##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Fiscal Year Ended December 31, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 0-8738
 BANCINSURANCE CORPORATION
  Ohio
    
    31-0790882(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)250 East Broad Street, Columbus, Ohio
(Address of principal executive offices)
    
    43215
(Zip Code)
 (614) 220-5200
  Title of each class
    
    Name of each exchange on which registeredNONE
    
    NONE
  COMMON SHARES, WITHOUT PAR VALUE
 YES o NO þ
 YES o NO þ
 þ o
 o o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ




---



##### 



PagePART IItem 1. Business
    
    
    3Item 2. Properties
    
    
    9Item 3. Legal Proceedings
    
    
    9Item 4. Submission of Matters to a Vote of Security Holders
    
    
    9PART IIItem 5. Market for Registrants Common Shares, Related
Shareholder Matters and Issuer Purchases of Equity Securities
    
    
    10Item 7. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    11Item 8. Consolidated Financial Statements and Supplementary Data
    
    
    29Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
    
    
    61Item 9A(T). Controls and Procedures
    
    
    61Item 9B. Other Information
    
    
    61PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    62Item 11. Executive Compensation
    
    
    64Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Shareholder Matters
    
    
    71Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    72Item 14. Principal Accounting Fees and Services
    
    
    74PART IVItem 15. Exhibits, Financial Statement Schedules
    
    
    75Exhibit 21Exhibit 23(a)Exhibit 23(b)Exhibit 31.1Exhibit 31.2Exhibit 32.1
   2




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##### Table of Contents



FORWARD-LOOKING INFORMATION
  
 PART I
 
 ITEM 1. BUSINESS
 GENERAL/OVERVIEW
   PRODUCTS AND SERVICES
 Ohio Indemnity Company
  Lender Service Products ®
  3




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Unemployment Compensation Products ®
 Waste Industry Products
   4




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Other Specialty Products
  Distribution of Products
 Ultimate Services Agency, LLC
  COMPETITION
  Importance of Industry Ratings
  Reliance on General Agents and Major Customers
  Type
    
    Gross Premiums Written
    
    
    % of TotalCustomer
    
    $
    24.3
    
    
    
    33.3
    %General Agent
    
    
    9.3
    
    
    
    12.8General Agent
    
    
    6.5
    
    
    
    8.8Customer
    
    
    6.2
    
    
    
    8.5General Agent
    
    
    4.5
    
    
    
    6.1Customer
    
    
    4.4
    
    
    
    6.0General Agent
    
    
    4.3
    
    
    
    5.8General Agent
    
    
    3.8
    
    
    
    5.2TOTAL
    
    $
    63.3
    
    
    
    86.5
    %
   5




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REINSURANCE
          6




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REGULATION
 Insurance Company Regulation
     Ohio Insurance Holding Company System Regulation
   National Association of Insurance Commissioners
    7




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SEC Investigation
       EMPLOYEES
  SERVICE MARKS
   8




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ITEM 2. PROPERTIES
  
 ITEM 3. LEGAL PROCEEDINGS
 Highlands Arbitration
 SEC Investigation
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   9




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PART II
 
 ITEM 5.
MARKET FOR REGISTRANTS COMMON SHARES, RELATED SHAREHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
 MARKET INFORMATION
  Period
    
    High Price
    
    
    Low PriceQuarterly period ended March 31, 2008
    
    $
    5.20
    
    
    $
    4.30Quarterly period ended June 30, 2008
    
    
    5.10
    
    
    
    4.25Quarterly period ended September 30, 2008
    
    
    6.00
    
    
    
    4.50Quarterly period ended December 31, 2008
    
    
    6.00
    
    
    
    3.25
 Period
    
    High Price
    
    
    Low PriceQuarterly period ended March 31, 2009
    
    $
    4.50
    
    
    $
    3.51Quarterly period ended June 30, 2009
    
    
    5.00
    
    
    
    3.00Quarterly period ended September 30, 2009
    
    
    4.00
    
    
    
    3.40Quarterly period ended December 31, 2009
    
    
    6.50
    
    
    
    3.45
    HOLDERS
  DIVIDENDS
   REPURCHASE OF COMMON SHARES
   10




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ITEM 7.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 OVERVIEW
  Products and Services
  Discontinued Bond Program
        11




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Recently Issued Accounting Standards
       12




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
    
    FSP FAS 157-4 (Codification reference ASC 820), Determining Fair Value When the Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly (FSP FAS 157-4). This FSP supersedes FSP
FAS 157-3 (Codification reference ASC 820), Determining the Fair Value of a Financial
Asset When the Market for That Asset is Not Active. This FSP provides additional guidance
on: (1) estimating fair value when the volume and level of activity for an asset or
liability have significantly decreased in relation to the normal market activity for the
asset or liability, and (2) identifying transactions that are not orderly. This FSP must be
applied prospectively and retrospective application is not permitted.
 
    
    FSP FAS 115-2 and FAS 124-2 (Codification reference ASC 320), Recognition and
Presentation of Other-Than-Temporary Impairments (FSP FAS 115-2 and FAS 124-2). This FSP
provides new guidance on the recognition and presentation of other-than-temporary
impairments (OTTI) for available for sale and held to maturity fixed maturities (equities
are excluded). An impaired security is not recognized as an impairment if management does
not intend to sell the impaired security and it is more likely than not it will not be
required to sell the security before the recovery of its amortized cost basis. If
management concludes a security is other-than-temporarily impaired, this FSP requires that
the difference between the fair value and the amortized cost of the security be presented
as an OTTI charge in the statements of operations, with an offset for any noncredit-related
loss component of the OTTI charge to be recognized in other comprehensive income.
Accordingly, only the credit loss component of the OTTI amount will have an impact on the
Companys results of operations. This FSP also requires extensive new interim and annual
disclosure for both fixed maturities and equities to provide further disaggregated
information as well as information about how the credit loss component of the OTTI charge
was determined and requiring a roll forward of such amount for each reporting period.
 
    
    FSP FAS 107-1 and APB 28-1 (Codification reference ASC 825), Interim Disclosures about
Fair Value of Financial Instruments (FSP FAS 107-1 and APB 28-1). This FSP extends the
disclosure requirements under SFAS No. 107 (Codification reference ASC 825), Disclosures
about Fair Value of Financial Instruments, to interim financial statements and it amends
APB Opinion 28 (Codification reference ASC 270), Interim Financial Reporting, to require
those disclosures in summarized financial information at interim reporting periods.
     13




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Reinsurance Transactions
  Automobile Service Contract Program
     SEC Investigation
   14




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SUMMARY RESULTS
  Period-to-Period Increase (Decrease)2008-2009Amount
    
    
    % ChangeNet premiums earned
    
    $
    (4,079,330
    )
    
    
    (8.5
    )%Net investment income
    
    
    149,249
    
    
    
    3.8Net realized gains on investments
    
    
    720,829
    
    
    
    299.9Other-than-temporary impairments on investments
    
    
    534,564
    
    
    
    (14.4
    )Management fees
    
    
    (210,075
    )
    
    
    (57.0
    )Total revenues
    
    
    (2,900,913
    )
    
    
    (5.9
    )Losses and LAE
    
    
    (2,578,928
    )
    
    
    (10.5
    )Discontinued bond program losses and LAE
    
    
    (2,087,556
    )
    
    
    2,048.6Policy acquisition costs
    
    
    (603,696
    )
    
    
    (5.2
    )Other operating expenses
    
    
    209,003
    
    
    
    2.7SEC investigation expenses
    
    
    (3,265,846
    )
    
    
    (99.3
    )Interest expense
    
    
    (416,836
    )
    
    
    (33.8
    )Income before federal income taxes
    
    
    5,842,946
    
    
    
    1,127.8Net income
    
    
    3,707,427
    
    
    
    272.3
   2009
    
    
    2008GAAP:Loss ratio
    
    
    46.9
    %
    
    
    53.0
    %Expense ratio
    
    
    42.7
    
    
    
    40.3Combined ratio
    
    
    89.6
    %
    
    
    93.3
    %Statutory:Loss ratio
    
    
    47.3
    %
    
    
    54.0
    %Expense ratio
    
    
    43.5
    
    
    
    44.5Combined ratio
    
    
    90.8
    %
    
    
    98.5
    %
  15




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RESULTS OF OPERATIONS
 2009 Compared to 2008
 Net Premiums Earned
    ®
   Net Investment Income
 Net Realized Gains on Investments
  Other-Than-Temporary Impairments on Investments
  Management Fees
  16




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Losses and Loss Adjustment Expenses
    ®
     Policy Acquisition Costs.
 Other Operating Expenses
 SEC Investigation Expenses.
  17




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Interest Expense
 Federal Income Taxes
 GAAP Combined Ratio
 BUSINESS OUTLOOK
 Lender Service
       18




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Unemployment Compensation
 ®
 Waste Industry
     Expenses
  Investments
   19




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LIQUIDITY AND CAPITAL RESOURCES
  2009
    
    
    2008Trust preferred debt issued to BIC Statutory Trust I
    
    $
    8,248,000
    
    
    $
    8,248,000Trust preferred debt issued to BIC Statutory Trust II
    
    
    7,217,000
    
    
    
    7,217,000Bank line of credit
    
    
    3,000,000
    
    
    
    2,500,000Total debt obligations
    
    
    18,465,000
    
    
    
    17,965,000Total shareholders equity
    
    
    44,371,719
    
    
    
    34,660,381Total capitalization
    
    $
    62,836,719
    
    
    $
    52,625,381Ratio of total debt obligations to total capitalization
    
    
    29.4
    %
    
    
    34.1
    %
  20




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21




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2009
    
    
    2008Cash & short-term investments
    
    $
    9,893,374
    
    
    $
    11,439,101Money market mutual fund(1)
    
    
    670
    
    
    
    49,096Total cash & short-term investments
    
    $
    9,894,044
    
    
    $
    11,488,197
 (1)
    
    Even though it is classified as an equity security in our accompanying balance
sheet, we treat the money market mutual fund as a short-term investment for purposes of our
liquidity management because of its liquid nature.        22




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INFLATION
   23




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CRITICAL ACCOUNTING POLICIES
  Other-Than-Temporary Impairment of Investments
  Fixed Maturity Securities
 
    
    the length of time and extent to which the estimated fair value has been less than
book value;
 
    
    the degree to which any appearance of impairment is attributable to an overall change
in market conditions (e.g., interest rates);
 
    
    the degree to which an issuer is current or in arrears in making principal and
interest/dividend payments on the securities in question;
 
    
    the financial condition and future prospects of the issuer, including any specific
events that may influence the issuers operations and its ability to make future
scheduled principal and interest payments on a timely basis;
 
    
    the independent auditors report on the issuers most recent financial statements;
 
    
    the judgment of our outside fixed income investment manager;
 
    
    relevant rating history, analysis and guidance provided by rating agencies and
analysts; and
 
    
    our intent to sell the security or the likelihood that we will be required to sell
the security before its anticipated recovery.
  Equity Securities
 
    
    the length of time and extent to which the estimated fair value has been less than
book value;
 
    
    whether the decline appears to be related to general market or industry conditions or
is issuer-specific;
 
    
    the financial condition and future prospects of the issuer, including any specific
events that may influence the issuers operations;
 
    
    the recent income or loss of the issuer;
 
    
    the independent auditors report on the issuers most recent financial statements;
 
    
    buy/hold/sell recommendations of investment advisors and analysts;
 
    
    relevant rating history, analysis and guidance provided by rating agencies and
analysts; and
 
    
    our ability and intent to hold the security for a period of time sufficient to allow
for recovery in the estimated fair value.
   24




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Loss and Loss Adjustment Expense Reserves
   Assumed Business
  Direct Business
  
    
    ULI  limited liability (ULIL)
 
    
    ULI  non-limited liability (ULIN)
 
    
    CPI
 
    
    GAP
   25




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Loss and LAE Reserves at Year End
 December 31, 2009
    
    
    December 31, 2008IBNR
    
    
    Case
    
    
    IBNR
    
    
    CaseULIL
    
    $
    836,000
    
    
    $
    146,796
    
    
    $
    1,087,000
    
    
    $
    101,182ULIN
    
    
    635,453
    
    
    
    385,859
    
    
    
    693,728
    
    
    
    472,363CPI
    
    
    361,764
    
    
    
    106,087
    
    
    
    179,472
    
    
    
    21,619EPD
    
    
    1,156,000
    
    
    
    463,273
    
    
    
    811,000
    
    
    
    339,000GAP
    
    
    4,868,854
    
    
    
    104,774
    
    
    
    3,410,122
    
    
    
    100,343UC
    
    
    1,965,624
    
    
    
    
    
    
    
    1,747,893
    
    
    
    WIP
    
    
    4,077,757
    
    
    
    
    
    
    
    3,262,742
    
    
    
    Discontinued bond program
    
    
    
    
    
    
    4,450,000
    
    
    
    6,019,253
    
    
    
    620,207Vehicle service contracts
    
    
    685,000
    
    
    
    
    
    
    
    1,436,263
    
    
    
    Other specialty products
    
    
    
    
    
    
    
    
    
    
    17,418
    
    
    
    Total
    
    $
    14,586,452
    
    
    $
    5,656,789
    
    
    $
    18,664,891
    
    
    $
    1,654,714
       26




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Equity-Based Compensation Expense
  Legal Matters
  Deferred Policy Acquisition Costs
  Federal Income Taxes
    27




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OFF-BALANCE SHEET TRANSACTIONS
   28




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##### Table of Contents



ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
 Report of Independent Registered Public Accounting Firm
 
    
   29




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Report of Independent Registered Public Accounting Firm
 
    
   30




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##### Table of Contents



BANCINSURANCE CORPORATION AND SUBSIDIARIES
 
 Consolidated Statements of Income
 Years ended December 31,2009
    
    
    2008Revenues:Net premiums earned
    
    $
    44,083,446
    
    
    $
    48,162,776Net investment income
    
    
    4,047,706
    
    
    
    3,898,457Net realized gains on investments
    
    
    961,197
    
    
    
    240,368Other-than-temporary impairments on investments
    
    
    (3,168,291
    )
    
    
    (3,702,945
    )Management fees
    
    
    158,766
    
    
    
    368,841Other income
    
    
    17,992
    
    
    
    34,232Total revenues
    
    
    46,100,816
    
    
    
    49,001,729Expenses:Losses and loss adjustment expenses
    
    
    21,977,573
    
    
    
    24,556,501Discontinued bond program losses and loss adjustment expenses (benefit)
    
    
    (2,189,460
    )
    
    
    (101,904
    )Policy acquisition costs
    
    
    11,100,497
    
    
    
    11,704,193Other operating expenses
    
    
    8,012,125
    
    
    
    7,803,122SEC investigation expenses
    
    
    23,616
    
    
    
    3,289,462Interest expense
    
    
    815,419
    
    
    
    1,232,255Total expenses
    
    
    39,739,770
    
    
    
