for any meeting of shareholders, for the
purpose of determining the shareholders entitled to notice of and to vote at
such meeting. In the absence of action by the Board of Directors to fix a stock
record date as herein provided, such stock record date shall be the fourteenth
(14th) day prior to the date of the meeting.
Section 8. Voting by Proxy
---------------------------
A shareholder entitled to vote at any meeting of shareholders may vote
either in person or by proxy, executed in writing by the shareholder of a duly
authorized attorney-in-fact of such shareholder. (For purposes of this section,
a proxy granted by the telegram by a shareholder shall be deemed "executed
in writing by the shareholder".) No proxy shall be voted at any meeting of
shareholders unless the same shall be filed with the Secretary of the meeting at
the commencement thereof. The general proxy of a fiduciary shall be given the
same effect as the general proxy of any other shareholder. No proxies shall be
valid after eleven (11) months from the date or execution unless a longer term
is expressly provided therein.
No share shall be voted at any meeting:
(a) on which an installment is due and unpaid; or
(b) which shall have been transferred on the books of
the corporation within ten (10) days next preceding
the date of the meeting; or
(c) which belongs to the corporation.
Section 9. Voting Lists
------------------------
The Secretary shall make, at least five (5) days before each meeting of
shareholders, a complete list of the shareholders entitled to vote at such
meeting, arranged in alphabetical order, with the address of each and the number
of shares held by each, which list, for the period of five (5) days prior to
such meeting, shall be kept on file at the principal office of the corporation
and shall be subject to inspection by any shareholder at any time during usual
business hours. Such a list shall also be produced and kept open at the time
and place of the meeting and shall be subject to inspection by any shareholder
during the whole time of the meeting.
Section 10. Quorum
-------------------
The persons owning a majority of the stock of this corporation shall
constitute a quorum at any meeting of shareholders, and be capable of
transacting any business thereof, except when otherwise especially provided by
law or by the Articles of Incorporation of this corporation; but if, at any
meeting of the shareholders, there be less than a quorum present, a majority in
interest of the shareholders present in person or by proxy may adjourn from time
to time without notice other than by announcement at the meeting until the
holders of the amount of stock requisite to constitute a quorum shall attend.
At any such adjourned meeting at which a quorum shall be present, any business
may be transacted which might have been transacted at the meeting as originally
notified.
Section 11. Conduct of Meetings
--------------------------------
Shareholder's meetings, including the order of business, shall be conducted
in accordance with Roberts' Rules of Order, Revised, except insofar as the
Articles of Incorporation, this Code of By-Laws, or any rule adopted by the
Board of Directors of shareholders may otherwise provide. The shareholders may,
by unanimous consent, waive the requirement of this section; but such waiver
shall not preclude any shareholder from invoking the requirements of this
section at any subsequent meeting.
ARTICLE III
-----------
BOARD OF DIRECTORS
------------------
Section 1. Duties and Qualifications
-------------------------------------
The business and affairs of the corporation shall be managed by a Board of
Directors, none of whom need be shareholders of the corporation.
Section 2. Number and Terms of Office
--------------------------------------
There shall be fourteen (14) (as amended 6-16-97) Directors of the
corporation, who shall be elected at each annual meeting of the shareholders, to
serve for a term of one (1) year and until their successors shall be chosen and
qualified, or until removal, resignation or death. If the annual meeting of the
shareholders is not held at the time designated in these By-Laws, such failure
shall not cause any defect in the existence of the corporation, and the
Directors then in office shall hold over until their successors shall be chosen
and qualified.
Section 3. Vacancies
---------------------
Any vacancy in the Board of Directors caused by death, resignation,
incapacity or increase in the number of Directors may be filled by a majority
vote of all the remaining members of the Board of Directors. Shareholders shall
be notified of any increase in the number of Directors and the name, address,
principal occupation and other pertinent information about any Directors elected
by the Board to fill any vacancy in the next mailing sent to the shareholders
following any such increase or election. Vacancies on the Board of Directors
occasioned by removal of a Director shall be filled by a vote of the
shareholders entitled to vote thereon at an annual or special meeting thereof.
Any Director so elected by the Board of Directors or by the shareholders shall
hold office until the next annual or special meeting of shareholders and until
his successor shall be elected and qualified.
Section 4. Annual Meeting
--------------------------
Unless otherwise agreed upon, the Board of Directors shall meet each year,
immediately following the annual meeting of the shareholders, at the place where
such meeting of shareholders was held, for the purpose of election of officers
of the corporation and consideration of any other business which may be brought
before the meeting. No notice shall be necessary for the holding of this annual
meeting.
Section 5. Other Meetings
--------------------------
Other meetings of the Board of Directors maybe held regularly pursuant to a
resolution of the Board to such effect or may be held upon the call of the
President or of any two (2) members of the Board and upon twenty-four (24) hours
notice specifying the time, place and general purposes of the meeting, given to
each Director, either personally or by mail, telegram or telephone. No notice
shall be necessary for any regular meeting and notice of any other meeting may
be waived in writing or by telegram. Attendance at any such meeting shall
constitute waiver of notice of such meeting. Pursuant to Indiana law, the Board
of Directors are authorized to conduct meetings by telephone or teleconference
(added 5-4-82).
