| For the fiscal year endedDecember 31, 2009 | Commission file number0-5534 |
|--------------------------------------------|------------------------------|

| Indiana(State or other jurisdiction ofIncorporation or organization                  | 35-0160330(I.R.S. EmployerIdentification No.) |
|-------------------------------------------------------------------------------------------|-----------------------------------------------|
| 1099 North Meridian Street, Indianapolis, Indiana(Address of principal executive offices) | 46204(Zip Code)                               |

| Common Stock, No Par Value: | Class A (voting)    |   2,623,109 shares |
|-----------------------------|---------------------|------------------------------|
|                        | Class B (nonvoting) | 12,170,839 shares       |

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|   | - | Casualty insurance including motor vehicle liability, physical damage and other liability insurance. |
|--------|---|------------------------------------------------------------------------------------------------------|

|   | - | Workers' compensation insurance. |
|--------|---|----------------------------------|

|   | - | Specialized accident (medical and indemnity) insurance for independent contractors. |
|--------|---|-------------------------------------------------------------------------------------|

|   | - | Fidelity and surety bonds. |
|--------|---|----------------------------|

|   | - | Inland Marine consisting principally of cargo insurance. |
|--------|---|----------------------------------------------------------|

|   | - | “Captive” insurance company products, which are provided through BLI in Bermuda. |
|--------|---|----------------------------------------------------------------------------------------------|

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----

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| RECONCILIATION OF LIABILITY FOR LOSSES AND LOSS ADJUSTMENT                   |   |
|------------------------------------------------------------------------------|--------|
| EXPENSES (GAAP BASIS)                                                        |   |
|                                                                         |   |   |   |   |   |   |   |   |   |
|                                                                         |   | Year Ended December 31 |   |
|                                                                         |   | 2009 |   |   | 2008 |   |   | 2007 |   |
| NET OF REINSURANCE RECOVERABLE:                                              |   | (in thousands) |   |
|   Liability for losses and LAE at the                              |   |   |   |   |   |   |   |   |   |
|     Beginning of the year                                |   | $ | 231,633 |   |   | $ | 244,500 |   |   | $ | 249,495 |   |
|                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|   Provision for losses and LAE:                                    |   |   |   |   |   |   |   |   |   |   |   |   |
|       Claims occurring during the current year |   |   | 108,935 |   |   |   | 132,829 |   |   |   | 129,065 |   |
|       Claims occurring during prior years      |   |   | (9,584 | ) |   |   | (17,077 | ) |   |   | (21,284 | ) |
|                                                                         |   |   | 99,351 |   |   |   | 115,752 |   |   |   | 107,781 |   |
|   Payments of losses and LAE:                                      |   |   |   |   |   |   |   |   |   |   |   |   |
|       Claims occurring during the current year |   |   | 41,302 |   |   |   | 51,649 |   |   |   | 53,820 |   |
|       Claims occurring during prior years      |   |   | 84,777 |   |   |   | 76,970 |   |   |   | 58,956 |   |
|                                                                         |   |   | 126,079 |   |   |   | 128,619 |   |   |   | 112,776 |   |
|                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|   Other reserve adjustment                                         |   |   | (1,652 | ) |   |   | - |   |   |   | - |   |
|                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|   Liability for losses and LAE at end of year                      |   |   | 203,253 |   |   |   | 231,633 |   |   |   | 244,500 |   |
|                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Reinsurance recoverable on unpaid losses                                     |   |   |   |   |   |   |   |   |   |   |   |   |
|   at end of the year                                               |   |   | 155,778 |   |   |   | 157,925 |   |   |   | 134,116 |   |
|                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Liability for losses and LAE, gross of                                       |   |   |   |   |   |   |   |   |   |   |   |   |
|   reinsurance recoverable, at end of the year                      |   | $ | 359,031 |   |   | $ | 389,558 |   |   | $ | 378,616 |   |
|                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |

| Years in Which Losses Were Incurred |   | Reserve at December 31, 2008 |    |   | (Savings) Deficiency Recorded During 2009 |   |   | % (Savings) Deficiency |   |
|-------------------------------------|--------|------------------------------|---------|--------|-------------------------------------------|--------|--------|------------------------|--------|
| 2008                                |   | $                            | 81,180  |   |                                      | $      | (2,368 | )                      |   |   | (2.9 | %) |
| 2007                                |   |                         | 43,625  |   |                                      |   | 1,088  |                   |   |   | 2.5 | % |
| 2006                                |   |                         | 23,395  |   |                                      |   | (7,141 | )                      |   |   | (30.5 | %) |
| 2005                                |   |                         | 28,406  |   |                                      |   | (1,397 | )                      |   |   | (4.9 | %) |
| 2004                                |   |                         | 11,216  |   |                                      |   | (1,427 | )                      |   |   | (12.7 | %) |
| 2003 & prior                    |   |                         | 43,811  |   |                                      |   | 1,661  |                   |   |   | 3.8 | % |
|                                |   |                         |    |   |                                      |   |   |                   |   |   |   |   |
|                                |   | $                            | 231,633 |   |                                      | $      | (9,584 | )                      |   |   | (4.1 | %) |

----

|                                                                                                |   | 2003 & Prior |   |   | 2004   |   |   | 2005   |   |   | 2006   |   |   | 2007   |   |   | 2008   |   |
|-----------------------------------------------------------------------------------------------------|--------|------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                                |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Losses and allocated loss expenses developed on cases known to exist at December 31, 2008           |   | $                | 1,089  |   |   | $      | 331    |   |   | $      | (763   | )      |   | $      | (1,413 | )      |   | $      | (323 | ) |   | $ | 2,271 |   |
| Losses and allocated loss expenses reported on cases unknown at December 31, 2008 (IBNR)            |   |             | 212    |   |   |   | -      |   |   |   | 282    |   |   |   | 56     |   |   |   | 567 |   |   |   | 9,606 |   |
| Unallocated loss expenses paid                                                                      |   |             | 136    |   |   |   | 218    |   |   |   | 577    |   |   |   | 303    |   |   |   | 1,062 |   |   |   | 1,273 |   |
| Change in reserves for incurred but not reported losses and allocated and unallocated loss expenses |   |             | 373    |   |   |   | (1,591 | )      |   |   | (2,035 | )      |   |   | (4,498 | )      |   |   | 1,063 |   |   |   | (22,905 | ) |
| Net (savings) deficiency on losses from directly-produced business                                  |   |             | 1,810  |   |   |   | (1,042 | )      |   |   | (1,939 | )      |   |   | (5,552 | )      |   |   | 2,369 |   |   |   | (9,755 | ) |
| (Savings)deficiency reported under reinsurance assumption agreements and residual markets           |   |             | (149   | )      |   |   | (385   | )      |   |   | 542    |   |   |   | (1,589 | )      |   |   | (1,281 | ) |   |   | 7,387 |   |
|                                                                                                |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net savings                                                                                         |   | $                | 1,661  |   |   | $      | (1,427 | )      |   | $      | (1,397 | )      |   | $      | (7,141 | )      |   | $      | 1,088 |   |   | $ | (2,368 | ) |
|                                                                                                |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                         |   | 2009   |    |   | 2008   |   |    | 2007   |   |
|------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
|                         |   |   |    |   |   |   |    |   |   |
| Fleet Transportation         |   | $      | (12,877 | )      |   | $      | (15,057 | )      |   | $ | (16,456 | ) |
| Private Passenger Automobile |   |   | (1,373  | )      |   |   | (1,191  | )      |   |   | (290 | ) |
| Reinsurance                  |   |   | 3,942   |   |   |   | (205    | )      |   |   | (4,112 | ) |
| Involuntary residual markets |   |   | 584     |   |   |   | (31     | )      |   |   | (56 | ) |
| All other                    |   |   | 140     |   |   |   | (593    | )      |   |   | (370 | ) |
|                         |   | $      | (9,584  | )      |   | $      | (17,077 | )      |   | $ | (21,284 | ) |
|                         |   |   |    |   |   |   |    |   |   |   |   |   |

----

----

|  Liability reported on a SAP basis - net of reinsurance recoverable                                                                                                                                                         |   | $      | 207,993 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|
|                                                                                                                                                                                                                             |   |   |    |   |
|   Add differences:      Reinsurance recoverable on unpaid losses and LAE                                                                                                                 |   |   | 155,778 |   |
|       Additional reserve for residual market losses not        reported to the Company at the current year end                                             |   |   | 360     |   |
|                                                                                                                                                                                                                             |   |   |    |   |
|   Deduct differences:      Estimated salvage and subrogation recoveries recorded on        a cash basis for SAP and on an accrual basis for GAAP |   |   | (5,100  | )      |
|                                                                                                                                                                                                                             |   |   |    |   |
|   Liability reported on a GAAP basis                                                                                                                                                                                   |   | $      | 359,031 |   |

----

----

----

| ANALYSIS OF LOSS AND LOSS ADJUSTMENT EXPENSE DEVELOPMENT--GAAP BASIS |   |
|----------------------------------------------------------------------|--------|
| (Dollars in thousands)                                               |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Year Ended December 31                                               |   | 1999 |   |   | 2000 |   |   | 2001 |   |   | 2002 |   |   | 2003 |   |   | 2004 |   |   | 2005 |   |   | 2006 |   |   | 2007 |   |   | 2008 |   |   | 2009 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liability for Unpaid                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Losses and LAE, Net                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   of Reinsurance                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Recoverables                                             |   | $ | 130,345 |   |   | $ | 119,905 |   |   | $ | 137,406 |   |   | $ | 144,267 |   |   | $ | 162,424 |   |   | $ | 207,137 |   |   | $ | 242,130 |   |   | $ | 249,495 |   |   | $ | 244,500 |   |   | $ | 231,633 |   |   | $ | 203,253 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liability Reestimated                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   as of:                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     One Year Later                               |   |   | 122,238 |   |   |   | 119,018 |   |   |   | 127,398 |   |   |   | 130,681 |   |   |   | 147,468 |   |   |   | 193,445 |   |   |   | 225,183 |   |   |   | 228,211 |   |   |   | 227,423 |   |   |   | 222,049 |   |   |   |   |   |
|     Two Years Later                              |   |   | 124,540 |   |   |   | 112,558 |   |   |   | 118,055 |   |   |   | 125,731 |   |   |   | 142,771 |   |   |   | 180,455 |   |   |   | 209,774 |   |   |   | 207,818 |   |   |   | 216,730 |   |   |   |   |   |   |   |   |   |
|     Three Years Later                            |   |   | 119,379 |   |   |   | 103,251 |   |   |   | 118,712 |   |   |   | 124,693 |   |   |   | 137,502 |   |   |   | 171,332 |   |   |   | 200,955 |   |   |   | 199,503 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Four Years Later                             |   |   | 111,476 |   |   |   | 105,508 |   |   |   | 119,925 |   |   |   | 124,714 |   |   |   | 134,661 |   |   |   | 171,225 |   |   |   | 198,376 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Five Years Later                             |   |   | 113,720 |   |   |   | 106,757 |   |   |   | 120,757 |   |   |   | 124,507 |   |   |   | 135,418 |   |   |   | 171,005 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Six Years Later                              |   |   | 114,546 |   |   |   | 107,364 |   |   |   | 121,406 |   |   |   | 124,609 |   |   |   | 136,623 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Seven Years Later                            |   |   | 115,166 |   |   |   | 108,040 |   |   |   | 121,599 |   |   |   | 124,606 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Eight Years Later                            |   |   | 115,964 |   |   |   | 107,921 |   |   |   | 121,409 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Nine Years Later                             |   |   | 115,927 |   |   |   | 107,893 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Ten Years Later                              |   |   | 116,085 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cumulative Redundancy                                                |   | $ | 14,260 |   |   | $ | 12,012 |   |   | $ | 15,997 |   |   | $ | 19,661 |   |   | $ | 25,801 |   |   | $ | 36,132 |   |   | $ | 43,754 |   |   | $ | 49,992 |   |   | $ | 27,770 |   |   | $ | 9,584 |   |   |   |   |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cumulative Amount of                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Liability Paid Through:                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     One Year Later                               |   | $ | 30,239 |   |   | $ | 31,132 |   |   | $ | 30,249 |   |   | $ | 39,956 |   |   | $ | 38,234 |   |   | $ | 60,343 |   |   | $ | 59,581 |   |   | $ | 58,956 |   |   | $ | 76,970 |   |   | $ | 84,777 |   |   |   |   |   |
|     Two Years Later                              |   |   | 49,068 |   |   |   | 47,060 |   |   |   | 55,724 |   |   |   | 57,522 |   |   |   | 62,380 |   |   |   | 84,265 |   |   |   | 94,947 |   |   |   | 100,990 |   |   |   | 124,870 |   |   |   |   |   |   |   |   |   |
|     Three Years Later                            |   |   | 60,427 |   |   |   | 58,618 |   |   |   | 64,489 |   |   |   | 69,959 |   |   |   | 74,198 |   |   |   | 102,692 |   |   |   | 117,522 |   |   |   | 127,011 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Four Years Later                             |   |   | 69,374 |   |   |   | 64,574 |   |   |   | 71,038 |   |   |   | 76,408 |   |   |   | 82,479 |   |   |   | 116,198 |   |   |   | 136,652 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Five Years Later                             |   |   | 73,958 |   |   |   | 69,316 |   |   |   | 75,878 |   |   |   | 81,121 |   |   |   | 91,607 |   |   |   | 124,176 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Six Years Later                              |   |   | 78,150 |   |   |   | 72,751 |   |   |   | 79,668 |   |   |   | 85,064 |   |   |   | 96,009 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Seven Years Later                            |   |   | 81,337 |   |   |   | 76,126 |   |   |   | 83,405 |   |   |   | 88,239 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Eight Years Later                            |   |   | 84,666 |   |   |   | 79,408 |   |   |   | 86,465 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Nine Years Later                             |   |   | 87,896 |   |   |   | 82,431 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Ten Years Later                              |   |   | 90,878 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                               |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |
|------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
| Year Ended December 31             |   | 1999   |    |   | 2000   |   |    | 2001   |   |   | 2002    |   |   | 2003   |    |   | 2004   |   |    | 2005   |   |   | 2006    |   |   | 2007   |    |   | 2008   |   |    | 2009   |   |
|                               |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |
| Direct and Assumed:                |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |
|                               |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |
| Liability for Unpaid Losses        |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |
|   and Loss Adjustment    |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |
|   Expenses               |   | $      | 173,115 |   |   | $      | 182,124 |   |   | $      | 246,816 |   |   | $      | 277,309 |   |   | $      | 342,449 |   |   | $      | 440,172 |   |   | $      | 430,273 |   |   | $      | 409,412 |   |   | $ | 378,616 |   |   | $ | 389,558 |   |   | $ | 359,030 |   |
|                               |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liability Reestimated as of        |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   December 31, 2009      |   |   | 181,893 |   |   |   | 214,918 |   |   |   | 262,405 |   |   |   | 294,210 |   |   |   | 318,883 |   |   |   | 367,387 |   |   |   | 339,221 |   |   |   | 312,871 |   |   |   | 332,161 |   |   |   | 349,070 |   |   |   |   |   |
|                               |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cumulative (Deficiency) Redundancy |   |   | (8,778  | )      |   |   | (32,794 | )      |   |   | (15,589 | )      |   |   | (16,901 | )      |   |   | 23,566  |   |   |   | 72,785  |   |   |   | 91,052  |   |   |   | 96,541  |   |   |   | 46,455 |   |   |   | 40,488 |   |   |   |   |   |
|                               |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                               |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ceded:                             |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                               |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liability for Unpaid Losses        |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   and Loss Adjustment    |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Expenses               |   |   | 42,770  |   |   |   | 62,219  |   |   |   | 109,410 |   |   |   | 133,042 |   |   |   | 180,025 |   |   |   | 233,035 |   |   |   | 188,143 |   |   |   | 159,917 |   |   |   | 134,116 |   |   |   | 157,925 |   |   |   | 155,778 |   |
|                               |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liability Reestimated as of        |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   December 31, 2009      |   |   | 65,808  |   |   |   | 107,025 |   |   |   | 140,996 |   |   |   | 169,604 |   |   |   | 182,260 |   |   |   | 196,382 |   |   |   | 140,845 |   |   |   | 113,368 |   |   |   | 115,431 |   |   |   | 127,021 |   |   |   |   |   |
|                               |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cumulative (Deficiency) Redundancy |   |   | (23,038 | )      |   |   | (44,806 | )      |   |   | (31,586 | )      |   |   | (36,562 | )      |   |   | (2,235  | )      |   |   | 36,653  |   |   |   | 47,298  |   |   |   | 46,549  |   |   |   | 18,685 |   |   |   | 30,904 |   |   |   |   |   |
|                               |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                               |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net:                               |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                               |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liability for Unpaid Losses        |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   and Loss Adjustment    |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Expenses               |   |   | 130,345 |   |   |   | 119,905 |   |   |   | 137,406 |   |   |   | 144,267 |   |   |   | 162,424 |   |   |   | 207,137 |   |   |   | 242,130 |   |   |   | 249,495 |   |   |   | 244,500 |   |   |   | 231,633 |   |   |   | 203,253 |   |
|                               |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liability Reestimated as of        |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   December 31, 2009      |   |   | 116,085 |   |   |   | 107,893 |   |   |   | 121,409 |   |   |   | 124,606 |   |   |   | 136,623 |   |   |   | 171,005 |   |   |   | 198,376 |   |   |   | 199,503 |   |   |   | 216,730 |   |   |   | 222,049 |   |   |   |   |   |
|                               |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cumulative Redundancy              |   |   | 14,260  |   |   |   | 12,012  |   |   |   | 15,997  |   |   |   | 19,661  |   |   |   | 25,801  |   |   |   | 36,132  |   |   |   | 43,754  |   |   |   | 49,992  |   |   |   | 27,770 |   |   |   | 9,584 |   |   |   |   |   |

