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Form 8-K HALLMARK FINANCIAL SERVI For: Aug 15

August 15, 2022 5:54 PM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported):               August 15, 2022

HALLMARK FINANCIAL SERVICES, INC.

(Exact Name of Registrant as Specified in Its Charter)

Nevada

(State or Other Jurisdiction of Incorporation)

001-11252

87-0447375

(Commission File Number)

(IRS Employer Identification No.)

5420 Lyndon B. Johnson Freeway, Suite 1100, Dallas, Texas

75240

(Address of Principal Executive Offices)

(Zip Code)

817-348-1600

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock $0.18 par value

HALL

Nasdaq Global Market

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   

Item 2.02Results of Operations and Financial Condition

On August 15, 2022, the Registrant issued a press release announcing its financial results for the three and six months ended June 30, 2022.  A copy of the Registrant’s press release is attached as Exhibit 99.1 to this Current Report.

Also, on August 15, 2022, the Registrant has posted on its website at www.hallmarkgrp.com its investor presentation for the quarter and six months ended June 30, 2022.

Item 9.01Financial Statements and Exhibits

(c)Exhibits.

99.1

Press release dated August 15, 2022.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned duly authorized.

    

HALLMARK FINANCIAL SERVICES, INC.

Date:

August 15, 2022

By:

/s/ CHRISTOPHER J. KENNEY

Christopher J. Kenney, President & Chief Financial Officer

Exhibit 99.1

Graphic

FOR IMMEDIATE RELEASE

HALLMARK ANNOUNCES SECOND QUARTER 2022 RESULTS

DALLAS, Texas, (August 15, 2022) - Hallmark Financial Services, Inc. (“Hallmark”) (NASDAQ: HALL) today announced financial results for the second quarter and six months ended June 30, 2022.

    

Second Quarter

    

Year-to-Date

2022

2021

2022

2021

$in millions:

Net (Loss) Income

 

$

(69.4)

$

(0.8)

$

(72.6)

$

8.1

Operating (Loss) Income (1)

$

(42.4)

$

(3.9)

$

(45.6)

$

0.5

$per diluted share:

 

  

 

  

 

  

 

  

Net (Loss) Income

$

(3.82)

$

(0.05)

$

(4.00)

$

0.45

Operating (Loss) Income (1)

$

(2.33)

$

(0.22)

$

(2.51)

$

0.03

(1)See Non-GAAP Financial Measures below

Highlights:

Net loss of $69.4 million, or $3.82 per share, in the second quarter of 2022 as compared to a net loss of $0.8 million, or $0.05 per share, for the same period of 2021. Year-to-date net loss of $72.6 million, or $4.00 per share, as compared to net income of $8.1 million, or $0.45 per share, for the same period of 2021.
The net loss for the second quarter and first six months of 2022 included a full valuation allowance of $23.9 million against net deferred tax assets primarily due to recent net losses, including the current period net loss.
The net loss for the second quarter included a $42.7 million after-tax impact from the previously announced exited contract binding business. This impact was driven by unfavorable prior year loss reserve development of $35.6 million during the quarter, of which $29.6 million related to exceeding the aggregate limit of the loss portfolio transfer agreement entered into in fiscal 2020.
Net combined ratio of 169.2% and 137.1% for the three and six months ended June 30, 2022, compared to 106.4% and 101.3% for the same periods the prior year
Underlying combined ratio (excluding net prior year development and catastrophe losses) of 97.3% and 96.3% for the three and six months ended June 30, 2022, compared to 99.4% and 95.9% for the same periods the prior year. See Non-GAAP Financial Measures below.
Gross premiums written for the three and six months ended June 30, 2022 increased 7.3% and 0.1%, respectively, compared to the same period the prior year.


Net catastrophe losses were $2.0 million in the second quarter of 2022, or 2.5 points of the net combined ratio, as compared to $3.7 million, or 3.8 points of the net combined ratio, for the same period the prior year. Net catastrophe losses were $3.1 million for the first six months of 2022, or 1.9 points of the net combined ratio, as compared to $9.6 million, or 4.8 points of the net combined ratio, for the same period the prior year.
Net investment income was $3.1 million and $5.0 million during the three and six months ended June 30, 2022, as compared to $2.4 million and $5.4 million during the same periods in 2021.
Net investment losses of $4.0 million during the second quarter of 2022 as compared to net investment gains of $3.9 million during the same period the prior year. Net investment losses of $3.9 million for the six months ended June 30, 2022 as compared to net investment gains of $9.7 million during the same period the prior year.

