Hallmark Financial Services, Inc. (“Hallmark”) (NASDAQ: HALL) today
filed its Form 10-Q and announced financial results for the third
quarter and nine months ended September 30, 2022.
| |
Third Quarter |
|
Year-to-Date |
|
|
|
2022 |
|
|
2021 |
|
|
|
2022 |
|
|
2021 |
|
|
$ in millions: |
|
|
|
|
|
|
Net loss from continuing operations |
$ |
(29.3 |
) |
$ |
(2.0 |
) |
|
$ |
(104.9 |
) |
$ |
(3.9 |
) |
|
Net income from discontinued operations |
$ |
1.1 |
|
$ |
5.5 |
|
|
$ |
4.2 |
|
$ |
15.4 |
|
|
Net (loss) income |
$ |
(28.2 |
) |
$ |
3.4 |
|
|
$ |
(100.8 |
) |
$ |
11.6 |
|
|
Operating loss (1) |
$ |
(20.6 |
) |
$ |
(1.6 |
) |
|
$ |
(69.2 |
) |
$ |
(11.1 |
) |
|
|
|
|
|
|
|
|
$ per diluted share: |
|
|
|
|
|
|
Net loss from continuing operations |
$ |
(1.61 |
) |
$ |
(0.11 |
) |
|
$ |
(5.77 |
) |
$ |
(0.21 |
) |
|
Net income from discontinued operations |
$ |
0.06 |
|
$ |
0.30 |
|
|
$ |
0.23 |
|
$ |
0.85 |
|
|
Net (loss) income |
$ |
(1.55 |
) |
$ |
0.19 |
|
|
$ |
(5.54 |
) |
$ |
0.64 |
|
|
Operating loss (1) |
$ |
(1.13 |
) |
$ |
(0.09 |
) |
|
$ |
(3.81 |
) |
$ |
(0.61 |
) |
(1) See “Non-GAAP Financial
Measures” belowHighlights:
- On October 7, 2022, Hallmark
completed the sale of substantially all of its excess and surplus
lines operations, for $40.0 million cash consideration, plus an
estimated $19.2 million consideration for the acquisition costs
associated with certain net unearned premium reserves. As a result,
the results of operations for the affected lines of business are
included in discontinued operations for all periods shown in its
Consolidated Statement of Operations and the corresponding assets
and liabilities are presented separately as single line items in
the asset and liability sections of its Consolidated Balance Sheet
at September 30, 2022.
- Net loss from continuing operations
of $29.3 million, or $1.61 per share, in the third quarter of 2022
as compared to a net loss of $2.0 million, or $0.11 per share, for
the same period of 2021. Year-to-date net loss from continuing
operations of $104.9 million, or $5.77 per share, as compared to
net loss from continuing operations of $3.9 million, or $0.21 per
share, for the same period of 2021.
- Net income from discontinued
operations of $1.1 million, or $0.06 per share, in the third
quarter of 2022 as compared to net income from discontinued
operations of $5.5 million, or $0.30 per share, for the same period
of 2021. Year-to-date net income from discontinued operations of
$4.2 million, or $0.23 per share, as compared to net income from
discontinued operations of $15.4 million, or $0.85 per share, for
the same period of 2021.
- Net loss of $28.2 million, or $1.55
per share, in the third quarter of 2022 as compared to net income
of $3.4 million, or $0.19 per share, for the same period of 2021.
Year-to-date net loss of $100.8 million, or $5.54 per share, as
compared to net income of $11.6 million, or $0.64 per share, for
the same period of 2021.
- Net loss from continuing operations
and net loss included an additional valuation allowance against net
deferred tax assets of $6.5 million for the third quarter of 2022
resulting in a full valuation allowance against net deferred tax
assets of $30.4 million year-to-date primarily due to recent net
losses, including the current period net loss.