----

----

|                                                               |   | 2009   |   |   | 2008   |   |
|--------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|    Obligations of states and political subdivisions |   |   | 31.9   | %      |   |   | 51.0 | % |
|    Short-term and money markets                     |   |   | 15.1   |   |   |   | 11.2 |   |
|    Corporate securities                             |   |   | 12.4   |   |   |   | 12.4 |   |
|    U.S. government obligations                      |   |   | 9.5    |   |   |   | 4.2 |   |
|    Residential mortgage-backed securities           |   |   | 8.4    |   |   |   | 2.0 |   |
|    Foreign government obligations                   |   |   | 1.3    |   |   |   | 1.2 |   |
|    Government sponsored entities                    |   |   | 1.0    |   |   |   | 0.9 |   |
|    Commercial mortgage-backed securities            |   |   | 1.0    |   |   |   | 0.7 |   |
|       Total fixed maturities         |   |   | 80.6   |   |   |   | 83.6 |   |
|    Equity securities                                |   |   | 7.3    |   |   |   | 7.7 |   |
|    Limited partnerships (equity basis)              |   |   | 12.1   |   |   |   | 8.7 |   |
|                                                               |   |   | 100.0  | %      |   |   | 100.0 | % |

|                              |   | 2009   |   |   | 2008   |   |
|-----------------------------------|--------|--------|--------|--------|--------|--------|
| Less than one year                |   |   | 55.6   | %      |   |   | 45.3 | % |
| 1 to 5 years                      |   |   | 29.4   |   |   |   | 40.3 |   |
| 5 to 10 years                     |   |   | 3.4    |   |   |   | 7.8 |   |
| More than 10 years                |   |   | 11.6   |   |   |   | 6.6 |   |
|                              |   |   | 100.0  | %      |   |   | 100.0 | % |
|                              |   |   |   |   |   |   |   |   |
| Average life of portfolio (years) |   |   | 3.8    |   |   |   | 3.0 |   |

----

----

|                                                                           |   | 2009   |   |   | 2008   |   |
|--------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Before federal tax:                                                            |   |   |   |   |   |   |
|      Investment income                                |   |   | 3.3    | %      |   |   | 3.7 | % |
|      Investment income plus investment gains (losses) |   |   | 9.6    |   |   |   | (4.9 | ) |
|                                                                           |   |   |   |   |   |   |   |   |
| After federal tax:                                                             |   |   |   |   |   |   |   |   |
|      Investment income                                |   |   | 2.7    |   |   |   | 3.1 |   |
|      Investment income plus investment gains (losses) |   |   | 6.8    |   |   |   | (2.5 | ) |

----

|   | · | The Company operates in the Property and Casualty insurance industry where many of its competitors are larger with far greater resources. Further, this industry is heavily regulated.  Changes in laws and regulations governing the insurance industry could have a significant impact on the Company’s ability to generate income from its insurance company operations.  The Company’s principal subsidiaries are regulated and licensed in all 50 of the United States, the District of Columbia, all Canadian provinces and Bermuda.  The Company is obliged to comply with numerous complex and varied governmental regulations in order to maintain its authority to write insurance business.  Failure to maintain compliance could result in various governmental regulators preventing the Company from writing new business and therefore having a material impact on the Company.  Further, the ability for the Company’s insurance subsidiaries to adjust insurance rates is regulated for significant portions of the Company’s business and such rate adjustments can be delayed for substantial periods by regulators. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The Company has two classes of common stock with unequal voting rights.  The Company is effectively controlled by its principal stockholders and management, which limits other stockholders’ ability to influence operations.  The Company’s executive officers, directors and principal stockholders and their affiliates control nearly 70% of the outstanding shares of voting Class A common stock and 39% of the outstanding shares of non-voting Class B common stock.  These parties effectively control the Company; direct its affairs, exert significant influence in the |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   |   | election of directors and approval of significant corporate transactions.  The interests of these stockholders may conflict with those of other stockholders, limit marketability of the stock and this concentration of voting power has the potential to delay, defer or prevent a change in control. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The Company limits its risk of loss from policies of insurance issued by its Insurance Subsidiaries through the purchase of reinsurance coverage from other insurance companies.  Such reinsurance does not relieve the Company from its responsibility to policyholders should the reinsurers be unable to meet their obligations to the Company under the terms of the underlying reinsurance agreements. As a result, we are subject to credit risk relating to our ability to recover amounts due from reinsurers. While the company has not experienced any significant reinsurance losses for almost twenty five years, certain of our reinsurance carriers have experienced deteriorating financial conditions or have been downgraded by rating agencies. If we are not able to collect the amounts due to us from reinsurers, the resultant credit losses could materially adversely affect our results of operations, equity, business and insurer financial strength. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Operating in the Property and Casualty insurance industry, the Company is exposed to loss from policies of insurance issued to its policyholders.  A large portion of losses recorded by the Company are estimates of future loss payments to be made.  Such estimates of future loss payments may prove to be inadequate.  Reserves represent our best estimate at a given point in time. Insurance reserves are not an exact calculation of liability but instead are complex estimates derived by us, generally utilizing a variety of reserve estimation techniques from numerous assumptions and expectations about future events, many of which are highly uncertain, such as estimates of claims severity, frequency of claims, inflation, claims handling, case reserving policies and procedures, underwriting and pricing policies, changes in the legal and regulatory environment and the lag time between the occurrence of an insured event and the time of its ultimate settlement. Many of these uncertainties are not precisely quantifiable and require significant judgment on our part. As trends in underlying claims develop, particularly in so-called “long tail” or long duration coverages, we are sometimes required to revise our reserves. This results in a charge to our earnings in the amount of the adjusted reserves, recorded in the period the change in estimate is made. These charges can be substantial and can have a material effect, either positively or negatively, on our results of operations and equity. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | A significant portion of the risk underwritten by the insurance subsidiaries covers property losses resulting from catastrophic events on a worldwide basis.  The occurrence and valuation of loss events for this business is highly unpredictable and a single catastrophic event could result in a materially significant loss to the Company. Catastrophe losses are an inevitable part of our business. Various events can cause catastrophe losses, including hurricanes, windstorms, earthquakes, hail, explosions, severe winter weather, and fires, and their frequency and severity are inherently unpredictable. In addition, longer-term natural catastrophe trends may be changing and new types of catastrophe losses may be developing due to climate change, a phenomenon that has been associated with extreme weather events linked to rising temperatures, and includes effects on global weather patterns, greenhouse gases, sea, land and air temperatures, sea levels, rain, and snow. The extent of our losses from catastrophes is a function of both the total amount of our insured exposures in the affected areas and the severity of the events themselves. In addition, as in the case of catastrophic losses generally, it can take many months, or even years, for the ultimate cost to us to be finally determined. As our claim experience develops on a particular catastrophe, we may be required to adjust our reserves to reflect our revised estimates of the total cost of claims. While the eventual occurrence of catastrophic losses is expected, we are prohibited by U.S. generally accepted accounting principles from establishing reserves for the expected future occurrence of these losses (such as is done in the life insurance industry).  Accordingly, upon the occurrence of such a loss, it will likely have a material adverse impact on the Company’s results of operations in the quarter in which it occurs. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The Company derives a significant percentage of its direct premium volume from a single major customer, FedEx Ground and certain of its subsidiaries and related entities, and from insurance coverage provided to its independent contractors.  Loss of this major customer would severely reduce the Company’s revenue and earnings potential. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The Company, through its Insurance Subsidiaries, requires collateral from its insureds covering the insureds’ obligations for self-insured retentions or deductibles related to policies of insurance provided.  Should the Company, as surety, become responsible for such insured obligations, the collateral held may prove to be insufficient. In this regard, FedEx Ground and certain of its subsidiaries and related entities, utilizes significant self-insured retentions and deductibles under policies of insurance provided by the Company’s insurance subsidiaries. In the case of FedEx Ground, the Company has determined that the financial strength of the customer is sufficient to allow for holding only partial collateral at this time.  Should the Company become |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   |   | responsible for this customer’s self-insured retention and deductible obligations, the collateral held could be insufficient and the Company could sustain a significant operating loss. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Given the Company’s significant interest-bearing investment portfolio, a drop in interest rates would likely have an adverse impact on the Company’s earnings and financial position.  Conversely, an increase in interest rates could have a significant temporary impact on the market value of the Company’s fixed maturity investment portfolio. The functioning of the fixed income markets, the values of the investments the Company holds and the Company’s ability to liquidate them may be adversely affected if those markets are disrupted by a change in interest rates or otherwise affected by significant negative factors, including, without limitation: local, national, or international events, such as regulatory changes, wars, or terrorist attacks; a recession, depression, or other adverse developments in either the U.S. or other economies that adversely affects the value of securities held in the Company’s portfolio; financial weakness or failure of one or more financial institutions that play a prominent role in securities markets or act as a counterparty for various financial instruments, which could further disrupt the markets; inactive markets for specific kinds of securities, or for the securities of certain issuers or in certain sectors, which could result in decreased valuations and impact the Company’s ability to sell a specific security or a group of securities at a reasonable price when desired; a significant change in inflation expectations, or the onset of deflation or stagflation.  If the fixed-income were to suffer a decrease in value to a substantial degree, the Company’s liquidity, financial position, and financial results could be materially adversely affected. Under these circumstances, the Company’s income from these investments could be materially reduced, and declines in the value of certain securities could further reduce the Company’s results of operations, equity, business and insurer financial strength. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The Company has a large portfolio of equity securities and limited partnership investments which can fluctuate in value with a wide variety of market conditions. A decline in the aggregate value of the equity securities and limited partnership investments would be expected to result in a commensurate decline both in the value of the Company’s equity securities and limited partnership investments and in the Company’s shareholders equity. The resultant decline could materially adversely affect the Company’s results of operations, equity, business and insurer financial strength. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|           |   |    |   |   |    |   |   |      |   |   |   |   |   | Cash     |   |
|----------------|--------|---------|--------|--------|---------|--------|--------|-----------|--------|--------|--------|--------|--------|----------|--------|
|           |   | Class A |   |   | Class B |   |   | Dividends |   |
|           |   | High    |   |   | Low     |   |   | High      |   |   | Low    |   |   | Declared |   |
| 2009:          |   |    |   |   |    |   |   |      |   |   |   |   |   |     |   |
| Fourth Quarter |   | $       | 24.38  |   |    | $      | 21.10  |      |   | $      | 24.98  |   |   | $        | 21.38  |   |   | $ | .25 |   |
| Third Quarter  |   |    | 22.70  |   |    |   | 17.32  |      |   |   | 24.39  |   |   |     | 19.19  |   |   |   | .25 |   |
| Second Quarter |   |    | 20.69  |   |    |   | 17.25  |      |   |   | 21.52  |   |   |     | 17.76  |   |   |   | .25 |   |
| First Quarter  |   |    | 18.00  |   |    |   | 15.40  |      |   |   | 20.76  |   |   |     | 14.28  |   |   |   | .25 |   |
|           |   |    |   |   |    |   |   |      |   |   |   |   |   |     |   |   |   |   |   |   |
| 2008:          |   |    |   |   |    |   |   |      |   |   |   |   |   |     |   |   |   |   |   |   |
| Fourth Quarter |   |    | 23.00  |   |    |   | 13.50  |      |   |   | 25.75  |   |   |     | 14.01  |   |   |   | .25 |   |
| Third Quarter  |   |    | 23.74  |   |    |   | 17.97  |      |   |   | 27.90  |   |   |     | 17.01  |   |   |   | .25 |   |
| Second Quarter |   |    | 23.22  |   |    |   | 20.19  |      |   |   | 25.99  |   |   |     | 17.36  |   |   |   | .25 |   |
| First Quarter  |   |    | 26.40  |   |    |   | 22.60  |      |   |   | 27.95  |   |   |     | 23.51  |   |   |   | .25 |   |

----

|                      |   |     |   |   | Period Ending |   |   |     |   |
|---------------------------|--------|----------|--------|--------|---------------|--------|--------|----------|--------|
| Index                     |   | 12/31/04 |   |   | 12/31/05      |   |   | 12/31/06 |   |   | 12/31/07 |   |   | 12/31/08 |   |   | 12/31/09 |   |
| Baldwin & Lyons, Inc. |   |     | 100.00 |   |          |   | 94.08  |     |   |   | 109.27 |   |   |   | 124.76 |   |   |   | 86.68 |   |   |   | 123.43 |   |
| NASDAQ Insurance Index    |   |     | 100.00 |   |          |   | 109.25 |     |   |   | 122.49 |   |   |   | 121.52 |   |   |   | 107.34 |   |   |   | 107.94 |   |
| Russell 2000              |   |     | 100.00 |   |          |   | 104.55 |     |   |   | 123.76 |   |   |   | 121.82 |   |   |   | 80.66 |   |   |   | 102.58 |   |

----

|                                       |   | Year Ended December 31                        |    |
|--------------------------------------------|--------|-----------------------------------------------|---------|
|                                       |   | 2009                                          |    |   | 2008 |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |
|                                       |   | (Dollars in thousands, except per share data) |    |
|                                       |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Direct and assumed premiums written        |   | $                                             | 250,159 |   |   | $ | 221,942 |   |   | $ | 207,367 |   |   | $ | 197,064 |   |   | $ | 222,445 |   |
|                                       |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net premiums earned                        |   |                                          | 181,300 |   |   |   | 182,299 |   |   |   | 179,065 |   |   |   | 169,766 |   |   |   | 186,165 |   |
|                                       |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net investment income                      |   |                                          | 13,971  |   |   |   | 17,063 |   |   |   | 19,595 |   |   |   | 19,548 |   |   |   | 14,840 |   |
|                                       |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net gains (losses) on investments          |   |                                          | 30,816  |   |   |   | (47,750 | ) |   |   | 40,096 |   |   |   | 17,064 |   |   |   | 22,981 |   |
|                                       |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Losses and loss expenses incurred          |   |                                          | 99,351  |   |   |   | 115,752 |   |   |   | 107,781 |   |   |   | 112,604 |   |   |   | 140,622 | 5 |
|                                       |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                          |   |                                          | 44,802  |   |   |   | (7,713 | ) |   |   | 55,131 |   |   |   | 38,185 |   |   |   | 34,223 |   |
|                                       |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings per share -- net income (loss) 1  |   |                                          | 3.04    |   |   |   | (.51 | ) |   |   | 3.63 |   |   |   | 2.54 |   |   |   | 2.30 |   |
|                                       |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash dividends per share 2                 |   |                                          | 1.00    |   |   |   | 1.00 |   |   |   | 1.65 |   |   |   | 2.55 |   |   |   | .95 |   |
|                                       |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment portfolio 3                     |   |                                          | 622,085 |   |   |   | 545,491 |   |   |   | 650,538 |   |   |   | 626,753 |   |   |   | 622,920 |   |
|                                       |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                               |   |                                          | 851,315 |   |   |   | 777,743 |   |   |   | 842,833 |   |   |   | 853,719 |   |   |   | 862,081 |   |
|                                       |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shareholders' equity                       |   |                                          | 372,943 |   |   |   | 330,067 |   |   |   | 380,718 |   |   |   | 357,627 |   |   |   | 346,685 |   |
|                                       |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of treasury shares purchased          |   |                                          | 880     |   |   |   | 8,908 |   |   |   | - |   |   |   | 401 |   |   |   | - |   |
|                                       |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Book value per share 1                     |   |                                          | 25.31   |   |   |   | 22.32 |   |   |   | 24.98 |   |   |   | 23.60 |   |   |   | 23.31 |   |
|                                       |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Underwriting ratios 4                      |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                       |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Losses and loss expenses |   |                                          | 54.8    | % |   |   | 63.5 | % |   |   | 60.2 | % |   |   | 66.3 | % |   |   | 75.5 | % |
|                                       |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Underwriting expenses    |   |                                          | 35.8    | % |   |   | 30.9 | % |   |   | 30.9 | % |   |   | 26.6 | % |   |   | 22.0 | % |
|                                       |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Combined                 |   |                                          | 90.6    | % |   |   | 94.4 | % |   |   | 91.1 | % |   |   | 92.9 | % |   |   | 97.5 | % |

|   | 2 Includes extra dividends of $0, $0, $.65, $1.70 and $.55 for 2009, 2008, 2007, 2006 and 2005, respectively. |
|--------|---------------------------------------------------------------------------------------------------------------|

|   | 3 Includes money market instruments classified with cash in the Consolidated Balance Sheets. |
|--------|---------------------------------------------------------------------------------------------------|

|   | 4 Data is for all coverages combined, does not include fee income and is presented based upon U.S. generally accepted accounting principles. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                         |   | 2009   |   |   | 2008   |   |
|------------------------------|--------|--------|--------|--------|--------|--------|
| Fleet Transportation         |   |   | 56.0   | %      |   |   | 63.6 | % |
| Private Passenger Automobile |   |   | 70.6   |   |   |   | 64.5 |   |
| Reinsurance                  |   |   | 40.9   |   |   |   | 63.7 |   |
| All lines                    |   |   | 54.8   |   |   |   | 63.5 |   |