    48,483,629Income before federal income taxes
    
    
    6,361,046
    
    
    
    518,100Federal income tax expense (benefit)
    
    
    1,292,316
    
    
    
    (843,203
    )Net income
    
    $
    5,068,730
    
    
    $
    1,361,303Net income per share:Basic
    
    $
    0.99
    
    
    $
    0.27Diluted
    
    $
    0.99
    
    
    $
    0.27Weighted average common shares outstanding:Basic
    
    
    5,135,928
    
    
    
    5,033,423Diluted
    
    
    5,138,010
    
    
    
    5,047,394Cash dividends declared per common share
    
    $
    0.50
    
    
    $
    
 See accompanying notes to consolidated financial statements.
  31




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BANCINSURANCE CORPORATION AND SUBSIDIARIES
 
 Consolidated Balance Sheets
 December 31,2009
    
    
    2008AssetsInvestments:Held to maturity:Fixed maturities, at amortized cost (fair value $5,294,900 in 2009 and $5,330,671 in 2008)
    
    $
    5,181,905
    
    
    $
    5,198,068Available for sale:Fixed maturities, at fair value (amortized cost $71,013,020 in 2009 and $67,022,560 in 2008)
    
    
    71,573,049
    
    
    
    59,675,070Equity securities, at fair value (cost $5,774,207 in 2009 and $7,295,353 in 2008)
    
    
    7,251,637
    
    
    
    6,541,864Short-term investments, at cost which approximates fair value
    
    
    342,002
    
    
    
    5,939,254Restricted short-term investments, at cost which approximates fair value
    
    
    3,410,069
    
    
    
    3,886,635Other invested assets
    
    
    715,000
    
    
    
    715,000Total investments
    
    
    88,473,662
    
    
    
    81,955,891Cash
    
    
    9,551,372
    
    
    
    5,499,847Premiums receivable
    
    
    4,614,787
    
    
    
    5,278,710Reinsurance recoverable
    
    
    6,821,490
    
    
    
    4,836,817Prepaid reinsurance premiums
    
    
    41,949,098
    
    
    
    35,615,978Deferred policy acquisition costs
    
    
    3,723,961
    
    
    
    4,535,805Loans to affiliates
    
    
    1,165,905
    
    
    
    1,093,932Accrued investment income
    
    
    1,085,096
    
    
    
    1,008,648Net deferred tax asset
    
    
    2,322,885
    
    
    
    5,583,390Other assets
    
    
    1,071,642
    
    
    
    1,244,583Total assets
    
    $
    160,779,898
    
    
    $
    146,653,601
 See accompanying notes to consolidated financial statements.
  32




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BANCINSURANCE CORPORATION AND SUBSIDIARIES  Consolidated Balance Sheets, Continued
 December 31,2009
    
    
    2008Liabilities and Shareholders EquityReserve for unpaid losses and loss adjustment expenses
    
    $
    15,793,241
    
    
    $
    13,680,145Discontinued bond program reserve for unpaid losses and loss adjustment expenses
    
    
    4,450,000
    
    
    
    6,639,460Unearned premiums
    
    
    62,185,040
    
    
    
    58,201,957Ceded reinsurance premiums payable
    
    
    3,362,762
    
    
    
    2,431,515Experience rating adjustments payable
    
    
    1,025,137
    
    
    
    1,046,391Retrospective premium adjustments payable
    
    
    958,883
    
    
    
    1,228,537Funds held under reinsurance treaties
    
    
    784,622
    
    
    
    651,267Funds held for account of others
    
    
    3,410,071
    
    
    
    3,886,635Contract funds on deposit
    
    
    2,062,992
    
    
    
    2,677,244Taxes, licenses and fees payable
    
    
    294,821
    
    
    
    336,413Current federal income tax payable
    
    
    140,183
    
    
    
    131,171Commissions payable
    
    
    2,176,797
    
    
    
    1,837,757Other liabilities
    
    
    1,298,630
    
    
    
    1,279,728Bank line of credit
    
    
    3,000,000
    
    
    
    2,500,000Trust preferred debt issued to affiliates
    
    
    15,465,000
    
    
    
    15,465,000Total liabilities
    
    $
    116,408,179
    
    
    $
    111,993,220Commitments and contingenciesShareholders equity:Non-voting preferred shares:Class A Serial Preference shares without par value; authorized 100,000 shares; no shares issued
or outstanding
    
    
    
    
    
    
    Class B Serial Preference shares without par value; authorized 98,646 shares; no shares issued
or outstanding
    
    
    
    
    
    
    Common shares without par value; authorized 20,000,000 shares; 6,170,341 shares issued at December 31,
2009 and 2008; 5,205,706 shares outstanding at December 31, 2009 and 5,082,574 shares outstanding
at December 31, 2008
    
    
    1,794,141
    
    
    
    1,794,141Additional paid-in capital
    
    
    1,574,340
    
    
    
    1,638,503Accumulated other comprehensive (loss) income
    
    
    1,344,720
    
    
    
    (5,346,647
    )Retained earnings
    
    
    44,438,576
    
    
    
    41,972,69949,151,777
    
    
    
    40,058,696Less: Treasury shares, at cost (964,635 common shares at December 31, 2009 and
1,087,767 common shares at December 31, 2008)
    
    
    (4,780,058
    )
    
    
    (5,398,315
    )Total shareholders equity
    
    
    44,371,719
    
    
    
    34,660,381Total liabilities and shareholders equity
    
    $
    160,779,898
    
    
    $
    146,653,601
 See accompanying notes to consolidated financial statements.
  33




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BANCINSURANCE CORPORATION AND SUBSIDIARIES
 
 Consolidated Statements of Shareholders Equity
 AccumulatedAdditional
    
    
    other
    
    
    
    
    
    
    
    
    
    
    TotalPreferred Shares
    
    
    Common
    
    
    paid-in
    
    
    comprehensive
    
    
    Retained
    
    
    Treasury
    
    
    shareholdersClass A
    
    
    Class B
    
    
    shares
    
    
    capital
    
    
    income (loss)
    
    
    earnings
    
    
    shares
    
    
    equityBalance at December 31, 2007
    
    $
    
    
    
    $
    
    
    
    $
    1,794,141
    
    
    $
    1,630,394
    
    
    $
    239,041
    
    
    $
    40,611,396
    
    
    $
    (5,818,050
    )
    
    $
    38,456,922Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,361,303
    
    
    
    
    
    
    
    1,361,303Unrealized losses, net of tax and
reclassification adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,585,688
    )
    
    
    
    
    
    
    
    
    
    
    (5,585,688
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,224,385
    )Equity-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    395,054
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    395,05484,624 common shares issued in
connection with restricted stock
awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (419,735
    )
    
    
    
    
    
    
    
    
    
    
    419,735
    
    
    
    Tax benefit related to vesting of
restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,790
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,790Balance at December 31, 2008
    
    
    
    
    
    
    
    
    
    
    1,794,141
    
    
    
    1,638,503
    
    
    
    (5,346,647
    )
    
    
    41,972,699
    
    
    
    (5,398,315
    )
    
    
    34,660,381Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,068,730
    
    
    
    
    
    
    
    5,068,730Unrealized gains, net of tax and
reclassification adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,691,367
    
    
    
    
    
    
    
    
    
    
    
    6,691,367Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,760,097Cash dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,602,853
    )
    
    
    
    
    
    
    (2,602,853
    )Equity-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    516,022
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    516,0224,822 treasury shares repurchased
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,395
    )
    
    
    (16,395
    )127,944 common shares issued in
connection with restricted stock
awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (634,652
    )
    
    
    
    
    
    
    
    
    
    
    634,652
    
    
    
    Tax benefit related to vesting of
restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54,467
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54,467Balance at December 31, 2009
    
    $
    
    
    
    $
    
    
    
    $
    1,794,141
    
    
    $
    1,574,340
    
    
    $
    1,344,720
    
    
    $
    44,438,576
    
    
    $
    (4,780,058
    )
    
    $
    44,371,719
 See accompanying notes to consolidated financial statements.
  34




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##### Table of Contents



BANCINSURANCE CORPORATION AND SUBSIDIARIES
 
 Consolidated Statements of Cash Flows
 Years ended December 31,2009
    
    
    2008Cash flows from operating activities:Net income
    
    $
    5,068,730
    
    
    $
    1,361,303Adjustments to reconcile net income to net cash provided by (used in) operating activities:Net realized gains on investments
    
    
    (961,197
    )
    
    
    (240,368
    )Other-than-temporary impairments on investments
    
    
    3,168,291
    
    
    
    3,702,945Net realized gains on disposal of property and equipment
    
    
    (4,635
    )
    
    
    Depreciation and amortization
    
    
    405,733
    
    
    
    588,696Equity-based compensation expense
    
    
    516,022
    
    
    
    395,054Deferred federal income tax benefit
    
    
    (186,563
    )
    
    
    (1,250,476
    )Change in assets and liabilities:Premiums receivable
    
    
    663,923
    
    
    
    2,198,724Reinsurance recoverable
    
    
    (1,984,673
    )
    
    
    (994,620
    )Prepaid reinsurance premiums
    
    
    (6,333,120
    )
    
    
    (9,099,182
    )Deferred policy acquisition costs
    
    
    811,844
    
    
    
    1,363,645Other assets, net
    
    
    (22,433
    )
    
    
    32,034Reserve for unpaid losses and loss adjustment expenses
    
    
    (76,364
    )
    
    
    2,935,859Unearned premiums
    
    
    3,983,083
    
    
    
    5,315,429Ceded reinsurance premiums payable
    
    
    931,247
    
    
    
    (2,231,665
    )Experience rating adjustments payable
    
    
    (21,254
    )
    
    
    (948,196
    )Retrospective premium adjustments payable
    
    
    (269,654
    )
    
    
    (2,987,890
    )Funds held under reinsurance treaties
    
    
    133,355
    
    
    
    (12,590
    )Funds held for account of others
    
    
    (476,564
    )
    
    
    (2,828,300
    )Contract funds on deposit
    
    
    (614,252
    )
    
    
    160,198Taxes, license and fees payable
    
    
    (41,592
    )
    
    
    (166,583
    )Commissions payable
    
    
    339,040
    
    
    
    (389,841
    )SEC investigation expense payable
    
    
    (401,503
    )
    
    
    (1,599,497
    )Other liabilities, net
    
    
    443,044
    
    
    
    (368,914
    )Net cash provided by (used in) operating activities
    
    
    5,070,508
    
    
    
    (5,064,235
    )Cash flows from investing activities:Proceeds from held to maturity fixed maturities due to redemption or maturity
    
    
    1,574,433
    
    
    
    1,255,000Proceeds from available for sale fixed maturities sold, redeemed or matured
    
    
    14,778,836
    
    
    
    14,878,376Proceeds from available for sale equity securities sold
    
    
    12,742,881
    
    
    
    12,318,746Cost of held to maturity fixed maturities
    
    
    (1,601,321
    )
    
    
    (1,293,250
    )Cost of available for sale fixed maturities
    
    
    (19,755,219
    )
    
    
    (11,103,831
    )Cost of available for sale equity securities
    
    
    (12,548,617
    )
    
    
    (9,522,920
    )Net change in short-term investments
    
    
    5,597,252
    
    
    
    (5,466,925
    )Net change in restricted short-term investments
    
    
    476,566
    
    
    
    2,828,300Proceeds from collection of note receivable
    
    
    
    
    
    
    300,000Purchase of land, property and leasehold improvements
    
    
    (164,546
    )
    
    
    (280,502
    )Net cash provided by investing activities
    
    
    1,100,265
    
    
    
    3,912,994Cash flows from financing activities:Acquisition of treasury shares
    
    
    (16,395
    )
    
    
    Proceeds from bank line of credit
    
    
    3,000,000
    
    
    
    2,500,000Payments on bank line of credit
    
    
    (2,500,000
    )
    
    
    Cash dividends paid
    
    
    (2,602,853
    )
    
    
    Net cash (used in) provided by financing activities
    
    
    (2,119,248
    )
    
    
    2,500,000Net increase in cash
    
    
    4,051,525
    
    
    
    1,348,759Cash at beginning of year
    
    
    5,499,847
    
    
    
    4,151,088Cash at end of year
    
    $
    9,551,372
    
    
    $
    5,499,847Supplemental disclosures of cash flow information:Cash paid during the year for:Interest
    
    $
    825,711
    
    
    $
    1,246,878Federal income taxes
    
    $
    1,415,400
    
    
    $
    444,000
 See accompanying notes to consolidated financial statements.
  35




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BANCINSURANCE CORPORATION AND SUBSIDIARIES
 
 Notes to Consolidated Financial Statements  December 31, 2009 and 2008
 (1)
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 (a)
    
    Organization
  Property/Casualty Insurance
 ®
 ®
   36




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##### Table of Contents



Insurance Agency
 (b)
    
    Basis of Financial Statement Presentation
   (c)
    
    Recently Issued Accounting Standards
    37




---



##### Table of Contents




    
    FSP FAS 157-4 (Codification reference ASC 820), Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly (FSP FAS 157-4). This FSP supersedes
FSP FAS 157-3 (Codification reference ASC 820), Determining the Fair Value of a
Financial Asset When the Market for That Asset is Not Active. This FSP provides
additional guidance on: (1) estimating fair value when the volume and level of activity
for an asset or liability have significantly decreased in relation to the normal market
activity for the asset or liability, and (2) identifying transactions that are not
orderly. This FSP must be applied prospectively and retrospective application is not
permitted.
 
