proxy.htm

This Proxy Statement is furnished in connection with the solicitation by Baldwin & Lyons, Inc. (the “Corporation”) of proxies to be voted at the Annual Meeting of Shareholders to be held on Tuesday, May 10, 2011, in accordance with the foregoing notice. The Proxy Statement and accompanying proxy card were mailed to shareholders on or about April 4, 2011.

Any proxy may be revoked by the person giving it at any time before it is voted by delivering to the Secretary of the Corporation a written notice of revocation or a duly executed proxy bearing a later date. Shares represented by a proxy, properly executed and returned to the Corporation, and not revoked, will be voted at the Annual Meeting.

Shares will be voted according to the directions of the shareholder as specified on the proxy. If no directions are given, the proxy will be voted FOR the election of the thirteen directors named as nominees in this Proxy Statement, FOR the ratification of the appointment of Ernst & Young LLP as independent auditors for the Corporation, FOR approval of executive officer compensation and FOR establishing the frequency of shareholder votes to approve executive compensation as annual. Any other matters that may properly come before the meeting will be acted upon by the persons named in the accompanying proxy in accordance with their discretion.

The close of business on March 22, 2011, has been fixed as the record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting and any adjournment thereof. As of March 22, 2011, the Corporation had 2,623,109 shares of Class A Common Stock outstanding and entitled to vote. Each share of Class A Common Stock is entitled to one vote. The vote can be exercised in person or by proxy. There are no other outstanding securities of the Corporation entitled to vote. There will be no cumulative voting for the election of directors.

All expenses of the solicitation of proxies will be paid by the Corporation. Officers, directors and other employees of the Corporation may solicit proxies by telephone or by special calls. The Corporation will also reimburse brokers and other persons holding stock in their names or in the names of their nominees for their expenses in forwarding proxies and proxy material to the beneficial owners of the Corporation’s stock.

Name and Address of Beneficial Owner (1)	Number of Class A Shares And Nature of Beneficial Ownership	Percent of Class A Shares
Shapiro Family Interests (in the aggregate) (2) 799 Central Avenue Highland Park, Illinois 60035 Nathan Shapiro Robert Shapiro Norton Shapiro Steven A. Shapiro	1,252,633 1,134,883 865,259 762,509 755,009	47.8% 43.3% 33.0% 29.1% 28.8%
John D. Weil 200 North Broadway St. Louis, Missouri 63102 (3)	314,055	12.0%

(2)

Information with respect to the Shapiro family interests was obtained from Amendment No. 13 to Schedule 13D dated December 23, 1986, and Forms 4 and 5 as filed by such persons with the Securities and Exchange Commission and delivered to the Corporation, and additional information was provided by Nathan Shapiro. The amounts shown for the individuals are included in the amount shown for the Shapiro family interests in the aggregate. Nathan, Robert and Norton Shapiro are brothers and Steven Shapiro is the son of Nathan Shapiro and nephew of Robert and Norton Shapiro. The Class A shares reported in the above table for the Shapiro family interests include 353,250 shares (13.47%) held of record by the Shapiro Family Limited Partnership – Gift Shares for which Nathan, Robert and Norton are each limited partners and beneficiaries, as well as 178,500 shares (6.81%) held of record by Gelbart Fur Dressers, 41,250 shares (l.57%) held of record by Jay Ell Company and 178,125 shares (6.79%) held of record by Diversified Enterprises, all three of which are Illinois partnerships of which Nathan, Robert and Norton Shapiro are the general partners and 3,884 shares (.15%) held of record by Emlin Cosmetics, Inc., an Illinois corporation of which Nathan, Robert and Norton Shapiro are owners and as to which they share voting and investment powers. These shares, totaling 755,009 Class A shares (28.78%), are included in the listing for individual beneficial ownership of each of the Shapiro Family members listed above.

(3)

Information with respect to the interests of John D. Weil was obtained from Amendment No. 5 to Schedule 13D, dated February 21, 2006, as well as Forms 4 and 5 filed with the Securities and Exchange Commission and delivered to the Corporation. The shares reported include all shares held in the name of family members, family custodianships or family trusts of Mr. Weil. Mr. Weil has reported that he has sole voting and investment powers as to 180,828 Class A shares and shared voting and investment powers as to 133,227 Class A shares, subject to the limitation that Mr. Weil has declared that the Schedule 13D shall not be construed as an admission that he is, for purposes of Sections 13(d) or 13(g) of the Securities Exchange Act, the beneficial owner of the shared securities covered by the Schedule 13D.

Thirteen (13) directors are to be elected to hold office until the 2012 Annual Meeting and until their respective successors are elected and qualified. The Corporation contemplates that all of the nominees will be able to serve. However, if any of the nominees are unable to serve, the persons named as proxies in the accompanying Proxy may vote for another nominee, or nominees according to their best judgment.

All of the nominees are currently directors of the Corporation. None of the nominees are family-related, except Nathan, Robert and Norton Shapiro, who are brothers and Steven Shapiro, who is the son of Nathan Shapiro and nephew of Robert and Norton Shapiro. A majority of the nominees are Independent Directors within the meaning of applicable NASDAQ listing standards, as noted in the table on Page 8.

Mr. Bilton has served as Chairman and C.E.O. of Aston Asset Management, LLC, a diversified investment management firm since 2006. He is also C.E.O. and a director of the Aston Funds, a family of mutual funds. Mr. Bilton was Vice Chairman of ABN AMRO Asset Management (US), Inc. from 2003 until 2006 and President and Chief Executive Officer of ABN AMRO Asset Management (US), Inc. from 2001 to 2003. Mr. Bilton’s extensive experience in investment management and his 23 years of service as a Board member to the Corporation provide him with the background necessary to serve as an effective Board member.

Mr. DeVito was named Chief Executive Officer of the Corporation in December, 2010. Prior thereto, he served as President and Chief Operating Officer of the Corporation since February, 2007 and President and a director of each of the Corporation’s major wholly owned subsidiaries. From 1997 until 2007, Mr. DeVito served as Executive Vice President of the Corporation. Mr. DeVito has been employed by the Corporation since 1981.

Mr. Frenzel has served as Chairman of Kauffman Engineering, Inc., an Indiana based manufacturer of electrical equipment, since 2001 and he was formerly Chairman of Symphony Bank in Indianapolis from 2005 until 2008. Mr. Frenzel’s extensive experience in banking and corporate management provide him with the background necessary to serve as an effective Board member.

Mr. Miller was named Executive Chairman in December, 2010. Prior thereto, he had served as Chairman and Chief Executive Officer of the Corporation since 1997 and was President of the Corporation from 1983 until February, 2007. He is also Chairman of each of the Corporation’s major wholly owned subsidiaries. Mr. Miller has been employed by the Corporation since 1965.