----

----

|                         |   | 2008   |   |   | 2007   |   |
|------------------------------|--------|--------|--------|--------|--------|--------|
| Fleet Transportation         |   |   | 63.6   | %      |   |   | 58.4 | % |
| Private Passenger Automobile |   |   | 64.5   |   |   |   | 67.7 |   |
| Reinsurance                  |   |   | 63.7   |   |   |   | 60.8 |   |
| All lines                    |   |   | 63.5   |   |   |   | 60.2 |   |

----

----

----

|                                                          |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|---------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Premium ceded (reduction to premium earned)                   |   | $      | 60,818 |   |   | $      | 46,514 |   |   | $ | 40,094 |   |
| Losses ceded (reduction to losses incurred)                   |   |   | 22,025 |   |   |   | 53,398 |   |   |   | 4,981 |   |
| Commissions from reinsurers (reduction to operating expenses) |   |   | 5,352  |   |   |   | 3,084  |   |   |   | 2,044 |   |

----

|                         |   | Direct and Assumed |    |   | Net    |   |
|------------------------------|--------|--------------------|---------|--------|--------|--------|
| Line of Business             |   | 2009               |    |   | 2008   |   |   | 2009 |   |   | 2008 |   |
|                         |   |               |    |   |   |   |   |   |   |   |   |   |
| Fleet Transportation         |   | $                  | 297,781 |   |   | $      | 325,765 |   |   | $ | 147,854 |   |   | $ | 173,320 |   |
| Reinsurance                  |   |               | 34,814  |   |   |   | 37,489 |   |   |   | 34,814 |   |   |   | 37,489 |   |
| Private Passenger Automobile |   |               | 10,293  |   |   |   | 9,802 |   |   |   | 9,802 |   |   |   | 9,802 |   |
| All other                    |   |               | 16,143  |   |   |   | 16,502 |   |   |   | 10,783 |   |   |   | 11,022 |   |
|                         |   | $                  | 359,031 |   |   | $      | 389,558 |   |   | $ | 203,253 |   |   | $ | 231,633 |   |
|                         |   |               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

----

|   | · | Consistency in the individual case reserving processes |
|--------|--------|--------------------------------------------------------|

|   | · | The selection of loss development factors in the establishment of bulk reserves for incurred but reported losses and loss expenses |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Projected future loss trend |
|--------|--------|-----------------------------|

|   | · | Expected loss ratios for the current book of business, particularly the Company’s large fleet excess product, where the number of accounts insured, selected self-insured retentions, policy limits and reinsurance structure may vary widely period to period |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                      |   | 2009   |   |   | 2008   |   |
|---------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|       Total deferred tax liabilities        |   | $      | 27,249 |   |   | $      | 13,155 |   |
|       Total deferred tax assets             |   |   | 22,205 |   |   |   | 23,745 |   |
|       Net deferred tax assets (liabilities) |   | $      | (5,044 | )      |   | $      | 10,590 |   |

----

----

|                                                                             |   |   |    |   |  Increase (Decrease) |   |
|----------------------------------------------------------------------------------|--------|--------|---------|--------|---------------------------|--------|
|                                                                             |   | Fair   |    |   | Interest                  |   |   | Equity |   |
|                                                                             |   | Value  |    |   | Rate Risk                 |   |   | Risk |   |
| 2009:                                                                            |   |   |    |   |                      |   |   |   |   |
|    U.S. government obligations                                    |   | $      | 54,632  |   |                      | $      | (929 | ) |   | $ | - |   |
|    Government sponsored entities                                  |   |   | 5,883   |   |                      |   | (113 | ) |   |   | - |   |
|    Residential mortgage-backed securities                         |   |   | 48,377  |   |                      |   | (1,135 | ) |   |   |   |   |
|    Commercial mortgage-backed securities                          |   |   | 5,652   |   |                      |   | (133 | ) |   |   | - |   |
|    Obligations of states and                                      |   |   |    |   |                      |   |   |   |   |   |   |   |
|        political subdivisions                 |   |   | 185,469 |   |                      |   | (2,848 | ) |   |   | - |   |
|    Corporate securities                                           |   |   | 72,185  |   |                      |   | (1,804 | ) |   |   | - |   |
|    Foreign government obligations                                 |   |   | 7,724   |   |                      |   | (131 | ) |   |   | - |   |
|       Total fixed maturities                       |   |   | 379,922 |   |                      |   | (7,093 | ) |   |   | - |   |
|    Equity securities                                              |   |   | 85,886  |   |                      |   | - |   |   |   | (8,590 | ) |
|    Limited partnerships                                           |   |   | 69,436  |   |                      |   | - |   |   |   | (9,040 | ) |
|    Short-term                                                     |   |   | 3,703   |   |                      |   | - |   |   |   | - |   |
|       Total available-for-sale securities          |   | $      | 538,947 |   |                      | $      | (7,093 | ) |   | $ | (17,630 | ) |
|                                                                             |   |   |    |   |                      |   |   |   |   |   |   |   |
| 2008:                                                                            |   |   |    |   |                      |   |   |   |   |   |   |   |
|    U.S. government obligations                                    |   | $      | 21,888  |   |                      | $      | (557 | ) |   | $ | - |   |
|    Government sponsored entities                                  |   |   | 4,672   |   |                      |   | (130 | ) |   |   | - |   |
|    Residential mortgage-backed securities                         |   |   | 10,248  |   |                      |   | (327 | ) |   |   | - |   |
|    Commercial mortgage-backed securities                          |   |   | 3,242   |   |                      |   | (104 | ) |   |   | - |   |
|    Obligations of states and                                      |   |   |    |   |                      |   |   |   |   |   |   |   |
|        political subdivisions                 |   |   | 267,152 |   |                      |   | (6,384 | ) |   |   | - |   |
|    Corporate securities                                           |   |   | 66,084  |   |                      |   | (1,953 | ) |   |   | - |   |
|    Foreign government obligations                                 |   |   | 5,975   |   |                      |   | (152 | ) |   |   | - |   |
|       Total fixed maturities                       |   |   | 379,261 |   |                      |   | (9,607 | ) |   |   | - |   |
|    Equity securities                                              |   |   | 63,200  |   |                      |   | - |   |   |   | (6,321 | ) |
|    Limited partnerships                                           |   |   | 44,883  |   |                      |   | - |   |   |   | (5,879 | ) |
|    Short-term                                                     |   |   | 33,820  |   |                      |   | - |   |   |   | - |   |
|       Total fixed maturities and other investments |   | $      | 521,164 |   |                      | $      | (9,607 | ) |   | $ | (12,200 | ) |

----

|                                                                             |   |   |    |   |  Increase (Decrease) |   |
|----------------------------------------------------------------------------------|--------|--------|---------|--------|---------------------------|--------|
|                                                                             |   | Fair   |    |   | Interest                  |   |   | Equity |   |
|                                                                             |   | Value  |    |   | Rate Risk                 |   |   | Risk |   |
| 2009:                                                                            |   |   |    |   |                      |   |   |   |   |
|    U.S. government obligations                                    |   | $      | 54,632  |   |                      | $      | (1,384 | ) |   | $ | - |   |
|    Government sponsored entities                                  |   |   | 5,883   |   |                      |   | (168 | ) |   |   | - |   |
|    Residential mortgage-backed securities                         |   |   | 48,377  |   |                      |   | (1,680 | ) |   |   | - |   |
|    Commercial mortgage-backed securities                          |   |   | 5,652   |   |                      |   | (196 | ) |   |   | - |   |
|    Obligations of states and                                      |   |   |    |   |                      |   |   |   |   |   |   |   |
|        political subdivisions                 |   |   | 185,469 |   |                      |   | (3,948 | ) |   |   | - |   |
|    Corporate securities                                           |   |   | 72,185  |   |                      |   | (2,670 | ) |   |   | - |   |
|    Foreign government obligations                                 |   |   | 7,724   |   |                      |   | (195 | ) |   |   | - |   |
|       Total fixed maturities                       |   |   | 379,922 |   |                      |   | (10,241 | ) |   |   | - |   |
|    Equity securities                                              |   |   | 85,886  |   |                      |   | - |   |   |   | (12,884 | ) |
|    Limited partnerships                                           |   |   | 69,436  |   |                      |   | - |   |   |   | (13,560 | ) |
|    Short-term                                                     |   |   | 3,703   |   |                      |   | - |   |   |   | - |   |
|       Total fixed maturities and other investments |   | $      | 538,947 |   |                      | $      | (10,241 | ) |   | $ | (26,444 | ) |
|                                                                             |   |   |    |   |                      |   |   |   |   |   |   |   |
| 2008:                                                                            |   |   |    |   |                      |   |   |   |   |   |   |   |
|    U.S. government obligations                                    |   | $      | 21,888  |   |                      | $      | (845 | ) |   | $ | - |   |
|    Government sponsored entities                                  |   |   | 4,672   |   |                      |   | (197 | ) |   |   | - |   |
|    Residential mortgage-backed securities                         |   |   | 10,248  |   |                      |   | (492 | ) |   |   | - |   |
|    Commercial mortgage-backed securities                          |   |   | 3,242   |   |                      |   | (156 | ) |   |   | - |   |
|    Obligations of states and                                      |   |   |    |   |                      |   |   |   |   |   |   |   |
|        political subdivisions                 |   |   | 267,152 |   |                      |   | (9,263 | ) |   |   | - |   |
|    Corporate securities                                           |   |   | 66,084  |   |                      |   | (2,947 | ) |   |   | - |   |
|    Foreign government obligations                                 |   |   | 5,975   |   |                      |   | (231 | ) |   |   | - |   |
|       Total fixed maturities                       |   |   | 379,261 |   |                      |   | (14,131 | ) |   |   | - |   |
|    Equity securities                                              |   |   | 63,200  |   |                      |   | - |   |   |   | (9,481 | ) |
|    Limited partnerships                                           |   |   | 44,883  |   |                      |   | - |   |   |   | (8,819 | ) |
|    Short-term                                                     |   |   | 33,820  |   |                      |   | - |   |   |   | - |   |
|       Total fixed maturities and other investments |   | $      | 521,164 |   |                      | $      | (14,131 | ) |   | $ | (18,300 | ) |

----

|                           |   | Payments Due by Period |   |
|--------------------------------|--------|------------------------|--------|
|                           |   | Total                  |   |   | Less than 1 year |   |   | 1 - 3 Years |   |   | 3 - 5 Years |   |   | More Than 5 Years |   |
|                           |   | (dollars in millions)  |   |
| Loss and loss expense reserves |   | $                      | 359.0  |   |   | $ | 110.9 |   |   | $ | 99.8 |   |   | $ | 40.9 |   |   | $ | 107.4 |   |
|                           |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment commitments         |   |                   | 2.2    |   |   |   | 2.2 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                           |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating leases               |   |                   | 5.6    |   |   |   | 1.5 |   |   |   | 2.9 |   |   |   | 1.2 |   |   |   | - |   |
|                           |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Borrowings                     |   |                   | 10.0   |   |   |   | - |   |   |   | 10.0 |   |   |   | - |   |   |   | - |   |
|                           |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                          |   | $                      | 376.8  |   |   | $ | 114.6 |   |   | $ | 112.7 |   |   | $ | 42.1 |   |   | $ | 107.4 |   |

----

| ITEM 8--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. |
|------------------------------------------------------|

----

----

| Consolidated Balance Sheets                                  |                         |   |                   |    |    |   |   |
|--------------------------------------------------------------|------------------------------|--------|------------------------|---------|---------|--------|--------|
| Baldwin & Lyons, Inc. and Subsidiaries                   |                         |   |                   |    |    |   |   |
|                                                         |                         |   |                   |    |    |   |   |
|                                                         |                         |   | December 31            |    |
|                                                         |                         |   | 2009                   |    |    | 2008   |   |
|                                                         |                         |   | (dollars in thousands) |    |
| Assets                                                       |                         |   |                   |    |    |   |   |
| Investments:                                                 |                         |   |                   |    |    |   |   |
| Fixed maturities                                             |                         |   | $                      | 379,922 |    |   | $      | 379,261 |   |
| Equity securities                                            |                         |   |                   | 85,886  |    |   |   | 63,200 |   |
| Limited partnerships                                         |                         |   |                   | 69,436  |    |   |   | 44,883 |   |
| Short-term and other                                         |                         |   |                   | 3,703   |    |   |   | 33,820 |   |
|                                                         |                         |   |                   | 538,947 |    |   |   | 521,164 |   |
|                                                         |                         |   |                   |    |    |   |   |   |   |
| Cash and cash equivalents                                    |                         |   |                   | 79,504  |    |   |   | 16,657 |   |
| Accounts receivable--less allowance (2009, $566; 2008, $650) |                         |   |                   | 32,535  |    |   |   | 29,701 |   |
| Accrued investment income                                    |                         |   |                   | 3,786   |    |   |   | 5,019 |   |
| Reinsurance recoverable                                      |                         |   |                   | 155,451 |    |   |   | 159,989 |   |
| Prepaid reinsurance premiums                                 |                         |   |                   | 10,651  |    |   |   | 4,914 |   |
| Deferred policy acquisition costs                            |                         |   |                   | 4,905   |    |   |   | 2,326 |   |
| Property and equipment--less accumulated depreciation        |                         |   |                   |    |    |   |   |   |   |
|                                                         | (2009, $9,551; 2008, $9,003) |   |                   |    | 13,332  |   |   |   | 11,582 |   |
| Notes receivable from employees                              |                         |   |                   | 2,054   |    |   |   | 2,199 |   |
| Other assets                                                 |                         |   |                   | 10,150  |    |   |   | 13,602 |   |
| Deferred federal income taxes                                |                         |   |                   | -       |    |   |   | 10,590 |   |
|                                                         |                         |   |                   | $       | 851,315 |   |   | $ | 777,743 |   |
|                                                         |                         |   |                   |    |    |   |   |   |   |   |
| Liabilities and Shareholders' Equity                         |                         |   |                   |    |    |   |   |   |   |
| Reserves:                                                    |                         |   |                   |    |    |   |   |   |   |
| Losses and loss expenses                                     |                         |   | $                      | 359,031 |    |   | $      | 389,558 |   |
| Unearned premiums                                            |                         |   |                   | 25,912  |    |   |   | 17,183 |   |
|                                                         |                         |   |                   |    | 384,943 |   |   |   | 406,741 |   |
|                                                         |                         |   |                   |    |    |   |   |   |   |   |
| Reinsurance payable                                          |                         |   |                   | 21,705  |    |   |   | 2,862 |   |
| Short-term borrowings                                        |                         |   |                   | 10,000  |    |   |   | 9,000 |   |
| Accounts payable and other liabilities                       |                         |   |                   | 50,173  |    |   |   | 27,076 |   |
| Current federal income taxes                                 |                         |   |                   | 6,507   |    |   |   | 1,997 |   |
| Deferred federal income taxes                                |                         |   |                   | 5,044   |    |   |   | - |   |
|                                                         |                         |   |                   |    | 478,372 |   |   |   | 447,676 |   |
| Shareholders' equity:                                        |                         |   |                   |    |    |   |   |   |   |
| Common stock, no par value:                                  |                         |   |                   |    |    |   |   |   |   |
| Class A voting -- authorized 3,000,000 shares;               |                         |   |                   |    |    |   |   |   |   |
| outstanding -- 2009, 2,623,109; 2008, 2,623,109 shares       |                         |   |                   | 112     |    |   |   | 112 |   |
| Class B non-voting -- authorized 20,000,000 shares;          |                         |   |                   |    |    |   |   |   |   |
| outstanding -- 2009, 12,109,878; 2008, 12,163,251 shares     |                         |   |                   | 517     |    |   |   | 519 |   |
| Additional paid-in capital                                   |                         |   |                   | 46,337  |    |   |   | 46,312 |   |
| Unrealized net gains on investments                          |                         |   |                   | 31,886  |    |   |   | 19,410 |   |
| Retained earnings                                            |                         |   |                   | 294,091 |    |   |   | 263,714 |   |
|                                                         |                         |   |                   |    | 372,943 |   |   |   | 330,067 |   |
|                                                         |                         |   |                   | $       | 851,315 |   |   | $ | 777,743 |   |

