FORT WORTH, Texas, March 14, 2011 (GLOBE NEWSWIRE) -- Hallmark Financial Services, Inc. (Nasdaq:HALL) ("Hallmark") today reported fourth quarter 2010 net earnings of $0.4 million compared to $9.3 million reported for the fourth quarter of 2009. Hallmark reported net earnings of $7.3 million for fiscal year 2010, compared to $24.6 million reported for fiscal year 2009. On a fully diluted basis, net earnings were $0.02 per share and $0.36 per share, respectively, for the fourth quarter and fiscal year 2010, as compared to net earnings of $0.46 per share and $1.19 per share, respectively, for the fourth quarter and fiscal year 2009. Total revenues were $79.3 million and $307.1 million for the fourth quarter and fiscal year 2010, up 8% and 7%, respectively, from the $73.5 million and $287.0 million reported for the fourth quarter and fiscal year 2009.
Mark J. Morrison, President and Chief Executive Officer, said, "Fiscal 2010 proved to be a year of challenges and opportunities for Hallmark. We missed our combined ratio target for the year due to a combination of factors affecting incurred losses in each of our three largest business units. Increased volatility of large losses and weather related claims negatively affected the results of our Standard Commercial and E&S Commercial business units. We also experienced uncharacteristically poor results in our Personal Lines business unit, as higher than expected growth from geographic and product expansion drove a greater proportion of less seasoned business into the total mix of policies in force. Compounding this situation was an extraordinary level of fraudulent claims from business written in the recent expansion state of Florida. In order to bring Personal Lines results back to acceptable levels, we are actively managing our exposure in less seasoned states through rate increases and aggressive agency plant management. We expect these efforts to bring our Personal Lines results back in line with our expectations by the end of 2011."
Mr. Morrison continued, "During the first week of February this year, most of the country was impacted by severe winter storms. We presently estimate our losses from these storms to be approximately $3 million, net of approximately $1 million in reinsurance. These events will be reflected in our first quarter 2011 results. Despite these challenges, Hallmark is continuing to build opportunities for the future. With the close of our acquisition of Hallmark National Insurance Company at the end of 2010 and the renewal rights to its non-standard personal automobile business, we have a pipeline of seasoned business to fuel growth in our Personal Lines business unit for 2011 and beyond. Additionally in 2010, our E&S Commercial business unit launched a nationwide non-standard medical malpractice insurance program with the hiring of an experienced Chicago-based underwriting team. This program produced $1.6 million of written premium during 2010."
Mark E. Schwarz, Executive Chairman of Hallmark, stated, "Book value per share grew 4% during fiscal 2010 to $11.72. Total cash, cash equivalents and investments grew $53 million, or 12%, during fiscal 2010 to $498 million, or approximately $25 per share. Total investment securities increased 32% during the year to $432 million, contributing to growth in investment income and helping to offset the effect of lower market yields. Fourth quarter 2010 investment income increased 16% to $4 million compared to the prior year quarter. Cash flow from operations was $36 million for the year. As of year-end, Hallmark continued to have significant cash and cash equivalents of $66 million."
During the three months and year ended December 31, 2010, Hallmark's total revenues were $79.3 million and $307.1 million, representing an 8% and 7% increase, respectively, from the $73.5 million and $287.0 million in total revenues for the same periods of 2009. The increase in revenue for the three months ended December 31, 2010 was primarily attributable to increased production in its Personal Segment due to geographic expansion. The increase in revenue for the year ended December 31, 2010 was also attributable to increased production in the Personal Segment due to geographic expansion, as well as increased retention of business in the Specialty Commercial Segment and gains realized on the investment portfolio. These increases in revenue were partially offset by reduced earned premium in the Standard Commercial Segment due to reduced premium production as a result of continued deterioration of the general economic environment in its major markets. Also partially offsetting the increase in revenue were lower commission and fees in our Specialty Commercial Segment due primarily to the shift from a third party agency structure to an insurance underwriting structure.