- Net loss from continuing operations
and net loss for the third quarter included a $12.4 million
after-tax impact from the previously exited contract binding
business driven by unfavorable prior year loss reserve development
of $14.0 million during the quarter.
- Net combined ratio of 177.1% and 184.1% for the three and nine
months ended September 30, 2022, compared to 105.5% and 108.8% for
the same periods the prior year.
- Underlying combined ratio
(excluding net prior year development and catastrophe losses) of
115.5% and 114.0% for the three and nine months ended September 30,
2022, compared to 110.8% and 107.5% for the same periods the prior
year. See Non-GAAP Financial Measures below.
- Gross premiums written for the
three and nine months ended September 30, 2022 decreased 5.0% and
10.0%, respectively, compared to the same period the prior
year.
- Net catastrophe losses were $1.8
million in the third quarter of 2022, or 4.9 points of the net
combined ratio, as compared to $0.6 million, or 1.4 points of the
net combined ratio, for the same period the prior year. Net
catastrophe losses were $3.2 million for the first nine months of
2022, or 2.8 points of the net combined ratio, as compared to $6.6
million, or 4.3 points of the net combined ratio, for the same
period the prior year.
- Net investment income was $3.7
million and $8.7 million during the three and nine months ended
September 30, 2022, as compared to $2.2 million and $7.6 million
during the same periods in 2021.
- Net investment losses of $2.8
million during the third quarter of 2022 as compared to net
investment losses of $0.5 million during the same period the prior
year. Net investment losses of $6.8 million for the nine months
ended September 30, 2022 as compared to net investment gains of
$9.1 million during the same period the prior year.
Third Quarter and Year-to-Date 2022
Financial Review
| |
|
|
|
|
|
| |
Third Quarter |
|
Year-to-Date |
|
|
|
2022 |
|
|
2021 |
|
|
|
2022 |
|
|
2021 |
|
| ($ in
thousands) |
|
|
|
|
|
|
Gross premiums written |
$ |
52,520 |
|
$ |
55,128 |
|
|
$ |
167,857 |
|
$ |
185,738 |
|
|
Net premiums written |
$ |
36,618 |
|
$ |
33,540 |
|
|
$ |
115,325 |
|
$ |
124,729 |
|
|
Net premiums earned |
$ |
36,380 |
|
$ |
42,703 |
|
|
$ |
112,732 |
|
$ |
151,343 |
|
|
Investment income, net of expenses |
$ |
3,721 |
|
$ |
2,213 |
|
|
$ |
8,700 |
|
$ |
7,576 |
|
|
Investment (losses) gains, net |
$ |
(2,821 |
) |
$ |
(533 |
) |
|
$ |
(6,764 |
) |
$ |
9,122 |
|
|
Net (loss) from continuing operations |
$ |
(29,253 |
) |
$ |
(2,044 |
) |
|
$ |
(104,943 |
) |
$ |
(3,864 |
) |
|
Net income from discontinued operations |
$ |
1,100 |
|
$ |
5,489 |
|
|
$ |
4,154 |
|
$ |
15,435 |
|
|
Net (loss) income |
$ |
(28,153 |
) |
$ |
3,445 |
|
|
$ |
(100,789 |
) |
$ |
11,571 |
|
|
Operating (loss) income |
$ |
(20,553 |
) |
$ |
(1,623 |
) |
|
$ |
(69,240 |
) |
$ |
(11,070 |
) |
|
Net (loss) income per share - from continuing operations basic
& diluted |
$ |
(1.61 |
) |
$ |
(0.11 |
) |
|
$ |
(5.77 |
) |
$ |
(0.21 |
) |
|
Net income per share from discontinued operations - basic &
diluted |
$ |
0.06 |
|
$ |
0.30 |
|
|
$ |
0.23 |
|
$ |
0.85 |
|
|
Net loss per share - basic & diluted |
$ |
(1.55 |
) |
$ |
0.19 |
|
|
$ |
(5.54 |
) |
$ |
0.64 |
|
|
Operating (loss) per share - basic & diluted (1) |
$ |
(1.13 |
) |
$ |
(0.09 |
) |
|
$ |
(3.81 |
) |
$ |
(0.61 |
) |
|
Book value per share |
$ |
3.62 |
|
$ |
9.78 |
|
|
$ |
3.62 |
|
$ |
9.78 |
|
(1) See “Non-GAAP Financial Measures”
below
Gross Premiums WrittenGross premiums written
were $52.5 million and $167.9 million during the three and nine
months ended September 30, 2022, representing a decrease of 5% and
10% from the $55.1 million and $185.7 in gross premiums written for
the same periods in 2021.