Mr. O’Mara served as a financial consultant, principally for portfolio companies of Citi Group Venture Capital from May 1993 to November 2009. Since then he has been a financial consultant and private investor. He was a director of The Midland Company until its sale in April, 2008. Mr. O’Mara’s extensive experience in investment management, management and directorship with other public companies and his 29 years of service as a Board member to the Corporation provide him with the background necessary to serve as an effective Board member.

Mr. Patrick has been a principal and co-owner of New Vernon Capital LLC, an investment management company since 2004. During 2002 and 2003, he was the Executive Vice Chairman, Finance & Administration of Merrill Lynch & Co., Inc., and prior thereto he held a number of executive positions with Merrill Lynch & Co., Inc. Mr. Patrick also serves as a director of Deere & Company and Computer Sciences Corporation. Mr. Patrick’s extensive experience in investment management, management and directorship with other public companies and his 27 years of service as a Board member to the Corporation provide him with the background necessary to serve as an effective Board member.

Prior to his retirement in 1996, Mr. Pigott served in various capacities at Anixter, Inc., including Director, Vice Chairman, President and Chief Executive Officer. Mr. Pigott’s experience in management and consulting with other public and private companies and his 13 years of service as a Board member to the Corporation provide him with the background necessary to serve as an effective Board member.

Mr. Sacks has served as co-Chief Executive Officer since September, 2010, and as Managing Principal and Chairman since 2003, of JMB Insurance Agency, Inc., an insurance brokerage company located in Chicago. Prior to his affiliation with JMB Insurance Agency, Inc., Mr. Sacks was engaged in real estate portfolio management with JMB Realty Corporation in Chicago and Merrill Lynch Hubbard in New York. Mr. Sack’s executive management experience in the property and casualty insurance industry, provide him with the background necessary to serve as an effective Board member.

Mr. Shapiro served as the President of SF Investments, Inc., a broker/dealer in securities from 1970 until 2009 and continues to serve as investment advisor to SF Investments, Inc. Since December, 1977, Mr. Shapiro has also served as President of New Horizons, Inc., management consultants. Mr. Shapiro’s extensive experience in investment management, management and directorship with other public and private companies and his 31 years of service as a Board member to the Corporation provide him with the background necessary to serve as an effective Board member.

Prior to his retirement in 1999, Mr. Shapiro served as Executive Vice President of National Superior Fur Dressing & Dyeing Co., Inc., a corporation engaged in the processing, cleaning and dressing of furs. Mr. Shapiro’s experience in management and directorship with other companies and his 27 years of service as a Board member to the Corporation provide him with the background necessary to serve as an effective Board member.

Mr. Shapiro has served as President and Chief Executive Officer of Emlin Cosmetics, Inc., a corporation engaged in the manufacture and distribution of cosmetic products, since 1964. Mr. Shapiro’s experience in management and directorship with other companies and his 13 years of service as a Board member to the Corporation provide him with the background necessary to serve as an effective Board member.

Mr. Shapiro has served as Vice President of SF Investments, a broker/dealer in securities since 1991 and has been a member of New Vernon Investment Management, LLC, the General Partner in a series of investment limited partnerships, including the New Vernon Insurance Fund, since 1999. Mr. Shapiro served on the Board of Directors of First Mercury Financial Corporation until its sale in February, 2011. Mr. Shapiro’s extensive experience in investment management, with emphasis on the property and casualty insurance industry, as well as management and directorship with other public and private companies provide him with the background necessary to serve as an effective Board member.

Mr. Weil has served as President of Clayton Management Co., a private investment management firm, since 1973. Mr. Weil also serves as a director of Allied Healthcare Products, Inc. Mr. Weil’s extensive experience in investment management, including several property and casualty insurance companies, as well as management and directorship with other public and private companies and his 13 years of service as a Board member to the Corporation provide him with the background necessary to serve as an effective Board member.

In December 2002 an action initiated by the Securities and Exchange Commission (“Commission”) against Mr. Weil was settled simultaneously with its filing pursuant to a consent agreement entered into by Mr. Weil. The Commission alleged violations of the anti-fraud provisions of the federal securities laws arising in connection with transactions in the securities of Kaye Group, Inc. (“Kaye Group”) involving

material non-public information. Mr. Weil was not an officer or director of Kaye Group. The transaction cited by the Commission in its complaint involved less than one percent of the securities of Kaye Group beneficially owned by Mr. Weil and less than one-tenth of one percent of the Kaye Group’s outstanding shares. Mr. Weil consented to the entry of a final judgment of permanent injunction and other relief, including disgorgement of alleged profits in the amount of $47,000 and civil penalties of a like amount, but did not admit to nor deny any of the allegations in the Commission’s complaint.

All members of the Compensation and Employee Benefits Committee are independent as defined in both the NASDAQ listing standards and the Securities and Exchange Commission standards applicable to compensation committee members. No interlocking relationship exists between any member of the Corporation’s Compensation and Employee Benefits Committee and any member of the compensation committee of any other company, nor has any such interlocking relationship existed in the past.

The executive compensation program is administered by the Compensation and Employee Benefit Committee of the Board of Directors. This Committee oversees the administration of the Corporation’s employee benefits plans and establishes policies relating to compensation of employees. The Committee reviews all aspects of executive compensation and evaluates performance of the Corporation’s executive officers, including the Named Executive Officers of the Corporation. In addition, the Committee reviews, manages, and administers all of the stock-based compensation plans of the Corporation and, in the case of the Employee Plan, designates officers and key employees to receive options or restricted stock, and the number and terms of the options or restricted stock. All decisions by the Committee relating to the compensation of the Corporation’s executive officers are reviewed and approved by the full Board. The Corporation’s Executive Compensation Discussion and Analysis is presented beginning on page 11 of this Proxy Statement.

The Investment Committee sets policy regarding composition, quality, risk and duration of the Corporation’s investment portfolios and the positioning of such portfolios in the context of the Corporation’s enterprise risk management program. The Investment Committee also approves hiring of all portfolio investment managers and evaluates the performance of each investment manager.

The Strategic Planning Committee is responsible for working closely with management to identify new opportunities available to the Corporation as well as strategies for profitably expanding existing businesses and the impact of both on the Corporation’s enterprise risk management program. The Strategic Planning Committee also has oversight of the Corporation’s adherence to its budgeting, risk management and succession planning processes.

