Baldwin & Lyons, Inc. (BWINB)

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Baldwin & Lyons, Inc. (BWINB)

Q2 2008 Earnings Call

July 31, 2008 11:00 am ET


Scott Epstein – Financial Relations Board

Gary W. Miller – Chief Executive Officer

Joseph J. Devito – President and Chief Operating Officer

G. Patrick Corydon – Chief Financial Officer


John Quinn – Morgan Keegan



Welcome to the Baldwin & Lyons, Inc. second quarter 2008 earnings conference call. (Operator Instructions) At this time for opening remarks and introductions I would like to turn the call over Scott Epstein of the Financial Relations Board.

Scott Epstein

If you did not receive a copy of the press release, you may access it online at the company's website, which is I would like to remind everyone that we are hosting a live webcast for 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 obtained. Factors and risks that could cause actual results to differ materially from expectations are detailed in the press release and from time to time within the company's filings with the SEC.

And now I'd like to introduce Gary Miller, Chairman and Chief Executive Officer of Baldwin & Lyons, and turn the call over to him.

Gary W. Miller

Joining me on the call this morning are Joe Devito, President and Chief Operating Officer of the company, and Pat Corydon, Executive Vice President and Chief Financial Officer.

We have changed the format of this call a bit from the manner we have handled calls in the past, that will allow you to get better acquainted with Joe Devito, our President. This morning I will give a short and very broad view of the just completed quarter’s results. Joe will expand on that and provide details on our operating results by product line, some restructuring changes we have made and what we might expect for the rest of the year and beyond. Pat will then go into more detail regarding our investment results and present some of the ratios and numbers you normally expect to hear. As always, the three of us will be happy to entertain any questions you might have at the end of our presentations.

Increased premium volume and a stellar consolidated combined ratio of 86.2%, or 84.9% if fee income is considered, offset an expected decline in investment income and allowed us to register the second best quarterly results from operations in the company’s history. From operations we made $8.2 million after tax, or $0.54 per share, for the second quarter.

Net income was reduced to $6.3 million, or $0.41 per share, where we had net investment losses of nearly $2.0 million, or $0.13 per share. As you will recall, those net investment losses include actual realized losses in our investment portfolio plus realized and unrealized losses in our limited partnership holdings.

You may also recall that we had a tough first quarter with underwriting results being less than we normally expect and a large investment decline that further hurt our income statement. So as our six-month figures include those first quarter results we are reporting just $0.11 per share in net income for the six months, although operating income was $0.82 per share for the six-month period.

Our gross from our net investment losses are $2.0 million for the quarter. In addition, our decline in unrealized gains was a tax-affected $5.2 million reflecting our inability to avoid the overall market decline for the quarter. Because those losses and value decline were not offset by the quarter’s income, book value per share declined by $0.14 for the quarter and at June 30, 2008, stood at $24.09 per share.

During the quarter we were active in buying treasury stock and purchased 198 shares at an average price $21.35 per share. Since we bought for under book value, that actually added to book value by $0.05 per share. We have approximately 2.8 million shares still authorized for purchase under the Board’s current authorization.

Joe will give you further details regarding our expansion of products and expansion of volumes in certain lines. Pat will fill in details on the financials.

I would mention we have reached a handshake deal on the purchase of a small trucking insurance agency that does about $20.0 million in premium volume. We believe the agency should be a profit center for us, continuing as an agency. We also see some synergies in that some of the business written by the agency might be placed with our insurance companies. Due diligence is in process and we will provide further details, if the transaction goes to completion, in our next conference call.

We continue to look for expansion opportunities through internal growth of existing lines, new lines, and acquisitions. We will have more to say on those items in future calls.

And now I will turn the call over to Joe Devito for more details on our insurance operations.

Joseph J. Devito

Before I review the details of our insurance operations I will briefly review the realignment of management that has taken place over the last 18 months. During prior conference calls I have mentioned that our strategy over that period of time has been to expand the breadth of product offerings so that we might better position ourselves to manage through cycles instead of around them.

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