Net Premiums WrittenNet premiums written were
$36.6 million and $115.3 million during the three and nine months
ended September 30, 2022, representing an increase of 9% and a
decrease of 8%, respectively, from the $33.5 million and $124.7
million in net premiums written for the same periods in
2021.
Net Premiums EarnedNet premiums earned were
$36.4 million and $112.7 million for the three and nine months
ended September 30, 2022, representing a decrease of 15% and 26%
from the $42.7 million and $151.3 million in net premiums earned
for the same periods in 2021.
InvestmentsTotal return on investment securities
was -0.6% and -2.0% for the three and nine months ended September
30, 2022.
Despite significant outperformance relative to
market benchmarks, severe declines in markets have precluded
positive contribution from investments in the quarter and year to
date periods. Year to date, the total return on Hallmark’s equity
portfolio was -10.2% compared to -23.9% for the S&P 500 Stock
Index. Year to date, the total return on Hallmark’s fixed income
portfolio was -1.8% compared to -14.6% for the Bloomberg Aggregate
Bond Index.
Net investment income was $3.7 million and $8.7
million during the three and nine months ended September 30, 2022,
as compared to $2.2 million and $7.6 million during the same
periods in 2021. The 68% increase in net investment income during
the third quarter of 2022 was due to a greater amount of income
generating securities and to higher yields.
Net investment losses were $2.8 million for the
third quarter of 2022 as compared to net investment losses of $0.5
million for the same period in 2021. In the current quarter, net
investment losses include $3.3 million unrealized losses on common
and preferred stocks.
Net investment losses were $6.8 million for the
nine months ended September 30, 2022 as compared to net investment
gains of $9.1 million for the same period in 2021. Year to date,
net investment losses include $1.1 million realized gains on common
stocks and $8.4 million unrealized losses on common and preferred
stocks.
Fixed-income securities were $417.1 million at
September 30, 2022, with a tax equivalent book yield of 3.3%
compared to 2.4% as of December 31, 2021. As of September 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 September 30, 2022, 9%
of the investment portfolio was invested in equity securities.
Total investments were $458.1 million at
September 30, 2022. Cash and cash equivalents, including restricted
cash were $138.3 million. Total investments, cash and cash
equivalents, and restricted cash were $596.4 million or $32.79 per
share.
Pre-Tax (Loss) Income from Continuing
OperationsPre-tax loss from continuing operations was $30.3 million
for the three months ended September 30, 2022, as compared to a
pre-tax loss from continuing operations of $1.9 million reported
during the same period in 2021. The decline in pre-tax results from
continuing operations for the third quarter of 2022 compared to the
same period of the prior year was driven by higher losses and LAE
of $21.6 million, lower net premiums earned of $6.3 million, higher
net investment losses of $2.3 million, higher interest expense of
$0.3 million and lower finance charges of $0.1 million, partially
offset by higher net investment income of $1.5 million and lower
operating expenses of $0.7 million.
Pre-tax loss from continuing operations was
$99.7 million for the nine months ended September 30, 2022, as
compared to a pre-tax loss from continuing operations of $3.0
million reported for the same period the prior year. The decline in
pre-tax results from continuing operations for the nine months
ended September 30, 2022, was driven by higher losses and LAE of
$49.6 million, lower net premiums earned of $38.6 million, net
investment losses of $6.8 million compared to net investment gains
of $9.1 million the prior year, lower finance charges of $0.4
million and higher interest expense of $0.4 million, partially
offset by lower operating expenses of $7.1 million and higher net
investment income of $1.1 million.