Section 6. Quorum
------------------
One-third (1/3rd) of the whole Board of Directors (but in no case less than
two (2) Directors) shall be necessary to constitute a quorum for the transaction
of any business, except the filing of vacancies and the act of the majority of
the Directors present at a meeting at which a quorum is present shall be the act
of the Board of Directors, unless the act of a greater number is required by
law, the Articles of Incorporation, or this Code of By-Laws.
Section 7. Action by Consent
-----------------------------
Any action which may be taken at any meeting of the Board, may be taken
without a meeting, if prior to such action a written consent to such action is
signed by all members of the Board and such consent is filed with the minutes of
proceedings of the Board.
Section 8. Committees of the Board of Directors
------------------------------------------------
The Board of Directors may, by resolution adopted by a majority of the
actual number of Directors elected and qualified, from time to time designate
from among its members an executive committee or such other committees as it may
specify. Any such committee shall have and exercise all the authority of the
Board of Directors, to the extent provided in such resolution and by law.
ARTICLE IV
----------
OFFICES
-------
Section 1. Offices and Qualification Therefor
----------------------------------------------
The officers of the corporation shall consist of a Chairman of the Board of
Directors, a President, an Executive Vice President, one (1) or more Vice
Presidents, a Secretary, a Treasurer and such assistant officers as the Board of
Directors shall designate. The President shall be chosen from among the
Directors. Any two (2) or more offices may be held by the same person, except
the duties of the President and the Secretary shall not be performed by the same
person.
Section 2. Terms of Office
---------------------------
Each Officer of the corporation shall be elected annually by the Board of
Directors at its annual meeting and shall hold office for a term of one (1) year
and until his successor shall be duly elected and qualified.
Section 3. Vacancies
---------------------
Whenever any vacancies shall occur in any of the offices of the corporation
for any reason, the same may be filled by the Board of Directors at a special or
annual meeting thereof, and any officer so elected shall hold office until the
next annual meeting of the Board of Directors and until his successor shall be
duly elected and qualified.
Section 4. Removal
-------------------
Any officer of the corporation may be removed, with or without cause, by
the Board of Directors whenever a majority of such Board shall vote in favor of
such removal.
Section 5. Compensation
------------------------
Each officer of the corporation shall receive such compensation for his
service in such office as may be fixed by action of the Board of Directors, duly
recorded.
ARTICLE V
---------
POWERS AND DUTIES OF OFFICERS
-----------------------------
Section 1. Chairman of the Board
---------------------------------
Subject to the general control of the Board of Directors, the Chairman
shall manage and supervise all the affairs and personnel of the corporation and
shall discharge all the usual functions of the Chief Executive Officer of a
corporation. The Chairman shall preside at all meetings of the Board and
shareholders, and shall have such other powers and duties as this Code of By-
Laws or the Board of Directors may prescribe.
Section 2. President
---------------------
The President shall be the chief operating officer of the corporation. He
shall also have all the powers of and perform the duties incumbent upon the
Chairman during his absence or disability. He shall have such other powers and
duties as this Code of By-Laws or the Board of Directors may prescribe. Shares
of other corporations owned by this corporation may be voted by the President or
by such proxies as the President shall designate. The President shall have
authority to execute, with the Secretary, powers of attorney appointing other
corporations, partnerships or individuals, the agents of the corporation subject
to law, the Articles of Incorporation and this Code of By-Laws.
Section 3. Executive Vice President
------------------------------------
The Executive Vice President shall assist the President in supervising the
operations of the corporation and, subject to the direction of the President,
shall manage and supervise the agency, sales and underwriting operations of the
corporation.
Section 4. Vice Presidents
---------------------------
The Vice Presidents shall, in the order designated by the Board of
Directors, have all the powers of and perform all the duties incumbent upon the
President during his absence or disability and shall have such other powers and
duties as this Code of By-Laws or the Board of Directors may prescribe.
Section 5. Secretary
---------------------
The Secretary shall attend all meetings of the shareholders and of the
Board of Directors, and keep, or cause to be kept, in a book provided for the
purpose, a true and complete record of the proceedings of such meeting, and he
shall perform a like duty, when required, for all standing committees appointed
by the Board of Directors. He shall attest the execution of all deeds, leases,
agreements and other official documents and shall affix the corporate seal
thereto. He shall attend to the giving and serving of all notices of the
corporation required by this Code of By-Laws, shall have custody of the books
(except books of account), records and corporate seal of the corporation, and in
general shall perform all duties pertaining to the office of Secretary and such
other duties as this Code of By-Laws or the Board of Directors may prescribe.
Section 6. Treasurer
---------------------
The Treasurer shall keep correct and complete records of account, showing
accurately at all times the financial condition of the corporation. He shall
have charge and custody of, and be responsible for, all funds, notes, securities
and other valuables which may fro time to time come into the possession of the
corporation. He shall deposit, or cause to be deposited, all funds of the
corporation with such depositories as the Board of Directors shall designate.
