BWINB

Baldwin & Lyons, Inc. (BWINB)

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Baldwin & Lyons, Inc. (BWINB)

Q4 2008 Earnings Call

February 04, 2009 11:00 AM ET

Executives

Leslie Loyet - Vice President, Financial Relations Board

Gary Wayne Miller - Chairman and Chief Executive Officer

Joseph James DeVito - President and Chief Operating Officer

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

Presentation

Operator

Good day everyone, and welcome to today's Baldwin & Lyons Incorporated Fourth Quarter 2008 Earnings 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 & Lyons fourth quarter and full year 2008 conference call. If you did not receive a copy of the press release, you may access it online at the company's website at baldwinandlyons.com. I would like to remind everyone that we are hosting a live webcast of the call which may be accessed on the company's website as well.

At this time, management would like me to inform you that certain statements during this conference call and in the press release which are not historical may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although, Baldwin & 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 attained.

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 & Lyons and I'll turn the call over to him. Please go ahead.

Gary Wayne Miller

Thank you, Les. Good morning to those of you joining us for the Baldwin & Lyons conference call reporting results for the fourth quarter and the for the year 2008. We are pleased you have joined us this morning and appreciate your interest in the company. I am Gary Miller and I am the Chairman and CEO of the company, joining me on this call are Joe DeVito, President of the company and Chief Operating Officer; and Pat Corydon, Executive Vice President and Chief Financial Officer.

I will give some brief opening comments which will be followed by Joe DeVito's remarks and then by Pat Corydon going into more detail regarding our financial results. At the conclusion of Pat's remarks, we will be happy to address any questions you might have.

As you might expect, as a financial services company Baldwin & Lyons did not escape the negatives that have marked the results for such companies. We have reported a net loss for the year caused by our losses on investments and our book value declined for the same reason.

On the other hand, we had a good quarter and a good year from operations. Our fourth quarter operating results of $0.52 per share was the best we've ever had in a fourth quarter and were the fifth best ever for the company. Our annual results were influenced by catastrophe activity specifically Hurricane Ike in the third quarter, but we still reported $1.55 per share in operating income as compared to last year's record of $1.91. However, though satisfactory operating results could not offset investment losses of $1.91 per share for the year 2008, resulting in a net loss for the year of $0.36 per share.

Joe and Pat will go into more detail regarding the operating income and the investment losses. I will again point out, that the company has significant investments in limited partnerships due to accounting rules for those investments we must recognize gains and losses from those partnerships, both realized and unrealized as to the partnerships, as realized gains and losses to us. And therefore, they are recognized through our income statement.

In times of general market pressures increasing or decreasing significantly, as they have this past quarter and past year, decrease that is, those increases or decreases caused more volatility in our income statement, as shown in the rather upsize gains of last year and correspondingly large investment losses for 2008. With this year's losses also being influenced by a significant impairment charges reflecting the decline in value of certain held assets, which also go through the income statement.

However, accounting rules aside and whether the losses went through the income statement over two time of the balance sheet, it was a terrible year for investors, especially one that has historically held significant equity investments.

The company's book value declined for the quarter and for the year, cheap causes where they realize investment loss of 28.8 million after-tax, which more than offset the company's operating income of 23.3 million. Our unrealized investment losses of 19.7 million and dividends paid of 15.1 million. Book value at year end was $22.32 a decline of 266 from December 31, 2007.

The company purchased 456,000 shares of its common stock during the year 2008, with 169,000 shares being repurchased in the fourth quarter at an average price of $16.97 per share. Those purchases reduced the average price paid per share for the year to $19.52, because the purchases were made below book value, the effect was actually an increase in to the company's book value of $0.16 per share.

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