The Nominating Committee is responsible for selecting nominees for election as directors and reviewing with the Board of Directors, on an annual basis, the requisite skills and characteristics of members of the Board of Directors. An additional discussion of the responsibilities of the Nominating Committee is contained on page 25 of this Proxy Statement.

As a part of its oversight function, the Board monitors how management operates the Corporation, in part via its committee structure. The board evaluates strategies, reviews management reports and considers the risks involved in all of the Corporation’s insurance and investment activities. The Corporation has no single risk management committee but, rather, each committee considers risk issues associated with its specific role as discussed in this document.

Between 1997 and December, 2010, Gary W. Miller served as the Corporation’s CEO as well as its Chairman. Effective December, 2010, Mr. Miller became the Executive Chairman of the Board of Directors. In determining that Mr. Miller was the appropriate person to serve in the role of Executive Chairman, the Board relied on several important measures. Mr. Miller’s leadership, integrity and vision have been instrumental in the successful growth of the Corporation for over 40 years. He has served an active role in the Corporation’s continued strong performance, despite challenging economic and market conditions. Mr. Miller has the confidence of the Board and the Board believes that Mr. Miller, working closely with the CEO, Joseph J. DeVito, has the ability to assist Mr. DeVito and his management team in

With the roles of Chairman and CEO separated, the Board believes that the office of Executive Chairman of the Board of Directors can function in an appropriate manner with the understanding that mechanisms are in place to ensure that the Corporation maintains the highest standards of corporate governance which insures the continued accountability of the CEO to the Board. These mechanisms include:

The election by the Board of Steven A. Shapiro to be the non-employee Lead Director. Mr. Shapiro has been a member of the Corporation’s Board since 2007, is co-chairman of the Strategic Planning Committee and a member of the Investment Committee. He has been a strong and influential member of the Board and plays an integral role in promoting confidence in the Board’s execution of its responsibilities. As detailed below in how the roles will interact, Mr. Shapiro’s responsibilities as Lead Director and his advisory role to Mr. Miller and Mr. DeVito will complement Mr. Miller’s role as Executive Chairman of the Board while providing the necessary checks and balances to hold both the Board and the Executive Chairman accountable in their respective roles.

The Board does not have a policy as to whether the role of the CEO and the Chairman should be separate, or whether the Chairman should be a management or non-management director. Thus, while the Board has determined that Mr. Miller will serve in the role of Executive Chairman of the Board, the Board has the right to determine, in the future, if the roles will be combined or remain separate, as well as to determine whether or not a management or non-management chairman would be in the best interest of the Corporation and its stockholders.

In 2010, each incumbent director attended at least 75 percent of the total number of meetings of the Board and the committees on which he or she serves. In addition, all board members are expected to attend the annual meeting of shareholders, and all attended in 2010 with the exception of Mr. Patrick. Current committee membership and the number of meetings of the full board and each committee in 2010 are shown in the table below.

Name	Board	Audit Committee	Compensation Committee	Investment Committee	Strategic Planning	Nominating Committee
Stuart D. Bilton	Member (a)			Member		Chairman
Joseph J. DeVito	Member				Co-Chairman
Otto N. Frenzel IV	Member (a)	Chairman			Member	Member
Gary W. Miller	Chairman			Member	Member
John M. O'Mara	Member (a)	Member		Member
Thomas H. Patrick	Member (a)		Member	Member
John A. Pigott	Member (a)	Member	Member			Member
Kenneth D. Sacks	Member (a)	Member	Member		Member
Nathan Shapiro	Member			Chairman	Member
Norton Shapiro	Member			Member	Member
Robert Shapiro	Member			Member	Member
Steven A. Shapiro	Member			Member	Co-Chairman
John D. Weil	Member (a)		Chairman	Member
Number of 2010 meetings	5	5	2 (b)	4 (b)	5 (b)	1

	Fees Earned
	or Paid in	Stock	All Other
	Cash	Awards	Compensation	Total
Name	($)	($)	($)	($)
Stuart D. Bilton	30,000	40,000	2,375	72,375
Otto N. Frenzel IV	40,000	40,000	2,375	82,375
John M. O'Mara	22,500	40,000	2,375	64,875
Thomas H. Patrick	22,500	40,000	2,375	64,875
John A. Pigott	30,000	40,000	2,375	72,375
Kenneth D. Sacks	22,500	40,000	2,375	64,875
Nathan Shapiro	30,000	40,000	2,375	72,375
Norton Shapiro	30,000	40,000	2,375	72,375
Robert Shapiro	30,000	40,000	2,375	72,375
Steven A. Shapiro	30,000	40,000	2,375	72,375
John D. Weil	30,000	40,000	2,375	72,375

An annual retainer in the amount of $40,000 is paid to each director in the form of restricted stock. Each annual restricted stock grant will be made on the date of the Corporation’s annual meeting. Restricted shares fully vest one year from the date of grant. For 2010, each director received a grant of 1,614 restricted shares (17,754 shares in total) on May 4, 2010, all of which will vest on May 4, 2011. The amount shown in the table above represents the fair value of this grant on May 4, 2010.

Restricted stock is treated as outstanding for purposes of dividend accruals from the date of grant. Accrued dividends are paid to directors upon the vesting of the restricted shares. The amount shown as All Other Compensation in the table above represents dividends paid to each director during 2010 upon the vesting of previously granted restricted stock.

The following table contains information concerning shares of Class A and Class B Common Stock of the Corporation beneficially owned on March 22, 2011 by all directors and nominees, the five most highly compensated executive officers (the “Named Executive Officers”) and by all directors and officers as a group:

	Class A Shares		Class B Shares
Name of Beneficial Owner or Identity of Group (1)	Number	Percent	Number (2)	Percent
Stuart D. Bilton	0	0.0%	36,696	0.3%
Mark L. Bonini	2,000	0.1%	10,536	0.1%
G. Patrick Corydon	10,125	0.4%	39,450	0.3%
Joseph J. DeVito	1,087	0.0%	146,359	1.2%
Otto N. Frenzel, IV	0	0.0%	3,514	0.0%
Gary W. Miller	46,286	1.8%	146,920	1.2%
Craig A. Morfas	0	0.0%	6,964	0.1%
John M. O’Mara (3)	84,631	3.2%	78,571	0.6%
Thomas H. Patrick (4)	88,875	3.4%	250,585	2.1%
John A. Pigott	5,062	0.2%	36,429	0.3%
Kenneth D. Sacks	0	0.0%	7,514	0.1%
Nathan Shapiro (5)	1,134,883	43.3%	2,560,811	21.0%
Norton Shapiro (5)	762,509	29.1%	1,827,759	15.0%
Robert Shapiro (5)	865,259	33.0%	1,861,176	15.3%
Steven A. Shapiro (5)	755,009	28.8%	1,820,654	14.9%
John D. Weil	314,055	12.0%	1,273,840	10.4%
All directors and Named Executive Officers (6)	1,804,754	68.8%	4,656,358	38.2%

(1)

Unless otherwise indicated, shares disclosed are those as to which the beneficial owner has sole voting and investment powers with respect to Class A shares or sole investment power with respect to Class B shares; and includes the beneficial interest of spouses and minor children who share the same residence as the named individual.