Loss and Loss Adjustment Expenses (“LAE”) from
Continuing OperationsLosses and LAE increased by $21.6 million to
$49.1 million for the three months ended September 30, 2022, as
compared to the same period of the previous year. The increase in
losses and LAE during the third quarter 2022 was primarily due to
$20.6 million of adverse prior year loss reserve development, $14.0
million of which was from the exited contract binding line of the
primary commercial automobile business, as compared to $2.9 million
of favorable prior year loss reserve development for the same
period the prior year, as well as higher catastrophe loss. Losses
and LAE for the third quarter of 2022 included $1.8 million of net
catastrophe losses as compared to $0.6 million during the same
period of the prior year.
Losses and LAE increased by $49.6 million to
$161.2 million for the nine months ended September 30, 2022, as
compared to the same period of the previous year. The increase in
losses and LAE for the first nine months of 2022 was primarily due
to $75.8 million of unfavorable prior year loss reserve
development, $58.4 million of which was from the exited contract
binding line of the primary commercial automobile business, as
compared to $4.6 million of favorable prior year loss reserve
development for the prior year period, partially offset by lower
net catastrophe losses. Losses and LAE for the nine months ended
September 30, 2022, included $3.2 million of net catastrophe losses
as compared to $6.6 million during the same period of the prior
year.
Net (Loss) Income Net loss from continuing
operations was $29.3 million and $104.9 million for the three and
nine months ended September 30, 2022 as compared to net loss from
continuing operations of $2.0 million and $3.9 million for the same
periods during 2021. On a diluted basis per share, net loss from
continuing operations was $1.61 per share and $5.77 per share for
the three and nine months ended September 30, 2022 as compared to a
net loss from continuing operations of $0.11 per share and $0.21
per share for the three and nine months ended September 30,
2021.
Net income from discontinued operations was $1.1
million and $4.2 million for the three and nine months ended
September 30, 2022 as compared to net income from discontinued
operations of $5.5 million and $15.4 million for the same periods
during 2021. On a diluted basis per share, net income from
discontinued operations was $0.06 per share and $0.23 per share for
the three and nine months ended September 30, 2022 as compared to a
net income from discontinued operations of $0.30 per share and
$0.85 per share for the three and nine months ended September 30,
2021.
Total net loss was $28.2 million and $100.8
million for the three and nine months ended September 30, 2022 as
compared to total net income of $3.4 million and $11.6 million for
the same periods during 2021. On a diluted basis per share, total
net loss was $1.55 per share and $5.54 per share for the three and
nine months ended September 30, 2022 as compared to net income of
$0.19 per share and $0.64 per share for the three and nine months
ended September 30, 2021.
The effective tax rate was -13.1% for the first
nine months of 2022 compared to 20.8% for the same period in
2021. During the first nine months of 2022, Hallmark recorded a
full valuation allowance of $30.4 million against net deferred tax
assets primarily due to recent net losses, including the current
period net loss. The effective rate for the nine months ended
September 30, 2021 varied from the statutory tax rates primarily
due to tax exempt interest income.
Net Loss, Expense and Combined RatiosThe net
loss ratio for continuing operations was 135.1% and 143.0% for the
three and nine months ended September 30, 2022, as compared to
64.5% and 73.7% reported during the same periods in 2021. Net
unfavorable prior year loss reserve development contributed 56.7
points and 67.3 points to the net loss ratio for the three and nine
months ended September 30, 2022, respectively, as compared to net
favorable prior year loss reserve development reducing the net loss
ratio 6.7 points and 3.0 points for the same periods during 2021.