----

| Consolidated Statements of Operations                       |   |                                          |    |   |   |   |    |   |   |
|-------------------------------------------------------------|--------|-----------------------------------------------|---------|--------|--------|--------|---------|--------|--------|
| Baldwin & Lyons, Inc. and Subsidiaries                  |   |                                          |    |   |   |   |    |   |   |
|                                                        |   |                                          |    |   |   |   |    |   |   |
|                                                        |   |                                          |    |   |   |   |    |   |   |
|                                                        |   | Year Ended December 31                        |    |
|                                                        |   | 2009                                          |    |   | 2008   |   |    | 2007   |   |
|                                                        |   | (dollars in thousands, except per share data) |    |
| Revenue:                                                    |   |                                          |    |   |   |   |    |   |   |
| Net premiums earned                                         |   | $                                             | 181,300 |   |   | $      | 182,299 |   |   | $ | 179,065 |   |
| Net investment income                                       |   |                                          | 13,971  |   |   |   | 17,063  |   |   |   | 19,595 |   |
| Commissions and other income                                |   |                                          | 6,562   |   |   |   | 5,317   |   |   |   | 5,007 |   |
| Net realized gains (losses) on investments, excluding       |   |                                          |    |   |   |   |    |   |   |   |   |   |
|     impairment losses                   |   |                                          | 33,662  |   |   |   | (35,868 | )      |   |   | 40,689 |   |
| Total other-than-temporary impairment losses on investments |   |                                          | (2,846  | )      |   |   | (11,881 | )      |   |   | (593 | ) |
| Net realized gains (losses) on investments                  |   |                                          | 30,816  |   |   |   | (47,749 | )      |   |   | 40,096 |   |
|                                                        |   |                                          | 232,649 |   |   |   | 156,930 |   |   |   | 243,763 |   |
| Expenses:                                                   |   |                                          |    |   |   |   |    |   |   |   |   |   |
| Losses and loss expenses incurred                           |   |                                          | 99,351  |   |   |   | 115,752 |   |   |   | 107,781 |   |
| Other operating expenses                                    |   |                                          | 69,032  |   |   |   | 58,577  |   |   |   | 56,330 |   |
|                                                        |   |                                          | 168,383 |   |   |   | 174,329 |   |   |   | 164,111 |   |
| Income (loss) before federal income taxes                   |   |                                          | 64,266  |   |   |   | (17,399 | )      |   |   | 79,652 |   |
|                                                        |   |                                          |    |   |   |   |    |   |   |   |   |   |
| Federal income taxes (benefits)                             |   |                                          | 19,464  |   |   |   | (9,686  | )      |   |   | 24,521 |   |
| Net income (loss)                                           |   | $                                             | 44,802  |   |   | $      | (7,713  | )      |   | $ | 55,131 |   |
|                                                        |   |                                          |    |   |   |   |    |   |   |   |   |   |
| Per share data:                                             |   |                                          |    |   |   |   |    |   |   |   |   |   |
| Diluted earnings                                            |   | $                                             | 3.04    |   |   | $      | ( .51   | )      |   | $ | 3.63 |   |
|                                                        |   |                                          |    |   |   |   |    |   |   |   |   |   |
| Basic earnings                                              |   | $                                             | 3.04    |   |   | $      | ( .51   | )      |   | $ | 3.63 |   |
|                                                        |   |                                          |    |   |   |   |    |   |   |   |   |   |
| Cash dividends paid                                         |   | $                                             | 1.00    |   |   | $      | 1.00    |   |   | $ | 1.65 |   |

----

| Consolidated Statements of Changes in Equity Other Than Capital                                                     |   |                   |    |   |   |   |    |   |   |
|---------------------------------------------------------------------------------------------------------------------|--------|------------------------|---------|--------|--------|--------|---------|--------|--------|
| Baldwin & Lyons, Inc. and Subsidiaries                                                                          |   |                   |    |   |   |   |    |   |   |
|                                                                                                                |   |                   |    |   |   |   |    |   |   |
|                                                                                                                |   |                   |    |   |   |   |    |   |   |
|                                                                                                                |   |                   |    |   |   |   |    |   |   |
|                                                                                                                |   | 2009                   |    |   | 2008   |   |    | 2007   |   |
|                                                                                                                |   | (dollars in thousands) |    |
|                                                                                                                |   |                   |    |   |   |   |    |   |   |
| Balances at beginning of year:                                                                                      |   |                   |    |   |   |   |    |   |   |
|     Retained earnings                                                                           |   | $                      | 263,714 |   |   | $      | 295,293 |   |   | $ | 264,060 |   |
|     Unrealized gains on investments                                                             |   |                   | 19,410  |   |   |   | 36,876  |   |   |   | 47,229 |   |
|                                                                                                                |   |                   | 283,124 |   |   |   | 332,169 |   |   |   | 311,289 |   |
|                                                                                                                |   |                   |    |   |   |   |    |   |   |   |   |   |
| Changes arising from income-producing activities:                                                                   |   |                   |    |   |   |   |    |   |   |   |   |   |
|     Net income (loss)                                                                           |   |                   | 44,802  |   |   |   | (7,713  | )      |   |   | 55,131 |   |
|                                                                                                                |   |                   |    |   |   |   |    |   |   |   |   |   |
|     Gains (losses) on investments:                                                              |   |                   |    |   |   |   |    |   |   |   |   |   |
|         Pre-tax holding gains (losses) on debt and equity securities        |   |                   |    |   |   |   |    |   |   |   |   |   |
|             arising during period                       |   |                   | 24,442  |   |   |   | (41,058 | )      |   |   | 1,027 |   |
|         Applicable federal income taxes                                     |   |                   | 8,555   |   |   |   | (14,370 | )      |   |   | 359 |   |
|                                                                                                                |   |                   | 15,887  |   |   |   | (26,688 | )      |   |   | 668 |   |
|                                                                                                                |   |                   |    |   |   |   |    |   |   |   |   |   |
|         Pre-tax gains (losses) on debt and equity securities                |   |                   |    |   |   |   |    |   |   |   |   |   |
|             included in net income (loss) during period |   |                   | 5,248   |   |   |   | (14,188 | )      |   |   | 16,955 |   |
|         Applicable federal income taxes                                     |   |                   | 1,837   |   |   |   | (4,966  | )      |   |   | 5,934 |   |
|                                                                                                                |   |                   | 3,411   |   |   |   | (9,222  | )      |   |   | 11,021 |   |
|                                                                                                                |   |                   |    |   |   |   |    |   |   |   |   |   |
|         Change in unrealized gains (losses) on investments                  |   |                   | 12,476  |   |   |   | (17,466 | )      |   |   | (10,353 | ) |
|                                                                                                                |   |                   |    |   |   |   |    |   |   |   |   |   |
|     Foreign exchange adjustment                                                                 |   |                   | 1,001   |   |   |   | (1,468  | )      |   |   | 1,164 |   |
|                                                                                                                |   |                   |    |   |   |   |    |   |   |   |   |   |
| Comprehensive income - total realized and                                                                           |   |                   |    |   |   |   |    |   |   |   |   |   |
|  unrealized income (loss)                                                                                      |   |                   | 58,279  |   |   |   | (26,647 | )      |   |   | 45,942 |   |
|                                                                                                                |   |                   |    |   |   |   |    |   |   |   |   |   |
| Other changes affecting retained earnings:                                                                          |   |                   |    |   |   |   |    |   |   |   |   |   |
|     Cash dividends paid to shareholders                                                         |   |                   | (14,744 | )      |   |   | (15,096 | )      |   |   | (25,062 | ) |
|     Cost of treasury shares in excess of original issue proceeds                                |   |                   | (682    | )      |   |   | (7,302  | )      |   |   | - |   |
|                                                                                                                |   |                   | (15,426 | )      |   |   | (22,398 | )      |   |   | (25,062 | ) |
| Total changes                                                                                                       |   |                   | 42,853  |   |   |   | (49,045 | )      |   |   | 20,880 |   |
|                                                                                                                |   |                   |    |   |   |   |    |   |   |   |   |   |
| Balances at end of year:                                                                                            |   |                   |    |   |   |   |    |   |   |   |   |   |
|     Retained earnings                                                                           |   |                   | 294,091 |   |   |   | 263,714 |   |   |   | 295,293 |   |
|     Unrealized gains on investments                                                             |   |                   | 31,886  |   |   |   | 19,410  |   |   |   | 36,876 |   |
|                                                                                                                |   | $                      | 325,977 |   |   | $      | 283,124 |   |   | $ | 332,169 |   |

----

| Consolidated Statements of Cash Flows                                                                                    |   |                   |     |   |   |   |     |   |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|------------------------|----------|--------|--------|--------|----------|--------|--------|
| Baldwin & Lyons, Inc. and Subsidiaries                                                                               |   |                   |     |   |   |   |     |   |   |
|                                                                                                                     |   | Year Ended December 31 |     |
|                                                                                                                     |   | 2009                   |     |   | 2008   |   |     | 2007   |   |
|                                                                                                                     |   | (dollars in thousands) |     |
| Operating activities                                                                                                     |   |                   |     |   |   |   |     |   |   |
|    Net income (loss)                                                                                      |   | $                      | 44,802   |   |   | $      | (7,713   | )      |   | $ | 55,131 |   |
|    Adjustments to reconcile net income (loss) to net cash                                                 |   |                   |     |   |   |   |     |   |   |   |   |   |
|       provided by (used in) operating activities:                                          |   |                   |     |   |   |   |     |   |   |   |   |   |
|          Change in accounts receivable and unearned premium                 |   |                   | 5,066    |   |   |   | (165     | )      |   |   | (4,891 | ) |
|          Change in accrued investment income                                |   |                   | 1,233    |   |   |   | (257     | )      |   |   | 247 |   |
|          Change in reinsurance recoverable on paid losses                   |   |                   | 2,577    |   |   |   | (3,453   | )      |   |   | 4,921 |   |
|          Change in losses and loss expenses reserves net of reinsurance     |   |                   | (28,569  | )      |   |   | (12,786  | )      |   |   | (5,097 | ) |
|          Change in other assets, other liabilities and current income taxes |   |                   | 21,324   |   |   |   | (18,543  | )      |   |   | 4,211 |   |
|          Amortization of net policy acquisition costs                       |   |                   | 23,475   |   |   |   | 20,353   |   |   |   | 18,941 |   |
|          Net policy acquisition costs deferred                              |   |                   | (26,054  | )      |   |   | (19,485  | )      |   |   | (17,392 | ) |
|          Provision for deferred income taxes                                |   |                   | 9,561    |   |   |   | (14,129  | )      |   |   | 5,620 |   |
|          Bond amortization                                                  |   |                   | 3,643    |   |   |   | 3,427    |   |   |   | 2,453 |   |
|          (Gain) loss on sale of property                                    |   |                   | 14       |   |   |   | (17      | )      |   |   | 35 |   |
|          Depreciation                                                       |   |                   | 3,355    |   |   |   | 2,976    |   |   |   | 2,337 |   |
|          Net (gain) loss on investments                                     |   |                   | (30,816  | )      |   |   | 47,749   |   |   |   | (40,096 | ) |
|          Excess tax benefit related to stock options                        |   |                   | -        |   |   |   | -        |   |   |   | (253 | ) |
|          Compensation expense related to restricted stock                   |   |                   | 1,085    |   |   |   | -        |   |   |   | - |   |
| Net cash provided by (used in) operating activities                                                                      |   |                   | 30,696   |   |   |   | (2,043   | )      |   |   | 26,167 |   |
|                                                                                                                     |   |                   |     |   |   |   |     |   |   |   |   |   |
| Investing activities                                                                                                     |   |                   |     |   |   |   |     |   |   |   |   |   |
|    Purchases of fixed maturities and equity securities                                                    |   |                   | (220,769 | )      |   |   | (276,737 | )      |   |   | (232,147 | ) |
|    Purchases of limited partnership interests                                                             |   |                   | (7       | )      |   |   | (16,199  | )      |   |   | (5,995 | ) |
|    Distributions from limited partnerships                                                                |   |                   | 1,022    |   |   |   | 3,657    |   |   |   | 5,565 |   |
|    Proceeds from maturities                                                                               |   |                   | 105,336  |   |   |   | 31,623   |   |   |   | 164,739 |   |
|    Proceeds from sales of fixed maturities                                                                |   |                   | 121,722  |   |   |   | 161,814  |   |   |   | 44,508 |   |
|    Proceeds from sales of equity securities                                                               |   |                   | 13,328   |   |   |   | 45,813   |   |   |   | 55,866 |   |
|    Net sales (purchases) of short-term investments                                                        |   |                   | 30,118   |   |   |   | 10,972   |   |   |   | 14,557 |   |
|    Purchase of subsidiary                                                                                 |   |                   | -        |   |   |   | (2,661   | )      |   |   | - |   |
|    Decrease in principal of notes receivable from employees                                               |   |                   | 143      |   |   |   | 29       |   |   |   | 110 |   |
|    Purchases of property and equipment                                                                    |   |                   | (5,307   | )      |   |   | (5,348   | )      |   |   | (6,225 | ) |
|    Proceeds from disposals of property and equipment                                                      |   |                   | 188      |   |   |   | 72       |   |   |   | 935 |   |
| Net cash provided by (used in) investing activities                                                                      |   |                   | 45,774   |   |   |   | (46,965  | )      |   |   | 41,913 |   |
|                                                                                                                     |   |                   |     |   |   |   |     |   |   |   |   |   |
| Financing activities                                                                                                     |   |                   |     |   |   |   |     |   |   |   |   |   |
|    Dividends paid to shareholders                                                                         |   |                   | (14,744  | )      |   |   | (15,096  | )      |   |   | (25,062 | ) |
|    Proceeds from sale of common stock                                                                     |   |                   | -        |   |   |   | -        |   |   |   | 2,211 |   |
|    Excess tax benefit related to stock options                                                            |   |                   | -        |   |   |   | -        |   |   |   | 253 |   |
|    Drawings on line of credit                                                                             |   |                   | 11,000   |   |   |   | 9,000    |   |   |   | - |   |
|    Repayment on line of credit                                                                            |   |                   | (10,000  | )      |   |   | -        |   |   |   | - |   |
|    Cost of treasury shares                                                                                |   |                   | (880     | )      |   |   | (8,908   | )      |   |   | - |   |
| Net cash used in financing activities                                                                                    |   |                   | (14,624  | )      |   |   | (15,004  | )      |   |   | (22,598 | ) |
|                                                                                                                     |   |                   |     |   |   |   |     |   |   |   |   |   |
|    Effect of foreign exchange rates on cash and cash equivalents                                          |   |                   | 1,001    |   |   |   | (1,468   | )      |   |   | 1,165 |   |
|                                                                                                                     |   |                   |     |   |   |   |     |   |   |   |   |   |
| Increase (decrease) in cash and cash equivalents                                                                         |   |                   | 62,847   |   |   |   | (65,480  | )      |   |   | 46,647 |   |
| Cash and cash equivalents at beginning of year                                                                           |   |                   | 16,657   |   |   |   | 82,137   |   |   |   | 35,490 |   |
| Cash and cash equivalents at end of year                                                                                 |   | $                      | 79,504   |   |   | $      | 16,657   |   |   | $ | 82,137 |   |