(5)

See “Beneficial Owners of More than 5% of the Common Stock” for additional information on Class A shares. The shares reported in the above table for Nathan, Norton, Robert and Steven Shapiro include 755,009 Class A and 1,817,140 Class B shares owned by the Shapiro Family Limited Partnership, a family charitable foundation, three partnerships: Gelbart Fur Dressers; Jay Ell Company and Diversified Enterprises and Emlin Cosmetics, Inc. Nathan, Robert, Norton and Steven Shapiro are beneficial owners and/or share investment power with respect to the shares owned of record by these entities and, accordingly, these shares are included in the listing for individual beneficial ownership of each of the Shapiro Family members.

Section 16(a) of the Securities Exchange Act of 1934 requires certain executive officers, directors and ten percent (10.0%) beneficial owners to file initial reports of ownership and reports of changes in ownership of the Corporation’s securities with the Securities and Exchange Commission. Copies of those reports must be furnished to the Corporation. Based solely on a review of the Section 16(a) reports furnished to the Corporation with respect to 2010 and written representations from the affected executive officers and directors, we believe that all Section 16(a) filing requirements applicable to the Corporation’s executive officers and directors during 2010 were satisfied.

The Corporation’s compensation philosophy and objectives are directly related to its business strategy and objectives. The Compensation and Employee Benefit Committee of the Board (the “Committee”) believes that, in order to maximize stakeholder value, executive compensation should be aligned with business strategy in addition to financial goals. The Committee, on behalf of the full Board of Directors, believes that the Corporation’s compensation programs should:

The Committee is responsible for approving all components of the compensation of the Executive Chairman, the Chief Executive Officer (“CEO”), as well as each executive reporting directly to the CEO, a group inclusive of all Named Executive Officers. The Committee administers all executive officer compensation plans, programs, and guidelines and has the final decision-making role in compensation paid to the Corporation’s executive officers.

The CEO and COO, Joseph J. DeVito, sets goals and evaluates each executive officer’s performance. He makes recommendations regarding compensation to the Executive Chairman of the Board and the Committee. Neither the Executive Chairman of the Board nor the CEO has decision authority regarding his own level of compensation, nor that of any of the other executive officers. However, the CEO does participate in Committee meetings, at the Committee’s request, to provide:

The Committee has the authority to engage an executive compensation consultant or other advisor as necessary to fulfill its duties to the Corporation’s shareholders. In 2008, the Corporation engaged an independent executive compensation consulting firm, to conduct an executive compensation review and provide feedback related to the Corporation’s executive compensation programs in general. Changes to executive compensation plans during 2008 and 2009 resulting from this review have been discussed in the Corporation’s Proxy Statements for the Annual Meeting of Shareholders for the meetings held May 5, 2009 and May 4, 2010, which may be obtained on the Corporation’s website at www.baldwinandlyons.com or from the SEC’s Edgar website (www.sec.gov/edgar). The Committee determined that an additional review was not necessary during 2010 as basic components of the Plan had not changed.

A percentage of annual incentive bonus for executive officers is paid in the form of the Corporation’s Class B common stock which vests over a number of years. This form of compensation not only aligns the executive’s interests with shareholders but provides retention benefits to the Corporation;

Because of the unique nature of the combination of markets in which the Corporation operates, the Committee does not believe that there are individual companies to which it can reliably compare the performance of the Corporation over a limited period of time. While the Committee has, in the past, as part of previous independent executive compensation reviews, identified companies which the Committee believed were suitable for consideration as peer companies, no such benchmarking was done in 2010.

One of the responsibilities of the Committee is to consult with members of the Strategic Planning and Audit Committees to consider the relationship of compensation programs to the Corporation’s financial and strategic goals. The committee reviews the balance achieved in the compensation programs related to the fact that management’s personal financial situation could be significantly impacted by the Corporation’s financial performance. Based on such inter-committee communications, the Committee believes that the executive compensation arrangements do not encourage executives to take unnecessary or excessive risks that could threaten the value of the Corporation.

The bonus hurdles selected by the Committee are based solely on operating income, rather than sales or revenue targets which could encourage the production of unprofitable business. Operating income hurdles are selected in conjunction with the full Board’s review and approval of the operating budget for the year as developed by management. Careful consideration is given to current and anticipated market conditions, including current competitive pressures and those related to the development of new products, which are expected to be encountered in the Corporation’s business operations.

The Committee believes that the present proportion of performance-based and non-performance based compensation is balanced in such a way as to motivate the executives to fulfill the corporate mission and vision, including specific and focused performance objectives, but does not encourage unnecessary or excessive risk taking. In addition, a significant portion of executives’ performance-based compensation is in the form of long-term equity incentives which do not encourage unnecessary or excessive risk because they generally vest over a three year period of time thereby focusing the executives on the Corporation’s long-term interests.

While the Committee considers these factors to guide its decisions, it does not rely on them exclusively. The Committee typically exercises significant business judgment based on an assessment of compensation levels and alignment with the Corporation’s compensation philosophy and pay strategy. The annual review of base salaries for 2010, as reported in the Proxy Statement for the Annual Meeting of Shareholders for the meeting held May 4, 2010, resulted in increases to base salaries for the Named Executive Officers by amounts ranging from 0% to 6.7% (averaging 4.1%).

The Corporation’s executive officers, including each of the Named Executive Officers, participated in the Corporation’s Executive Incentive Bonus Plan for 2010 (“the Plan”). A more detailed description of the Plan was included, starting on page 21, of the Proxy Statement for the Annual Meeting of Shareholders for the meeting held May 4, 2010, which may be obtained on the Corporation’s website at www.baldwinandlyons.com or from the SEC’s Edgar web site (www.sec.gov/edgar).

Under the Plan, each participant, including each of the Named Executive Officers, was provided with a target annual incentive opportunity according to the pay strategy discussed above. Annual incentive bonuses for 2010 were determined using a preset formula-based bonus program consisting of two components: 50% was dependent upon pre-tax operating profit and 50% was dependent on an evaluation of each officer’s individual performance and changes in executive responsibilities.