Catastrophe losses contributed 4.9 points and 2.8 points to the net
loss ratio for the three and nine months ended September 30, 2022,
respectively, as compared to 1.4 points and 4.3 points for the same
periods during 2021.
The expense ratio was 42.0% and 41.1% for the
three and nine months ended September 30, 2022, as compared to
41.0% and 35.1% during the same periods in 2021. The net combined
ratio was 177.1% and 184.1% for the three and nine months ended
September 30, 2022, as compared to 105.5% and 108.8% for the same
periods during 2021. The exited contract binding business adversely
impacted the net combined ratio by 35.3 points and 58.6 points
during the three and nine months ended September 30, 2022.
Book Value Per ShareBook value per share
decreased 63% to $3.62 per share as of September 30, 2022 as
compared to $9.66 per share as of December 31, 2021.
Non-GAAP Financial Measures
The Company’s financial statements are prepared
in accordance with United States generally accepted accounting
principles (“GAAP”). However, the Company also presents and
discusses certain non-GAAP financial measures that it believes are
useful to investors as measures of operating performance.
Management may also use such non-GAAP financial measures in
evaluating the effectiveness of business strategies and for
planning and budgeting purposes. However, these non-GAAP financial
measures should not be viewed as an alternative or substitute for
the results reflected in the Company’s GAAP financial statements.
In addition, the Company’s definitions of these items may not be
comparable to the definitions used by other companies.
Operating income and operating income per share
are calculated by excluding net investment gains and losses and
asset impairments or valuation allowances from GAAP net income from
continuing operations. Asset impairments and valuation allowances
are unusual and infrequent charges for the Company. Management
believes that operating income and operating income per share
provide useful information to investors about the performance of
and underlying trends in the Company’s core insurance operations.
Net income from continuing operations and net income per share from
continuing operations are the GAAP measures that are most directly
comparable to operating earnings and operating earnings per share.
A reconciliation of operating income and operating income per share
to the most comparable GAAP financial measures is presented
below.
| |
| Hallmark
Financial Services, Inc. and Subsidiaries |
| Non-GAAP
Financial Measures Reconciliation |
|
($ in thousands) |
Income (Loss)from Continuing OperationsBefore
Tax |
Less TaxEffect |
NetAfter Tax |
WeightedAverageShares Diluted |
DilutedPer Share |
|
Third Quarter 2022 |
|
|
|
|
|
|
Reported GAAP measures |
$ |
(30,260 |
) |
$ |
(1,007 |
) |
$ |
(29,253 |
) |
|
18,185 |
|
$ |
(1.61 |
) |
|
Excluded deferred tax valuation allowance |
$ |
- |
|
$ |
(6,471 |
) |
$ |
6,471 |
|
|
18,185 |
|
$ |
0.36 |
|
|
Excluded investment (gains)/losses |
$ |
2,821 |
|