    
    FSP FAS 115-2 and FAS 124-2 (Codification reference ASC 320), Recognition and
Presentation of Other-Than-Temporary Impairments (FSP FAS 115-2 and FAS 124-2). This
FSP provides new guidance on the recognition and presentation of other-than-temporary
impairments (OTTI) for available for sale and held to maturity fixed maturities
(equities are excluded). An impaired security is not recognized as an impairment if
management does not intend to sell the impaired security and it is more likely than not
it will not be required to sell the security before the recovery of its amortized cost
basis. If management concludes a security is other-than-temporarily impaired, this FSP
requires that the difference between the fair value and the amortized cost of the
security be presented as an OTTI charge in the statements of operations, with an offset for any noncredit-related
loss component of the OTTI charge to be recognized in other comprehensive income.
Accordingly, only the credit loss component of the OTTI amount will
  38




---



##### Table of Contents




    
    FSP FAS 107-1 and APB 28-1 (Codification reference ASC 825), Interim Disclosures
about Fair Value of Financial Instruments (FSP FAS 107-1 and APB 28-1). This FSP
extends the disclosure requirements under SFAS No. 107 (Codification reference ASC 825),
Disclosures about Fair Value of Financial Instruments, to interim financial statements
and it amends APB Opinion 28 (Codification reference ASC 270), Interim Financial
Reporting, to require those disclosures in summarized financial information at interim
reporting periods.
    (d)
    
    Consolidation Policy
  (e)
    
    Investments
     39




---



##### Table of Contents



(f)
    
    Recognition of Revenue
    (g)
    
    Deferred Policy Acquisition Costs
  (h)
    
    Reserve for Unpaid Losses and Loss Adjustment Expenses
  (i)
    
    Reinsurance
  (j)
    
    Experience Rating and Retrospective Premium Adjustments
  (k)
    
    Restricted Short-Term Investments and Funds Held for Account of Others
  (l)
    
    Contract Funds on Deposit
   40




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##### Table of Contents



(m)
    
    Depreciation and Amortization
  (n)
    
    Federal Income Taxes
  (o)
    
    Cash and Cash Equivalents
  (p)
    
    Reclassification
   41




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##### Table of Contents



(2)
    
    INVESTMENTS
  December 31, 2009Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    faircost
    
    
    gains
    
    
    losses
    
    
    valueHeld to maturity:Fixed maturities:U.S. Treasury securities and obligations of
U.S. Government corporations and agencies
    
    $
    2,321,243
    
    
    $
    5,620
    
    
    $
    
    
    
    $
    2,326,863Obligations of U.S. states, municipals and political
subdivisions
    
    
    2,860,662
    
    
    
    107,375
    
    
    
    
    
    
    
    2,968,037Total held to maturity
    
    
    5,181,905
    
    
    
    112,995
    
    
    
    
    
    
    
    5,294,900Available for sale:Fixed maturities:Obligations of U.S. states, municipals and political
subdivisions
    
    
    69,903,319
    
    
    
    1,569,125
    
    
    
    1,589,637
    
    
    
    69,882,807Corporate and other taxable debt securities
    
    
    960,851
    
    
    
    554,696
    
    
    
    20,205
    
    
    
    1,495,342Redeemable preferred stock
    
    
    148,850
    
    
    
    46,050
    
    
    
    
    
    
    
    194,900Total fixed maturities
    
    
    71,013,020
    
    
    
    2,169,871
    
    
    
    1,609,842
    
    
    
    71,573,049Equity securities:Banks, trusts and insurance companies
    
    
    441,185
    
    
    
    419,825
    
    
    
    
    
    
    
    861,010Industrial and miscellaneous
    
    
    1,908,973
    
    
    
    235,728
    
    
    
    11,960
    
    
    
    2,132,741Mutual funds
    
    
    3,424,049
    
    
    
    847,064
    
    
    
    13,227
    
    
    
    4,257,886Total equities
    
    
    5,774,207
    
    
    
    1,502,617
    
    
    
    25,187
    
    
    
    7,251,637Total available for sale
    
    
    76,787,227
    
    
    
    3,672,488
    
    
    
    1,635,029
    
    
    
    78,824,686Total
    
    $
    81,969,132
    
    
    $
    3,785,483
    
    
    $
    1,635,029
    
    
    $
    84,119,586
 December 31, 2008Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    faircost
    
    
    gains
    
    
    losses
    
    
    valueHeld to maturity:Fixed maturities:U.S. Treasury securities and obligations of
U.S. Government corporations and agencies
    
    $
    2,306,533
    
    
    $
    43,350
    
    
    $
    
    
    
    $
    2,349,883Obligations of U.S. states, municipals and political
subdivisions
    
    
    2,891,535
    
    
    
    99,232
    
    
    
    9,979
    
    
    
    2,980,788Total held to maturity
    
    
    5,198,068
    
    
    
    142,582
    
    
    
    9,979
    
    
    
    5,330,671Available for sale:Fixed maturities:Obligations of U.S. states, municipals and political
subdivisions
    
    
    64,840,650
    
    
    
    275,143
    
    
    
    7,597,616
    
    
    
    57,518,177Corporate and other taxable debt securities
    
    
    1,800,360
    
    
    
    
    
    
    
    161,717
    
    
    
    1,638,643Redeemable preferred stock
    
    
    381,550
    
    
    
    136,700
    
    
    
    
    
    
    
    518,250Total fixed maturities
    
    
    67,022,560
    
    
    
    411,843
    
    
    
    7,759,333
    
    
    
    59,675,070Equity securities:Banks, trusts and insurance companies
    
    
    2,137,422
    
    
    
    580,828
    
    
    
    205,919
    
    
    
    2,512,331Industrial and miscellaneous
    
    
    369,277
    
    
    
    44,309
    
    
    
    26,440
    
    
    
    387,146Mutual funds
    
    
    4,788,654
    
    
    
    
    
    
    
    1,146,267
    
    
    
    3,642,387Total equities
    
    
    7,295,353
    
    
    
    625,137
    
    
    
    1,378,626
    
    
    
    6,541,864Total available for sale
    
    
    74,317,913
    
    
    
    1,036,980
    
    
    
    9,137,959
    
    
    
    66,216,934Total
    
    $
    79,515,981
    
    
    $
    1,179,562
    
    
    $
    9,147,938
    
    
    $
    71,547,605
  42




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##### Table of Contents



December 31, 2009Held to Maturity
    
    
    Available for SaleAmortized
    
    
    Estimated
    
    
    Amortized
    
    
    Estimatedcost
    
    
    fair value
    
    
    cost
    
    
    fair valueDue in one year or less
    
    $
    2,771,703
    
    
    $
    2,808,989
    
    
    $
    915,342
    
    
    $
    918,897Due after one year but less than five years
    
    
    1,260,270
    
    
    
    1,294,970
    
    
    
    2,520,260
    
    
    
    3,096,261Due after five years but less than ten years
    
    
    646,098
    
    
    
    663,001
    
    
    
    7,077,832
    
    
    
    7,093,293Due after ten years
    
    
    503,834
    
    
    
    527,940
    
    
    
    60,499,586
    
    
    
    60,464,598Total
    
    $
    5,181,905
    
    
    $
    5,294,900
    
    
    $
    71,013,020
    
    
    $
    71,573,049
  2009
    
    
    2008Fixed maturities
    
    $
    3,668,619
    
    
    $
    3,379,485Equity securities
    
    
    529,318
    
    
    
    617,687Short-term investments
    
    
    83,606
    
    
    
    127,384Other
    
    
    23,568
    
    
    
    34,776Expenses
    
    
    (257,405
    )
    
    
    (260,875
    )Net investment income
    
    $
    4,047,706
    
    
    $
    3,898,457
   2009
    
    
    2008Gross realized gains:Fixed maturities
    
    $
    521,704
    
    
    $
    100,635Equity securities
    
    
    896,730
    
    
    
    569,567Total gains
    
    
    1,418,434
    
    
    
    670,202Gross realized losses:Fixed maturities
    
    
    (439,890
    )
    
    
    (191,252
    )Equity securities
    
    
    (17,347
    )
    
    
    (238,582
    )Total losses
    
    
    (457,237
    )
    
    
    (429,834
    )Net realized gains on investments
    
    
    961,197
    
    
    
    240,368Other-than-temporary impairments
    
    $
    (3,168,291
    )
    
    $
    (3,702,945
    )Changes in net unrealized gains (losses) on
available for sale investments:Fixed maturities
    
    $
    7,907,519
    
    
    $
    (6,664,962
    )Equity securities
    
    
    2,230,919
    
    
    
    (1,798,202
    )Net change in net unrealized gains (losses)
    
    $
    10,138,438
    
    
    $
    (8,463,164
    )
   43




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##### Table of Contents



December 31, 2009AggregateEstimated
    
    
    Gross
    
    
    fair value to
    
    
    PercentBook
    
    
    fair
    
    
    unrealized
    
    
    book value
    
    
    of totalFair value to book value ratio
    
    value
    
    
    value
    
    
    loss
    
    
    ratio
    
    
    book valueFixed maturities:90% to 99%
    
    $
    26,912,700
    
    
    $
    25,974,320
    
    
    $
    938,380
    
    
    
    96.5
    %
    
    
    88.1
    %80% to 89%
    
    
    2,288,457
    
    
    
    1,975,020
    
    
    
    313,437
    
    
    
    86.3
    
    
    
    7.570% to 79%
    
    
    1,093,641
    
    
    
    819,751
    
    
    
    273,890
    
    
    
    75.0
    
    
    
    3.660% to 69%
    
    
    245,730
    
    
    
    161,595
    
    
    
    84,135
    
    
    
    65.8
    
    
    
    0.8Total fixed maturities
    
    
    30,540,528
    
    
    
    28,930,686
    
    
    
    1,609,842
    
    
    
    94.7
    
    
    
    100.0Equities:90% to 99%
    
    
    1,301,601
    
    
    
    1,276,414
    
    
    
    25,187
    
    
    
    98.1
    
    
    
    100.0Total equities
    
    
    1,301,601
    
    
    
    1,276,414
    
    
    
    25,187
    
    
    
    98.1
    
    
    
    100.0Total
    
    $
    31,842,129
    
    
    $
    30,207,100
    
    
    $
    1,635,029
    
    
    
    94.9
    %
    
    
    100.0
    %
 December 31, 2008AggregateEstimated
    
    
    Gross
    
    
    fair value to
    
    
    PercentBook
    
    
    fair
    
    
    unrealized
    
    
    book value
    
    
    of totalFair value to book value ratio
    
    value
    
    
    value
    
    
    loss
    
    
    ratio
    
    
    book valueFixed maturities:90% to 99%
    
    $
    22,410,310
    
    
    $
    21,412,638
    
    
    $
    997,672
    
    
    
    95.5
    %
    
    
    40.5
    %80% to 89%
    
    
    16,775,908
    
    
    
    14,348,190
    
    
    
    2,427,718
    
    
    
    85.5
    
    
    
    30.370% to 79%
    
    
    11,703,885
    
    
    
    8,920,951
    
    
    
    2,782,934
    
    
    
    76.2
    
    
    
    21.160% to 69%
    
    
    4,294,231
    
    
    
    2,822,767
    
    
    
    1,471,464
    
    
    
    65.7
    
    
    
    7.750% to 59%
    
    
    204,298
    
    
    
    114,774
    
    
    
    89,524
    
    
    
    56.2
    
    
    
    0.4Total fixed maturities
    
    
    55,388,632
    
    
    
    47,619,320
    
    
    
    7,769,312
    
    
    
    86.0
    
    
    
    100.0Equities:90% to 99%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80% to 89%
    
    
    232,550
    
    
    
    191,400
    
    
    
    41,150
    
    
    
    82.3
    
    
    
    4.370% to 79%
    
    
    4,787,788
    
    
    
    3,570,322
    
    
    
    1,217,466
    
    
    
    74.6
    
    
    
    88.660% to 69%
    
    
    383,915
    
    
    
    263,905
    
    
    
    120,010
    
    
    
    68.7
    
    
    
    7.1Total equities
    
    
    5,404,253
    
    
    
    4,025,627
    
    
    
    1,378,626
    
    
    
    74.5
    
    
    
    100.0Total
    
    $
    60,792,885
    
    
    $
    51,644,947
    
    
    $
    9,147,938
    
    
    
    85.0
    %
    
    
    100.0
    %
 
  44




---



##### Table of Contents



December 31, 2009AggregateEquivalent
    
    Equivalent
    
    
    
    
    
    Estimated
    
    
    Gross
    
    
    fair value to
    
    
    PercentNAIC
    
    S&P
    
    Moodys
    
    Book
    
    
    fair
    
    
    unrealized
    
    
    book value
    
    
    of totalrating
    
    rating
    
    rating
    
    value
    
    
    value
    
    
    loss
    
    
    ratio
    
    
    book value1FE
    
    AAA/AA/A
    
    Aaa/Aa/A
    
    $
    23,998,345
    
    
    $
    23,051,591
    
    
    $
    946,754
    
    
    
    96.1
    %
    
    
    78.6
    %2FE
    
    BBB
    
    Baa
    
    
    6,542,183
    
    
    
    5,879,095
    
    
    
    663,088
    
    
    
    89.9
    
    
    
    21.43FE
    
    BB
    
    Ba
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4FE
    
    B
    
    B
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5FE
    
    CCC or lower
    
    Caa or lower
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6FE
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    $
    30,540,528
    
    
    $
    28,930,686
    
    
    $
    1,609,842
    
    
    
    94.7
    %
    
    
    100.0
    %
 December 31, 2008AggregateEquivalent
    
    Equivalent
    
    
    
    
    
    Estimated
    
    
    Gross
    
    
    fair value to
    
    
    PercentNAIC
    
    S&P
    
    Moodys
    
    Book
    
    
    fair
    
    
    unrealized
    
    
    book value
    
    
    of totalrating
    
    rating
    
    rating
    
    value
    
    
    value
    
    
    loss
    
    
    ratio
    
    
    book value1FE
    
    AAA/AA/A
    
    Aaa/Aa/A
    
    $
    39,482,827
    
    
    $
    34,523,147
    
    
    $
    4,959,680
    
    
    
    87.4
    %
    
    
    71.3
    %2FE
    
    BBB
    
    Baa
    
    
    15,488,507
    
    
    
    12,720,581
    
    
    
    2,767,926
    
    
    
    82.1
    
    
    
    28.03FE
    
    BB
    
    Ba
    
    
    417,298
    
    
    
    375,592
    
    
    
    41,706
    
    
    
    90.0
    
    
    
    0.74FE
    
    B
    
    B
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5FE
    
    CCC or lower
    
    Caa or lower
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6FE
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    $
    55,388,632
    
    
    $
    47,619,320
    
    
    $
    7,769,312
    
    
    
    86.0
    %
    
    
    100.0
    %
  Less Than 12 Months
    
    
    12 Months or Greater
    
    
    TotalEstimated
    
    
    Gross
    
    
    Estimated
    
    
    Gross
    
    
    Estimated
    
    
    Grossfair
    
    
    unrealized
    
    
    fair
    
    
    unrealized
    
    
    fair
    
    
    unrealizedAt December 31, 2009
    
    value
    
    
    loss
    
    
    value
    
    
    loss
    
    
    value
    
    
    lossFixed maturities:Obligations of U.S. states, municipals
and political subdivisions
    
    $
    10,236,585
    
    
    $
    160,640
    
    
    $
    18,694,101
    
    
    $
    1,449,202
    
    
    $
    28,930,686
    
    
    $
    1,609,842Corporate and other taxable debt securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total fixed maturities
    
    
    10,236,585
    
    
    
    160,640
    
    
    
    18,694,101
    
    
    
    1,449,202
    
    
    
    28,930,686
    
    
    
    1,609,842Equity securities:Banks, trusts and insurance companies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Industrial and miscellaneous
    
    
    295,944
    
    
    
    11,960
    
    
    
    
    
    
    
    
    
    
    
    295,944
    
    
    
    11,960Closed-end mutual funds
    
    
    980,470
    
    
    
    13,227
    
    
    
    
    
    
    
    
    
    
    
    980,470
    
    
    
    13,227Total equities
    
    
    1,276,414
    
    
    
    25,187
    
    
    
    
    
    
    
    
    
    
    
    1,276,414
    
    
    