Second Quarter and Year-to-Date 2022 Financial Review

    

Second Quarter

    

Year-to-Date

 

2022

    

2021

    

% Change

2022

    

2021

    

% Change

 

($in thousands)

Gross premiums written

$

182,066

$

169,716

 

7

%

$

333,025

$

332,734

 

0

%

Net premiums written

$

84,301

$

87,486

 

(4)

%

$

162,622

$

178,983

 

(9)

%

Net premiums earned

$

80,113

$

96,584

 

(17)

%

$

162,589

$

198,436

 

(18)

%

Investment income, net of expenses

$

3,120

$

2,353

 

33

%

$

4,979

$

5,363

 

(7)

%

Investment (losses) gains ,net

$

(3,994)

$

3,876

 

nm

$

(3,943)

$

9,655

 

nm

Net (loss) income

$

(69,417)

$

(845)

 

nm

$

(72,636)

$

8,125

 

nm

Operating (loss) income (1)

$

(42,374)

$

(3,908)

 

nm

$

(45,633)

$

498

 

nm

Net (loss) income per share - basic

$

(3.82)

$

(0.05)

 

nm

$

(4.00)

$

0.45

 

nm

Net (loss) income per share - diluted

$

(3.82)

$

(0.05)

 

nm

$

(4.00)

$

0.45

 

nm

Operating (loss) income per share - diluted (1)

$

(2.33)

$

(0.22)

 

nm

$

(2.51)

$

0.03

 

nm

Book value per share

$

5.30

$

9.63

 

(45)

%

$

5.30

$

9.63

 

(45.0)

%


(1)See Non-GAAP Financial Measures below

Gross Premiums Written

Gross premiums written were $182.1 million and $333.0 million during the three and six months ended June 30, 2022, representing an increase of 7% and 0% from the $169.7 million and $332.7 in gross premiums written for the same periods in 2021.

Net Premiums Written

Net premiums written were $84.3 million and $162.6 million during the three and six months ended June 30, 2022, representing a decrease of 4% and 9% from the $87.5 million and $179.0 million in net premiums written for the same periods in 2021.

Net Premiums Earned

Net premiums earned were $80.1 million and $162.6 million for the three and six months ended June 30, 2022, representing a decrease of 17% and 18% from the $96.6 million and $198.4 million in net premiums earned for the same periods in 2021.


Investments

Total return on investment securities was -1.1% during the second quarter of 2022. Despite both equity and fixed income portfolios outperforming benchmarks, severe declines in equity and fixed income markets during the quarter prevented investments from contributing positively to results. The total return on Hallmark’s equity portfolio was -6.0% compared to -16.1% for the S&P 500 Stock Index. The total return on Hallmark’s fixed income portfolio was -0.9% compared to -4.5% for the Bloomberg Aggregate Bond Index.

Total return on investment securities was -1.3% during the six months ended June 30, 2022, again significantly outperforming market averages. The total return on Hallmark’s equity portfolio was -3.2% compared to -20.0% for the S&P 500 Stock Index. The total return on Hallmark’s fixed income portfolio was -1.6% compared to -10.4% for the Bloomberg Aggregate Bond Index.

Beginning in second quarter of 2020, following the steep decline in interest rates resulting from COVID-19 stimulus measures, significant restraint was exercised in making new commitments to bond investments. The amount of cash held steadily increased, growing to more than $350 million by 2021 year-end. As interest rates rose significantly in the latter part of the first quarter of 2022, $154 million of cash was deployed into fixed income securities at yields comparable to, or higher than, the average yield of the existing portfolio. During the second quarter of 2022, an additional $92 million was deployed in debt securities of similar or better yields.

These actions had two primary purposes. First, the cash reserves and short duration of debt securities held provided protection to the balance sheet during what has been described as among the worst periods of performance in bond markets in U.S. history – avoiding unrealized losses in longer dated maturities that will likely persist for years. Second, opportunistic reinvestment of large sums of cash into income generating securities with comparatively attractive yields is expected to contribute to an increase in investment income in future periods.