----

----

----

----

| Note B - Investments                                                    |   |   |    |   |      |                              |    |       |   |    |       |   |   |       |   |
|-------------------------------------------------------------------------|--------|--------|---------|--------|-----------|-----------------------------------|---------|------------|--------|---------|------------|--------|--------|------------|--------|
|                                                                    |   |   |    |   |      |                              |    |       |   |    |       |   |   |       |   |
| The following is a summary of investments at December 31:               |   |   |    |   |      |                              |    |       |   |    |
|                                                                    |   |   |    |   |      |                              |    |       |   |    |       |   |   |       |   |
|                                                                    |   |   |    |   |      |                              |    |       |   |    |       |   |   | Net        |   |
|                                                                    |   |   |    |   | Cost or   |                              |    | Gross      |   |    | Gross      |   |   | Unrealized |   |
|                                                                    |   | Fair   |    |   | Amortized |                              |    | Unrealized |   |    | Unrealized |   |   | Gains      |   |
|                                                                    |   | Value  |    |   | Cost      |                              |    | Gains      |   |    | Losses     |   |   | (Losses)   |   |
| 2009:                                                                   |   |   |    |   |      |                              |    |       |   |    |       |   |   |       |   |
|    U.S. government obligations                           |   | $      | 54,632  |   |      | $                                 | 54,615  |       |   | $       | 86         |   |   | $          | (69    | ) |   | $ | 17 |   |
|    Government sponsored entities                         |   |   | 5,883   |   |      |                              | 5,825   |       |   |    | 72         |   |   |       | (14    | ) |   |   | 58 |   |
|    Residential mortgage-backed securities                |   |   | 48,377  |   |      |                              | 48,068  |       |   |    | 572        |   |   |       | (263   | ) |   |   | 309 |   |
|    Commercial mortgage-backed securities                 |   |   | 5,652   |   |      |                              | 5,655   |       |   |    | -          |   |   |       | (3     | ) |   |   | (3 | ) |
|    Obligations of states and                             |   |   |    |   |      |                              |    |       |   |    |       |   |   |       |   |   |   |   |   |   |
|        political subdivisions        |   |   | 185,469 |   |      |                              | 182,536 |       |   |    | 2,940      |   |   |       | (7     | ) |   |   | 2,933 |   |
|    Corporate securities                                  |   |   | 72,185  |   |      |                              | 70,791  |       |   |    | 1,572      |   |   |       | (178   | ) |   |   | 1,394 |   |
|    Foreign government obligations                        |   |   | 7,724   |   |      |                              | 7,695   |       |   |    | 29         |   |   |       | -      |   |   |   | 29 |   |
|       Total fixed maturities              |   |   | 379,922 |   |      |                              | 375,185 |       |   |    | 5,271      |   |   |       | (534   | ) |   |   | 4,737 |   |
|    Equity securities                                     |   |   | 85,886  |   |      |                              | 41,568  |       |   |    | 44,636     |   |   |       | (318   | ) |   |   | 44,318 |   |
|    Limited partnerships                                  |   |   | 69,436  |   |      |                              | 69,436  |       |   |    | -          |   |   |       | -      |   |   |   | - |   |
|    Short-term                                            |   |   | 3,703   |   |      |                              | 3,703   |       |   |    | -          |   |   |       | -      |   |   |   | - |   |
|       Total available-for-sale securities |   | $      | 538,947 |   |      | $                                 | 489,892 |       |   | $       | 49,907     |   |   | $          | (852   | ) |   |   | 49,055 |   |
|                                                                    |   |   |    |   |      |                              |    |       |   |    |       |   |   |       |   |   |   |   |   |   |
|                                                                    |   |   |    |   |      | Applicable federal income taxes   |    |       |   | (17,169 | )          |
|                                                                    |   |   |    |   |      |                              |    |       |   |    |       |   |   |       |   |   |   |   |   |   |
|                                                                    |   |   |    |   |      | Net unrealized gains - net of tax |    |       | $      | 31,886  |       |
|                                                                    |   |   |    |   |      |                              |    |       |   |    |       |   |   |       |   |   |   |   |   |   |
| 2008:                                                                   |   |   |    |   |      |                              |    |       |   |    |       |   |   |       |   |   |   |   |   |   |
|    U.S. government obligations                           |   | $      | 21,888  |   |      | $                                 | 21,513  |       |   | $       | 375        |   |   | $          | -      |   |   | $ | 375 |   |
|    Government sponsored entities                         |   |   | 4,672   |   |      |                              | 4,537   |       |   |    | 135        |   |   |       | -      |   |   |   | 135 |   |
|    Residential mortgage-backed securities                |   |   | 10,248  |   |      |                              | 10,115  |       |   |    | 157        |   |   |       | (24    | ) |   |   | 133 |   |
|    Commercial mortgage-backed securities                 |   |   | 3,242   |   |      |                              | 3,698   |       |   |    | -          |   |   |       | (456   | ) |   |   | (456 | ) |
|    Obligations of states and                             |   |   |    |   |      |                              |    |       |   |    |       |   |   |       |   |   |   |   |   |   |
|        political subdivisions        |   |   | 267,152 |   |      |                              | 263,026 |       |   |    | 5,132      |   |   |       | (1,006 | ) |   |   | 4,126 |   |
|    Corporate securities                                  |   |   | 66,084  |   |      |                              | 63,774  |       |   |    | 3,520      |   |   |       | (1,210 | ) |   |   | 2,310 |   |
|    Foreign government obligations                        |   |   | 5,975   |   |      |                              | 5,867   |       |   |    | 108        |   |   |       | -      |   |   |   | 108 |   |
|       Total fixed maturities              |   |   | 379,261 |   |      |                              | 372,530 |       |   |    | 9,427      |   |   |       | (2,696 | ) |   |   | 6,731 |   |
|    Equity securities                                     |   |   | 63,200  |   |      |                              | 40,071  |       |   |    | 27,415     |   |   |       | (4,286 | ) |   |   | 23,129 |   |
|    Limited partnerships                                  |   |   | 44,883  |   |      |                              | 44,883  |       |   |    | -          |   |   |       | -      |   |   |   | - |   |
|    Short-term                                            |   |   | 33,820  |   |      |                              | 33,820  |       |   |    | -          |   |   |       | -      |   |   |   | - |   |
|       Total available-for-sale securities |   | $      | 521,164 |   |      | $                                 | 491,304 |       |   | $       | 36,842     |   |   | $          | (6,982 | ) |   |   | 29,860 |   |
|                                                                    |   |   |    |   |      |                              |    |       |   |    |       |   |   |       |   |   |   |   |   |   |
|                                                                    |   |   |    |   |      | Applicable federal income taxes   |    |       |   | (10,450 | )          |
|                                                                    |   |   |    |   |      |                              |    |       |   |    |       |   |   |       |   |   |   |   |   |   |
|                                                                    |   |   |    |   |      | Net unrealized gains - net of tax |    |       | $      | 19,410  |       |

----

|                       |   | 2009                 |   |   | 2008       |   |
|----------------------------|--------|----------------------|--------|--------|------------|--------|
|                       |   | Number of Securities |   |   | Fair Value |   |   | Gross Unrealized Loss |   |   | Number of Securities |   |   | Fair Value |   |   | Gross Unrealized Loss |   |
| Fixed maturity securities: |   |                 |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 12 months or less          |   |                 | 109    |   |       | $      | 70,568 |   |   | $ | (411 | ) |   |   | 47 |   |   | $ | 80,993 |   |   | $ | (2,675 | ) |
| Greater than 12 months     |   |                 | 4      |   |       |   | 6,220 |   |   |   | (123 | ) |   |   | 6 |   |   |   | 1,812 |   |   |   | (21 | ) |
| Total fixed maturities     |   |                 | 113    |   |       |   | 76,788 |   |   |   | (534 | ) |   |   | 53 |   |   |   | 82,805 |   |   |   | (2,696 | ) |
| Equity securities:         |   |                 |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 12 months or less          |   |                 | 21     |   |       |   | 2,032 |   |   |   | (147 | ) |   |   | 33 |   |   |   | 11,362 |   |   |   | (3,085 | ) |
| Greater than 12 months     |   |                 | 8      |   |       |   | 2,913 |   |   |   | (171 | ) |   |   | 14 |   |   |   | 5,845 |   |   |   | (1,201 | ) |
| Total equity securities    |   |                 | 29     |   |       |   | 4,945 |   |   |   | (318 | ) |   |   | 47 |   |   |   | 17,207 |   |   |   | (4,286 | ) |
| Total                      |   |                 | 142    |   |       | $      | 81,733 |   |   | $ | (852 | ) |   |   | 100 |   |   | $ | 100,012 |   |   | $ | (6,982 | ) |

|                               |   | Fair Value |    |   |   |   |   | Cost or Amortized Cost |   |   |    |   |
|------------------------------------|--------|------------|---------|--------|--------|--------|--------|------------------------|--------|--------|---------|--------|
| One year or less                   |   | $          | 160,086 |   |   |   | 42.1   | %                      |   | $      | 158,818 |   |   |   | 42.3 | % |
| Excess of one year to five years   |   |       | 149,586 |   |   |   | 39.4   |                   |   |   | 146,991 |   |   |   | 39.2 |   |
| Excess of five years to ten years  |   |       | 9,619   |   |   |   | 2.5    |                   |   |   | 9,123   |   |   |   | 2.4 |   |
| Excess of ten years                |   |       | 6,602   |   |   |   | 1.8    |                   |   |   | 6,530   |   |   |   | 1.8 |   |
|    Total maturities |   |       | 325,893 |   |   |   | 85.8   |                   |   |   | 321,462 |   |   |   | 85.7 |   |
| Mortgage-backed securities         |   |       | 54,029  |   |   |   | 14.2   |                   |   |   | 53,723  |   |   |   | 14.3 |   |
|                               |   | $          | 379,922 |   |   |   | 100.0  | %                      |   | $      | 375,185 |   |   |   | 100.0 | % |

|                  |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|-----------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Fixed maturities      |   | $      | 14,151 |   |   | $      | 14,417 |   |   | $ | 14,329 |   |
| Equity securities     |   |   | 1,327  |   |   |   | 1,712  |   |   |   | 1,866 |   |
| Money market funds    |   |   | 162    |   |   |   | 1,332  |   |   |   | 2,613 |   |
| Short-term and other  |   |   | 328    |   |   |   | 1,649  |   |   |   | 2,602 |   |
|                  |   |   | 15,968 |   |   |   | 19,110 |   |   |   | 21,410 |   |
| Investment expenses   |   |   | (1,997 | )      |   |   | (2,047 | )      |   |   | (1,815 | ) |
| Net investment income |   | $      | 13,971 |   |   | $      | 17,063 |   |   | $ | 19,595 |   |

----

|                                                         |   | 2009   |   |   | 2008   |   |    | 2007   |   |
|--------------------------------------------------------------|--------|--------|--------|--------|--------|--------|---------|--------|--------|
| Fixed maturities:                                            |   |   |   |   |   |   |    |   |   |
|    Gross gains                                |   | $      | 8,646  |   |   | $      | 3,333   |   |   | $ | 536 |   |
|    Gross losses                               |   |   | (1,505 | )      |   |   | (6,806  | )      |   |   | (680 | ) |
|       Net gains (losses)       |   |   | 7,141  |   |   |   | (3,473  | )      |   |   | (144 | ) |
|                                                         |   |   |   |   |   |   |    |   |   |   |   |   |
| Equity securities:                                           |   |   |   |   |   |   |    |   |   |   |   |   |
|    Gross gains                                |   |   | 1,533  |   |   |   | 4,463   |   |   |   | 19,293 |   |
|    Gross losses                               |   |   | (3,426 | )      |   |   | (12,943 | )      |   |   | (2,483 | ) |
|       Net gains (losses)       |   |   | (1,893 | )      |   |   | (8,480  | )      |   |   | 16,810 |   |
|                                                         |   |   |   |   |   |   |    |   |   |   |   |   |
| Limited partnerships - net gain (loss)                       |   |   | 25,568 |   |   |   | (33,562 | )      |   |   | 23,141 |   |
|                                                         |   |   |   |   |   |   |    |   |   |   |   |   |
| Other - net gain (loss)                                      |   |   | -      |   |   |   | (2,234  | )      |   |   | 289 |   |
|                                                         |   |   |   |   |   |   |    |   |   |   |   |   |
|       Total net gains (losses) |   | $      | 30,816 |   |   | $      | (47,749 | )      |   | $ | 40,096 |   |

|                                                  |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|-------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Cumulative charges to income at beginning of year     |   | $      | 11,698 |   |   | $      | 2,734  |   |   | $ | 3,717 |   |
| Writedowns based on objective and subjective criteria |   |   | 2,846  |   |   |   | 11,881 |   |   |   | 593 |   |
| Recovery of prior writedowns upon sale or disposal    |   |   | (5,309 | )      |   |   | (2,917 | )      |   |   | (1,576 | ) |
| Cumulative charges to income at end of year           |   | $      | 9,235  |   |   | $      | 11,698 |   |   | $ | 2,734 |   |
|                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Net pre-tax realized gain (loss)                      |   | $      | 2,463  |   |   | $      | (8,964 | )      |   | $ | 983 |   |
|                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Addition (reduction) to earnings per share from net   |   |   |   |   |   |   |   |   |   |   |   |   |
| after-tax realized gain (loss)                        |   | $      | .11    |   |   | $      | (.39   | )      |   | $ | .04 |   |
|                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized gain on investments previously             |   |   |   |   |   |   |   |   |   |   |   |   |
| written down at end of the year - see note below      |   | $      | 9,379  |   |   | $      | 7,211  |   |   | $ | 4,878 |   |

----

|                               |   | 2009   |   |   | 2008   |   |    | 2007   |   |
|------------------------------------|--------|--------|--------|--------|--------|--------|---------|--------|--------|
| Estimated realized income          |   | $      | 593    |   |   | $      | 670     |   |   | $ | 4,241 |   |
| Estimated unrealized income (loss) |   |   | 10,322 |   |   |   | (26,625 | )      |   |   | 12,983 |   |
| Net earnings (losses)              |   | $      | 10,915 |   |   | $      | (25,955 | )      |   | $ | 17,224 |   |

|                                                                   |   | 2009   |    |   | 2008   |   |
|------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Total assets                                                           |   | $      | 914,927 |   |   | $      | 582,920 |   |
| Total partners' capital                                                |   |   | 843,633 |   |   |   | 550,840 |   |
| Net increase (decrease) in partners' capital resulting from operations |   |   | 333,12  |   |   |   | (858,680 | ) |

----

|                                                            |   | 2009   |    |   | 2008   |   |    | 2007   |   |
|-----------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
| Reserves at the beginning of the year                           |   | $      | 231,633 |   |   | $      | 244,500 |   |   | $ | 249,495 |   |
|                                                            |   |   |    |   |   |   |    |   |   |   |   |   |
| Provision for losses and loss expenses:                         |   |   |    |   |   |   |    |   |   |   |   |   |
|    Claims occurring during the current year      |   |   | 108,935 |   |   |   | 132,829 |   |   |   | 129,065 |   |
|    Claims occurring during prior years           |   |   | (9,584  | )      |   |   | (17,077 | )      |   |   | (21,284 | ) |
|       Total incurred              |   |   | 99,351  |   |   |   | 115,752 |   |   |   | 107,781 |   |
|                                                            |   |   |    |   |   |   |    |   |   |   |   |   |
| Loss and loss expense payments:                                 |   |   |    |   |   |   |    |   |   |   |   |   |
|    Claims occurring during the current year      |   |   | 41,302  |   |   |   | 51,649  |   |   |   | 53,820 |   |
|    Claims occurring during prior years           |   |   | 84,777  |   |   |   | 76,970  |   |   |   | 58,956 |   |
|       Total paid                  |   |   | 126,079 |   |   |   | 128,619 |   |   |   | 112,776 |   |
|                                                            |   |   |    |   |   |   |    |   |   |   |   |   |
| Other reserve adjustment                                        |   |   | (1,652  | )      |   |   | -       |   |   |   | - |   |
|                                                            |   |   |    |   |   |   |    |   |   |   |   |   |
| Reserves at the end of the year                                 |   |   | 203,253 |   |   |   | 231,633 |   |   |   | 244,500 |   |
|                                                            |   |   |    |   |   |   |    |   |   |   |   |   |
| Reinsurance recoverable on unpaid losses at the end of the year |   |   | 155,778 |   |   |   | 157,925 |   |   |   | 134,116 |   |
| Reserves, gross of reinsurance                                  |   |   |    |   |   |   |    |   |   |   |   |   |
|     recoverable, at the end of the year     |   | $      | 359,031 |   |   | $      | 389,558 |   |   | $ | 378,616 |   |
|                                                            |   |   |    |   |   |   |    |   |   |   |   |   |

|                                              |   |   (Savings) Deficiency Developed |    |
|---------------------------------------------------|--------|---------------------------------------|---------|
|                                              |   | 2009                                  |    |   | 2008 |   |   | 2007 |   |
| Directly produced property and casualty insurance |   | $                                     | (14,110 | ) |   | $ | (16,841 | ) |   | $ | (17,116 | ) |
| Reinsurance assumed                               |   |                                  | 3,942   |   |   |   | (205 | ) |   |   | (4,112 | ) |
| Involuntary residual markets                      |   |                                  | 584     |   |   |   | (31 | ) |   |   | (56 | ) |
|       Totals        |   | $                                     | (9,584  | ) |   | $ | (17,077 | ) |   | $ | (21,284 | ) |
|                                              |   |                                  |    |   |   |   |   |   |   |   |   |   |

----

|                          |   | Premiums Written |    |   | Premiums Earned |   |
|-------------------------------|--------|------------------|---------|--------|-----------------|--------|
|                          |   | 2009             |    |   | 2008            |   |   | 2007 |   |   | 2009 |   |   | 2008 |   |   | 2007 |   |
| Direct                        |   | $                | 209,129 |   |            | $      | 182,810 |   |   | $ | 176,233 |   |   | $ | 200,341 |   |   | $ | 188,285 |   |   | $ | 185,781 |   |
| Ceded on direct               |   |             | (58,643 | )      |            |   | (39,828 | ) |   |   | (32,980 | ) |   |   | (59,330 | ) |   |   | (41,214 | ) |   |   | (35,294 | ) |
|    Net direct  |   |             | 150,486 |   |            |   | 142,982 |   |   |   | 143,253 |   |   |   | 141,011 |   |   |   | 147,071 |   |   |   | 150,487 |   |
|                          |   |             |    |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assumed                       |   |             | 41,030  |   |            |   | 39,132 |   |   |   | 31,134 |   |   |   | 41,777 |   |   |   | 40,528 |   |   |   | 33,378 |   |
| Ceded on assumed              |   |             | (1,488  | )      |            |   | (5,300 | ) |   |   | (4,800 | ) |   |   | (1,488 | ) |   |   | (5,300 | ) |   |   | (4,800 | ) |
|    Net assumed |   |             | 39,542  |   |            |   | 33,832 |   |   |   | 26,334 |   |   |   | 40,289 |   |   |   | 35,228 |   |   |   | 28,578 |   |
| Net                           |   | $                | 190,028 |   |            | $      | 176,814 |   |   | $ | 169,587 |   |   | $ | 181,300 |   |   | $ | 182,299 |   |   | $ | 179,065 |   |