He shall furnish at meetings of the Board of Directors, or whenever required, a
statement of the financial condition of the corporation, and in general shall
perform all duties pertaining to the office of Treasurer and such other duties
as this Code of By-Laws or the Board of Directors may prescribe.
Section 7. Assistant Officers
------------------------------
Such assistant officers as the Board of Directors shall from time to time
designate and elect shall have such powers and duties as the officers whom they
are elected to assist shall specify and delegate to them and such other powers
and duties as this Code of By-Laws or the Board of Directors may prescribe. An
Assistant Secretary may, in the absence or disability of the Secretary, attest
the execution of all documents by the corporation and affix the corporate seal
thereto.
Section 8. Delegation of Duties
--------------------------------
In case of the absence of inability to act of any officer of the
corporation, the Board of Directors may delegate for the time being the duties
of such officer to any other officer or to any director.
Section 9. Loans to Officers
-----------------------------
No loan of money or property or advancement on account of services to be
performed in the future shall be made to any officer or director of the
Corporation, except as may otherwise be provided by statute (as amended 1-26-
83).
ARTICLE VI
-----------
MISCELLANEOUS
Section 1. Corporate Seal
--------------------------
The seal of the corporation shall be circular in form with the name of the
corporation around the top of its periphery, the word "Indiana" around the
bottom of its periphery, and the word "Seal" through the center.
Section 2. Execution of Contracts and Other Documents
------------------------------------------------------
Unless otherwise ordered by the Board of Directors, all written contracts
and other documents entered into by the corporation shall be executed on behalf
of the corporation by the President or a Vice President. If the corporate seal
is required to be affixed thereto, it shall be affixed and attested by the
Secretary or an Assistant Secretary.
Section 3. Fiscal Year
-----------------------
The fiscal year of the corporation commences on the first (1st) day of
January and ends on the thirty-first (31st) day of December of each year.
ARTICLE VII
-----------
AMENDMENTS
----------
Section 1. Amendments of By-Laws
---------------------------------
Subject to law and the Articles of Incorporation, the power to make, alter,
amend or repeal all or any part of this Code of By-Laws is vested in the Board
of Directors. The affirmative vote of a majority of all the Directors shall be
necessary to affect any such changes in this Code of By-Laws.
<TABLE>
BALDWIN & LYONS, INC.
FORM 10-Q, EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
-------------------------- --------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<C> <C>
<S>
PRIMARY:
Average number of shares
outstanding 13,821,503 14,170,712 13,844,111 14,301,617
Dilutive stock options--based on
treasury stock method using
average market price 190,053 165,378 189,465 164,740
----------- ----------- ----------- -----------
Totals 14,011,556 14,336,090 14,033,576 14,466,357
=========== =========== =========== ===========
Net Income $ 6,238,679 $ 6,272,998 $12,811,548 $10,783,678
=========== =========== =========== ===========
Per share amount $ .44 $ .44 $ .91 $ .75
=========== =========== =========== ===========
FULLY DILUTED:
Average number of shares
outstanding 13,821,503 14,170,712 13,844,111 14,301,617
Dilutive stock options--based on
treasury stock method using
average market price 191,196 166,420 190,037 165,261
----------- ----------- ----------- -----------
Totals 14,012,699 14,337,132 14,034,148 14,466,878
=========== =========== =========== ===========
Net Income $ 6,238,679 $ 6,272,998 $12,811,548 $10,783,678
=========== =========== =========== ===========
Per share amount $ .44 $ .44 $ .91 $ .75
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of operations enclosed
herein electronically in Form 10Q for the year-to-date, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<DEBT-HELD-FOR-SALE> 278,247
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 132,094
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 433,396
<CASH> 26,655<F1>
<RECOVER-REINSURE> 6,902
<DEFERRED-ACQUISITION> 2,075
<TOTAL-ASSETS> 533,689
<POLICY-LOSSES> 197,641
<UNEARNED-PREMIUMS> 15,890
<POLICY-OTHER> 71
<POLICY-HOLDER-FUNDS> 6,079
<NOTES-PAYABLE> 0
0
0
<COMMON> 736
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 533,689
28,309
<INVESTMENT-INCOME> 9,275
<INVESTMENT-GAINS> 9,331
<OTHER-INCOME> 819
<BENEFITS> 18,349
<UNDERWRITING-AMORTIZATION> 3,155
<UNDERWRITING-OTHER> 2,721
<INCOME-PRETAX> 18,762
<INCOME-TAX> 5,950
<INCOME-CONTINUING> 12,812
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,812
<EPS-PRIMARY> .91
<EPS-DILUTED> .91
<RESERVE-OPEN> 154,537<F2>
<PROVISION-CURRENT> 22,051<F2>
<PROVISION-PRIOR> (3,702)<F2>
<PAYMENTS-CURRENT> 7,470<F2>
<PAYMENTS-PRIOR> 12,005<F2>
<RESERVE-CLOSE> 153,411<F2>
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1>Cash includes cash equivalents.
<F2>All loss data is presented net of applicable reinsurance recoverable.
</FN>
</TABLE>