For the operating profit component, the Compensation and Employee Benefit Committee (the “Committee”) established a “hurdle”. The hurdle was referenced to the planned pre-tax operating income for 2010, as approved by the Board of Directors. Fifty percent (50%) of the executive’s bonus was determined by comparing the actual pre-tax operating income for the year against the hurdle amount. That portion of the bonus may increase or decrease as actual pre-tax operating income is higher or lower than the hurdle. A range has been established with 75% of the hurdle, referred to as the “threshold” and 150% of the hurdle, referred to as “superior performance”. The formula multiplies 50% of the target bonus by the percentage difference within this range times two. Therefore, if operating income falls below the threshold, this portion of the bonus would be eliminated. If operating income equals or exceeds superior performance, the maximum portion of the bonus could be double the target. For 2010, actual operating profit was below the threshold and, accordingly, this portion of the target bonus was reduced to zero.

The individual performance component of the Plan is designed in recognition of the fact that significant contributions by certain executives to the long-term success of the Corporation may not be immediately reflected in operating income. The CEO develops performance goals for the executives in conjunction with the creation of the corporate strategic plan and, while individual performance goals vary among the executives depending on their specific responsibilities, many of these goals are inter-dependent with the

The most significant common objective goals for 2010 included numerous activities designed to meet the goals set forth in the Corporation’s three year strategic plan, the enhancement and evolution of comprehensive performance-based management criteria for each department, formal quarterly evaluation of improvements in staff productivity and adherence to budgets. In addition, Mr. Corydon was responsible for the successful renewal of major reinsurance treaties, oversight for all “non-wheels” products, maintenance of enterprise risk management programs, financial evaluation of new business opportunities and implementation of accounting systems for all new products; Mr. Bonini was responsible for the achievement of customer relations goals for all “wheels” product lines in a difficult and highly competitive environment, including the successful renewal of all major clients, expansion of the Corporation’s brokerage business and the development of value added partnerships in the area of safety and risk selection; and Mr. Morfas was responsible for continued reduction in claim handling costs, the establishment of systematic, repeatable training programs for all claims operations, the selection and design of new comprehensive claims systems and continued improvement of in-house legal capabilities.

In addition to overall responsibility for all of the individual goals mentioned for the executives above, Mr. DeVito’s specific goals included successful implementation of the three year strategic plan, the principal responsibility for evaluation of new business opportunities and continuance and expansion of favorable relationships with major customers and business partners. In recognition of Mr. DeVito’s success in these areas during the period 2007 through 2010, he was named Chief Executive Officer, in addition to his roles as President and Chief Operating Officer, in December, 2010. Mr. Miller, CEO until December, 2010 and now Executive Chairman of the Board of Directors, was evaluated on the successful completion of all executive officer goals as well as the effective and timely communication between management and the Board of Directors.

Determination of satisfactory achievement of individual goals is reviewed on a frequent basis through both group and individual evaluations conducted between the executives and the CEO. Achievement of all significant individual performance goals is considered when determining the discretionary component of the bonus. This component can be decreased or eliminated based on the CEO’s determination of an executive’s performance related to his or her individual goals. There is no specific percentage that each individual goal contributes to the total but, rather, it is the substantial achievement of all of the significant goals which is evaluated for each executive. For 2010, the Committee determined that the CEO substantially achieved all of his discretionary goals and, accordingly, his target bonus was awarded at 100%. The Committee also determined that the Executive Chairman largely met his goals and 77% of this target bonus was awarded. The Committee agreed with the CEO’s determination that the other Named Executive Officers, to varying degrees, achieved their significant individual goals and, accordingly, target awards for this component were awarded in the range of 69% to 100%.

All bonuses granted under the Plan were paid to executives, including the Named Executive Officers, two-thirds in cash and one-third in the form of restricted Class B common shares, in accordance with the Plan. Amounts presented in the Summary Compensation Table reflect this distribution with cash portions shown in the Bonus column and the equity component shown in the Stock Awards column. Class B common shares paid as part of the 2010 bonuses are subject to risk of forfeiture upon termination of employment for any reason other than death, disability or retirement prior to vesting. Vesting occurs ratably on the first, second and third anniversaries of the grant. Additional information regarding these restrictions is presented in the equity award tables elsewhere in this document.

of a portion of annual incentive bonuses in the form of restricted Class B shares, as described elsewhere in the document. Instead, for several years the Corporation has utilized “book value appreciation rights” (BVARs) as the sole form of long-term incentives for executive officers and other management personnel. BVARs do not have any association with the market value of the Corporation’s common stock and are settled solely in cash. No equity securities are issued in connection with this form of compensation.

BVARs provide deferred compensation to employees, including the Named Executive Officers, formulaically based on the increase in the Corporation’s book value, with certain adjustments for extra dividends paid to shareholders, over a five-year period. This program results in compensation which is directly linked to the Corporation’s performance and increases in the book value of the Corporation, closely aligning value realized from BVARs with shareholder value creation.

Increases and decreases in the value of BVARs for the Named Executives for the three year period ending December 31, 2010, resulting from changes in the Corporation’s book value, are shown in the Non-Equity Incentive Compensation column of the Summary Compensation Table. Management believes this presentation is appropriate since the BVARs are not based upon changes in the market value of equity securities and are not settled in any form of equity security.

Currently outstanding BVARs vest ratably over a three-year period, cannot be exercised prior to January 1 of the calendar year in which they expire (five years from grant), except in the case of death, disability or normal retirement. In addition, termination of employment for reasons other than death, disability or retirement results in forfeit of all vested and unvested BVARs. These plan provisions provide employee retention benefits to the Corporation. BVARs, when granted, have historically been widely distributed to virtually all salaried employees in amounts proportional to their job responsibilities and annual salary bases.

The Corporation offers its executive officers standard employee benefits, including the ability to participate in the group life, health, dental and disability insurance as well as the Corporation’s 401(k) Plan, to the same extent offered to all employees of the Corporation. The Corporation matches contributions made by the executive officers to the 401(k) Plan consistent with the matching contribution for all participants of the Plan.

Any incentives earned as a result of the 2011 annual incentive plan will be distributed early in 2012 with two-thirds paid in cash and one-third in the form of restricted stock. The total incentive earned will be determined 50% based on operating profits and 50% based on individual goals although the provisions of the Plan could result in either component being more or less than 50% of the final award. This is identical to the pro-ration used in 2010. The restricted stock portion of the bonus will be granted to each

A more detailed description of the Executive Bonus Plan, which was effective beginning in 2010, was included starting on page 21 of the Proxy Statement for the Annual Meeting of Shareholders for the meeting held May 4, 2010, which may be obtained on the Corporation’s website at www.baldwinandlyons.com or from the SEC Edgar website (www.sec.gov/edgar).