Net investment income was $3.1 million and $5.0 million during the three and six months ended June 30, 2022, as compared to $2.4 million and $5.4 million during the same periods in 2021. The 33% increase in net investment income during the second quarter of 2022 was primarily due to the reinvestment of cash into higher yielding securities, as discussed above.

Net investment losses were $4.0 million for the second quarter of 2022 as compared to net investment gains of $3.9 million for the same period in 2021. Net realized gains on common stocks of $1.0 million were offset by a $5.0 million reduction in the amount of unrealized gains on common and preferred stocks existing at March 31, 2022.

Net investment losses were $3.9 million for the six months ended June 30, 2022 as compared to net investment gains of $9.7 million for the same period in 2021. Net realized gains on common stocks of $1.2 million were offset by a $5.1 million reduction in the amount of unrealized gains on common and preferred stocks existing at December 31, 2021.

Fixed-income securities were $435.3 million at June 30, 2022, with a tax equivalent book yield of 2.9% compared to 2.4% as of December 31, 2021. As of June 30, 2022, the fixed-income portfolio had an


average modified duration of 1.0 years and 85% of the securities had remaining time to maturity of five years or less. As of June 30, 2022, 9% of the investment portfolio was invested in equity securities.

Total investments were $479.6 million at June 30, 2022. Cash and cash equivalents, including restricted cash were $117.2 million. Total investments, cash and cash equivalents, and restricted cash were $596.8 million or $32.81 per share.

Pre-Tax (Loss) Income

Pre-tax loss was $57.6 million for the three months ended June 30, 2022, as compared to a pre-tax loss of $1.0 million reported during the same period in 2021. The decline in pre-tax results for the second quarter of 2022 compared to the same period of the prior year was predominately driven by higher loss and LAE of $35.4 million, as well as lower revenue driven by lower net premiums earned of $16.5 million, net investment losses of $4.0 million compared to net investment gains of $3.9 million the prior year, and lower finance charges of $0.1 million, partially offset by higher net investment income of $0.8 million. Lower operating expenses of $2.7 million partially offset the increase in pre-tax loss for the three months ended June 30, 2022 as compared to the same period of the prior year.

Pre-tax loss was $61.7 million for the six months ended June 30, 2022, as compared to pre-tax income of $10.2 million reported for the same period the prior year. The decline in pre-tax results for the six months ended June 30, 2022, was predominately driven by higher loss and LAE of $30.0 million, as well as lower revenue driven by decreased net premiums earned of $35.8 million, net investment losses of $3.9 million compared to net investment gains of $9.7 million the prior year, lower net investment income of $0.4 million and lower finance charges of $0.3 million, partially offset by higher commission and fees of $0.1 million. Lower operating expenses of $8.3 million partially offset the increase in pre-tax loss for the six months ended June 30, 2022 as compared to pre-tax income reported for the same period of the prior year.

Loss and Loss Adjustment Expenses (“LAE”) and Net Combined Ratios

Losses and LAE increased by $35.4 million to $111.9 million for the three months ended June 30, 2022, as compared to the same period of the previous year. The increase in losses and LAE during the second quarter 2022 was primarily due to $55.6 million of adverse prior year loss reserve development, $35.6 million of which was from the exited contract binding line of the primary commercial automobile business, as compared to $3.1 million of unfavorable prior year loss reserve development for the same period the prior year, partially offset by lower earned premium volume and lower net catastrophe losses. Losses and LAE for the second quarter of 2022 included $2.0 million of net catastrophe losses as compared to $3.7 million during the same period of the prior year.

Losses and LAE increased by $30.0 million to $176.0 million for the six months ended June 30, 2022, as compared to the same period of the previous year. The increase in losses and LAE for the first six months of 2022 was primarily due to $63.3 million of unfavorable prior year loss reserve development, $44.4 million of which was from the exited contract binding line of the primary commercial automobile business, as compared to $1.0 million of unfavorable prior year loss reserve development for the prior year period, partially offset by lower earned premium volume and lower net catastrophe losses. Losses and LAE for the six months ended June 30, 2022, included $3.1 million of net catastrophe losses as compared to $9.6 million during the same period of the prior year.

Net (Loss) Income

Net loss was $69.4 million and $72.6 million for the three and six months ended June 30, 2022 as compared to net loss of $0.8 million and net income of $8.1 million for the same periods during 2021.