    25,187Total
    
    $
    11,512,999
    
    
    $
    185,827
    
    
    $
    18,694,101
    
    
    $
    1,449,202
    
    
    $
    30,207,100
    
    
    $
    1,635,029
  45




---



##### Table of Contents



Less Than 12 Months
    
    
    12 Months or Greater
    
    
    TotalEstimated
    
    
    Gross
    
    
    Estimated
    
    
    Gross
    
    
    Estimated
    
    
    Grossfair
    
    
    unrealized
    
    
    fair
    
    
    unrealized
    
    
    fair
    
    
    unrealizedAt December 31, 2008
    
    value
    
    
    loss
    
    
    value
    
    
    loss
    
    
    value
    
    
    lossFixed maturities:Obligations of U.S. states, municipals
and political subdivisions
    
    $
    25,655,047
    
    
    $
    2,532,779
    
    
    $
    20,575,630
    
    
    $
    5,074,816
    
    
    $
    46,230,677
    
    
    $
    7,607,595Corporate and other taxable debt securities
    
    
    1,294,380
    
    
    
    155,980
    
    
    
    94,263
    
    
    
    5,737
    
    
    
    1,388,643
    
    
    
    161,717Total fixed maturities
    
    
    26,949,427
    
    
    
    2,688,759
    
    
    
    20,669,893
    
    
    
    5,080,553
    
    
    
    47,619,320
    
    
    
    7,769,312Equity securities:Banks, trusts and insurance companies
    
    
    647,299
    
    
    
    205,919
    
    
    
    
    
    
    
    
    
    
    
    647,299
    
    
    
    205,919Industrial and miscellaneous
    
    
    81,662
    
    
    
    26,440
    
    
    
    
    
    
    
    
    
    
    
    81,662
    
    
    
    26,440Closed-end mutual funds
    
    
    970,705
    
    
    
    279,813
    
    
    
    2,325,961
    
    
    
    866,454
    
    
    
    3,296,666
    
    
    
    1,146,267Total equities
    
    
    1,699,666
    
    
    
    512,172
    
    
    
    2,325,961
    
    
    
    866,454
    
    
    
    4,025,627
    
    
    
    1,378,626Total
    
    $
    28,649,093
    
    
    $
    3,200,931
    
    
    $
    22,995,854
    
    
    $
    5,947,007
    
    
    $
    51,644,947
    
    
    $
    9,147,938
    (3)
    
    DEFERRED POLICY ACQUISITION COSTS
  2009
    
    
    2008Net deferred, January 1
    
    $
    4,535,805
    
    
    $
    5,899,450Additions:Commissions, net of ceded commissions
    
    
    8,031,741
    
    
    
    7,664,752Premium tax
    
    
    922,222
    
    
    
    886,945Total additions
    
    
    8,953,963
    
    
    
    8,551,697Amortization to expense
    
    
    9,765,807
    
    
    
    9,915,342Net deferred, December 31
    
    $
    3,723,961
    
    
    $
    4,535,805
 (4)
    
    GUARANTEES
   46




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##### Table of Contents



(5)
    
    BANK LINE OF CREDIT
  (6)
    
    LEASE EXPENSES
   2010
    
    $
    251,2182011
    
    
    259,1682012
    
    
    267,1682013
    
    
    272,9172014
    
    
    278,050Thereafter
    
    
    286,000Total
    
    $
    1,614,521
  47




---



##### Table of Contents



(7)
    
    TRUST PREFERRED DEBT ISSUED TO AFFILIATES
   (8)
    
    FEDERAL INCOME TAXES
  2009
    
    
    2008Deferred tax assets:Net unrealized losses on available for sale securities
    
    $
    
    
    
    $
    2,754,333Unpaid loss and LAE reserves
    
    
    303,310
    
    
    
    390,216Unearned premium reserves
    
    
    1,459,824
    
    
    
    1,535,847Alternative minimum tax
    
    
    1,127,494
    
    
    
    1,127,494Other-than-temporary impairment on investments
    
    
    1,379,515
    
    
    
    1,175,331Guarantee liabilities
    
    
    
    
    
    
    125,800Other
    
    
    721,126
    
    
    
    458,319Total deferred tax assets
    
    
    4,991,269
    
    
    
    7,567,340Deferred tax liabilities:Net unrealized gains on available for sale securities
    
    
    (692,735
    )
    
    
    Deferred policy acquisition costs
    
    
    (1,266,146
    )
    
    
    (1,542,174
    )Accrued dividends receivable
    
    
    (25,471
    )
    
    
    (15,891
    )Other
    
    
    (684,032
    )
    
    
    (425,885
    )Total deferred tax liabilities
    
    
    (2,668,384
    )
    
    
    (1,983,950
    )Net deferred tax asset
    
    $
    2,322,885
    
    
    $
    5,583,390
   48




---



##### Table of Contents



2009
    
    
    2008Current expense
    
    $
    1,478,879
    
    
    $
    407,272Deferred benefit
    
    
    (186,563
    )
    
    
    (1,250,475
    )Federal income tax expense (benefit)
    
    $
    1,292,316
    
    
    $
    (843,203
    )
  2009
    
    
    2008Federal income tax at statutory rate
    
    $
    2,162,756
    
    
    $
    175,936Dividends received deduction and tax exempt interest
    
    
    (988,517
    )
    
    
    (940,728
    )Business meals and entertainment
    
    
    28,916
    
    
    
    19,243Other
    
    
    89,161
    
    
    
    (97,654
    )Federal income tax expense (benefit)
    
    $
    1,292,316
    
    
    $
    (843,203
    )
   (9)
    
    BENEFIT PLANS
  (10)
    
    EQUITY-BASED COMPENSATION
      49




---



##### Table of Contents



Weighted-averagegrant date fair valueShares
    
    
    per common shareOutstanding at January 1, 2009
    
    
    122,443
    
    
    $
    5.26Granted
    
    
    127,954
    
    
    
    3.40Vested
    
    
    47,116
    
    
    
    5.41Cancelled
    
    
    
    
    
    
    Outstanding at December 31, 2009
    
    
    203,281
    
    
    
    4.05
   2009
    
    
    2008Risk-free interest rate
    
    
    3.49
    %
    
    
    3.27
    %Expected life
    
    7 years
    
    
    7 yearsExpected volatility
    
    
    66.2
    %
    
    
    53.2
    %Dividend yield
    
    
    0
    %
    
    
    0
    %
  50




---



##### Table of Contents



Weighted-averageexercise price
    
    
    Weighted-average
    
    
    AggregateShares
    
    
    per common share
    
    
    contractual life (years)
    
    
    intrinsic valueOutstanding at January 1, 2009
    
    
    728,500
    
    
    $
    5.67Granted
    
    
    12,000
    
    
    
    3.40Exercised
    
    
    
    
    
    
    Expired
    
    
    49,500
    
    
    
    5.37Cancelled
    
    
    
    
    
    
    Outstanding at December 31, 2009
    
    
    691,000
    
    
    
    5.65
    
    
    
    4.68
    
    
    $
    368,840Vested and exercisable at December 31, 2009
    
    
    591,000
    
    
    
    5.65
    
    
    
    4.32
    
    
    $
    338,360
   Weighted-averagegrant date fair valueShares
    
    
    per common shareNonvested at January 1, 2009
    
    
    169,800
    
    
    $
    2.50Granted
    
    
    12,000
    
    
    
    2.26Vested
    
    
    81,800
    
    
    
    2.52Expired
    
    
    
    
    
    
    Cancelled
    
    
    
    
    
    
    Nonvested at December 31, 2009
    
    
    100,000
    
    
    
    2.45
    Options Outstanding
    
    
    Options ExercisableNumber
    
    
    Weighted-average
    
    
    Weighted-average
    
    
    Number
    
    
    Weighted-averageoutstanding
    
    
    remaining
    
    
    exercise
    
    
    exercisable
    
    
    exerciseRange of Exercise Prices
    
    at 12/31/09
    
    
    contractual life (years)
    
    
    price
    
    
    at 12/31/09
    
    
    price3.40
    
    
    12,000
    
    
    
    9.57
    
    
    $
    3.40
    
    
    
    
    
    
    $
    4.063  4.82
    
    
    162,000
    
    
    
    2.68
    
    
    
    4.50
    
    
    
    162,000
    
    
    
    4.505.00  5.30
    
    
    140,000
    
    
    
    3.31
    
    
    
    5.18
    
    
    
    140,000
    
    
    
    5.186.00  6.40
    
    
    248,000
    
    
    
    6.40
    
    
    
    6.02
    
    
    
    160,000
    
    
    
    6.037.04  8.00
    
    
    129,000
    
    
    
    4.93
    
    
    
    7.11
    
    
    
    129,000
    
    
    
    7.11Total ($3.40  $8.00)
    
    
    691,000
    
    
    
    4.68
    
    
    
    5.65
    
    
    
    591,000
    
    
    
    5.65
  51




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##### Table of Contents



(11)
    
    STATUTORY RESTRICTIONS
   (12)
    
    STATUTORY SURPLUS AND NET INCOME
   Shareholders Equity/Surplus
    
    
    Net Income2009
    
    
    2008
    
    
    2009
    
    
    2008Statutory
    
    $
    45,188,206
    
    
    $
    45,167,551
    
    
    $
    5,300,961
    
    
    $
    3,115,387Reconciling items:Non-admitted assets
    
    
    341,297
    
    
    
    260,153
    
    
    
    
    
    
    
    Deferred policy acquisition costs
    
    
    3,723,961
    
    
    
    4,541,773
    
    
    
    (817,812
    )
    
    
    (1,418,563
    )Taxes
    
    
    (609,321
    )
    
    
    2,689,472
    
    
    
    211,871
    
    
    
    850,895Unrealized gains (losses) on investments
    
    
    685,833
    
    
    
    (7,273,854
    )
    
    
    
    
    
    
    Statutory unearned premium reserve adjustment
    
    
    1,232,056
    
    
    
    838,616
    
    
    
    393,440
    
    
    
    838,616GAAP
    
    $
    50,562,032
    
    
    $
    46,223,711
    
    
    $
    5,088,460
    
    
    $
    3,386,335
 (13)
    
    OTHER COMPREHENSIVE INCOME (LOSS)
  Year ended December 31, 2009Pre-tax
    
    
    Income tax
    
    
    Net-of-taxamount
    
    
    effect
    
    
    amountNet unrealized holding gains on securities:Unrealized holding gains arising during 2009
    
    $
    7,931,344
    
    
    $
    2,696,659
    
    
    $
    5,234,685Add back: reclassification adjustments for losses realized in net income
    
    
    2,207,094
    
    
    
    750,412
    
    
    
    1,456,682Net unrealized holding gains
    
    
    10,138,438
    
    
    
    3,447,071
    
    
    
    6,691,367Other comprehensive income
    
    $
    10,138,438
    
    
    $
    3,447,071
    
    
    $
    6,691,367
 Year ended December 31, 2008Pre-tax
    
    
    Income tax
    
    
    Net-of-taxamount
    
    
    effect
    
    
    amountNet unrealized holding losses on securities:Unrealized holding losses arising during 2008
    
    $
    (11,925,741
    )
    
    $
    (4,054,752
    )
    
    $
    (7,870,989
    )Add back: reclassification adjustments for losses realized in net income
    
    
    3,462,577
    
    
    
    1,177,276
    
    
    
    2,285,301Net unrealized holding losses
    
    
    (8,463,164
    )
    
    
    (2,877,476
    )
    
    
    (5,585,688
    )Other comprehensive loss
    
    $
    (8,463,164
    )
    
    $
    (2,877,476
    )
    
    $
    (5,585,688
    )
  52




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##### Table of Contents



(14)
    
    RESERVE FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES
  2009
    
    
    2008Balance at January 1
    
    $
    20,320
    
    
    $
    17,384Less reinsurance recoverable
    
    
    4,837
    
    
    
    3,842Net Balance at January 1
    
    
    15,483
    
    
    
    13,542Incurred related to:Current year
    
    
    24,244
    
    
    
    25,821Prior years
    
    
    (4,456
    )
    
    
    (1,366
    )Total incurred
    
    
    19,788
    
    
    
    24,455Paid related to:Current year
    
    
    17,301
    
    
    
    20,123Prior years
    
    
    4,548
    
    
    
    3,835Total paid
    
    
    21,849
    
    
    
    23,958Reserves transferred from funds held for account
of others
    
    
    
    
    
    
    1,444Net Balance at December 31
    
    
    13,422
    
    
    
    15,483Plus reinsurance recoverable
    
    
    6,821
    
    
    
    4,837Balance at December 31
    
    $
    20,243
    
    
    $
    20,320Reserve for unpaid losses and LAE
    
    $
    15,793
    
    
    $
    13,680Discontinued bond program reserve for unpaid losses and LAE
    
    
    4,450
    
    
    
    6,640Total reserve for unpaid
losses and LAE
    
    $
    20,243
    
    
    $
    20,320
   (15)
    
    REINSURANCE
      53




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##### Table of Contents



2009
    
    
    2008Premiums
    
    
    Premiums
    
    
    Premiums
    
    
    Premiumswritten
    
    
    earned
    
    
    written
    
    
    earnedDirect
    
    $
    68,032,253
    
    
    $
    64,662,823
    
    
    $
    65,958,352
    
    
    $
    64,328,556Assumed
    
    
    5,018,514
    
    
    
    4,695,769
    
    
    
    5,041,884
    
    
    
    5,292,338Ceded
    
    
    (31,608,265
    )
    
    
    (25,275,146
    )
    
    
    (30,557,301
    )
    
    
    (21,458,118
    )$
    41,442,502
    
    
    $
    44,083,446
    
    
    $
    40,442,935
    
    
    $
    48,162,776
  Discontinued Bond Program
     54




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##### Table of Contents



Automobile Service Contract Program
   55




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##### Table of Contents



(16)
    
    RELATED PARTIES
   Bancinsurance shares its executive offices and facilities with certain of its consolidated
subsidiaries. Certain expenses are allocated among Bancinsurance and those subsidiaries
pursuant to cost sharing agreements.
 See Note 4 for information concerning the undertaking agreements entered into by and between the
Company and certain executive officers in connection with the SEC investigation.
 (17)
    
    CONCENTRATIONS
  2009
    
    
    2008Product  Customer TypeGeneral Agent
    
    $
    6,785,802
    
    
    $
    7,146,767Lender Service Customer
    
    $
    6,509,507
    
    
    $
    6,515,349Managing General Agent
    
    $
    6,057,662
    
    
    $
    6,136,720Managing General Agent
    
    $
    3,627,673
    
    
    $
    5,080,020
  56




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##### Table of Contents



(18)
    
    FAIR VALUE MEASUREMENTS
  
    
    Level 1 Quoted prices for identical instruments in active markets.
    
    Level 2 Quoted prices for similar instruments in active markets; quoted prices for
identical or similar instruments in markets that are not active; and model-derived
valuations in which all significant inputs and significant value drivers are observable
in active markets.
    