Hallmark reported net earnings of $0.4 million and $7.3 million for the three months and year ended December 31, 2010, respectively, which were $8.9 million and $17.3 million lower than the $9.3 million and $24.6 million net earnings reported for the same periods of 2009. On a fully diluted basis, net earnings were $0.02 and $0.36 per share for the three months and year ended December 31, 2010, respectively, as compared to net earnings of $0.46 and $1.19 per share for the same periods in 2009. The decrease in net income for the three months and year ending December 31, 2010 was primarily due to increased current accident year loss and loss adjustment expenses primarily caused by increased volatility of large losses, greater than anticipated Personal Segment expansion into Florida and weather related losses. Unfavorable prior year loss development of $2.1 million and $9.2 million recognized during the three months and year ended December 31, 2010, respectively, as compared to favorable development of $1.8 million and unfavorable development of $1.6 million recognized for the three months and year ended December 31, 2009 also contributed to the decrease in net income. Partially offsetting the increased loss and loss adjustment expenses was the increase in revenue for the three months and year ending December 31, 2010, as well as lower operating expenses due to lower production related expenses in the Standard Commercial Segment and Specialty Commercial Segment and lower general and administrative costs in the Standard Commercial Segment as a result of ongoing cost reduction initiatives.
Hallmark's net loss ratio was 79.1% and 72.8% for the three months and year ended December 31, 2010, respectively, as compared to 58.5% and 61.2% for the same periods in 2009. Hallmark's net expense ratio was 29.9% and 29.6% for the three months and year ended December 31, 2010, respectively, as compared to 29.7% and 30.5% for the same periods in 2009. Hallmark's net combined ratio was 109.0% and 102.4% for the three months and year ended December 31, 2010, respectively, as compared to 88.2% and 91.7% for the same periods in 2009.
Hallmark Financial Services, Inc. is an insurance holding company which, through its subsidiaries, engages in the sale of property/casualty insurance products to businesses and individuals. Hallmark's business involves marketing, distributing, underwriting and servicing commercial insurance, personal insurance, medical malpractice insurance and general aviation insurance, as well as providing other insurance related services. The Company is headquartered in Fort Worth, Texas and its common stock is listed on NASDAQ under the symbol "HALL."
The Hallmark Financial Services, Inc. logo is available at
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 substantially 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.
1 Produced premium is a non-GAAP measurement that management uses to track total controlled premium produced by Hallmark's operations. Hallmark believes this is a useful tool for users of its financial statements to measure premium production whether retained by Hallmark's insurance company subsidiaries or assumed by third party insurance carriers who pay it commission revenue. Produced premium excludes unaffiliated third party premium fronted by its Hallmark County Mutual Insurance Company subsidiary.
2 The net loss ratio is calculated as incurred losses and LAE divided by net premiums earned, each determined in accordance with GAAP. During the second quarter of 2009 Hallmark changed the method in which the net expense ratio is calculated. The net expense ratio is now calculated for the business units that retain 100% of produced premium as total operating expenses for the unit offset by agency fee income divided by net premiums earned, each determined in accordance with GAAP. For the business units that do not retain 100% of the produced premium, the net expense ratio is calculated as underwriting expenses of the insurance company subsidiaries for the unit offset by agency fee income, divided by net premiums earned, each determined in accordance with GAAP. Net combined ratio is calculated as the sum of the net loss ratio and the net expense ratio.
1 Produced premium is a non-GAAP measurement that management uses to track total controlled premium produced by Hallmark's operations. Hallmark believes this is a useful tool for users of its financial statements to measure premium production whether retained by Hallmark's insurance company subsidiaries or assumed by third party insurance carriers who pay it commission revenue. Produced premium excludes unaffiliated third party premium fronted by its Hallmark County Mutual Insurance Company subsidiary.
2 The net loss ratio is calculated as incurred losses and LAE divided by net premiums earned, each determined in accordance with GAAP. During the second quarter of 2009 Hallmark changed the method in which the net expense ratio is calculated. The net expense ratio is now calculated for the business units that retain 100% of produced premium as total operating expenses for the unit offset by agency fee income divided by net premiums earned, each determined in accordance with GAAP. For the business units that do not retain 100% of the produced premium, the net expense ratio is calculated as underwriting expenses of the insurance company subsidiaries for the unit offset by agency fee income, divided by net premiums earned, each determined in accordance with GAAP. Net combined ratio is calculated as the sum of the net loss ratio and the net expense ratio.
CONTACT: Mark J. Morrison, President and Chief Executive Officer 817.348.1600 www.hallmarkgrp.com