----

|                                                      |   | 2009   |    |   | 2008   |   |
|-----------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Case unpaid losses, net of valuation allowance            |   | $      | 87,467  |   |   | $      | 88,349 |   |
| Incurred but not reported unpaid losses and loss expenses |   | $      | 66,030  |   |   | $      | 67,106 |   |
| Paid losses and loss expenses                             |   |   | 1,954   |   |   |   | 4,531 |   |
| Unearned premiums                                         |   |   | -       |   |   |   | 3 |   |
|                                                      |   | $      | 155,451 |   |   | $      | 159,989 |   |

|                                                                              |   | 2009   |   |   | 2008   |   |
|-----------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Deferred tax liabilities:                                                         |   |   |   |   |   |   |
|    Unrealized gain on fixed income and equity security investments |   | $      | 17,169 |   |   | $      | 10,450 |   |
|    Limited partnership investments                                 |   |   | 5,252  |   |   |   | - |   |
|    Deferred acquisition costs                                      |   |   | 2,748  |   |   |   | 814 |   |
|    Salvage and subrogation                                         |   |   | 1,785  |   |   |   | 1,575 |   |
|    Other                                                           |   |   | 295    |   |   |   | 316 |   |
|       Total deferred tax liabilities                |   |   | 27,249 |   |   |   | 13,155 |   |
|                                                                              |   |   |   |   |   |   |   |   |
| Deferred tax assets:                                                              |   |   |   |   |   |   |   |   |
|    Loss and loss expense reserves                                  |   |   | 15,274 |   |   |   | 15,575 |   |
|    Limited partnership investments                                 |   |   | -      |   |   |   | 2,420 |   |
|    Unearned premiums discount                                      |   |   | 1,814  |   |   |   | 1,203 |   |
|    Other-than-temporary investment declines                        |   |   | 3,232  |   |   |   | 4,094 |   |
|    Deferred compensation                                           |   |   | 560    |   |   |   | 228 |   |
|    Deferred ceding commission                                      |   |   | 1,032  |   |   |   | - |   |
|    Other                                                           |   |   | 293    |   |   |   | 225 |   |
|       Total deferred tax assets                     |   |   | 22,205 |   |   |   | 23,745 |   |
|                                                                              |   |   |   |   |   |   |   |   |
|       Net deferred tax assets (liabilities)         |   | $      | (5,044 | )      |   | $      | 10,590 |   |
|                                                                              |   |   |   |   |   |   |   |   |

|                                                           |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|----------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                           |   |   |   |   |   |   |   |   |   |
| Statutory federal income rate applied to pretax income (loss)  |   | $      | 22,493 |   |   | $      | (6,090 | )      |   | $ | 27,878 |   |
| Tax effect of (deduction):                                     |   |   |   |   |   |   |   |   |   |   |   |   |
|    Tax-exempt investment income                 |   |   | (2,682 | )      |   |   | (3,649 | )      |   |   | (3,298 | ) |
|    Net addition to (reduction of) tax positions |   |   | (405   | )      |   |   | (192   | )      |   |   | 125 |   |
|    Other                                        |   |   | 58     |   |   |   | 245    |   |   |   | (184 | ) |
| Federal income tax expense (benefit)                           |   | $      | 19,464 |   |   | $      | (9,686 | )      |   | $ | 24,521 |   |

----

| Federal income tax expense consists of the following: |   |   |   |   |   |   |    |   |   |
|-------------------------------------------------------|--------|--------|--------|--------|--------|--------|---------|--------|--------|
|                                                  |   | 2009   |   |   | 2008   |   |    | 2007   |   |
| Taxes (credits) on pre-tax income (loss):             |   |   |   |   |   |   |    |   |   |
|    Current                             |   | $      | 9,903  |   |   | $      | 4,443   |   |   | $ | 18,901 |   |
|    Deferred                            |   |   | 9,561  |   |   |   | (14,129 | )      |   |   | 5,620 |   |
|                                                  |   | $      | 19,464 |   |   | $      | (9,686  | )      |   | $ | 24,521 |   |

| The components of the provision for deferred federal income taxes (credits) are as follows: |   |   |   |   |
|---------------------------------------------------------------------------------------------|--------|--------|--------|--------|
|                                                                                        |   |   |   |   |   |   |   |   |   |
|                                                                                        |   | 2009   |   |   | 2008 |   |   | 2007 |   |
| Limited partnerships                                                                        |   | $      | 7,672  |   |   | $ | (13,052 | ) |   | $ | 5,354 |   |
| Discounts of loss and loss expense reserves                                                 |   |   | 946    |   |   |   | 354 |   |   |   | 32 |   |
| Unearned premium discount                                                                   |   |   | (611   | )      |   |   | 384 |   |   |   | 663 |   |
| Deferred compensation                                                                       |   |   | (350   | )      |   |   | 1,310 |   |   |   | (508 | ) |
| Other-than-temporary investment declines                                                    |   |   | 862    |   |   |   | (3,137 | ) |   |   | 344 |   |
| Deferred acquisitions costs and ceding commission                                           |   |   | 902    |   |   |   | (304 | ) |   |   | (542 | ) |
| Other                                                                                       |   |   | 140    |   |   |   | 316 |   |   |   | 277 |   |
|    Provision for deferred federal income tax                                 |   | $      | 9,561  |   |   | $ | (14,129 | ) |   | $ | 5,620 |   |
|                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |

|                                             |   | 2009   |   |   | 2008   |   |
|--------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Balance at January 1                             |   | $      | 5,955  |   |   | $      | 7,781 |   |
| Reductions for tax positions of the current year |   |   | (850   | )      |   |   | (271 | ) |
| Additions for tax positions of prior years       |   |   | 1,833  |   |   |   | - |   |
| Reductions for tax positions of prior years      |   |   | -      |   |   |   | (1,441 | ) |
| Settlements with tax authorities                 |   |   | (338   | )      |   |   | (114 | ) |
| Balance at December 31                           |   | $      | 6,600  |   |   | $      | 5,955 |   |

----

| Note F - Shareholders' Equity                                                 |   |    |      |   |    |   |   |    |   |   |       |   |   |       |   |
|------------------------------------------------------------------------------------|--------|---------|-----------|--------|---------|--------|--------|---------|--------|--------|------------|--------|--------|------------|--------|
| Changes in common stock outstanding and additional paid-in capital are as follows: |   |    |      |   |    |   |   |
|                                                                               |   |    |      |   |    |   |   |    |   |   |       |   |   | Additional |   |
|                                                                               |   | Class A |      |   | Class B |   |   | Paid-in |   |
|                                                                               |   | Shares  |      |   | Amount  |   |   | Shares  |   |   | Amount     |   |   | Capital    |   |
| Balance at January 1, 2007                                                         |   |    | 2,650,059 |   |    |   | 113    |    |   |   | 12,485,205 |   |   |       | 533    |   |   |   | 45,692 |   |
|    Stock options exercised                                          |   |    | -         |   |    |   | -      |    |   |   | 107,350    |   |   |       | 4      |   |   |   | 2,207 |   |
| Balance at December 31, 2007                                                       |   |    | 2,650,059 |   |    |   | 113    |    |   |   | 12,592,555 |   |   |       | 537    |   |   |   | 47,899 |   |
|    Treasury shares purchased                                        |   |    | (26,950   | )      |    |   | (1     | )       |   |   | (429,304   | )      |   |       | (18    | ) |   |   | (1,587 | ) |
| Balance at December 31, 2008                                                       |   |    | 2,623,109 |   |    |   | 112    |    |   |   | 12,163,251 |   |   |       | 519    |   |   | $ | 46,312 |   |
|    Treasury shares purchased                                        |   |    | -         |   |    |   | -      |    |   |   | (53,373    | )      |   |       | (2     | ) |   |   | (195 | ) |
|    Restricted stock grant                                           |   |    | -         |   |    |   | -      |    |   |   | -          |   |   |       | -      |   |   |   | 220 |   |
| Balance at December 31, 2009                                                       |   |    | 2,623,109 |   |    | $      | 112    |    |   |   | 12,109,878 |   |   | $          | 517    |   |   | $ | 46,337 |   |

| Note G - Other Operating Expenses                                    |   |   |   |   |   |   |   |   |
|----------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                 |   |   |   |   |   |   |   |   |
| Details of other operating expenses for the years ended December 31: |   |   |   |   |   |   |   |
|                                                                 |   |   |   |   |   |   |   |   |
|                                                                 | 2009   |   |   | 2008   |   |   | 2007   |   |
| Amortization of gross deferred policy acquisition costs              | $      | 28,827 |   |   | $      | 23,437 |   |   | $ | 20,985 |   |
| Other underwriting expenses                                          |   | 23,794 |   |   |   | 19,745 |   |   |   | 21,688 |   |
| Expense allowances from reinsurers                                   |   | (5,352 | )      |   |   | (3,084 | )      |   |   | (2,044 | ) |
| Total underwriting expenses                                |   | 47,269 |   |   |   | 40,098 |   |   |   | 40,629 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses of non-insurance companies                        |   | 21,763 |   |   |   | 18,479 |   |   |   | 15,701 |   |
| Total other operating expenses                             | $      | 69,032 |   |   | $      | 58,577 |   |   | $ | 56,330 |   |

----

----

|                                |   |   | 2009   |    |   | 2008   |   |    | 2007   |   |
|-------------------------------------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
| Direct and assumed premium written: |   |   |   |    |   |   |   |    |   |   |
| Property and casualty insurance     |   |   | $      | 209,129 |   |   | $      | 182,810 |   |   | $ | 176,233 |   |
| Reinsurance                         |   |   |   | 41,030  |   |   |   | 39,132  |   |   |   | 31,134 |   |
|                                | Totals |   | $      | 250,159 |   |   | $      | 221,942 |   |   | $ | 207,367 |   |
|                                |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Net premium earned:                 |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Property and casualty insurance     |   |   | $      | 141,011 |   |   | $      | 147,071 |   |   | $ | 150,487 |   |
| Reinsurance                         |   |   |   | 40,289  |   |   |   | 35,228  |   |   |   | 28,578 |   |
|                                | Totals |   | $      | 181,300 |   |   | $      | 182,299 |   |   | $ | 179,065 |   |
|                                |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Underwriting gain:                  |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Property and casualty insurance     |   |   | $      | 22,190  |   |   | $      | 20,022  |   |   | $ | 26,654 |   |
| Reinsurance                         |   |   |   | 12,065  |   |   |   | 6,718   |   |   |   | 5,554 |   |
|                                | Totals |   | $      | 34,255  |   |   | $      | 26,740  |   |   | $ | 32,208 |   |

|                                       |   | 2009   |    |   | 2008   |   |    | 2007   |   |
|--------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
| Profit:                                    |   |   |    |   |   |   |    |   |   |
| Underwriting gain                          |   | $      | 34,255  |   |   | $      | 26,740  |   |   | $ | 32,208 |   |
| Net investment income                      |   |   | 13,971  |   |   |   | 17,063  |   |   |   | 19,595 |   |
| Net realized gains (losses) on investments |   |   | 30,816  |   |   |   | (47,749 | )      |   |   | 40,096 |   |
| Corporate expenses                         |   |   | (14,776 | )      |   |   | (13,453 | )      |   |   | (12,247 | ) |
| Income (loss) before federal income taxes  |   | $      | 64,266  |   |   | $      | (17,399 | )      |   | $ | 79,652 |   |

|                                                      |   | 2009   |       |   | 2008   |   |       | 2007   |   |
|-----------------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
|                                                      |   |   |       |   |   |   |       |   |   |
| Average share outstanding for basic earnings per share    |   |   | 14,741,487 |   |   |   | 15,080,149 |   |   |   | 15,175,074 |   |
|                                                      |   |   |       |   |   |   |       |   |   |   |   |   |
| Dilutive effect of options                                |   |   | 11,992     |   |   |   | -          |   |   |   | 14,269 |   |
|                                                      |   |   |       |   |   |   |       |   |   |   |   |   |
| Average shares outstanding for diluted earnings per share |   |   | 14,753,479 |   |   |   | 15,080,149 |   |   |   | 15,189,343 |   |

----

| Balance at December 31, 2008                        |   | $      | 3,221 |   |
|-----------------------------------------------------|--------|--------|-------|--------|
|    Post closing purchase price adjustment |   |   | (69   | )      |
| Balance at December 31, 2009                        |   | $      | 3,152 |   |

----

| Description              |   | Maturity      |   | 2009   |   |   | 2008   |   |   | Interest Rate |   |
|--------------------------|--------|---------------|--------|--------|--------|--------|--------|--------|--------|---------------|--------|
|                     |   |          |   |   |   |   |   |   |   |          |   |
| Revolving line of credit |   | June 23, 2011 |   | $      | 5,000  |   |   |   | 5,000  |          |   |   | 0.73 | % |
| Revolving line of credit |   | June 23, 2011 |   |   | 5,000  |   |   |   | 4,000  |          |   |   | 0.78 | % |
| Total Debt               |   |          |   | $      | 10,000 |   |   | $      | 9,000  |          |   |   |   |   |

| Description                                                      |   | Total  |    |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
|------------------------------------------------------------------|--------|--------|---------|--------|---------|--------|--------|---------|--------|--------|---------|--------|
|                                                             |   |   |    |   |    |   |   |    |   |   |    |   |
| U.S. government obligations                                      |   | $      | 54,632  |   |    | $      | -      |    |   | $      | 54,632  |   |   | $ | - |   |
| Government sponsored entities                                    |   |   | 5,883   |   |    |   | -      |    |   |   | 5,883   |   |   |   | - |   |
| Residential mortgage-backed securities                           |   |   | 48,377  |   |    |   | -      |    |   |   | 48,377  |   |   |   | - |   |
| Commercial mortgage-backed securities                            |   |   | 5,652   |   |    |   | -      |    |   |   | 5,652   |   |   |   | - |   |
| Obligations of states and                                        |   |   |    |   |    |   |   |    |   |   |    |   |   |   |   |   |
|        political subdivisions |   |   | 185,469 |   |    |   | -      |    |   |   | 185,469 |   |   |   | - |   |
| Corporate securities                                             |   |   | 72,185  |   |    |   | -      |    |   |   | 57,298  |   |   |   | 14,887 |   |
| Foreign government obligations                                   |   |   | 7,724   |   |    |   | -      |    |   |   | 7,724   |   |   |   | - |   |
|       Total fixed maturities       |   | $      | 379,922 |   |    |   | -      |    |   |   | 365,035 |   |   |   | 14,887 |   |
| Equity securities                                                |   |   | 85,886  |   |    |   | 85,886 |    |   |   | -       |   |   |   | - |   |
| Short term                                                       |   |   | 3,703   |   |    |   | 3,600  |    |   |   | 103     |   |   |   | - |   |
| Cash equivalents                                                 |   |   | 83,138  |   |    |   | -      |    |   |   | 83,138  |   |   |   | - |   |
|                                                             |   | $      | 552,649 |   |    | $      | 89,486 |    |   | $      | 448,276 |   |   | $ | 14,887 |   |

----

| Description                                                      |   | Total  |    |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
|------------------------------------------------------------------|--------|--------|---------|--------|---------|--------|--------|---------|--------|--------|---------|--------|
|                                                             |   |   |    |   |    |   |   |    |   |   |    |   |
| U.S. government obligations                                      |   | $      | 21,888  |   |    | $      | -      |    |   | $      | 21,888  |   |   | $ | - |   |
| Government sponsored entities                                    |   |   | 4,672   |   |    |   | -      |    |   |   | 4,672   |   |   |   | - |   |
| Residential mortgage-backed securities                           |   |   | 10,248  |   |    |   | -      |    |   |   | 10,248  |   |   |   | - |   |
| Commercial mortgage-backed securities                            |   |   | 3,242   |   |    |   | -      |    |   |   | 3,242   |   |   |   | - |   |
| Obligations of states and                                        |   |   |    |   |    |   |   |    |   |   |    |   |   |   |   |   |
|        political subdivisions |   |   | 267,152 |   |    |   | -      |    |   |   | 267,152 |   |   |   | - |   |
| Corporate securities                                             |   |   | 66,084  |   |    |   | -      |    |   |   | 51,103  |   |   |   | 14,981 |   |
| Foreign government obligations                                   |   |   | 5,975   |   |    |   | -      |    |   |   | 5,975   |   |   |   | - |   |
|       Total fixed maturities       |   | $      | 379,261 |   |    |   | -      |    |   |   | 364,280 |   |   |   | 14,981 |   |
| Equity securities                                                |   |   | 63,200  |   |    |   | 63,200 |    |   |   | -       |   |   |   | - |   |
| Short term                                                       |   |   | 33,820  |   |    |   | 2,964  |    |   |   | 30,856  |   |   |   | - |   |
| Cash equivalents                                                 |   |   | 24,327  |   |    |   | -      |    |   |   | 24,327  |   |   |   | - |   |
|                                                             |   | $      | 500,608 |   |    | $      | 66,164 |    |   | $      | 419,463 |   |   | $ | 14,981 |   |

| Level Input: |    | Input Definition:                                                                                                                                                  |
|-------------------|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Level 1           |    | Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.                                                |
| Level 2           |    | Inputs other than quoted prices included in Level 1 that are observable for the asset or liability through corroboration with market data at the measurement date. |
| Level 3           |    | Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. |

|                                            |   | 2009   |   |   | 2008   |   |
|-------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Beginning of period balance                     |   | $      | 14,981 |   |   | $      | - |   |
| Total gain or losses (realized or unrealized)   |   |   |   |   |   |   |   |   |
| Included in earnings (or changes in net assets) |   |   | 231    |   |   |   | - |   |
| Included in other comprehensive income          |   |   | 268    |   |   |   | - |   |
| Purchases, issuances, and settlements           |   |   | (593   | )      |   |   | 14,981 |   |
| Transfers in and/or out of Level 3              |   |   | -      |   |   |   | - |   |
| December 31 balance                             |   | $      | 14,887 |   |   | $      | 14,981 |   |