    Level 3 Valuations derived from valuation techniques in which one or more
significant inputs or significant value drivers are unobservable.
 Fair Value Hierarchy
 December 31, 2009Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Available for sale investments:Fixed maturities
    
    $
    71,573,049
    
    
    $
    194,900
    
    
    $
    71,378,149
    
    
    $
    -Equity securities
    
    
    7,251,637
    
    
    
    7,251,637
    
    
    
    
    
    
    
    -Total
    
    $
    78,824,686
    
    
    $
    7,446,537
    
    
    $
    71,378,149
    
    
    $
    -
 December 31, 2008Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Available for sale investments:Fixed maturities
    
    $
    59,675,070
    
    
    $
    518,250
    
    
    $
    59,156,820
    
    
    $
    Equity securities
    
    
    6,541,864
    
    
    
    6,541,864
    
    
    
    
    
    
    
    Total
    
    $
    66,216,934
    
    
    $
    7,060,114
    
    
    $
    59,156,820
    
    
    $
    
  Valuation of Investments
    57




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##### Table of Contents



Available for Sale Equity Securities
 Available for Sale Fixed Maturity Securities
 Fair Value of Financial Instruments
 2009
    
    
    2008Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    Estimatedamount
    
    
    fair value
    
    
    amount
    
    
    fair valueAssets:Held to maturity fixed maturities
    
    $
    5,181,905
    
    
    $
    5,294,900
    
    
    $
    5,198,068
    
    
    $
    5,330,671Available for sale fixed maturities
    
    
    71,573,049
    
    
    
    71,573,049
    
    
    
    59,675,070
    
    
    
    59,675,070Available for sale equity securities
    
    
    7,251,637
    
    
    
    7,251,637
    
    
    
    6,541,864
    
    
    
    6,541,864Short-term investments
    
    
    342,002
    
    
    
    342,002
    
    
    
    5,939,254
    
    
    
    5,939,254Restricted short-term investments
    
    
    3,410,069
    
    
    
    3,410,069
    
    
    
    3,886,635
    
    
    
    3,886,635Cash
    
    
    9,551,372
    
    
    
    9,551,372
    
    
    
    5,499,847
    
    
    
    5,499,847Liabilities:Trust preferred debt issued to affiliates
    
    
    15,465,000
    
    
    
    15,465,000
    
    
    
    15,465,000
    
    
    
    15,465,000Bank line of credit
    
    
    3,000,000
    
    
    
    3,000,000
    
    
    
    2,500,000
    
    
    
    2,500,000
  
    
    Cash and short-term investments: The carrying amounts are reasonable estimates of
fair value.
    
    Fixed maturities and equity securities: See Valuation of Investments above, which
also applies to our held to maturity fixed maturities.
    
    Trust preferred debt issued to affiliates and bank line of credit: Fair value is
estimated using discounted cash flow calculations based on interest rates currently
being offered for similar obligations with maturities consistent with the obligation
being valued. As the interest rate adjusts regularly, the carrying amount is a
reasonable estimate of fair value.
 (19)
    
    QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
 Our results of operations have varied, and in the future may vary, from quarter to quarter,
principally because of fluctuations in our underwriting results, operating expenses and/or
realized gain (loss) activity. Consequently, quarterly results are not necessarily indicative
of full year results, nor are they necessarily comparable to the results of other quarters. The
following table sets forth certain unaudited quarterly consolidated financial and operating
data:
 2009First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterTotal revenues
    
    $
    8,557,556
    
    
    $
    12,538,711
    
    
    $
    12,514,277
    
    
    $
    12,490,272(Loss) income before federal income taxes
    
    
    (1,017,462
    )
    
    
    1,523,214
    
    
    
    2,460,460
    
    
    
    3,394,834Net (loss) income
    
    
    (971,521
    )
    
    
    1,445,461
    
    
    
    2,248,001
    
    
    
    2,346,789Net (loss) income per common share(1):Basic
    
    
    (.19
    )
    
    
    .28
    
    
    
    .43
    
    
    
    .45Diluted
    
    
    (.19
    )
    
    
    .28
    
    
    
    .43
    
    
    
    .45
  58




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##### Table of Contents



2008First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterTotal revenues
    
    $
    11,779,421
    
    
    $
    14,345,752
    
    
    $
    11,502,832
    
    
    $
    11,373,724(Loss) income before federal income taxes
    
    
    (636,728
    )
    
    
    1,516,041
    
    
    
    (324,773
    )
    
    
    (36,440
    )Net (loss) income
    
    
    (584,898
    )
    
    
    1,416,848
    
    
    
    (189,681
    )
    
    
    719,034Net (loss) income per common share(1):Basic
    
    
    (.12
    )
    
    
    .28
    
    
    
    (.04
    )
    
    
    .14Diluted
    
    
    (.12
    )
    
    
    .28
    
    
    
    (.04
    )
    
    
    .14
 (1)
    
    Year-to-date income per share amounts may not foot when adding the quarterly
income per share amounts due to rounding. (20)
    
    COMMITMENTS & CONTINGENCIES
   (21)
    
    SUPPLEMENTAL DISCLOSURE FOR NET INCOME PER SHARE
 2009
    
    
    2008Net income
    
    $
    5,068,730
    
    
    $
    1,361,303Income available to common shareholders,
assuming dilution
    
    $
    5,068,730
    
    
    $
    1,361,303Weighted-average common shares outstanding
    
    
    5,135,928
    
    
    
    5,033,423Dilutive effect of outstanding options
    
    
    2,082
    
    
    
    13,971Diluted common shares
    
    
    5,138,010
    
    
    
    5,047,394Basic net income per common share
    
    $
    0.99
    
    
    $
    0.27Diluted net income per common share
    
    $
    0.99
    
    
    $
    0.27
 (22)
    
    SEGMENT INFORMATION
  December 31, 2009Property/Casualty
    
    
    Insurance
    
    
    ReportableSegmentInsurance
    
    
    Agency
    
    
    TotalRevenues from external customers
    
    $
    42,207,219
    
    
    $
    
    
    
    $
    42,207,219Intersegment revenues
    
    
    
    
    
    
    1,774,782
    
    
    
    1,774,782Interest revenue
    
    
    3,860,827
    
    
    
    101
    
    
    
    3,860,928Interest expense
    
    
    
    
    
    
    
    
    
    
    Depreciation and amortization
    
    
    353,125
    
    
    
    
    
    
    
    353,125Segment profit
    
    
    6,419,156
    
    
    
    1,604,220
    
    
    
    8,023,376Federal income tax expense
    
    
    1,330,695
    
    
    
    545,435
    
    
    
    1,876,130Segment assets
    
    
    153,665,654
    
    
    
    298,432
    
    
    
    153,964,086
  59




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##### Table of Contents



December 31, 2008ReportableProperty/Casualty
    
    
    Insurance
    
    
    SegmentInsurance
    
    
    Agency
    
    
    TotalRevenues from external customers
    
    $
    45,143,413
    
    
    $
    
    
    
    $
    45, 143,413Intersegment revenues
    
    
    
    
    
    
    1,991,010
    
    
    
    1,991,010Interest revenue
    
    
    3,793,261
    
    
    
    1,167
    
    
    
    3,794,428Interest expense
    
    
    12
    
    
    
    
    
    
    
    12Depreciation and amortization
    
    
    482,257
    
    
    
    
    
    
    
    482,257Segment profit
    
    
    3,615,656
    
    
    
    1,991,689
    
    
    
    5,607,345Federal income tax expense
    
    
    229,278
    
    
    
    677,174
    
    
    
    906,452Segment assets
    
    
    139,884,442
    
    
    
    359,794
    
    
    
    140,244,236
  2009
    
    
    2008RevenuesTotal revenues for reportable segments
    
    $
    47,842,929
    
    
    $
    50,928,851Parent company revenues
    
    
    32,669
    
    
    
    63,888Elimination of intersegment revenues
    
    
    (1,774,782
    )
    
    
    (1,991,010
    )Total consolidated revenues
    
    $
    46,100,816
    
    
    $
    49,001,729ProfitTotal profit for reportable segments
    
    $
    8,023,376
    
    
    $
    5,607,345Parent company SEC investigation expenses
    
    
    (23,616
    )
    
    
    (3,289,462
    )Parent company other expenses, net of intersegment eliminations
    
    
    (1,638,714
    )
    
    
    (1,799,783
    )Total consolidated net income before federal income taxes
    
    $
    6,361,046
    
    
    $
    518,100AssetsTotal assets for reportable segments
    
    $
    153,964,086
    
    
    $
    140,244,236Parent company assets
    
    
    12,479,756
    
    
    
    6,865,641Elimination of intersegment receivables
    
    
    (5,663,944
    )
    
    
    (456,276
    )Total consolidated assets
    
    $
    160,779,898
    
    
    $
    146,653,601
 (23)
    
    DIVIDENDS
   60




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##### Table of Contents



ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A(T).
CONTROLS AND PROCEDURES
 DISCLOSURE CONTROLS AND PROCEDURES
    MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
 Internal
Control  Integrated Framework
  CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
  
 ITEM 9B.
OTHER INFORMATION
   61




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##### Table of Contents



PART III
 
 ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 DIRECTORS AND DIRECTOR NOMINEES OF THE COMPANY
  John S. Sokol
 Douglas G. Borror,
 Kenton R. Bowen
 Stephen P. Close
 Edward N. Cohn
  62




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##### Table of Contents



Daniel D. Harkins
 Matthew D. Walter
 EXECUTIVE OFFICERS OF THE COMPANY
  Matthew C. Nolan
 Daniel J. Stephan
 Stephen J. Toth
 Margaret A. Noreen
 CODE OF ETHICS
   63




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##### Table of Contents



SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
  AUDIT COMMITTEE
  
 ITEM 11.
EXECUTIVE COMPENSATION
 COMPENSATION OF DIRECTORS
  
    
    $10,000 annual retainer ($20,000 and $13,000 in the case of the Audit Committee Chairman
and the Compensation Committee Chairman, respectively);
    
    $750 for each Board or committee meeting that he attends in person (provided that a
non-employee director receives only $750 for attending multiple Board and committee
meetings held on the same date);
    
    $250 for each Board or committee meeting in which he participates telephonically
(provided that a non-employee director receives only $250 for participating telephonically
in multiple Board and committee meetings held on the same date); and
    
    stock options to purchase 2,000 of our common shares pursuant to the 2002 Stock Plan.
    64




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##### Table of Contents



2009 Director Compensation Table
  FeesEarnedor Paid
    
    
    Optionin Cash
    
    
    Awards(1)(2)
    
    
    TotalName
    
    ($)
    
    
    ($)
    
    
    ($)Douglas G. Borror
    
    
    16,500
    
    
    
    5,445
    
    
    
    21,945Kenton R. Bowen
    
    
    15,250
    
    
    
    5,445
    
    
    
    20,695Stephen P. Close
    
    
    17,750
    
    
    
    5,445
    
    
    
    23,195Edward N. Cohn
    
    
    16,000
    
    
    
    5,445
    
    
    
    21,445Daniel D. Harkins
    
    
    32,750
    
    
    
    5,445
    
    
    
    38,195Matthew D. Walter
    
    
    19,750
    
    
    
    5,445
    
    
    
    25,195
 
 (1)
    
    The amounts shown reflect the aggregate grant date fair value computed in accordance with
FASB ASC Topic 718 for awards granted during fiscal year 2009. Assumptions used in the
calculation of this amount are included in Note 10 to the Consolidated Financial Statements
included in Item 8 of this Annual Report on Form 10-K.(2)
    
    As of December 31, 2009, the non-employee directors held the following stock options to
purchase the Companys common shares: Douglas G. Borror: 8,000 options (6,000 exercisable and
2,000 unexercisable); Kenton R. Bowen: 10,000 options (8,000 exercisable and 2,000
unexercisable); Stephen P. Close: 8,000 options (6,000 exercisable and 2,000 unexercisable);
Edward N. Cohn: 6,000 options (4,000 exercisable and 2,000 unexercisable); Daniel D. Harkins:
14,000 options (12,000 exercisable and 2,000 unexercisable); and Matthew D. Walter: 14,000
options (12,000 exercisable and 2,000 unexercisable). COMPENSATION OF EXECUTIVE OFFICERS
 2009 Summary Compensation Table
  Non-EquityStock
    
    
    Option
    
    
    Incentive Plan
    
    
    All OtherName and Principal
    
    
    
    
    
    Salary
    
    
    Bonus
    
    
    Awards(1)
    
    
    Awards(1)
    
    
    Compensation(2)
    
    
    Compensation
    
    
    TotalPosition
    
    Year
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)John S. SokolChairman, Chief
Executive Officer
and President
    
    
    2009
    
    
    
    349,650
    
    
    
    
    
    
    
    206,615
    
    
    
    
    
    
    
    262,238
    
    
    
    105,828
    (3)
    
    
    924,3312008
    
    
    
    349,650
    
    
    
    
    
    
    
    177,455
    
    
    
    
    
    
    
    127,972
    
    
    
    121,149
    (3)
    
    
    776,226Matthew C. NolanVice President,
Chief Financial Officer,
Treasurer and Secretary
    
    
    2009
    
    
    
    210,000
    
    
    
    
    
    
    
    51,745
    
    
    
    
    
    
    
    65,625
    
    
    
    26,487
    (4)
    
    
    353,8572008
    
    
    
    210,000
    
    
    
    
    
    
    
    44,479
    
    
    
    
    
    
    
    32,025
    
    
    
    26,607
    (4)
    
    
    313,111Daniel J. StephanPresident of OIC
Lender Services, a
division of Ohio
Indemnity
    
    
    2009
    
    
    
    180,810
    
    
    
    
    
    
    
    100,055
    
    
    
    
    
    
    
    81,552
    
    
    
    24,383
    (5)
    
    
    386,8002008
    
    
    
    180,810
    
    
    
    
    
    
    
    71,307
    
    
    
    
    
    
    
    61,981
    
    
    
    25,037
    (5)
    
    
    339,135
 
 (1)
    
    The amounts shown reflect the aggregate grant date fair value computed in accordance with
FASB ASC Topic 718 for awards granted during such fiscal year. Assumptions used in the
calculation of these amounts are included in Note 10 to the Consolidated Financial Statements
included in Item 8 of this Annual Report on Form 10-K. See Equity Based Compensation below
for more information concerning equity based compensation awarded to the NEOs for 2009.(2)
    
    The amounts shown reflect cash bonuses earned by the NEOs under the Companys 2009 and 2008
Fiscal Year Executive  65




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##### Table of Contents



Officer Bonus Plans. See Annual Bonus below for more information
concerning cash bonuses awarded to the NEOs for
their performance in 2009.(3)
    
