BWINB

Baldwin & Lyons, Inc. (BWINB)

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Baldwin and Lyons, Incorporated (BWINB)

Q3 2008 Earnings Call

November 3, 2008 11:00 am ET

Executives

Leslie Loyet - Vice President, Financial Relations Board

Gary W. Miller - Chairman and Chief Executive Officer

Joseph J. DeVito – President and Chief Operating Officer

G. Patrick Corydon – Executive Vice President and Chief Financial Officer

Analysts

Chris [Gaffen] – Equity Portfolio Unlimited Partnerships

Presentation

Operator

Good day, everyone, and welcome to today’s Baldwin and Lyons Incorporated third quarter earnings 2008 conference call. Today’s call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Leslie Loyet of the Financial Relations Board. Please go ahead.

Leslie Loyet

Thank you and thank you all for joining us this morning for the Baldwin and Lyons third quarter 2008 conference call. If you did not receive a copy of the press release, you may access it online at the company’s website which is www.baldwinandlyons.com. I would like to remind everyone that we are hosting a live webcast of the call which may be accessed again on the company’s website as well.

At this time, management would like me to inform you that certain statements made during this conference call and in the press release which are not historical may be forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Baldwin and Lyons believes the expectations reflected in any forward looking statements are based on reasonable assumptions it can give no assurance that its expectations will be obtained.

Factors and risks that could cause the actual results to differ materially from expectations are detailed in the press release and from time to time with the company’s filings with the SEC. And now, I would like to introduce Gary Miller, Chairman and Chief Executive Officer of Baldwin and Lyons and turn the call over to him. Please go ahead.

Gary W. Miller

Thank you. Good morning to all of you joining us for the Baldwin and Lyons conference call reporting 3rd quarter 2008 results. We are happy you joined us this morning and pleased that you have an interest in our company. My name is Gary Miller. I am the CEO of the company. Joining me on the call this morning are Joe DeVito and Pat Corydon. Joe is President and Chief Operating Officer of the company. Pat is Executive Vice President and Chief Financial Officer of the company.

Continuing the changed format first used last quarter for this call, I will give some highlights and a broad view of the just completed quarter results. Joe will then expand, giving more details on the operations and products that make our business. Pat will go into more detail regarding investment results by presenting some of the numbers and the ratios you have come to expect. As always, we all stand ready to answer any questions you might have at the end of our presentations.

The just completed quarter was challenging. On the operations side, we continued to operate in a very soft insurance market which presents volume and margin challenges. Then we had a major hurricane, causing significant catastrophe losses. On the investment side, the quarter saw the financial equivalent of a hurricane, as financial disruptions were revealed almost daily and equity markets plunged.

With our strong capital structure, while not unaffected by the unfolding events, your company remains strong and solid, with value per share at September 30th, 2008 stands at $22.99, representing a surplus number of $333.9 million. That is down from the beginning of the year by about $37 million reflecting losses, both realized and unrealized, in our investments that were not completely offset by our operating income. Also included in the $37 million in surplus decline were $11.4 million of dividend payments this year, and $6 million for the repurchase of the company’s stock.

Since the first of the year, we have made open market purchases of 287,000 shares of the company’s stock, about 2% of outstanding, at an average below book value price of $21.03. A total of 89,000 shares were re-purchased in the 3rd quarter. Authorization for repurchase of 2.7 million shares remains. Operating income for the quarter was $0.21 per share. We have previously announced $4.4 million pre-tax in hurricane losses for the third quarter.

That is a net loss estimate after [retrosations] in which by the way, that is still a good estimate at this date. Our growth loss is more. When we had projected results by the purchase of the previously mentioned [retrosational] coverage. As a result, Hurricane Ike reduced our quarterly operating results by about $.19 per share.

Joe will have more comments on our other products’ results. In general, all had satisfactory quarters with profitable operations. However, net operating income was not up to the prior year’s or the prior quarter. There were few reserve releases in the quarter and continuing rate softness is having an impact.

There is no need to give a macro view on investment results for the quarter. We have all felt the pain. As you may recall, the company has allocated a portion of its investment portfolio to the limited partnerships. When those partnership participations have a reduction in value due to investment losses, realized or unrealized, we, due to accounting rules, must take that decline as a realized loss through our income statement. That plus losses on our direct security trading accounted for the income statements after tax investment loss of $10.4 million for the quarter and $21.1 million for the year-to-date.

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