On a diluted basis per share, net loss was $3.82 per share and $4.00 per share for the three and six months ended June 30, 2022 as compared to a net loss of $0.05 per share and net income of $0.45 per share for the three and six months ended June 30, 2021. The effective tax rate was -17.8% for the first six months of 2022 compared to 20.5% for the same period in 2021. During the second quarter of 2022 Hallmark recorded a full valuation allowance of $23.9 million against net deferred tax assets primarily due to  recent net losses, including the current period net loss. The effective rate for the six months ended June 30, 2021 varied from the statutory tax rates primarily due to tax exempt interest income.

Net Loss, Expense and Combined Ratios

The net loss ratio was 139.7% and108.2% for the three and six months ended June 30, 2022, as compared to 79.2% and 73.6% reported during the same periods in 2021. Net unfavorable prior year loss reserve development contributed 69.4 points and 38.9 points to the net loss ratio for the three and six months ended June 30, 2022, respectively, as compared to 3.2 points and 0.5 points for the same periods during 2021. Catastrophe losses contributed 2.5 points and 1.9 points to the net loss ratio for the three and six months ended June 30, 2022, respectively, as compared to 3.8 points and 4.8 points for the same periods during 2021.

The expense ratio was 29.5% and 28.9% for the three and six months ended June 30, 2022, as compared to 27.2% and 27.7% during the same periods in 2021. The net combined ratio was 169.2% and 137.1% for the three and six months ended June 30, 2022, as compared to 106.4% and 101.3% for the same periods during 2021. The exited contract binding business adversely impacted the net combined ratio by 45.2 points and 27.6 points during the three and six months ended June 30, 2022.

Book Value Per Share

Book value per share decreased 45% to $5.30 per share as of June 30, 2022 as compared to $9.66 per share as of December 31, 2021.

Non-GAAP Financial Measures

The Company’s financial statements are prepared in accordance with United States generally accepted accounting principles (“GAAP”). However, the Company also presents and discusses certain non-GAAP financial measures that it believes are useful to investors as measures of operating performance. Management may also use such non-GAAP financial measures in evaluating the effectiveness of business strategies and for planning and budgeting purposes. However, these non-GAAP financial measures should not be viewed as an alternative or substitute for the results reflected in the Company’s GAAP financial statements. In addition, the Company’s definitions of these items may not be comparable to the definitions used by other companies.

Operating income and operating income per share are calculated by excluding net investment gains and losses and asset impairments or valuation allowances from GAAP net income.  Asset impairments and valuation allowances are unusual and infrequent charges for the Company. Management believes that operating income and operating income per share provide useful information to investors about the performance of and underlying trends in the Company’s core insurance operations. Net income and net income per share are the GAAP measures that are most directly comparable to operating earnings and


operating earnings per share. A reconciliation of operating income and operating income per share to the most comparable GAAP financial measures is presented below.

Hallmark Financial Services, Inc. and Subsidiaries

Non-GAAP Financial Measures Reconcilation

Weighted

Income (Loss)

Less Tax

Net

Average

Diluted

($in thousands)

    

Before Tax

    

Effect

    

After Tax

    

Shares Diluted

    

Per Share

Second Quarter 2022

 

  

 

  

 

  

 

  

 

  

Reported GAAP measures

$

(57,550)

$

11,867

$

(69,417)

 

18,186

$

(3.82)

Excluded deferred tax valuation allowance

$

$

(23,888)

$

23,888

 

18,186

$

1.31

Excluded investment (gains)/losses

$

3,994

$

839

$

3,155

 

18,186

$

0.17

Operating loss

$

(53,556)

$

(11,182)

$

(42,374)

 

18,186

$

(2.33)

Second Quarter 2021

 

  

 

  

 

  

 

  

 

  

Reported GAAP measures

$

(1,011)

$

(165)

$

(846)

 

18,171

$

(0.05)

Excluded investment (gains)/losses

$

(3,876)

$

(814)

$

(3,062)

 

18,171

$

(0.17)

Operating loss

$

(4,887)

$

(979)

$

(3,908)

 

18,171

$

(0.22)

Year-to-Date 2022

 

  

 

  

 

  

 

  

 

  

Reported GAAP measures

$

(61,669)

$

10,967

$

(72,636)

 

18,179

$

(4.00)

Excluded deferred tax valuation allowance

$

$

(23,888)

$

23,888

 

18,179

$

1.31

Excluded investment (gains)/losses

$

3,943

$

828

$

3,115

 