    Includes (a) $9,800 and $8,552 for the Companys matching contribution under its 401(k) Plan
for the 2009 and 2008 fiscal years, respectively, (b) $12,000 for a Company provided allowance
for life insurance premiums for the benefit of John S. Sokol for each of the 2009 and 2008
fiscal years, (c) $6,000 and $6,042 for the Companys reimbursement of estimated taxes
incurred by John S. Sokol in connection with the Companys provision of the life insurance
allowance for the 2009 and 2008 fiscal years, respectively, and (d) with respect to the 2009
and 2008 fiscal years, $19,989 and $30,016, respectively, for tax gross-up payments made by
the Company as reimbursement for estimated taxes incurred by John S. Sokol in connection with
the vesting of 9,531 restricted common shares on May 30, 2009 and 2008, respectively (see
footnote 6 below). Also includes the aggregate incremental cost to the Company for certain
other perquisites, none of which exceeded the greater of $25,000 or ten percent of the total
amount of perquisites. Does not include dues and expenses paid by the Company related to
membership in professional organizations of $37,972 and $29,420 for the 2009 and 2008 fiscal
years, respectively, as such expenses were business-related.(4)
    
    Includes $9,800 and $9,200 for the Companys matching contribution under its 401(k) Plan for
the 2009 and 2008 fiscal years, respectively. With respect to the 2009 and 2008 fiscal years,
includes $5,462 and $8,201, respectively, for tax gross-up payments made by the Company as
reimbursement for estimated taxes incurred by Matthew C. Nolan in connection with the vesting
of 2,604 restricted common shares on May 30, 2009 and 2008, respectively (see footnote 6
below). Also includes the aggregate incremental cost to the Company for certain perquisites,
none of which exceeded the greater of $25,000 or ten percent of the total amount of
perquisites.(5)
    
    Includes $9,800 and $8,988 for the Companys matching contribution under its 401(k) Plan for
the 2009 and 2008 fiscal years, respectively. With respect to the 2009 and 2008 fiscal years,
includes $5,369 and $8,062, respectively, for tax gross-up payments made by the Company as
reimbursement for estimated taxes incurred by Daniel J. Stephan in connection with the vesting
of restricted 2,560 common shares on May 30, 2009 and 2008, respectively (see footnote 6
below). Also includes the aggregate incremental cost to the Company for certain perquisites,
none of which exceeded the greater of $25,000 or ten percent of the total amount of
perquisites.(6)
    
    As previously reported, on May 30, 2007, the Compensation Committee granted 25,894, 7,813 and
7,681 restricted common shares to John S. Sokol, Matthew C. Nolan and Daniel J. Stephan,
respectively. The restricted common shares vest in equal annual installments on the first,
second and third anniversaries of the date of grant, subject to the NEOs continued employment
with the Company on the applicable anniversary date. The 2007 restricted stock awards did not
include additional shares to provide for the NEOs estimated tax withholdings. As a result,
in connection with the vesting of these awards during 2009 and 2008, the Compensation
Committee approved tax gross-up payments in cash to the NEOs to reimburse each NEO for the
estimated taxes incurred by him in connection with the vesting of the restricted common shares
on May 30, 2009 and May 30, 2008. See -Equity Based Compensation below for more information
concerning equity based compensation awarded to the NEOs. Annual Bonus
  Target Bonus as a %
    
    
    Company Goal/Individual GoalNamed Executive Officer
    
    of Base Salary
    
    
    WeightingJohn S. Sokol
    
    
    60
    %
    
    
    100%/0
    %Matthew C. Nolan
    
    
    25
    %
    
    
    100%/0
    %Daniel J. Stephan
    
    
    50
    %
    
    
    50%/50
    %
  66




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##### Table of Contents



Company Performance Goal Component
   
    
    if ROE for fiscal year 2009 was less than 5%, no bonus would be awarded for the Company goal component;
    
    if the Company achieved a ROE of 5% for fiscal year 2009, each NEO would be entitled to receive a
bonus equal to the product of (1) 50% of the amount of the NEOs target bonus and (2) the percentage
of his bonus allocated to the Company goal component;
    
    if the Company achieved a ROE of 10% for fiscal year 2009, each NEO would be entitled to receive a
bonus equal to the product of (1) 100% of the amount of the NEOs target bonus and (2) the percentage
of his bonus allocated to the Company goal component; and
    
    if the Company achieved a ROE of at least 15% for fiscal year 2009, each NEO would be entitled to
receive a bonus equal to the product of (1) 125% of the amount of his target bonus and (2) the
percentage of his bonus allocated to the Company goal component.
  Individual Performance Goal Component
    Equity Based Compensation
   67




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##### Table of Contents



Number of Restricted
    
    
    Grant Date FairNamed Executive Officer
    
    Common Shares
    
    
    Value of Stock AwardsJohn S. Sokol
    
    
    60,769
    
    
    $
    206,615Matthew C. Nolan
    
    
    15,219
    
    
    $
    51,745Daniel J. Stephan
    
    
    29,428
    
    
    $
    100,055
   Number of Restricted
    
    
    Grant Date FairNamed Executive Officer
    
    Common Shares
    
    
    Value of Stock AwardsJohn S. Sokol
    
    
    37,359
    
    
    $
    177,455Matthew C. Nolan
    
    
    9,364
    
    
    $
    44,479Daniel J. Stephan
    
    
    15,012
    
    
    $
    71,307
    Benefits and Perquisites
     68




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##### Table of Contents



Outstanding Equity Awards at 2009 Fiscal Year-End
  Option Awards
    
    
    Stock AwardsNumber of
    
    
    Number ofSecurities
    
    
    Securities
    
    
    
    
    
    
    
    
    
    
    Number ofUnderlying
    
    
    Underlying
    
    
    
    
    
    
    
    
    
    
    Shares or
    
    
    Market Value ofUnexercised
    
    
    Unexercised
    
    
    
    
    
    
    
    
    
    
    Units of Stock
    
    
    Shares or UnitsOptions
    
    
    Options
    
    
    Option
    
    
    Option
    
    
    That Have
    
    
    of Stock That(#)
    
    
    (#)
    
    
    Exercise Price
    
    
    Expiration
    
    
    Not Vested
    
    
    Have Not VestedName
    
    Exercisable
    
    
    Unexercisable(1)
    
    
    ($)
    
    
    Date
    
    
    (#)
    
    
    ($)(5)John S. Sokol
    
    
    100,000
    
    
    
    
    
    
    
    4.50
    
    
    
    7/25/2012100,000
    
    
    
    
    
    
    
    5.21
    
    
    
    6/1/2013100,000
    
    
    
    
    
    
    
    7.04
    
    
    
    12/20/201460,000
    
    
    
    40,000
    (a)
    
    
    6.00
    
    
    
    5/30/2016
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,532
    (2)
    
    
    56,620
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,906
    (3)
    
    
    147,942
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60,769
    (4)
    
    
    360,968Matthew C. Nolan
    
    
    8,000
    
    
    
    
    
    
    
    7.04
    
    
    
    12/20/201415,000
    
    
    
    10,000
    (b)
    
    
    6.00
    
    
    
    5/30/2016
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,605
    (2)
    
    
    15,474
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,243
    (3)
    
    
    37,083
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,219
    (4)
    
    
    90,401Daniel J. Stephan
    
    
    10,000
    
    
    
    
    
    
    
    4.06
    
    
    
    5/16/201010,000
    
    
    
    
    
    
    
    4.38
    
    
    
    5/16/20115,000
    
    
    
    
    
    
    
    4.65
    
    
    
    5/29/201110,000
    
    
    
    
    
    
    
    5.00
    
    
    
    5/16/20125,000
    
    
    
    
    
    
    
    4.50
    
    
    
    7/25/201210,000
    
    
    
    
    
    
    
    5.03
    
    
    
    5/16/20135,000
    
    
    
    
    
    
    
    5.21
    
    
    
    6/1/201310,000
    
    
    
    
    
    
    
    8.00
    
    
    
    5/16/201415,000
    
    
    
    10,000
    (c)
    
    
    6.00
    
    
    
    5/30/2016
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,561
    (2)
    
    
    15,212
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,008
    (3)
    
    
    59,448
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,428
    (4)
    
    
    174,802
 
 (1)
    
    The unexercisable stock options vest according to the following schedule: (a)
    
    20,000 common shares on each of 5/31/2010 and 5/31/2011;(b)
    
    5,000 common shares on each of 5/31/2010 and 5/31/2011;(c)
    
    5,000 common shares on each of 5/31/2010 and 5/31/2011. (2)
    
    Represents unvested restricted common shares granted on May 30, 2007 which fully vest on
May 30, 2010, subject to the applicable NEOs continued employment with the Company on the
applicable vesting date.(3)
    
    Represents unvested restricted common shares granted on July 31, 2008 which vest in one-half
increments on each of July 31, 2010 and 2011, subject to the applicable NEOs continued
employment with the Company on the applicable vesting date.(4)
    
    Represents unvested restricted common shares granted on July 27, 2009 which vest in one-third
increments on each of July 27, 2010, 2011 and 2012, subject to the applicable NEOs continued
employment with the Company on the applicable vesting date.(5)
    
    The market value of the restricted common shares which have not vested is based on the
closing price of the common shares on the OTC Bulletin Board on December 31, 2009 ($5.94).  69




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##### Table of Contents



Potential Payments Upon Termination of Employment or Change in Control
     70




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##### Table of Contents



ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
 EQUITY COMPENSATION PLAN INFORMATION
  (c)(a)
    
    
    (b)
    
    
    Number of securities remainingNumber of securities to
    
    
    Weighted-average
    
    
    available for future issuancebe issued upon exercise
    
    
    exercise price of
    
    
    under equity compensation plansof outstanding options,
    
    
    outstanding options,
    
    
    (excluding securities reflected inPlan category
    
    warrants and rights
    
    
    warrants and rights
    
    
    column (a))Equity compensation plans
approved by security holders
    
    
    691,000
    
    
    $
    5.65
    
    
    
    85,693
    (1)Equity compensation plans
not approved by security holders
    
    None
    
    
    None
    
    
    NoneTotal
    
    
    691,000
    
    
    $
    5.65
    
    
    
    85,693
    (1)
 (1)
    
    Reflects the number of common shares available for future grant under the 2002
Stock Plan as of December 31, 2009. The 2002 Stock Plan provides for the grant of
equity-based awards, including stock options and restricted stock, to key employees, officers
and directors of, and consultants and advisors to, the Company. PRINCIPAL SHAREHOLDERS
  Name
    
    Number of Common
    
    
    Percentof Beneficial
    
    Shares Beneficially
    
    
    ofOwner
    
    Owned(1)
    
    
    ClassBarbara K. Sokol
    
    
    2,381,168
    (2, 3)
    
    
    45.74
    %John S. Sokol
    
    
    2,486,360
    (2, 4, 5, 6)
    
    
    44.67
    %Douglas G. Borror
    
    
    11,000
    (5)
    
    
    (7)Kenton R. Bowen
    
    
    28,000
    (5)
    
    
    (7)Stephen P. Close
    
    
    6,000
    (5)
    
    
    (7)Edward N. Cohn
    
    
    6,000
    (5)
    
    
    (7)Daniel D. Harkins
    
    
    61,150
    (5)
    
    
    1.17
    %Matthew D. Walter
    
    
    37,000
    (5)
    
    
    (7)Matthew C. Nolan
    
    
    55,396
    (5, 6)
    
    
    1.06
    %Daniel J. Stephan
    
    
    130,211
    (5, 6)
    
    
    2.46
    %All directors and executive officers
as a group (12 persons)
    
    
    3,540,108
    
    
    
    61.45
    %
 
 (1)
    
    Except as otherwise noted, the beneficial owner has sole voting and dispositive power over
the common shares shown.(2)
    
    Falcon Equity Partners, L.P. (Falcon Equity Partners), an Ohio limited partnership whose
sole partners are members of the Si Sokol family and trusts for the benefit of members of the
Si Sokol family, owns of record 1,750,000 common shares. Barbara K. Sokol owns, directly and
indirectly as trustee of a trust of which she is the sole trustee and beneficiary, a
11.4% interest in  71




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##### Table of Contents



Falcon Equity Partners, John S. Sokol owns, directly and indirectly as trustee of trusts for
the benefit of members of the Si Sokol family, a 67.2% interest in Falcon Equity Partners and
James K. Sokol and Carla A. Sokol (together with John S. Sokol, the children of Si Sokol and
Barbara K. Sokol) each own directly a 10.7% interest in Falcon Equity Partners. As the sole
managing general partner, John S. Sokol has sole power to dispose or direct the disposition of
the common shares held of record by Falcon Equity Partners. As the general partners, John S.
Sokol and Barbara K. Sokol share the power to vote or direct the vote of the common shares
held of record by Falcon Equity Partners. James K. Sokol and Carla A. Sokol also own of record
or through a broker 31,050 and 66,261 common shares, respectively.(3)
    
    1,750,000 of these common shares are beneficially owned by Barbara K. Sokol as a general
partner of Falcon Equity Partners, as more fully described in note (2) above. 450,372 of
these common shares are owned of record or through a broker by Barbara K. Sokol individually.
180,796 of these common shares are held by the Family Trust of the Si Sokol Trust, of which
Barbara K. Sokol is the sole trustee and beneficiary and exercises all rights with respect to
such common shares.(4)
    
    1,750,000 of these common shares are beneficially owned by John S. Sokol as the sole managing
general partner and a general partner of Falcon Equity Partners, as more fully described in
note (2) above. 214,906 of these common shares are owned of record or through a broker by John
S. Sokol individually. 66,247 of these common shares are held by John S. Sokol as custodian
for his minor children.(5)
    
    Includes 360,000, 6,000, 8,000, 6,000, 4,000, 12,000, 12,000, 23,000 and 80,000 common shares
that underlie currently exercisable options or options exercisable within 60 days of February
2, 2010 held by John S. Sokol, Douglas G. Borror, Kenton R. Bowen, Stephen P. Close, Edward N.
Cohn, Daniel D. Harkins, Matthew D. Walter, Matthew C. Nolan and Daniel J. Stephan,
respectively.(6)
    
    Includes (a) 9,532, 2,605 and 2,561 restricted Common Shares held by John S. Sokol, Matthew
C. Nolan and Daniel J. Stephan, respectively, which fully vest on May 30, 2010, subject to
such executive officers continued employment with the Company on such vesting date; (b)
24,906, 6,243 and 10,008 restricted Common Shares held by John S. Sokol, Matthew C. Nolan and
Daniel J. Stephan, respectively, which vest in one-half increments on July 31, 2010 and 2011,
subject to such executive officers continued employment with the Company on the applicable
vesting date; and (c) 60,769, 15,219 and 29,428 restricted Common Shares held by John S.
Sokol, Matthew C. Nolan and Daniel J. Stephan, respectively, which vest in one-third
increments on July 27, 2010, 2011 and 2012, subject to such executive officers continued
employment with the Company on the applicable vesting date.(7)
    