The Corporation has not entered into employment, severance or change-in-control agreements with any employees, including the Named Executive Officers, which would provide compensation in the event of a termination. All employees of the Corporation are employed on an at-will basis and either the employee or the Corporation is free to terminate the employment relationship at any time.

Section 162(m) of the Internal Revenue Code, limits the Corporation’s ability to take a tax deduction for certain compensation paid in excess of $1 million to the Named Executive Officers listed in the summary compensation table below. However, performance-based compensation, as defined in the tax law, is fully deductible if the programs are approved by shareholders and meet certain other requirements. The Committee has considered the impact of Section 162(m), and the regulations thereunder, on the deductibility of executive compensation by the Corporation and has determined that, to the extent practical, bonus and deferred compensation plans should be submitted to shareholders for approval to allow for deductibility of compensation paid under these plans. The Committee will continue to monitor the regulations and any possible impact they may have on the Corporation, and to take appropriate steps when, and if, any measures are necessary.

The Committee has reviewed and discussed the above Executive Compensation Discussion and Analysis with management and, based on this review and discussion, has recommended to the Board of Directors that the Executive Compensation Discussion and Analysis be included in this Proxy Statement and, by reference, in the Corporation’s annual report on Form 10-K.

Name and Principal Position	Year	Salary	Bonus	Stock Awards (1)	Non-Equity Incentive Compensation (2)	All Other Compen-sation (3)	Total
Gary W. Miller	2010	870,000	166,665	83,335	61,500	38,871	1,220,371
Executive Chairman	2009	870,000	401,907	200,959	114,500	24,721	1,612,087
of BOD (4)	2008	1,010,167	283,442	0	(51,500)	192,781	1,434,890
Joseph J. DeVito	2010	870,000	216,665	108,335	55,350	38,595	1,288,945
C.E.O., President	2009	815,000	429,172	214,593	103,050	39,304	1,601,119
and C.O.O. (5)	2008	910,083	260,020	0	(46,350)	137,347	1,261,100
G. Patrick Corydon	2010	528,000	100,049	50,026	21,525	30,913	730,513
Exec. Vice President	2009	498,000	235,654	117,830	40,075	29,037	920,596
and C.F.O. (6)	2008	560,250	180,014	0	(18,025)	30,415	752,654
Mark L. Bonini	2010	396,300	74,109	37,056	18,450	30,655	556,570
Executive Vice	2009	381,100	127,192	63,598	34,350	35,908	642,148
President (7)	2008	409,056	87,508	0	(15,450)	48,161	529,275
Craig C. Morfas	2010	333,000	49,450	24,725	12,300	34,197	453,672
Sr. Vice President	2009	314,150	128,400	64,202	22,900	32,007	561,659
and Secretary (8)	2008	336,347	87,508	0	(15,450)	30,900	439,305

(1)

Stock awards represent the grant date value of the portion of annual incentive bonuses payable in the form of the Corporation’s Class B common stock. These shares are subject to risk of forfeiture and vest over three years from the date of grant, as more fully described elsewhere in this document.

(2)

Amounts shown in this column represent the change in vested and unvested value of book value appreciation rights which are based on actual increases or decreases in the Corporation’s book value during the year. The actual compensation realized, if any, is settled only in cash and only upon satisfaction of holding period restrictions, as more fully described elsewhere in this document. Compensation from book value appreciation rights is subject to complete forfeiture should employment terminate prior to satisfaction of holding period requirements and, thus, amounts reported in this column may not ultimately be paid.

		Estimated Future Payouts				Grant Date
		Under Equity			All Other	FV of
		Incentive Plan Awards			Stock	Stock and
	Grant	Threshold	Target	Maximum	Awards	Option
Name	Date	(#)	(#) (1)	(#)	(#)	Awards

Gary W. Miller	2/9/2011	n/a	3,563	n/a	0	83,335


Joseph J. DeVito	2/9/2011	n/a	4,632	n/a	0	108,335


G. Patrick Corydon	2/9/2011	n/a	2,139	n/a	0	50,026


Mark L. Bonini	2/9/2011	n/a	1,584	n/a	0	37,056


Craig C. Morfas	2/9/2011	n/a	1,057	n/a	0	24,725

(1)

Shares awarded under the Corporation’s Executive Incentive Bonus Plan for 2010. These shares vest one-third on each of the first, second and third anniversaries of the Grant Date and are subject to forfeiture in the event of termination of employment for any reason other than death, disability or retirement.

	Stock Awards






			Equity Incentive	Equity Incentive
	Number of Shares or Units	Market Value of Shares or Units	Plan Awards: Number of Unearned	Plan Awards: Market or Payout Value
Name	of Stock That Have Not Vested (#) (1)	of Stock That Have Not Vested ($)	Shares or Units That Have Not Vested (#)	of Unearned Shares or Units Not Vested ($)

Gary W. Miller	9,368	$220,429	n/a	n/a


Joseph J. DeVito	10,830	$254,830	n/a	n/a


G. Patrick Corydon	5,542	$130,403	n/a	n/a


Mark L. Bonini	3,421	$80,496	n/a	n/a


Craig C. Morfas	2,912	$68,519	n/a	n/a

At the 2002 Annual Meeting of Shareholders, the shareholders of the Corporation adopted the Baldwin & Lyons, Inc. 2002 Stock Purchase Plan (the “Stock Purchase Plan”). The Stock Purchase Plan was intended to encourage officers and certain management personnel of the Corporation to purchase additional Class B Common Shares in the open market. The Stock Purchase Plan authorized the Corporation to loan the funds necessary to enable participating management personnel to make those purchases. Each loan is evidenced by a ten year full recourse promissory note, interest only payable annually in arrears and is secured by a pledge of all of the shares purchased. The loans were offered to officers and certain other management personnel and forty-nine employees originally participated in the program. As of December 31, 2010, five employees have outstanding loans with all others having been fully repaid to the Corporation. For detailed information concerning the loans to the Named Executive Officers as well as overall information concerning the loans to all employees see “Transactions with Management and Others” on page 26 of this Proxy Statement. As a result of legislation enacted during 2002, no further loans will be made under the 2002 Stock Purchase Plan.

The Board is seeking your approval of the compensation of our executives as disclosed in the compensation tables and accompanying narrative in this Proxy Statement, including the Executive Compensation Discussion and Analysis and Compensation and Employee Benefits Committee Report. This proposal, commonly known as a "Say on Pay" proposal, gives you the opportunity to express your views on the Corporation's executive compensation practices. This resolution is a new requirement of the Securities and Exchange Commission. Because your vote is advisory, it will not be binding upon the Board. However, the Compensation Committee will consider the outcome of the vote when making future executive compensation decisions.