----

| Note P - Quarterly Results of Operations (Unaudited)    |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |    |   |
|---------------------------------------------------------|--------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|---------|--------|
|                                                    |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |    |   |   |   |   |   |
| Quarterly results of operations are as follows:         |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |    |   |   |   |   |
|                                                    | Results by Quarter |   |
|                                                    | 2009               |   | 2008   |   |
|                                                    | 1st                |   |   | 2nd    |   |   | 3rd    |   |   | 4th    |   | 1st    |   |   | 2nd    |   |    | 3rd    |   |   | 4th |   |
|                                                    |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |    |   |   |   |   |   |
| Net premiums earned                                     | $                  | 44,164 |   |   | $      | 41,042 |   |   | $      | 45,077 |   |   | $      | 51,017 |   | $      | 45,087  |   |   | $ | 46,902 |   |   | $ | 43,579 |   |   | $ | 46,730 |   |
| Net investment income                                   |               | 3,259  |   |   |   | 3,478  |   |   |   | 3,256  |   |   |   | 3,978  |   |   | 4,200   |   |   |   | 4,195 |   |   |   | 4,372 |   |   |   | 4,296 |   |
| Net gains (losses) on investments                       |               | (1,232 | )      |   |   | 12,494 |   |   |   | 15,441 |   |   |   | 4,113  |   |   | (13,575 | )      |   |   | (2,960 | ) |   |   | (15,965 | ) |   |   | (15,249 | ) |
| Losses and loss expenses incurred                       |               | 23,888 |   |   |   | 22,087 |   |   |   | 26,714 |   |   |   | 26,662 |   |   | 29,461  |   |   |   | 26,462 |   |   |   | 30,427 |   |   |   | 29,402 |   |
|                                                    |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                       |               | 5,441  |   |   |   | 14,125 |   |   |   | 14,340 |   |   |   | 10,896 |   |   | (4,608  | )      |   |   | 6,307 |   |   |   | (7,270 | ) |   |   | (2,142 | ) |
|                                                    |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Net income (loss) per share - diluted | $                  | .37    |   |   | $      | .96    |   |   | $      | .97    |   |   | $      | .74    |   | $      | (.30    | )      |   | $ | .41 |   |   | $ | (.48 | ) |   | $ | (.14 | ) |

|                            |   |   |   |
|---------------------------------|--------|--------|--------|
| 2010                            |   | $      | 1,509  |   |
| 2011                            |   |   | 1,530  |   |
| 2012                            |   |   | 1,501  |   |
| 2013                            |   |   | 1,022  |   |
| 2014                            |   |   | 36     |   |
| Thereafter                      |   |   | -      |   |
| Total minimum payments required |   | $      | 5,598  |   |

----

----

----

|  Name           |  Age |  Title                      | Served inSuch Capacity Since |
|----------------------|-----------|----------------------------------|------------------------------|
|  Gary W. Miller |  69  |  Chairman and CEO           |  1997                   |
| Joseph J. DeVito     | 58        | President and COO                | 2007 (1)                     |
| G. Patrick Corydon   | 61        | Executive Vice President and CFO | 1979 (2)                     |
| Craig C. Morfas      | 51        | Vice President and Secretary     | 2008 (3)                     |
| Mark L. Bonini       | 51        | Vice President                   | 2001                         |

|   | (1)  Mr. DeVito was elected President and Chief Operating Officer in February, 2007.  He was elected Executive Vice President in 2001 and has served in similar capacity since 1986. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2)  Mr. Corydon was elected Executive Vice President in 2008. |
|--------|--------------------------------------------------------------------------|

|   | (3)  Mr. Morfas was elected Vice President of the Company in 2007 and Secretary of the Company in 2008. |
|--------|-------------------------------------------------------------------------------------------------------------------|

----

|   | (a) | 1.  List of Financial Statements--The following consolidated financial statements of the registrant and its subsidiaries (including the Report of Independent Registered Public Accounting Firm) are submitted in Item 8 of this report. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Consolidated Balance Sheets - December 31, 2009 and 2008                                                       |
|----------------------------------------------------------------------------------------------------------------|
| Statements of Operations - Years ended December 31, 2009, 2008 and 2007                                        |
| Consolidated Statements of Changes in Equity Other Than Capital - Years ended December 31, 2009, 2008 and 2007 |
| Consolidated Statements of Cash Flows - Years ended December 31, 2009, 2008 and 2007                           |
| Notes to Consolidated Financial Statements                                                                     |

|   | 2. | List of Financial Statement Schedules--The following consolidated financial statement schedules of Baldwin & Lyons, Inc. and subsidiaries are included in Item 15(d): |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Pursuant to Article 7:                                                                  |
|-----------------------------------------------------------------------------------------|
| Schedule I--Summary of Investments--Other than Investments in Related Parties           |
| Schedule II--Condensed Financial Information of the Registrant                          |
| Schedule III--Supplementary Insurance Information                                       |
| Schedule IV--Reinsurance                                                                |
| Schedule VI--Supplemental Information Concerning Property/Casualty Insurance Operations |

----

| Number & Caption fromExhibit Table ofItem 601 of Regulation S-K  |   Exhibit Number and Description                                                                                                                                                                                                                  |
|---------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3) (Articles of Incorporation & By Laws)                             | EXHIBIT 3(i) –Articles of Incorporation of Baldwin & Lyons, Inc., as amended (Incorporated as an exhibit by reference to Exhibit 3(a) to the Company's Annual Report on Form 10-K for the year ended December 31, 1986)                      |
|                                                                      | EXHIBIT 3(ii)--By-Laws of Baldwin & Lyons, Inc., as restated (Incorporated as an exhibit by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K dated May 4, 2004)                                                         |
| (10) (Material Contracts)                                                 | EXHIBIT 10(a)-- 1981 Employee Stock Purchase Plan (Incorporated as an exhibit by reference to Exhibit A to the Company's definitive Proxy Statement for its Annual Meeting held May 5, 1981)                                                           |
|                                                                      | EXHIBIT 10(b)--Baldwin & Lyons, Inc. Employee Discounted Stock Option Plan  (Incorporated as an exhibit by reference to Appendix A to the Company’s definitive Proxy Statement for its Annual Meeting held May 2, 1989)            |
|                                                                      | EXHIBIT 10(c)--Baldwin & Lyons, Inc. Deferred Directors Fee Option Plan (Incorporated as an exhibit by reference to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the year ended December 31, 1989)                                |
|                                                                      | EXHIBIT 10(d)--Baldwin & Lyons, Inc. Amended Employee Discounted Stock OptionPlan (Incorporated as an exhibit by reference to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992)                      |
|                                                                      | EXHIBIT 10(e)--Baldwin & Lyons, Inc. Restated Employee Discounted Stock Option Plan.  (Incorporated as an exhibit by reference to Exhibit 10(f) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997)  |
|                                                                      | EXHIBIT 10(f)--Baldwin & Lyons, Inc. Executive Incentive Bonus Plan (Incorporated as an exhibit by reference to the Company's definitive Proxy Statement for its Annual Meeting held May 5, 2009)                                                  |
|                                                                      | EXHIBIT 10(g)--Baldwin & Lyons, Inc. Managing General Agency Agreement with Paladin Catastrophe Management LLC                                                                                                                                     |

----

|    Number & Caption fromExhibit Table ofItem 601 of Regulation S-K  |      Exhibit Number and Description                                                                                                                                                                    |
|---------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  (14) (Code of ethics)                                                                 |  EXHIBIT 14--Code of Business Conduct of Baldwin & Lyons, Inc.  (Incorporated asan exhibit by reference to Exhibit 14 to the Company’s AnnualReport on Form 10-K for the year ended December 31, 2005) |
|  (21) (Subsidiaries of the registrant)                                                 |  EXHIBIT 21­­--Subsidiaries of Baldwin & Lyons, Inc.                                                                                                                                                         |

| (23) (Consents of experts and counsel) | EXHIBIT 23--Consent of Ernst & Young LLP                                                             |
|----------------------------------------|---------------------------------------------------------------------------------------------------------------|
| (24) (Powers of Attorney)              | EXHIBIT 24--Powers of Attorney for certain Officers and Directors                                        |
| (31) (Certification)                   | EXHIBIT 31.1--Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act                     |
|                                   | EXHIBIT 31.2--Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act                     |
| (32) (Certification)                   | EXHIBIT 32.1--Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act and 18 U.S.C. 1350  |
|                                   | EXHIBIT 32.2--Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act and 18 U.S.C. 1350  |

| (b) | A report on Form 8-K was filed by the Company in the fourth quarter of 2009 to announce its third quarter earnings press release. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------|

| (c) | Exhibits.  The response to this portion of Item 15 is submitted as a separate section of this report. |
|-----|-----------------------------------------------------------------------------------------------------------------|

| (d) | Financial Statement Schedules.  The response to this portion of Item 15 is submitted on pages 68 through 74 of this report. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------|

----

| SCHEDULE I -- SUMMARY OF INVESTMENTS-                                                                                                                                                                                                                                                               |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| OTHER THAN INVESTMENTS IN RELATED PARTIES                                                                                                                                                                                                                                                           |   |
|                                                                                                                                                                                                                                                                                                |   |   |   |   |   |   |   |   |   |
| Form 10-K - Year Ended December 31, 2009                                                                                                                                                                                                                                                            |   |
|                                                                                                                                                                                                                                                                                                |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                |   |   |   |   |   |   |   |   |   |
| Baldwin & Lyons, Inc. and Subsidiaries                                                                                                                                                                                                                                                          |   |
|                                                                                                                                                                                                                                                                                                |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                |   |   |   |   |   |   |   |   |   |
| Column A                                                                                                                                                                                                                                                                                            |   | Column B |   |   | Column C |   |   | Column D |   |
| (Dollars in thousands)                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                |   |   |   |   |   |   |   | Amount At |   |
|                                                                                                                                                                                                                                                                                                |   |   |   |   |   |   |   | Which Shown |   |
|                                                                                                                                                                                                                                                                                                |   |   |   |   | Fair |   |   | In The Balance |   |
| Type of Investment                                                                                                                                                                                                                                                                                  |   | Cost |   |   | Value |   |   | Sheet (A) |   |
|                                                                                                                                                                                                                                                                                                |   |   |   |   |   |   |   |   |   |
| Fixed Maturities:                                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |   |
|   Bonds:                                                                                                                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |
|     U.S. government obligations                                                                                                                                                                                                                                                 |   | $ | 54,615 |   |   | $ | 54,632 |   |   | $ | 54,632 |   |
|     Government sponsored entities                                                                                                                                                                                                                                               |   |   | 5,825 |   |   |   | 5,883 |   |   |   | 5,883 |   |
|     Mortgage-backed securities                                                                                                                                                                                                                                                  |   |   | 53,723 |   |   |   | 54,029 |   |   |   | 54,029 |   |
|     Obligations of states and                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
|       political subdivisions                                                                                                                                                                                                                                          |   |   | 182,536 |   |   |   | 185,469 |   |   |   | 185,469 |   |
|     Foreign governments                                                                                                                                                                                                                                                         |   |   | 7,695 |   |   |   | 7,724 |   |   |   | 7,724 |   |
|     All other corporate bonds                                                                                                                                                                                                                                                   |   |   | 70,791 |   |   |   | 72,185 |   |   |   | 72,185 |   |
|           Total fixed maturities                                                                                                                                                                                                                  |   |   | 375,185 |   |   |   | 379,922 |   |   |   | 379,922 |   |
|                                                                                                                                                                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
| Equity Securities:                                                                                                                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
|   Common Stocks:                                                                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
|     Industrial, miscellaneous and all other                                                                                                                                                                                                                                     |   |   | 41,568 |   |   |   | 85,886 |   |   |   | 85,886 |   |
|          Total equity securities                                                                                                                                                                                                                       |   |   | 41,568 |   |   |   | 85,886 |   |   |   | 85,886 |   |
|                                                                                                                                                                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
| Limited partnerships                                                                                                                                                                                                                                                                                |   |   | 69,436 |   |   |   | 69,436 |   |   |   | 69,436 |   |
|                                                                                                                                                                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
| Short-term:                                                                                                                                                                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|   Certificates of deposit                                                                                                                                                                                                                                                                 |   |   | 3,600 |   |   |   | 3,600 |   |   |   | 3,600 |   |
|   Commercial paper                                                                                                                                                                                                                                                                        |   |   | 103 |   |   |   | 103 |   |   |   | 103 |   |
|       Total short-term and other                                                                                                                                                                                                                                      |   |   | 3,703 |   |   |   | 3,703 |   |   |   | 3,703 |   |
|          Total investments                                                                                                                                                                                                                             |   | $ | 489,892 |   |   | $ | 538,947 |   |   | $ | 538,947 |   |
|                                                                                                                                                                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
| (A) All securities listed are considered available-for-sale and, accordingly, are presented at fair value in the financial statements. Investments presented above do not include $83,138 of money market funds classified with cash and cash equivalents in the balance sheet. |   |

----

| SCHEDULE II                                                             |   |
|-------------------------------------------------------------------------|--------|
| CONDENSED FINANCIAL INFORMATION OF REGISTRANT                           |   |
|                                                                    |   |   |   |   |   |   |
| Form 10-K                                                               |   |
|                                                                    |   |   |   |   |   |   |
|                                                                    |   |   |   |   |   |   |
| Baldwin & Lyons, Inc.                                               |   |
|                                                                    |   |   |   |   |   |   |
| Condensed Balance Sheets                                                |   |   |   |   |   |   |
|                                                                    |   | December 31 |   |
|                                                                    |   | 2009 |   |   | 2008 |   |
| Assets                                                                  |   |   |   |   |   |   |
| Investment in subsidiaries                                              |   | $ | 376,447 |   |   | $ | 334,087 |   |
| Due from affiliates                                                     |   |   | 4,260 |   |   |   | 2,446 |   |
| Investments other than subsidiaries:                                    |   |   |   |   |   |   |   |   |
|    Fixed maturities                                      |   |   | 10,679 |   |   |   | 11,243 |   |
|    Limited partnerships                                  |   |   | 809 |   |   |   | 915 |   |
|                                                                    |   |   | 11,488 |   |   |   | 12,158 |   |
| Cash and cash equivalents                                               |   |   | 8,182 |   |   |   | 5,727 |   |
| Accounts receivable                                                     |   |   | 5,744 |   |   |   | 6,696 |   |
| Notes receivable from employees                                         |   |   | 2,054 |   |   |   | 2,199 |   |
| Other assets                                                            |   |   | 5,894 |   |   |   | 4,467 |   |
| Total assets                                                            |   | $ | 414,069 |   |   | $ | 367,780 |   |
|                                                                    |   |   |   |   |   |   |   |   |
| Liabilities and shareholders' equity                                    |   |   |   |   |   |   |   |   |
|                                                                    |   |   |   |   |   |   |   |   |
| Liabilities:                                                            |   |   |   |   |   |   |   |   |
|    Premiums payable                                      |   | $ | 15,019 |   |   | $ | 14,009 |   |
|    Deposits from insureds                                |   |   | 12,863 |   |   |   | 12,041 |   |
|    Notes payable to bank                                 |   |   | 10,000 |   |   |   | 9,000 |   |
|    Current payable federal income taxes                  |   |   | 693 |   |   |   | 129 |   |
|    Other liabilities                                     |   |   | 2,551 |   |   |   | 2,534 |   |
|                                                                    |   |   | 41,126 |   |   |   | 37,713 |   |
|                                                                    |   |   |   |   |   |   |   |   |
| Shareholders' equity:                                                   |   |   |   |   |   |   |   |   |
|    Common stock:                                         |   |   |   |   |   |   |   |   |
|       Class A                             |   |   | 112 |   |   |   | 112 |   |
|       Class B                             |   |   | 517 |   |   |   | 519 |   |
|       Additional paid-in capital          |   |   | 46,337 |   |   |   | 46,312 |   |
|       Unrealized net gains on investments |   |   | 31,886 |   |   |   | 19,410 |   |
|       Retained earnings                   |   |   | 294,091 |   |   |   | 263,714 |   |
|                                                                    |   |   | 372,943 |   |   |   | 330,067 |   |
| Total liabilities and shareholders' equity                              |   | $ | 414,069 |   |   | $ | 367,780 |   |
|                                                                    |   |   |   |   |   |   |   |   |
|                                                                    |   |   |   |   |   |   |   |   |
|                                                                    |   |   |   |   |   |   |   |   |
|                                                                    |   |   |   |   |   |   |   |   |
| See notes to condensed financial statements                             |   |   |   |   |   |   |   |   |

----

| SCHEDULE II                                                  |   |
|--------------------------------------------------------------|--------|
| CONDENSED FINANCIAL INFORMATION OF REGISTRANT                |   |
|                                                         |   |   |   |   |   |   |   |   |   |
| Form 10-K                                                    |   |
|                                                         |   |   |   |   |   |   |   |   |   |
|                                                         |   |   |   |   |   |   |   |   |   |
| Baldwin & Lyons, Inc.                                    |   |
|                                                         |   |   |   |   |   |   |   |   |   |
| Condensed Statements of Operations                           |   |   |   |   |   |   |   |   |   |
|                                                         |   | Year Ended December 31 |   |
|                                                         |   | 2009 |   |   | 2008 |   |   | 2007 |   |
| Revenue:                                                     |   |   |   |   |   |   |   |   |   |
|    Commissions and service fees               |   | $ | 19,182 |   |   | $ | 18,539 |   |   | $ | 16,514 |   |
|    Dividends from subsidiaries                |   |   | 15,000 |   |   |   | 13,000 |   |   |   | 20,000 |   |
|    Net investment income                      |   |   | 506 |   |   |   | 476 |   |   |   | 1,082 |   |
|    Net realized gains (losses) on investments |   |   | 37 |   |   |   | 543 |   |   |   | (58 | ) |
|    Other                                      |   |   | 92 |   |   |   | 657 |   |   |   | 1,576 |   |
|                                                         |   |   | 34,817 |   |   |   | 33,215 |   |   |   | 39,114 |   |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Expenses:                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
|    Salary and related items                   |   |   | 14,145 |   |   |   | 12,946 |   |   |   | 13,337 |   |
|    Other                                      |   |   | 5,274 |   |   |   | 5,120 |   |   |   | 3,632 |   |
|                                                         |   |   | 19,419 |   |   |   | 18,066 |   |   |   | 16,969 |   |
| Income before federal income taxes                           |   |   |   |   |   |   |   |   |   |   |   |   |
| and equity in undistributed                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| income of subsidiaries                                       |   |   | 15,398 |   |   |   | 15,149 |   |   |   | 22,145 |   |
| Federal income tax (benefit)                                 |   |   | (496 | ) |   |   | 671 |   |   |   | 687 |   |
|                                                         |   |   | 15,894 |   |   |   | 14,478 |   |   |   | 21,458 |   |
| Equity in undistributed income (loss)                        |   |   |   |   |   |   |   |   |   |   |   |   |
|    of subsidiaries                            |   |   | 28,908 |   |   |   | (22,191 | ) |   |   | 33,673 |   |
| Net income (loss)                                            |   | $ | 44,802 |   |   | $ | (7,713 | ) |   | $ | 55,131 |   |