    Represents ownership of less than 1% of the outstanding Common Shares.The address of each of Barbara K. Sokol and John S. Sokol is 250 East Broad Street, Seventh
Floor, Columbus, Ohio 43215. 
 ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 DIRECTOR INDEPENDENCE
  BOARD COMMITTEES
   72




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##### Table of Contents



TRANSACTIONS WITH RELATED PERSONS
 Undertaking Agreements
      2009
    
    
    2008John S. Sokol
    
    $
    (62,663
    )
    
    $
    284,718Matthew C. Nolan
    
    
    (28,905
    )
    
    
    203,128Stephen J. Toth
    
    
    (55,852
    )
    
    
    486,972Total Expenses
    
    $
    (147,420
    )
    
    $
    974,818
   73




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##### Table of Contents



Split-Dollar Agreement
  
 ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
 INDEPENDENT AUDITOR FEES
  2009
    
    
    2008Audit Fees(1)
    
    $
    144,000
    
    
    $
    206,000Audit-Related Fees
    
    
    
    
    
    
    Tax Fees
    
    
    
    
    
    
    All Other Fees(2)
    
    
    
    
    
    
    540,933Total Fees
    
    $
    144,000
    
    
    $
    746,933
 
 (1)
    
    Audit Fees consist of the aggregate fees for professional services rendered by the
independent auditor for the audit of the Companys annual consolidated financial statements
and review of the condensed consolidated financial statements included in the Companys
Quarterly Reports on Form 10-Q. For the 2009 fiscal year, the amount shown also includes
fees for Skodas audit of Ohio Indemnitys annual statutory financial statements. For the
2009 fiscal year, the amount shown does not include Daszkals billed fees of (1) $75,000 in
connection with their reviews of the Companys Form 10-Qs for the three quarterly periods
in 2009, (2) $43,202 in connection with their audit work related to the Companys internal
controls under Section 404 of the Sarbanes-Oxley Act prior to SECs extension of the
effective date for non-accelerated filers on October 2, 2009 and (3) $37,500 in connection
with their audit work related to the Companys 2009 annual consolidated financial
statements prior to their dismissal.(2)
    
    All Other Fees consist of the aggregate fees and expenses billed during the 2008 fiscal
year related to Daszkals responses to certain investigative subpoenas received from the
staff of the SEC in connection with the SEC investigation as more fully described above in
Regulation-SEC Investigation in Item 1 of this Annual Report on Form 10-K and Note 4 to
the Consolidated Financial Statements included in Item 8 of this Annual Report on Form
10-K. These fees and expenses were billed to the Company pursuant to the terms of the
engagement letter between the Company and Daszkal, and included $455,086 for Daszkals
outside counsel, $59,803 for Daszkal employees and $26,044 for former Daszkal employees. AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
     74




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##### Table of Contents



PART IV
 
 ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
  Page inthisReport(1) Financial StatementsThe following financial statements, which are included in Item 8 of Part II of this report:Report of Independent Registered Public Accounting Firm  Skoda Minotti
    
    
    29Report of Independent Registered Public Accounting Firm  Daszkal Bolton LLP
    
    
    30Consolidated Statements of Income for the years ended December 31, 2009 and 2008
    
    
    31Consolidated Balance Sheets as of December 31, 2009 and 2008
    
    
    32Consolidated Statements of Shareholders Equity for the years ended December 31, 2009 and 2008
    
    
    34Consolidated Statements of Cash Flows for the years ended December 31, 2009 and 2008
    
    
    35Notes to Consolidated Financial Statements
    
    
    36(2) Financial Statement SchedulesThe following financial statement schedules are included in this Item 15 of Part IV of this
report:Schedule I  Summary of investments  other than investments in related parties
    
    
    78Schedule II  Condensed financial information of Bancinsurance Corporation (Parent Company Only)
    
    
    79
  Exhibits
  3
    (a)
    
    Amended and Restated Articles of Incorporation of Bancinsurance Corporation
(reference is made to Exhibit 3(a) of Form 10-K for the fiscal year ended December 31,
1984 (file number 0-8738), which is incorporated herein by reference).3
    (b)
    
    Certificate of Amendment to the Amended and Restated Articles of
Incorporation of Bancinsurance Corporation dated March 10, 1993 (reference is made to
Exhibit 3(b) of Form 10-K for the fiscal year ended December 31, 2001 (file number
0-8738), which is incorporated herein by reference).3
    (c)
    
    Amended and Restated Articles of Incorporation of Bancinsurance Corporation
(reflecting amendments through March 10, 1993) (for SEC reporting purposes only)
(reference is made to Exhibit 3(c) of Form 10-K for the fiscal year ended December 31,
2001 (file number 0-8738), which is incorporated herein by reference).3
    (d)
    
    Amended and Restated Code of Regulations of Bancinsurance Corporation
(reference is made to Exhibit 3(b) of Form 10-K for the fiscal year ended December 31,
1984 (file number 0-8738), which is incorporated herein by reference).4
    (a)
    
    Indenture dated as of December 4, 2002 by and between Bancinsurance
Corporation and State Street Bank and Trust Company of Connecticut, National
Association (reference is made to Exhibit 4(g) of Form 10-K for the fiscal year ended
December 31, 2002 (file number 0-8738), which is incorporated herein by reference).4
    (b)
    
    Amended and Restated Declaration of Trust dated as of December 4, 2002 by and
among Bancinsurance Corporation, State Street Bank and Trust Company of Connecticut,
National Association, John Sokol, Si Sokol and Sally Cress (reference is made to
Exhibit 4(h) of Form 10-K for the fiscal year ended December 31, 2002 (file number
0-8738), which is incorporated herein by reference).
  75




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##### Table of Contents



4
    (c)
    
    Guarantee Agreement dated as of December 4, 2002 by and between Bancinsurance
Corporation and State Street Bank and Trust Company of Connecticut, National
Association (reference is made to Exhibit 4(i) of Form 10-K for the fiscal year ended
December 31, 2002 (file number 0-8738), which is incorporated herein by reference).4
    (d)
    
    Indenture dated as of September 30, 2003 by and between Bancinsurance
Corporation and JPMorgan Chase Bank (reference is made to Exhibit 4(b) of Form 10-Q
for the fiscal quarter ended September 30, 2003 (file number 0-8738), which is
incorporated herein by reference).4
    (e)
    
    Amended and Restated Declaration of Trust dated as of September 30, 2003 by
and among Bancinsurance Corporation, JPMorgan Chase Bank, Chase Manhattan Bank USA,
National Association, John Sokol, Si Sokol and Sally Cress (reference is made to
Exhibit 4(c) of Form 10-Q for the fiscal quarter ended September 30, 2003 (file number
0-8738), which is incorporated herein by reference).4
    (f)
    
    Guarantee Agreement dated as of September 30, 2003 by and between
Bancinsurance Corporation and JPMorgan Chase Bank (reference is made to Exhibit 4(d)
of Form 10-Q for the fiscal quarter ended September 30, 2003 (file number 0-8738),
which is incorporated herein by reference).4
    (g)
    
    Amended and Restated Credit Agreement effective as of June 15, 2006 by and
between Bancinsurance Corporation and Fifth Third Bank of Columbus, Ohio (reference is
made to Exhibit 4.1 of Current Report on Form 8-K filed June 16, 2006 (file number
0-8738), which is incorporated herein by reference).4
    (h)
    
    Eleventh Amendment and Restatement of Note effective as of June 15, 2006 by
and between Bancinsurance Corporation and Fifth Third Bank of Columbus, Ohio
(reference is made to Exhibit 4.2 of Form 8-K filed June 16, 2006 (file number
0-8738), which is incorporated herein by reference).4
    (i)
    
    First Addendum to Eleventh Amendment and Restatement of Note effective as of
September 27, 2007 by and between Bancinsurance Corporation and Fifth Third Bank
(reference is made to Exhibit 10.1 of Current Report on Form 10-Q filed November 13,
2007 (File No. 0-8738), which is incorporated herein by reference).10
    (a)
    
    Amended Tax Allocation Agreement by and between Bancinsurance Corporation
and Ohio Indemnity Company (reference is made to Exhibit 10(d) of Form 10-K for the
fiscal year ended December 31, 1983 (file number 0-8738), which is incorporated herein
by reference).10
    (b)#
    
    Bancinsurance Corporation 1994 Stock Option Plan (reference is made to Exhibit 10(f)
of Form 10-Q for the fiscal quarter ended June 30, 1994 (file number 0-8738), which is
incorporated herein by reference).10
    (c)#
    
    Bancinsurance Corporation 2002 Stock Incentive Plan Form of Stock Option Award
Agreement (reference is made to Exhibit 10.1 of Current Report on Form 8-K filed June
6, 2006 (file number 0-8738), which is incorporated herein by reference).10
    (d)#
    
    Bancinsurance Corporation 2002 Stock Incentive Plan Form of Restricted Stock Award
Agreement (reference is made to Exhibit 10.1 of Current Report on Form 8-K filed
June 4, 2007 (File No. 0-8738), which is incorporated herein by reference).10
    (e)#
    
    Form of Undertaking Agreement dated November 12, 2007 by and between Bancinsurance
Corporation and John S. Sokol, Matthew C. Nolan and Stephen J. Toth (reference is made
to Exhibit 10.2 of Current Report on Form 10-Q filed November 13, 2007 (File
No. 0-8738), which is incorporated herein by reference).10
    (f)#
    
    Split Dollar Insurance Agreement, dated June 20, 1994, between Bancinsurance
Corporation and Fifth Third Bank of Columbus, as Trustee of the Si and Barbara K.
Sokol Irrevocable Trust dated May 6, 1994 (reference is made to Exhibit 10(p) of Form
10-K for the fiscal year ended December 31, 2007 (file number 0-8738), which is
incorporated herein by reference).10
    (g)#
    
    Split Dollar Insurance Agreement Collateral Assignment, dated June 21, 1994, by and
between Bancinsurance Corporation and Fifth Third Bank of Columbus, Trustee of the Si
and Barbara K. Sokol Irrevocable Trust dated May 6, 1994 (reference is made to
Exhibit 10(q) of Form 10-K for the fiscal year ended December 31, 2007 (file number
0-8738), which is incorporated herein by reference).10
    (h)
    
    Commercial Lease Agreement between Ohio Indemnity Company and 250 East Broad
Street Properties, LLC, dated August 11, 2008 (reference is made to Exhibit 10.1 of
Current Report on Form 8-K filed on August 20, 2008 (file number 0-08738), which is
incorporated herein by reference).10
    (i)#
    
    Amended and Restated Bancinsurance Corporation 2002 Stock Incentive Plan effective
as of January 1, 2009 (reference is made to Exhibit 10.1 of Current Report on
Form 10-Q filed October 31, 2008 (file number 0-8738), which is incorporated herein by
reference).
  76




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##### Table of Contents



10
    (j)#
    
    First Amendment to Bancinsurance Corporation 1994 Stock Option Plan effective as of
January 1, 2009 (reference is made to Exhibit 10.2 of Current Report on Form 10-Q
filed October 31, 2008 (file number 0-8738), which is incorporated herein by
reference).10
    (k)#
    
    Summary of Bancinsurance Corporation 2008 Fiscal Year Executive Officer Bonus Plan
(reference is made to Exhibit 10.1 of Current Report on Form 8-K filed March 7, 2008
(file number 0-8738), which is incorporated herein by reference).10
    (l)#
    
    Bancinsurance Corporation 2009 Fiscal Year Executive Officer Bonus Plan (reference
is made to Exhibit 10.1 of Current Report on Form 8-K filed March 5, 2009 (file number
0-8738), which is incorporated herein by reference).21
    *
    
    Subsidiaries of the Registrant as of December 31, 2009.23
    (a)*
    
    Consent of Skoda Minotti.23
    (b)*
    
    Consent of Daszkal Bolton LLP.31.1
    *
    
    Certification of Principal Executive Officer Pursuant to Rule 13a-14 under
the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    *
    
    Certification of Principal Financial Officer Pursuant to Rule 13a-14 under
the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    *
    
    Certification of Principal Executive Officer and Principal Financial Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed with this Annual Report on Form 10-K.#
    
    Constitutes a management contract or compensatory plan or arrangement required to
be filed as an exhibit to this Annual Report on Form 10-K. (b)
ExhibitsSee Item 15(a)(3).(c)
Financial Statement SchedulesSee Item 15(a)(2).
  77




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##### Table of Contents



Column A
    
    Column B
    
    
    Column C
    
    
    Column DEstimated
    
    
    Amount at whichfair
    
    
    shown in theType of Investment
    
    Cost (1)
    
    
    value
    
    
    balance sheetHeld to maturity:Fixed maturities:Governments
    
    $
    2,321,243
    
    
    $
    2,326,863
    
    
    $
    2,321,243Political subdivisions
    
    
    1,510,730
    
    
    
    1,574,786
    
    
    
    1,510,730Special revenue and assessments
    
    
    1,349,932
    
    
    
    1,393,251
    
    
    
    1,349,932Total held to maturity
    
    
    5,181,905
    
    
    
    5,294,900
    
    
    
    5,181,905Available for sale:Fixed maturities:States, territories and
possessions
    
    
    4,068,391
    
    
    
    4,135,866
    
    
    
    4,135,866Special revenue and assessments
    
    
    65,834,928
    
    
    
    65,746,941
    
    
    
    65,746,941Taxable municipal bonds
    
    
    500,000
    
    
    
    479,795
    
    
    
    479,795Corporate debt securities
    
    
    460,851
    
    
    
    1,015,547
    
    
    
    1,015,547Redeemable preferred stocks
    
    
    148,850
    
    
    
    194,900
    
    
    
    194,900Total available for sale fixed
maturities
    
    
    71,013,020
    
    
    
    71,573,049
    
    
    
    71,573,049Equity securities:Non-redeemable preferred stocks:Banks, trusts and insurance
companies
    
    
    140,187
    
    
    
    221,260
    
    
    
    221,260Industrial and miscellaneous
    
    
    549,854
    
    
    
    652,800
    
    
    
    652,800Total non-redeemable preferred stocks
    
    
    690,041
    
    
    
    874,060
    
    
    
    874,060Common stocks:Banks, trusts and insurance
Companies
    
    
    300,997
    
    
    
    639,750
    
    
    
    639,750Industrial and miscellaneous
    
    
    1,359,120
    
    
    
    1,479,941
    
    
    
    1,479,941Investment in mutual funds
    
    
    3,424,049
    
    
    
    4,257,886
    
    
    
    4,257,886Total common stocks
    
    
    5,084,166
    
    
    
    6,377,577
    
    
    
    6,377,577Total available for sale equity securities
    
    
    5,774,207
    
    
    
    7,251,637
    
    
    
    7,251,637Short-term investments
    
    
    342,002
    
    
    
    342,002
    
    
    
    342,002Restricted short-term investments
    
    
    3,410,069
    
    
    
    3,410,069
    
    
    
    3,410,069Other invested assets
    
    
    715,000
    
    
    
    715,000
    
    
    