The Board recognizes that there is considerable public discussion regarding appropriate approaches to compensation. However, the Board believes that the Corporation's executive compensation policies are balanced, appropriately focused on pay for performance principles, strongly aligned with the long-term interests of our shareholders, and enable the Corporation to attract and retain strong and experienced senior executives.

As described more fully in the Executive Compensation Discussion and Analysis and Compensation and Employee Benefits Committee Report herein, the Corporation evaluates executive officer compensation in several different ways, including market survey compensation data, periodically reviewing customized compensation information for peer companies and receiving advice and recommendations from the Chief Executive Officer and the Executive Chairman of the Board of Directors. This careful evaluation ensures that our executive compensation is competitive yet closely tied to both the Corporation’s and each executive officer's performance. Additionally, the Corporation's formula bonus program recognizes and rewards the success of executives who manage performance to achieve both the long-term and short-term goals set for them every year by the CEO and the Compensation and Employee Benefits Committee.

The Board is presenting a proposal to provide you with the opportunity to inform the Corporation as to how often you wish the Corporation to include an executive compensation advisory vote in its Proxy Statement. This resolution is also a new requirement of the Securities and Exchange Commission. You may vote for the executive compensation vote to occur every year, every two years, or every three years; or, you may abstain. Because your vote is advisory, it will not be binding upon the Board. However, the Corporation has adopted a policy whereby it will include an advisory vote on executive compensation, similar to the above "Say on Pay" proposal, consistent with the majority of votes cast in this advisory vote.

The Board recommends that you vote for an advisory vote on executive compensation every year. The Board recommends an annual vote because the Board believes an annual vote is the most useful way to hear directly from shareholders about the Corporation's compensation practices. The Board believes an annual vote will promote consistent and timely communication on this issue, as well as provide the highest level of accountability since the compensation vote will respond to the majority of information presented in the accompanying Proxy Statement for the applicable shareholders' meeting. The Board also believes that an annual compensation vote will eliminate any confusion as to the implications of the vote or whether the vote is referencing the current compensation year or some previous year.

All members of the Audit Committee are independent as defined in both the NASDAQ listing standards and the Securities and Exchange Commission standards applicable to audit committee members. The Audit Committee has a charter, a copy of which may be found in the corporate governance section of the Corporation’s website at www.baldwinandlyons.com. The board of directors has determined that Otto N. Frenzel IV is an audit committee financial expert, as defined in the rules of the Securities and Exchange Commission.

In accordance with its written charter adopted by the Board of Directors, the Audit Committee of the Board (the “Audit Committee”) assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing and financial reporting practices of the Corporation. During the calendar year 2010, the Audit committee met five (5) times. The full Audit Committee discussed and reviewed the interim financial information contained in the Corporation’s quarterly Forms 10-Q with the CEO, the CFO and the independent auditors prior to filing with the Securities and Exchange Commission.

In discharging its oversight responsibility as to the audit process, the Audit Committee obtained from the independent auditors a formal written statement describing all relationships between the auditors and the Corporation that might bear on the auditors’ independence consistent with Independence Standards Board Standard No. 1 “Independence Discussions with Audit Committees,” and discussed with the auditors any relations that may impact their objectivity and independence and satisfied itself as to the auditors’ independence. The Audit Committee also discussed with management, the director of internal audit and the independent auditors the quality and adequacy of the Corporation’s internal controls and the internal audit function’s organization, responsibilities, budget and staffing. The Audit Committee also reviewed both with the independent auditors and the director of internal audit their audit plans, audit scope and identification of audit risks.

The Audit Committee discussed and reviewed with the independent auditors all communications required by generally accepted auditing standards, including those described in Statement of Auditing Standards No. 61, as amended, “Communication with Audit Committees,” and, with and without management present, discussed and reviewed the results of the independent auditors’ examination of the financial statements.

The Audit Committee reviewed the audited financial statement of the Corporation as of and for the year ended December 31, 2010, with management and the independent auditors. Management has the responsibility for the preparation of the Corporation’s financial statements and the independent auditors have the responsibility for the examination of those statements.

Based on the above-mentioned review and discussions with management and the independent auditors, the Audit Committee recommended to the Board of Directors that the Corporation’s audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2010, for filing with the Securities and Exchange Commission. The Audit Committee also recommended the reappointment, subject to the shareholder approval, of the independent auditors, Ernst & Young LLP, and the Board of Directors concurred in the recommendation.

Fees for audit services performed by Ernst & Young LLP are expected to total $498,900 for the year ended December 31, 2010 and totaled $498,900 for the year ended December 31, 2009, including fees associated with the annual audit, reviews of quarterly reports on Forms 10-Q and statutory audits and loss reserve certifications required by regulatory authorities as well as the review of the internal controls of the Corporation by Ernst & Young LLP as required by Section 404 of the Sarbanes-Oxley Act.

The Audit Committee pre-approves audit engagement terms and fees prior to the commencement of any audit work, other than that which may be necessary for the independent auditor to prepare the proposed audit approach, scope and fee estimates. The independent auditors submit a written proposal that details all audit and audit-related services. Revisions to the written proposal, if necessary, are also submitted in writing. Audit fees, including internal control attestation required by Sarbanes-Oxley Act, are fixed and contained in the proposal. The Corporation received a proposal for the audit engagement for the year

Subject to ratification by the shareholders, the Board of Directors has appointed Ernst & Young LLP as independent auditors to audit the financial statements of the Corporation for 2011. Representatives of Ernst & Young LLP are expected to attend the Annual Meeting. They will be provided an opportunity to make a statement should they desire to do so and will be available to respond to appropriate inquiries from the shareholders. Ernst & Young LLP has acted as the Corporation’s independent auditors since 1970.

The Board of Directors has a separate nominating committee, consisting solely of Independent Directors, for the purpose of consideration and nomination of directors of the Corporation. The nominating committee has a charter, a copy of which may be found in the corporate governance section of the Corporation’s website at www.baldwinandlyons.com. The current members of the Nominating Committee are Stuart D. Bilton, Chairman, Otto N. Frenzel IV and John A. Pigott. The Nominating Committee is responsible for selecting the nominees for election as directors and reviewing with the Board of Directors, on an annual basis, the requisite skills and characteristics of members of the Board of Directors. The skills and characteristics assessed include independence, business, strategic and financial skills, as well as overall experience in the context of the needs of the Board of Directors as a whole.