----

| SCHEDULE II                                                    |   |
|----------------------------------------------------------------|--------|
| CONDENSED FINANCIAL INFORMATION OF REGISTRANT                  |   |
|                                                           |   |   |   |   |   |   |   |   |   |
| Form 10-K                                                      |   |
|                                                           |   |   |   |   |   |   |   |   |   |
|                                                           |   |   |   |   |   |   |   |   |   |
| Baldwin & Lyons, Inc.                                      |   |
|                                                           |   |   |   |   |   |   |   |   |   |
| Condensed Statements of Cash Flows                             |   |   |   |   |   |   |   |   |   |
|                                                           |   | Year Ended December 31 |   |
|                                                           |   | 2009 |   |   | 2008 |   |   | 2007 |   |
|                                                           |   |   |   |   |   |   |   |   |   |
| Net cash provided by operating activities                      |   | $ | 18,309 |   |   | $ | 15,072 |   |   | $ | 9,371 |   |
|                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Investing activities:                                          |   |   |   |   |   |   |   |   |   |   |   |   |
|    Purchases of long-term investments           |   |   | (6,803 | ) |   |   | (8,747 | ) |   |   | (9,781 | ) |
|    Sales or maturities of long-term investments |   |   | 7,343 |   |   |   | 7,552 |   |   |   | 9,331 |   |
|    Net sales of short-term investments          |   |   | - |   |   |   | - |   |   |   | 9,890 |   |
|    Decrease in notes receivable from employees  |   |   | 143 |   |   |   | 29 |   |   |   | 110 |   |
|    Distributions from limited partnerships      |   |   | 23 |   |   |   | 833 |   |   |   | 683 |   |
|    Net purchases of property and equipment      |   |   | (2,124 | ) |   |   | (751 | ) |   |   | (2,274 | ) |
|    Purchase of Transport Insurance Agency       |   |   | - |   |   |   | (3,500 | ) |   |   | - |   |
|    Other                                        |   |   | 188 |   |   |   | 73 |   |   |   | 925 |   |
| Net cash provided by (used in) investing activities            |   |   | (1,230 | ) |   |   | (4,511 | ) |   |   | 8,884 |   |
|                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Financing activities:                                          |   |   |   |   |   |   |   |   |   |   |   |   |
|    Dividends paid to shareholders               |   |   | (14,744 | ) |   |   | (15,096 | ) |   |   | (25,062 | ) |
|    Drawing on line of credit                    |   |   | 11,000 |   |   |   | 9,000 |   |   |   | - |   |
|    Repayment on line of credit                  |   |   | (10,000 | ) |   |   | - |   |   |   | - |   |
|    Stock option exercises and other             |   |   | - |   |   |   | - |   |   |   | 2,211 |   |
|    Cost of treasury shares                      |   |   | (880 | ) |   |   | (8,908 | ) |   |   | - |   |
|    Capitalization of subsidiary                 |   |   | - |   |   |   | (1,344 | ) |   |   | - |   |
| Net cash used in financing activities                          |   |   | (14,624 | ) |   |   | (16,348 | ) |   |   | (22,851 | ) |
| Increase (decrease) in cash and cash equivalents               |   |   | 2,455 |   |   |   | (5,787 | ) |   |   | (4,596 | ) |
| Cash and cash equivalents at beginning of year                 |   |   | 5,727 |   |   |   | 11,514 |   |   |   | 16,110 |   |
| Cash and cash equivalents at end of year                       |   | $ | 8,182 |   |   | $ | 5,727 |   |   | $ | 11,514 |   |
|                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| See notes to condensed financial statements                    |   |   |   |   |   |   |   |   |   |   |   |   |

----

| SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION |
|-----------------------------------------------------|
|                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Form 10-K                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Baldwin & Lyons, Inc. and Subsidiaries          |
|                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Dollars in thousands)                              |
|                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Column A                                            |   | Column B |   | Column C |   | Column D |   | Column E |   | Column F |   | Column G |   | Column H |   | Column I |   | Column J |   | Column K |
|                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                |   | As of December 31 |   | Year Ended December 31 |
|                                                |   |   |   | Reserves |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                |   |   |   | for Unpaid |   |   |   | Other |   |   |   |   |   | Benefits, |   | Amortization |   |   |   |   |
|                                                |   | Deferred |   | Claims |   |   |   | Policy |   |   |   |   |   | Claims, |   | of Deferred |   |   |   |   |
|                                                |   | Policy |   | and Claim |   |   |   | Claims and |   | Net |   | Net |   | Losses and |   | Policy |   | Other |   | Net |
|                                                |   | Acquisition |   | Adjustment |   | Unearned |   | Benefits |   | Premium |   | Investment |   | Settlement |   | Acquisition |   | Operating |   | Premiums |
| Segment                                             |   | Costs |   | Expenses |   | Premiums |   | Payable |   | Earned |   | Income |   | Expenses |   | Costs |   | Expenses |   | Written |
|                                                |   |   |   |   |   |   |   |   |   |   |   | (A) |   | (A) |   |   |   | (A)  (B) |   |   |
| Property/Casualty                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Insurance                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     2009                        |   | $ 4,905 |   | $ 359,031 |   | $ 25,912 |   |      --- |   | $ 181,300 |   | $ 13,971 |   | $ 99,351 |   | $ 28,827 |   | $ 18,442 |   | $ 190,028 |
|                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     2008                        |   | 2,326 |   | 389,558 |   | 17,183 |   |      --- |   | 182,299 |   | 17,063 |   | 115,752 |   | 23,437 |   | 16,661 |   | 176,814 |
|                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     2007                        |   | 3,193 |   | 378,616 |   | 22,678 |   |       --- |   | 179,065 |   | 19,595 |   | 107,781 |   | 20,985 |   | 19,644 |   | 169,587 |

----

| SCHEDULE IV -- REINSURANCE                                                                                                                           |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Form 10-K                                                                                                                                            |   |
|                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Baldwin & Lyons, Inc. and Subsidiaries                                                                                                           |   |
|                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Dollars in thousands)                                                                                                                               |   |
|                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Column A                                                                                                                                             |   | Column B |   |   | Column C |   |   | Column D |   |   | Column E |   |   | Column F |   |
|                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   | % of |   |
|                                                                                                                                                 |   |   |   |   | Ceded |   |   | Assumed |   |   |   |   |   | Amount |   |
|                                                                                                                                                 |   | Direct |   |   | to Other |   |   | from Other |   |   | Net |   |   | Assumed to |   |
|                                                                                                                                                 |   | Premiums |   |   | Companies |   |   | Companies |   |   | Amount |   |   | Net |   |
|                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Premiums Earned -                                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Property/casualty insurance:                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Years Ended December 31:                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                         2009 |   | $ | 200,341 |   |   | $ | 60,818 |   |   | $ | 41,777 |   |   | $ | 181,300 |   |   |   | 22.2 |   |
|                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                         2008 |   |   | 188,285 |   |   |   | 46,514 |   |   |   | 40,528 |   |   |   | 182,299 |   |   |   | 19.3 |   |
|                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                         2007 |   |   | 185,781 |   |   |   | 40,094 |   |   |   | 33,378 |   |   |   | 179,065 |   |   |   | 16.0 |   |

----

| SCHEDULE VI--SUPPLEMENTAL INFORMATION                                                                                                                                                                   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| CONCERNING PROPERTY/CASUALTY INSURANCE OPERATIONS                                                                                                                                                       |   |
|                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Form 10-K                                                                                                                                                                                               |   |
|                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Baldwin & Lyons, Inc. and Subsidiaries                                                                                                                                                              |   |
|                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Dollars in thousands)                                                                                                                                                                                  |   |
|                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Column A                                                                                                                                                                                                |   | Column B |   | Column C |   | Column D |   | Column E |   | Column F |   | Column G |   | Column H |   | Column I |   |   | Column J |   |   | Column K |   |
|                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                    |   | As of December 31 |   | Year Ended December 31 |   |
|                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                    |   |   |   | Reserves |   |   |   |   |   |   |   |   |   | Claims and Claim |   | Amortiza- |   |   |   |   |   |   |   |
|                                                                                                                                                                                                    |   |   |   | for Unpaid |   | Discount, |   |   |   |   |   |   |   | Adjustment Expenses |   | tion of |   |   |   |   |   |   |   |
|                                                                                                                                                                                                    |   | Deferred |   | Claims |   | if any |   |   |   |   |   |   |   | Incurred Related to |   | Deferred |   |   | Paid Claims |   |   |   |   |
| AFFILIATION                                                                                                                                                                                             |   | Policy |   | and Claim |   | Deducted |   |   |   |   |   | Net |   | (1) |   | (2) |   | Policy |   |   | and Claim |   |   | Net |   |
| WITH                                                                                                                                                                                                    |   | Acquisi- |   | Adjustment |   | in |   | Unearned |   | Earned |   | Investment |   | Current |   | Prior |   | Acquisition |   |   | Adjustment |   |   | Premiums |   |
| REGISTRANT                                                                                                                                                                                              |   | tion Costs |   | Expenses |   | Column C |   | Premiums |   | Premiums |   | Income |   | Year |   | Years |   | Costs |   |   | Expenses |   |   | Written |   |
|                                                                                                                                                                                                    |   |   |   |   |   |  (A) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated Property/Casualty Subsidiaries:                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 2009                                                                                                                                                                                                    |   | $ | 4,905 |   | $ | 359,031 |   | $ | 6,656 |   | $ | 25,912 |   | $ | 181,300 |   | $ | 13,971 |   | $ | 108,935 |   | $ | (9,584 | ) | $ | 28,827 |   |   | $ | 126,079 |   |   | $ | 190,028 |   |
| 2008                                                                                                                                                                                                    |   |   | 2,326 |   |   | 389,558 |   |   | 5,342 |   |   | 17,183 |   |   | 182,299 |   |   | 17,063 |   |   | 132,829 |   |   | (17,077 | ) |   | 23,437 |   |   |   | 128,619 |   |   |   | 176,814 |   |
| 2007                                                                                                                                                                                                    |   |   | 3,193 |   |   | 378,616 |   |   | 5,591 |   |   | 22,678 |   |   | 179,065 |   |   | 19,595 |   |   | 129,065 |   |   | (21,284 | ) |   | 20,985 |   |   |   | 112,776 |   |   |   | 169,587 |   |
|                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (A) Loss reserves on certain reinsurance assumed and permanent total disability worker's compensation claims have been discounted to present value using pretax interest rates not exceeding 3.5%. |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| March 11, 2010 | By /s/ Gary W. Miller                                    |
|----------------|----------------------------------------------------------|
|           | Gary W. Miller,Chairman and CEO(Chief Executive Officer) |

| March 11, 2010 | By /s/ Gary W. Miller                                    |
|----------------|----------------------------------------------------------|
|           | Gary W. Miller,Chairman and CEO(Chief Executive Officer) |

| March 11, 2010 | By /s/ G. Patrick Corydon                                                                       |
|----------------|-------------------------------------------------------------------------------------------------|
|           | G. Patrick Corydon,Executive Vice President and CFO(Principal Financial and Accounting Officer) |

| March 11, 2010 | By /s/ Joseph DeVito                                          |
|----------------|---------------------------------------------------------------|
|           | Joseph DeVito,Director, President and Chief Operating Officer |

| March 11, 2010 | By /s/ Stuart D. Bilton(*) |
|----------------|----------------------------|
|           | Stuart D. Bilton,Director  |

| March 11, 2010 | By /s/ Otto N. Frenzel IV(*) |
|----------------|------------------------------|
|           | Otto N. Frenzel IV,Director  |

| March 11, 2010 | By /s/ John M. O’Mara(*) |
|----------------|--------------------------------|
|           | John M. O'Mara,Director        |

----

| March 11, 2010 | By /s/ Thomas H. Patrick(*) |
|----------------|-----------------------------|
|           | Thomas H. Patrick,Director  |

| March 11, 2010 | By /s/ John Pigott(*) |
|----------------|-----------------------|
|           | John Pigott,Director  |

| March 11, 2010 | By /s/ Kenneth D. Sacks(*) |
|----------------|----------------------------|
|           | Kenneth D. Sacks,Director  |

| March 11, 2010 | By /s/ Nathan Shapiro(*) |
|----------------|--------------------------|
|           | Nathan Shapiro,Director  |

| March 11, 2010 | By /s/ Norton Shapiro(*) |
|----------------|--------------------------|
|           | Norton Shapiro,Director  |

| March 11, 2010 | By /s/ Robert Shapiro(*) |
|----------------|--------------------------|
|           | Robert Shapiro,Director  |

| March 11, 2010 | By /s/ Steven A. Shapiro(*) |
|----------------|-----------------------------|
|           | Steven A. Shapiro,Director  |

| March 11, 2010 | By /s/ John D. Weil(*) |
|----------------|------------------------|
|           | John D. Weil,Director  |

----

| ITEM 15(c)--CERTAIN EXHIBITS |
|------------------------------|

----

|  Exhibit No.                                                                                                                                                                                                                              | Begins on sequential page number of Form 10-K  |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------|
| EXHIBIT 3(i)--Articles of Incorporation of Baldwin & Lyons, Inc. as amended (Incorporated as an exhibit by reference to Exhibit 3(a) to the Company's Annual Report on Form10-K for the year ended December 31, 1986)                      |    N/A                          |
| EXHIBIT 3(ii)--By-Laws of Baldwin & Lyons, Inc., as restated (Incorporated as an exhibit byreference to Exhibit 99.1 to the Company's Current Report on Form 8-K dated May 4, 2004)                                                        |    N/A                          |
| EXHIBIT 10(a)--1981 Employees Stock Purchase Plan (Incorporated as an exhibit by  reference to Exhibit A to the Company's definitive Proxy Statement for its Annual Meetingheld May 5, 1981)                                    |    N/A                               |
| EXHIBIT 10(b)--Baldwin & Lyons, Inc. Employee Discounted Stock Option Plan (Incorporated as an exhibit by reference to Appendix A to the Company's definitive Proxy Statement for its Annual Meeting held May 2, 1989)                |    N/A                               |
| EXHIBIT 10(c)--Baldwin & Lyons, Inc. Deferred Directors Fee Option Plan (Incorporated as an  exhibit by reference to Exhibit 10(f) to the Company's Annual Report on Form 10-Kfor the year ended December 31, 1989)              |    N/A                          |
| EXHIBIT 10(d)--Baldwin & Lyons, Inc. Amended Employee Discounted Stock Option Plan (Incorporated  as an exhibit by reference to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the year ended December 31, 1989)  |    N/A                          |
| EXHIBIT 10(e)--Baldwin & Lyons, Inc. Restated Employee Discounted Stock Option Plan (Incorporated  as an exhibit by reference to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the year ended December 31, 1997) |    N/A                          |
| EXHIBIT 10(f)--Baldwin & Lyons, Inc. Executive Incentive Bonus Plan (Incorporated as an exhibit by reference to the Company's definitive Proxy Statement for its Annual Meeting held May 5, 2009)                                     |   N/A                                |
| EXHIBIT 10(g)--Baldwin & Lyons, Inc. Managing General Agency Agreement with Paladin Catastrophe Management LLC                                                                                                                        |  filed electronically herewith                 |

----

| INDEX TO EXHIBITS (CONTINUED)                                                                                                                                                                       |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  Exhibit No.                                                                                                                                                                                   | Begins on sequential page number of Form 10-K  |
| EXHIBIT 14--Code of Business Conduct, as amended May 3, 2005 (Incorporated as an exhibit byreference to Exhibit 14 to the Company's Annual Report on Form 10-K for the yearended December 31, 2005) |    N/A  |
| EXHIBIT 21--Subsidiaries of Baldwin & Lyons, Inc.                                                                                                                                          |  filed electronically herewith |
| EXHIBIT 23--Consent of Ernst & Young LLP                                                                                                                                                        |  filed electronically herewith |

| EXHIBIT 24--Powers of Attorney for certain Officers and Directors                                                                             |  filed electronically herewith |
|----------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------|
| EXHIBIT 31.1--Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                 |  filed electronically herewith |
| EXHIBIT 31.2--Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                 |  filed electronically herewith |
| EXHIBIT 32.1--Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  |  filed electronically herewith |
| EXHIBIT 32.2--Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  |  filed electronically herewith |

----