    715,000Total investments
    
    $
    86,436,203
    
    
    $
    88,586,657
    
    
    $
    88,473,662
 (1)
    
    Original cost of equity securities, adjusted for any write-downs, and, as to fixed maturities
and short-term investments, original cost reduced by repayments, write-downs and adjusted for
amortization of premiums or accrual of discounts.  78




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##### Table of Contents



December 31,2009
    
    
    2008AssetsCash
    
    $
    2,966,286
    
    
    $
    3,261,413Unaffiliated investments
    
    
    1,252,501
    
    
    
    715,000Investments in subsidiaries (at equity)
    
    
    50,593,380
    
    
    
    46,392,329Federal income tax recoverable
    
    
    392,178
    
    
    
    194,218Receivable from subsidiaries, net
    
    
    158,446
    
    
    
    67,691Dividend receivable from subsidiaries
    
    
    4,916,755
    
    
    
    Other assets
    
    
    2,793,590
    
    
    
    2,627,319Total assets
    
    
    63,073,136
    
    
    
    53,257,970Liabilities and Shareholders EquityBank line of credit
    
    
    3,000,000
    
    
    
    2,500,000Trust preferred debt issued to affiliates
    
    
    15,465,000
    
    
    
    15,465,000Other liabilities
    
    
    236,417
    
    
    
    632,589Shareholders equity
    
    
    44,371,719
    
    
    
    34,660,381Total liabilities and shareholders equity
    
    $
    63,073,136
    
    
    $
    53,257,970
  79




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##### Table of Contents



Years ended December 31,2009
    
    
    2008Other income
    
    $
    32,668
    
    
    $
    63,783Interest expense
    
    
    (815,419
    )
    
    
    (1,232,243
    )SEC investigation expenses
    
    
    (23,616
    )
    
    
    (3,289,462
    )Other expenses
    
    
    (855,962
    )
    
    
    (631,451
    )Loss before federal income taxes and equity in earnings of subsidiaries
    
    
    (1,662,329
    )
    
    
    (5,089,373
    )Federal income tax benefit
    
    
    583,814
    
    
    
    1,749,655Loss before equity in earnings of subsidiaries
    
    
    (1,078,515
    )
    
    
    (3,339,718
    )Equity in distributed and undistributed earnings of subsidiaries
    
    
    6,147,245
    
    
    
    4,701,021Net income
    
    $
    5,068,730
    
    
    $
    1,361,303
  80




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##### Table of Contents



Years ended December 31,2009
    
    
    2008Cash flows from operating activities:Net income
    
    $
    5,068,730
    
    
    $
    1,361,303Adjustments to reconcile net income to net cash provided by (used in)
operating activities:Equity in distributed and undistributed net earnings of subsidiaries
    
    
    (6,147,245
    )
    
    
    (4,701,021
    )Net realized gains from sale of property
    
    
    (4,635
    )
    
    
    Depreciation and amortization
    
    
    84,188
    
    
    
    106,396Deferred federal income tax benefit
    
    
    (202,795
    )
    
    
    (171,478
    )Equity-based compensation expense
    
    
    516,022
    
    
    
    395,054Change in assets and liabilities:Loans to affiliates
    
    
    (75,162
    )
    
    
    (56,371
    )Accounts receivable/payable from/to subsidiaries
    
    
    (90,755
    )
    
    
    45,208Other assets
    
    
    (138,626
    )
    
    
    294,447SEC investigation expense payable
    
    
    (401,503
    )
    
    
    (1,598,497
    )Other liabilities
    
    
    48,370
    
    
    
    (131,447
    )Net cash used in operating activities
    
    
    (1,343,411
    )
    
    
    (4,456,406
    )Cash flows from investing activities:Proceeds from collection of note receivable
    
    
    
    
    
    
    300,000Purchase of available for sale equity securities
    
    
    (500,000
    )
    
    
    Purchase of land, property and leasehold improvements
    
    
    (28,523
    )
    
    
    (76,040
    )Net cash (used in) provided by investing activities
    
    
    (528,523
    )
    
    
    223,960Cash flows from financing activities:Acquisition of treasury shares
    
    
    (16,395
    )
    
    
    Proceeds from bank line of credit
    
    
    3,000,000
    
    
    
    2,500,000Payments on bank line of credit
    
    
    (2,500,000
    )
    
    
    Dividends from subsidiaries
    
    
    3,696,055
    
    
    
    3,380,005Dividends to shareholders
    
    
    (2,602,853
    )
    
    
    Net cash provided by financing activities
    
    
    1,576,807
    
    
    
    5,880,005Net (decrease) increase in cash
    
    
    (295,127
    )
    
    
    1,647,559Cash at beginning of year
    
    
    3,261,413
    
    
    
    1,613,854Cash at end of year
    
    $
    2,966,286
    
    
    $
    3,261,413Supplemental disclosures of cash flow information:Cash paid (received) during the year for:Interest
    
    $
    825,711
    
    
    $
    1,246,866Federal income taxes
    
    $
    (381,019
    )
    
    $
    (1,578,177
    )
  81




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##### Table of Contents



Signatures
  Bancinsurance CorporationDated: March 1, 2010
    By:
    /s/  John S. SokolJohn S. SokolChairman, Chief Executive Officer
and President
(Principal Executive Officer)  Dated: March 1, 2010
    
    /s/  John S. Sokol

John S. Sokol 
Chairman, Chief Executive Officer
and President
(Principal Executive Officer)Dated: March 1, 2010
    
    /s/ Douglas G. Borror

Douglas G. Borror
    
    Dated: March 1, 2010
    
    /s/  Kenton R. Bowen

Kenton R. BowenDirector
    
    
    
    DirectorDated: March 1, 2010
    
    /s/ Stephen P. Close

Stephen P. Close
    
    Dated: March 1, 2010
    
    /s/  Daniel D. Harkins

Daniel D. HarkinsDirector
    
    
    
    DirectorDated: March 1, 2010
    
    /s/ Edward N. Cohn

Edward N. Cohn
    
    Dated: March 1, 2010
    
    /s/  Matthew D. Walter

Matthew D. WalterDirector
    
    
    
    DirectorDated: March 1, 2010
    
    /s/ Matthew C. Nolan

Matthew C. NolanVice President, Chief
Financial Officer, 
Treasurer and Secretary
(Principal Financial Officer 
and Principal Accounting
Officer)
  82




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##### Table of Contents



INDEX OF EXHIBITS
  Exhibit No.
    
    Description3
    (a)
    
    Amended and Restated Articles of Incorporation of Bancinsurance Corporation (reference
is made to Exhibit 3(a) of Form 10-K for the fiscal year ended December 31, 1984 (file
number 0-8738), which is incorporated herein by reference).3
    (b)
    
    Certificate of Amendment to the Amended and Restated Articles of Incorporation of
Bancinsurance Corporation dated March 10, 1993 (reference is made to Exhibit 3(b) of Form
10-K for the fiscal year ended December 31, 2001 (file number 0-8738), which is
incorporated herein by reference).3
    (c)
    
    Amended and Restated Articles of Incorporation of Bancinsurance Corporation (reflecting
amendments through March 10, 1993) (for SEC reporting purposes only) (reference is made to
Exhibit 3(c) of Form 10-K for the fiscal year ended December 31, 2001 (file number 0-8738),
which is incorporated herein by reference).3
    (d)
    
    Amended and Restated Code of Regulations of Bancinsurance Corporation (reference is
made to Exhibit 3(b) of Form 10-K for the fiscal year ended December 31, 1984 (file number
0-8738), which is incorporated herein by reference).4
    (a)
    
    Indenture dated as of December 4, 2002 by and between Bancinsurance Corporation and
State Street Bank and Trust Company of Connecticut, National Association (reference is made
to Exhibit 4(g) of Form 10-K for the fiscal year ended December 31, 2002 (file number
0-8738), which is incorporated herein by reference).4
    (b)
    
    Amended and Restated Declaration of Trust dated as of December 4, 2002 by and among
Bancinsurance Corporation, State Street Bank and Trust Company of Connecticut, National
Association, John Sokol, Si Sokol and Sally Cress (reference is made to Exhibit 4(h) of
Form 10-K for the fiscal year ended December 31, 2002 (file number 0-8738), which is
incorporated herein by reference).4
    (c)
    
    Guarantee Agreement dated as of December 4, 2002 by and between Bancinsurance
Corporation and State Street Bank and Trust Company of Connecticut, National Association
(reference is made to Exhibit 4(i) of Form 10-K for the fiscal year ended December 31, 2002
(file number 0-8738), which is incorporated herein by reference).4
    (d)
    
    Indenture dated as of September 30, 2003 by and between Bancinsurance Corporation and
JPMorgan Chase Bank (reference is made to Exhibit 4(b) of Form 10-Q for the fiscal quarter
ended September 30, 2003 (file number 0-8738), which is incorporated herein by reference).4
    (e)
    
    Amended and Restated Declaration of Trust dated as of September 30, 2003 by and among
Bancinsurance Corporation, JPMorgan Chase Bank, Chase Manhattan Bank USA, National
Association, John Sokol, Si Sokol and Sally Cress (reference is made to Exhibit 4(c) of
Form 10-Q for the fiscal quarter ended September 30, 2003 (file number 0-8738), which is
incorporated herein by reference).4
    (f)
    
    Guarantee Agreement dated as of September 30, 2003 by and between Bancinsurance
Corporation and JPMorgan Chase Bank (reference is made to Exhibit 4(d) of Form 10-Q for the
fiscal quarter ended September 30, 2003 (file number 0-8738), which is incorporated herein
by reference).4
    (g)
    
    Amended and Restated Credit Agreement effective as of June 15, 2006 by and between
Bancinsurance Corporation and Fifth Third Bank of Columbus, Ohio (reference is made to
Exhibit 4.1 of Current Report on Form 8-K filed June 16, 2006 (file number 0-8738), which
is incorporated herein by reference).4
    (h)
    
    Eleventh Amendment and Restatement of Note effective as of June 15, 2006 by and between
Bancinsurance Corporation and Fifth Third Bank of Columbus, Ohio (reference is made to
Exhibit 4.2 of Form 8-K filed June 16, 2006 (file number 0-8738), which is incorporated
herein by reference).4
    (i)
    
    First Addendum to Eleventh Amendment and Restatement of Note effective as of
September 27, 2007 by and between Bancinsurance Corporation and Fifth Third Bank (reference
is made to Exhibit 10.1 of Current Report on Form 10-Q filed November 13, 2007 (File
No. 0-8738), which is incorporated herein by reference).10
    (a)
    
    Amended Tax Allocation Agreement by and between Bancinsurance Corporation and Ohio
Indemnity Company (reference is made to Exhibit 10(d) of Form 10-K for the fiscal year
ended December 31, 1983 (file number 0-8738), which is incorporated herein by reference).10
    (b)#
    
    Bancinsurance Corporation 1994 Stock Option Plan (reference is made to Exhibit 10(f) of
Form 10-Q for the fiscal quarter ended June 30, 1994 (file number 0-8738), which is
incorporated herein by reference).10
    (c)#
    
    Bancinsurance Corporation 2002 Stock Incentive Plan Form of Stock Option Award Agreement
(reference is made to Exhibit 10.1 of Current Report on Form 8-K filed June 6, 2006 (file
number 0-8738), which is incorporated herein by reference).
  83




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##### Table of Contents



Exhibit No.
    
    Description10
    (d)#
    
    Bancinsurance Corporation 2002 Stock Incentive Plan Form of Restricted Stock Award
Agreement (reference is made to Exhibit 10.1 of Current Report on Form 8-K filed June 4,
2007 (File No. 0-8738), which is incorporated herein by reference).10
    (e)#
    
    Form of Undertaking Agreement dated November 12, 2007 by and between Bancinsurance
Corporation and John S. Sokol, Matthew C. Nolan and Stephen J. Toth (reference is made to
Exhibit 10.2 of Current Report on Form 10-Q filed November 13, 2007 (File No. 0-8738),
which is incorporated herein by reference).10
    (f)#
    
    Split Dollar Insurance Agreement, dated June 20, 1994, between Bancinsurance Corporation
and Fifth Third Bank of Columbus, as Trustee of the Si and Barbara K. Sokol Irrevocable
Trust dated May 6, 1994 (reference is made to Exhibit 10(p) of Form 10-K for the fiscal
year ended December 31, 2007 (file number 0-8738), which is incorporated herein by
reference).10
    (g)#
    
    Split Dollar Insurance Agreement Collateral Assignment, dated June 21, 1994, by and
between Bancinsurance Corporation and Fifth Third Bank of Columbus, Trustee of the Si and
Barbara K. Sokol Irrevocable Trust dated May 6, 1994 (reference is made to Exhibit 10(q) of
Form 10-K for the fiscal year ended December 31, 2007 (file number 0-8738), which is
incorporated herein by reference).10
    (h)
    
    Commercial Lease Agreement between Ohio Indemnity Company and 250 East Broad Street
Properties, LLC, dated August 11, 2008 (reference is made to Exhibit 10.1 of Current Report
on Form 8-K filed on August 20, 2008 (file number 0-08738), which is incorporated herein by
reference).10
    (i)#
    
    Amended and Restated Bancinsurance Corporation 2002 Stock Incentive Plan effective as of
January 1, 2009 (reference is made to Exhibit 10.1 of Current Report on Form 10-Q filed
October 31, 2008 (file number 0-8738), which is incorporated herein by reference).10
    (j)#
    
    First Amendment to Bancinsurance Corporation 1994 Stock Option Plan effective as of
January 1, 2009 (reference is made to Exhibit 10.2 of Current Report on Form 10-Q filed
October 31, 2008 (file number 0-8738), which is incorporated herein by reference).10
    (k)#
    
    Summary of Bancinsurance Corporation 2008 Fiscal Year Executive Officer Bonus Plan
(reference is made to Exhibit 10.1 of Current Report on Form 8-K filed March 7, 2008 (file
number 0-8738), which is incorporated herein by reference).10
    (l)#
    
    Bancinsurance Corporation 2009 Fiscal Year Executive Officer Bonus Plan (reference is
made to Exhibit 10.1 of Current Report on Form 8-K filed March 5, 2009 (file number
0-8738), which is incorporated herein by reference).21
    *
    
    Subsidiaries of the Registrant as of December 31, 2009.23
    (a)*
    
    Consent of Skoda Minotti.23
    (b)*
    
    Consent of Daszkal Bolton LLP.31.1
    *
    
    Certification of Principal Executive Officer Pursuant to Rule 13a-14 under the
Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.31.2
    *
    
    Certification of Principal Financial Officer Pursuant to Rule 13a-14 under the
Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.32.1
    *
    
    Certification of Principal Executive Officer and Principal Financial Officer Pursuant
to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 
 *
    
    Filed with this Annual Report on Form 10-K.#
    
    Constitutes a management contract or compensatory plan or arrangement required to
be filed as an exhibit to this Annual Report on Form 10-K.  84