Any shareholder nominee, together with any information about the candidate’s qualifications, will be evaluated by the members of the Nominating Committee along with any other proposed candidates. A shareholder wishing to nominate a candidate for the Board of Directors should send a written nomination to the Corporate Secretary at the principal offices of the Corporation. The nomination should specify the nominee’s name and other qualifications, including, but not limited to, those specified above. To be considered, a nomination must be received at least 120 days prior to the next annual meeting of shareholders. In the case of the 2012 annual meeting, the deadline is November 30, 2011. All recommendations must be accompanied by a written consent of the nominee to be nominated for election to the Corporation’s Board of Directors.

The Board of Directors has determined to provide a process by which shareholders may communicate with the Board as a whole, a Board Committee or individual directors. Shareholders wishing to communicate with either the Board as a whole, a Board Committee or an individual member may do so by sending a written communication addressed to the Board of Directors of Baldwin & Lyons, Inc. or to the desired committee or to an individual director, c/o Corporate Secretary, Baldwin & Lyons, Inc., 1099 N. Meridian Street, Indianapolis, Indiana, 46204 or by sending an electronic mail message to boardofdirectors@baldwinandlyons.com. All communications will be compiled by the Secretary of the Corporation and submitted to the Board of Directors or the addressee not later than the next regular Board meeting.

The Corporation, through its subsidiary, Protective, has invested $9,000,000 in two limited partnerships, with a market value of approximately $22,735,000 at year end 2010, managed by New Vernon Investment Management, LLC (“NVIM”). NVIM is owned by NV Capital Holdings II, LLC (“NV”) and affiliates. Thomas H. Patrick, together with Nathan Shapiro, Steven Shapiro and affiliates, own 34% of NV in the aggregate. Messrs. Patrick, Nathan Shapiro and Steven Shapiro are directors of the Corporation. During 2010, Protective has recorded $258,227 in management fees and $687,444 in performance based fees to NVIM for management of these limited partnerships. The Corporation has been informed that the fee rates applied to its investments in partnerships managed by NVIM are the same as, or lower than, the fee rates charged to unaffiliated customers for similar investments.

Protective also has invested $15,000,000 in the New Vernon India Fund, L.P. (“India Fund”) which is managed by New Vernon Management, LLC (“NVM”), an affiliate of NV. The India Fund has a market value of approximately $33,197,000 at year end 2010 and, during 2010, Protective recorded $561,843 in management fees and no performance based fees to NVM and its affiliates for management of this limited partnership. The Corporation has been informed that the fee rates applied to its investment in the India Fund are the same as, or lower than, the fee rates charged to unaffiliated customers for similar investments.

Protective utilizes SF Investments, Inc. (“SF”), a broker-dealer firm, for management of portions of its investment portfolio. Steven Shapiro is Vice President of SF and Nathan Shapiro is an advisor to SF. Specifically, SF manages a portion of Protective’s equity securities portfolio with a market value of approximately $1,887,000 at year end 2010 and serves as agent for a limited number of purchases and sales of securities. The Corporation has been informed that commission rates charged by SF to the Corporation and its subsidiaries are no higher, and often less than, rates charged to non-affiliated customers for similar investments. Total commissions earned by SF on these transactions were less than $500 during 2010. SF also manages a portion of Protective’s fixed income securities portfolio with a market value of approximately $19,378,000 at year end 2010. Fees paid for the management of this portfolio totaled approximately $27,600 during 2010. The Corporation also paid approximately $151,800 during 2010 to SF and its affiliates for advice and counseling on the Corporation’s investment portfolios.

During 2010, the Corporation completed remodeling of portions of its headquarters building utilizing the services of two corporations owned in whole or in part by Gary W. Miller, Executive Chairman of the Board of Directors or his wife. Charges for these services totaled $176,804. The Corporation has been informed that the rates charged for these products and services are the same as, or lower than, the rates charged to unaffiliated customers for similar services.

The 2002 Stock Purchase Plan authorized the Corporation to loan the funds necessary to enable participating employees to purchase shares of Class B Common stock of the Corporation. The loans were made to a total of forty-nine employees, including the Named Executive Officers. The full-recourse notes evidencing the loans bear interest at the prime rate effective on the date of the loan and are secured by share certificates covering the full value of the loans. As of December 31, 2010, a total of $1,358,350 in principal and $55,387 in interest was owed to the Corporation by loan plan participants. Included within those amounts are sums due from Mr. DeVito of $1,151,669. During the year ended December 31, 2010, all loan plan participants paid principal and interest to the Corporation in the sums of $610,672 and $90,736, respectively, including $441,678 and $75,728 paid by Mr. DeVito and $128,995 and $2,734 paid by Mr. Morfas. There were no defaults on any of the loans. As a result of legislation enacted during 2002, no further loans will be made under the 2002 Stock Purchase Plan.

Shareholders owning a majority of the Class A shares outstanding must be present or represented by proxy in order to constitute a quorum for the transaction of business. Thus, a total of 1,311,555 Class A shares will be required at the meeting for there to be a quorum. In order to elect the directors for the ensuing year, to confirm the appointment of Ernst & Young LLP as the Corporation’s independent auditors and to provide advisory votes on approving executive officer compensation as well as the timing of votes on approval of executive officer compensation, a majority of the votes present at the meeting, either in person or by proxy, a quorum being present, will be required.

The Board of Directors has adopted a Code of Business Conduct which is applicable to all directors, officers at the vice president level and above as well as certain other employees with control over accounting data. The Code of Business Conduct is available on the Corporation’s website at www.baldwinandlyons.com.

The Corporation knows of no other matters to be presented for action at the meeting. If any other matters should properly come before the meeting, or any adjournment of the meeting, those matters will be acted on by the persons named as proxies in the accompanying Proxy. The proxies will use their best judgment to vote the shares in the best interests of the Corporation.

The Annual Report to Shareholders on Form 10-K contains financial statements for the year ended December 31, 2010 and other information about the operations of the Corporation. The Form 10-K is enclosed with this Proxy Statement but is not regarded as proxy soliciting material. In addition, the Report of the Compensation and Employee Benefits Committee included in this Proxy Statement is not regarded as proxy soliciting material.

		401(K) Plan
	Total	Contribution	Perquisites
Mr. Miller	$ 38,871	$ 19,600	$ 19,271
Mr. DeVito	38,595	19,600	18,995
Mr. Corydon	30,913	19,600	11,313
Mr. Bonini	30,655	19,600	11,055
Mr. Morfas	34,197	19,600	14,597

(a)	An Indepdendent Director within the meaning of applicable NASDAQ listing standards.
(b)	In addition to formal meetings, these committees also carry on their business through telephone conversations and informal contacts among their members.