$ |
592 |
|
$ |
2,229 |
|
|
18,185 |
|
$ |
0.12 |
|
|
Operating loss |
$ |
(27,439 |
) |
$ |
(6,886 |
) |
$ |
(20,553 |
) |
|
18,185 |
|
$ |
(1.13 |
) |
|
|
|
|
|
|
|
|
Third Quarter 2021 |
|
|
|
|
|
|
Reported GAAP measures |
$ |
(1,883 |
) |
$ |
161 |
|
$ |
(2,044 |
) |
|
18,142 |
|
$ |
(0.11 |
) |
|
Excluded investment (gains)/losses |
$ |
533 |
|
$ |
112 |
|
$ |
421 |
|
|
18,142 |
|
$ |
0.02 |
|
|
Operating loss |
$ |
(1,350 |
) |
$ |
273 |
|
$ |
(1,623 |
) |
|
18,142 |
|
$ |
(0.09 |
) |
|
|
|
|
|
|
|
|
Year-to-Date 2022 |
|
|
|
|
|
|
Reported GAAP measures |
$ |
(99,701 |
) |
$ |
5,242 |
|
$ |
(104,943 |
) |
|
18,181 |
|
$ |
(5.77 |
) |
|
Excluded deferred tax valuation allowance |
$ |
- |
|
$ |
(30,359 |
) |
$ |
30,359 |
|
|
18,181 |
|
$ |
1.67 |
|
|
Excluded investment (gains)/losses |
$ |
6,764 |
|
$ |
1,420 |
|
$ |
5,344 |
|
|
18,181 |
|
$ |
0.29 |
|
|
Operating loss |
$ |
(92,937 |
) |
$ |
(23,697 |
) |
$ |
(69,240 |
) |
|
18,181 |
|
$ |
(3.81 |
) |
|
|
|
|
|
|
|
|
Year-to-Date 2021 |
|
|
|
|
|
|
Reported GAAP measures |
$ |
(3,036 |
) |
$ |
828 |
|
$ |
(3,864 |
) |
|
18,157 |
|
$ |
(0.21 |
) |
|
Excluded investment (gains)/losses |
$ |
(9,122 |
) |
$ |
(1,916 |
) |
$ |
(7,206 |
) |
|
18,157 |
|
$ |
(0.40 |
) |
|
Operating income |
$ |
(12,158 |
) |
$ |
(1,088 |
) |
$ |
(11,070 |
) |
|
18,157 |
|
$ |
(0.61 |
) |
| |
|
|
|
|
|
Underlying combined ratio is calculated by
excluding the impact of net favorable or unfavorable prior year
loss development and catastrophe losses from the calculation of the
net combined ratio. Management believes that the underlying
combined ratio provides useful information to investors about the
current performance of the Company's insurance operations absent
historical developments and uncontrollable events. Combined ratio
is the GAAP measure most comparable to underlying combined ratio. A
reconciliation of the underlying combined ratio to the combined
ratio is presented below.
| |
|
|
|
|
| |
3rdQ 2022 |
3rdQ
2021 |
YTD
2022 |
YTD 2021 |
|
Net combined ratio |
|
177.1 |
% |
|
105.5 |
% |
|
184.1 |
% |
|
108.8 |
% |
|
Impact on net combined ratio |
|
|
|
|
|
Net Unfavorable (Favorable) Prior Year Development |
|
56.7 |
% |
|
-6.7 |
% |
|
67.3 |
% |
|
-3.0 |
% |
|
Catastrophes, net of reinsurance |
|
4.9 |
% |
|
1.4 |
% |
|
2.8 |
% |
|
4.3 |
% |
|
Underlying combined ratio |
|
115.5 |
% |
|
110.8 |
% |
|
114.0 |
% |
|
107.5 |
% |
| |
|
|
|
|
About Hallmark
Hallmark is a 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 KenneyPresidentChief Financial Officer
817.348.1600www.hallmarkgrp.com
|
|
|
Hallmark Financial Services, Inc. and
Subsidiaries |
|
Consolidated Balance Sheets |
|
|
|
|
|
($ in thousands, except par value) |
|
Sep. 30 |
|
Dec. 31 |
|
ASSETS |
|
2022 |
|
2021 |
|
Investments: |
|
(unaudited) |
|
|
Debt securities, available-for-sale, at fair value (amortized cost:
$426,870 in 2022 and $288,175 in 2021) |
$ |
417,053 |
|
$ |
290,073 |
|
|
Equity securities (cost: $42,858 in 2022 and $42,120 in 2021) |
|
41,002 |
|
|
48,695 |
|
|