18,179

$

0.17

Operating loss

$

(57,726)

$

(12,093)

$

(45,633)

 

18,179

$

(2.51)

Year-to-Date 2021

 

  

 

  

 

  

 

  

 

  

Reported GAAP measures

$

10,216

$

2,091

$

8,125

 

18,157

$

0.45

Excluded investment (gains)/losses

$

(9,655)

$

(2,028)

$

(7,627)

 

18,157

$

(0.42)

Operating income

$

561

$

63

$

498

 

18,157

$

0.03

    

2ndQ 2022

    

2ndQ 2021

    

YTD 2022

    

YTD 2021

 

Net combined ratio

 

169.2

%

106.4

%

137.1

%

101.3

%

Impact on net combined ratio

Net Unfavorable (Favorable) Prior Year Development

 

69.4

%

3.2

%

38.9

%

0.5

%

Catastrophes, net of reinsurance

 

2.5

%

3.8

%

1.9

%

4.9

%

Underlying combined ratio

 

97.3

%

99.4

%

96.3

%

95.9

%


About Hallmark

Hallmark is a specialty property and casualty insurance holding company with a diversified portfolio of insurance products written on a national platform. With six insurance subsidiaries, Hallmark markets, underwrites and services commercial and personal insurance in select markets. Hallmark is headquartered in Dallas, Texas and its common stock is listed on NASDAQ under the symbol "HALL."

Forward-looking statements in this release are made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that actual results may differ materially from such forward-looking statements. Forward-looking statements involve risks and uncertainties including, but not limited to, continued acceptance of the Company’s products and services in the marketplace, competitive factors, interest rate trends, general economic conditions, the availability of financing, underwriting loss experience and other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission.

For further information, please contact:

Chris Kenney

President

Chief Financial Officer

817.348.1600

www.hallmarkgrp.com


Hallmark Financial Services, Inc. and Subsidiaries

Consolidated Balance Sheets

($in thousands, except par value)

    

Jun. 30

    

Dec. 31

ASSETS

2022

2021

Investments:

(unaudited)

Debt securities, available-for-sale, at fair value (amortized cost: $442,218 in 2022 and $288,175 in 2021)

$

435,266

$

290,073

Equity securities (cost: $42,856 in 2022 and $42,120 in 2021)

44,325

48,695

Total investments

479,591

338,768

Cash and cash equivalents

113,207

 

352,867

Restricted cash

4,019

 

3,810

Ceded unearned premiums

158,634

 

146,433

Premiums receivable

99,994

 

90,621

Accounts receivable

4,413

 

6,914

Receivable from reinsurer

38,645

 

Receivable for securities

3,970

 

1,326

Reinsurance recoverable

522,957

 

549,964

Deferred policy acquisition costs

5,318

 

6,811

Intangible assets, net

567

 

819

Federal income tax recoverable

2,906

 

18,217

Deferred federal income taxes, net

 

8,906

Prepaid pension

57

 

Prepaid expenses

4,141

 

2,389

Other assets

27,584

 

25,753

Total Assets

$

1,466,003

$

1,553,598

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities:

Senior unsecured notes due 2029 (less unamortized debt issuance costs of $697 in 2022 and $746 in 2021)

$

49,303

$

49,254

Subordinated debt securities (less unamortized debt issuance costs of $717 in 2022 and $744 in 2021)

 

55,985

 

55,959

Reserves for unpaid losses and loss adjustment expenses

 

848,207

 

816,681

Unearned premiums

 

296,662

 

284,427

Reinsurance payable

 

64,466

 

117,908

Pension liability

 

-

 

174

Payable for securities

 

1,078

 

3,280

Accounts payable and other liabilites

 

53,930

 

50,394

Total Liabilities

 

1,369,631

 

1,378,077

Commitments and contingencies

Stockholders’ equity:

Common stock, $.18 par value, authorized 33,333,333 shares; issued 20,872,831 shares in 2022 and 2021

 

3,757

 

3,757

Additional paid-in capital

 

123,166

 

122,844

Retained earnings

 

2,067

 

74,703

Accumulated other comprehensive loss

 

(7,984)

 

(1,035)

Treasury stock (2,688,007 shares in 2022 and 2,700,364 shares in 2021), at cost

 

(24,634)

 

(24,748)

Total Stockholders Equity

 

96,372

 

175,521

Total Liabilities & Stockholders Equity

$

1,466,003

$

1,553,598


Hallmark Financial Services, Inc. and Subsidiaries

Consolidated Statements of Operations

    

Three Months Ended

    

Year-to-Date

($in thousands, except per share amounts, unaudited)

June 30,

June 30,

2022

2021

2022

2021

Gross premiums written

$

182,066

$

169,716

$

333,025

$

332,734

Ceded premiums written

 

(97,765)

 

(82,230)

 

(170,403)

 

(153,751)

Net premiums written

 

84,301

 

87,486

 

162,622

 

178,983

Change in unearned premiums

 

(4,188)

 

9,098

 

(33)

 

19,453

Net premiums earned

 

80,113

 

96,584

 

162,589

 

198,436

Investment income, net of expenses

 

3,120

 

2,353

 

4,979

 

5,363

Investment (losses) gains, net

 

(3,994)

 

3,876

 

(3,943)

 

9,655

Finance charges

 

980

 

1,109

 

1,963

 

2,242

Commission and fees

 

283

 

250

 

570

 

510

Other income

 

12

 

16

 

28

 

35

Total revenues

 

80,514

 

104,188

 

166,186

 

216,241

Losses and loss adjustment expenses

 

111,933

 

76,489

 

175,957

 

145,968

Operating expenses

 

24,639

 

27,335

 

49,016

 

57,307

Interest expense

 

1,366

 

1,249

 

2,630

 

2,498

Amortization of intangible assets

 

126

 

126

 

252

 

252

Total expenses

 

138,064

 

105,199

 

227,855

 

206,025

(Loss) income before tax

 

(57,550)

 

(1,011)

 

(61,669)

 

10,216

Income tax expense (benefit)

 

11,867

 

(165)

 

10,967

 

2,091

Net (loss) income

$

(69,417)

$

(846)

$

(72,636)

$

8,125

Net (loss) income per share:

Basic

$

(3.82)

$

(0.05)

$

(4.00)

$

0.45

Diluted

$

(3.82)

$

(0.05)

$

(4.00)

$

0.45


Hallmark Financial Services, Inc. and Subsidiaries

Consolidated Segment Data

Three Months Ended Jun. 30

    

Specialty Commercial

    

Standard Commercial

    

    

    

Segment

Segment

Personal Segment

Corporate

Consolidated

($in thousands, unaudited)

2022

2021

2022

2021

2022

2021

2022

2021

2022

    

2021

Gross premiums written

$

138,379

$

126,190

$

28,569

$

27,712

$

15,118

 

$

15,814

$

$

$

182,066

$

169,716

Ceded premiums written

 

(86,846)

 

(71,805)

 

(10,845)

 

(10,330)

 

(74)

 

(95)

 

 

 

(97,765)

 

(82,230)

Net premiums written

 

51,533

 

54,385

 

17,724

 

17,382

 

15,044

 

15,719

 

 

 

84,301

 

87,486

Change in unearned premiums

 

(3,838)

 

7,937

 

(1,160)

 

(835)

 

810

 

1,996

 

 

 

(4,188)

 

9,098

Net premiums earned

 

47,695

 

62,322

 

16,564

 

16,547

 

15,854

 

17,715

 

 

 

80,113

 

96,584

Total revenues

 

49,087

 

64,890

 

16,888

 

17,240

 

17,048

 

19,115

 

(2,509)

 

2,943

 

80,514

 

104,188

Losses and loss adjustment expenses

 

85,765

 

46,112

 

12,074

 

14,138

 

14,094

 

16,239

 

 

 

111,933

 

76,489

Pre-tax income (loss)

 

(45,907)

 

4,848

 

(786)

 

(1,976)

 

(2,819)

 

(2,766)

 

(8,038)

 

(1,117)

 

(57,550)

 

(1,011)

Net loss ratio (1)

 

179.8

%

 

74.0

%  

 

72.9

%  

 

85.4

%  

 

88.9

%  

91.7

%  

 

139.7

%

 

79.2

%

Net expense ratio (1)

 

19.2

%  

 

23.8

%  

 

34.5

%  

 

31.7

%  

 

31.6

%  

27.2

%  

 

29.5

%

 

27.2

%

Net combined ratio (1)

 

199.0

%  

 

97.8

%  

 

107.4

%  

 

117.1

%  

 

120.5

%  

118.9

%  

 

169.2

%

 

106.4

%

Impact on net combined ratio

Net Unfavorable (Favorable) Prior Year Development

 

111.7

%  

 

1.8

%  

 

2.8

%  

 

0.1

%  

 

11.6

%  

11.2

%  

 

69.4

%

 

3.2

%

Catastrophes, net of reinsurance

 

2.4

%  

 

0.2

%  

 

4.7

%  

 

19.3

%  

 

0.4

%  

2.3

%  

 

2.5

%

 

3.8

%

Underlying combined ratio (1)

 

84.9

%  

 

95.8

%  

 

99.9

%  

 

97.7

%  

 

108.5

%  

105.4

%  

 

97.3

%

 

99.4

%

Net Unfavorable (Favorable) Prior Year Development

 

53,278

 

1,127

 

470

 

18

 

1,835

 

1,985

 

 

 

55,583

 

3,130


(1)The net loss ratio is calculated as incurred losses and loss adjustment expenses divided by net premiums earned, each determined in accordance with GAAP. The net expense ratio is calculated as total underwriting expenses offset by agency fee income divided by net premiums earned, each determined in accordance with GAAP. The net combined ratio is calculated as the sum of the net loss ratio and the net expense ratio. The underlying combined ratio is the net combined ratio excluding the impact of net prior year reserve development and catastrophes.


Hallmark Financial Services, Inc. and Subsidiaries

Consolidated Segment Data

Six Months Ended Jun. 30

Specialty Commercial

Standard Commercial

Segment

Segment

Personal Segment

Corporate

Consolidated

($ in thousands, unaudited)

2022

2021

2022

2021

2022

2021

2022

2021

2022

2021

Gross premiums written

$

242,229

$

240,180

$

58,846

$

57,447

$

31,950

$

35,107

$

$

$

333,025

$

332,734

Ceded premiums written

(147,915)

(133,009)

(22,338)

(20,580)

(150)

(162)

(170,403)

 

(153,751)

Net premiums written

94,314

107,171

36,508

36,867

31,800

34,945

162,622

 

178,983

Change in unearned premiums

3,591

22,362

(3,237)

(3,254)

(387)

345

(33)

 

19,453

Net premiums earned

97,905

129,533

33,271

33,613

31,413

35,290

162,589

 

198,436

Total revenues

100,998

134,489

34,016

34,928

33,867

38,074

(2,695)

8,750

166,186

 

216,241

Losses and loss adjustment expenses

125,077

89,095

24,207

26,229

26,673

30,644

175,957

 

145,968

Pre-tax income (loss)

(43,342)

16,196

(1,478)

(1,610)

(3,845)

(4,389)

(13,004)

19

(61,669)

 

10,216

Net loss ratio (1)

127.8

%

68.8

%

72.8

%

78.0

%

84.9

%

86.8

%

108.2

%

 

73.6

%

Net expense ratio (1)

20.7

%

24.0

%

34.6

%

31.7

%

30.3

%

28.8

%

28.9

%

 

27.7

%

Net combined ratio (1)

148.5

%

92.8

%

107.4

%

109.7

%

115.2

%

115.6

%

137.1

%

 

101.3

%

Impact on net combined ratio

Net Unfavorable (Favorable) Prior Year Development

60.9

%

(0.6)

%

0.6

%

(0.6)

%

8.7

%

(4.0)

%

38.9

%

 

0.5

%

Catastrophes, net of reinsurance

2.1

%

2.8

%

2.9

%

2.8

%

0.3

%

15.4

%

1.9

%

 

4.9

%

Underlying combined ratio (1)

85.5

%

90.6

%

103.9

%

107.5

%

106.2

%

104.2

%

96.3

%

 

95.9

%

Net Unfavorable (Favorable) Prior Year Development

59,658

(772)

208

(1,343)

3,408

3,159

63,274

 

1,044


(1)The net loss ratio is calculated as incurred losses and loss adjustment expenses divided by net premiums earned, each determined in accordance with GAAP. The net expense ratio is calculated as total underwriting expenses offset by agency fee income divided by net premiums earned, each determined in accordance with GAAP. The net combined ratio is calculated as the sum of the net loss ratio and the net expense ratio. The underlying combined ratio is the net combined ratio excluding the impact of net prior year reserve development and catastrophes.



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