Total investments |
|
458,055 |
|
|
338,768 |
|
|
Cash and cash equivalents |
|
129,468 |
|
|
352,867 |
|
|
Restricted cash |
|
8,845 |
|
|
3,810 |
|
|
Ceded unearned premiums |
|
30,473 |
|
|
29,207 |
|
|
Premiums receivable |
|
74,920 |
|
|
90,621 |
|
|
Accounts receivable |
|
5,749 |
|
|
6,914 |
|
|
Receivable from reinsurer |
|
62,028 |
|
|
- |
|
|
Receivable for securities |
|
883 |
|
|
1,326 |
|
|
Reinsurance recoverable |
|
542,818 |
|
|
549,964 |
|
|
Deferred policy acquisition costs |
|
5,341 |
|
|
6,811 |
|
|
Intangible assets, net |
|
441 |
|
|
819 |
|
|
Federal income tax recoverable |
|
2,378 |
|
|
18,217 |
|
|
Deferred federal income taxes, net |
|
- |
|
|
8,906 |
|
|
Prepaid pension |
|
172 |
|
|
- |
|
|
Prepaid expenses |
|
2,320 |
|
|
2,173 |
|
|
Other assets |
|
25,671 |
|
|
25,119 |
|
|
Assets held-for-sale |
|
132,444 |
|
|
118,076 |
|
|
Total Assets |
$ |
1,482,006 |
|
$ |
1,553,598 |
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
Liabilities: |
|
|
|
|
|
Senior unsecured notes due 2029 (less unamortized debt issuance
costs of $672 in 2022 and $746 in 2021) |
$ |
49,328 |
|
$ |
49,254 |
|
|
Subordinated debt securities (less unamortized debt issuance costs
of $704 in 2022 and $744 in 2021) |
|
55,998 |
|
|
55,959 |
|
|
Reserves for unpaid losses and loss adjustment expenses |
|
858,888 |
|
|
816,681 |
|
|
Unearned premiums |
|
86,595 |
|
|
82,736 |
|
|
Reinsurance payable |
|
97,065 |
|
|
117,908 |
|
|
Pension liability |
|
- |
|
|
174 |
|
|
Payable for securities |
|
- |
|
|
3,280 |
|
|
Accounts payable and other liabilities |
|
52,836 |
|
|
49,442 |
|
|
Liabilities held-for-sale |
|
215,528 |
|
|
202,643 |
|
| Total Liabilities |
|
1,416,238 |
|
|
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 |
|
122,959 |
|
|
122,844 |
|
|
(Accumulated deficit) retained earnings |
|
(26,086 |
) |
|
74,703 |
|
|
Accumulated other comprehensive loss |
|
(10,228 |
) |
|
(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 |
|
65,768 |
|
|
175,521 |
|
|
Total Liabilities & Stockholders Equity |
$ |
1,482,006 |
|
$ |
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) |
September
30, |
|
September
30, |
|
|
2022 |
2021 |
|
2022 |
2021 |
|
Gross premiums written |
$ |
52,520 |
|
$ |
55,128 |
|
|
$ |
167,857 |
|
$ |
185,738 |
|
|
Ceded premiums written |
|
(15,902 |
) |
|
(21,588 |
) |
|
|
(52,532 |
) |
|
(61,009 |
) |
|
Net premiums written |
|
36,618 |
|
|
33,540 |
|
|
|
115,325 |
|
|
124,729 |
|
|
Change in unearned premiums |
|
(238 |
) |
|
9,163 |
|
|
|
(2,593 |
) |
|
26,614 |
|
|
Net premiums earned |
|
36,380 |
|
|
42,703 |
|
|
|
112,732 |
|
|
151,343 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income, net of expenses |
|
3,721 |
|
|
2,213 |
|
|
|
8,700 |
|
|
7,576 |
|
|
Investment (losses) gains, net |
|
(2,821 |
) |
|
(533 |
) |
|
|
(6,764 |
) |
|
9,122 |
|
|
Finance charges |
|
937 |
|
|
1,076 |
|
|
|
2,900 |
|
|
3,318 |
|
|
Commission and fees |
|
1 |
|
|
2 |
|
|
|
3 |
|
|
3 |
|
|
Other income |
|
14 |
|
|
15 |
|
|
|
42 |
|
|
50 |
|
|
Total revenues |
|
38,232 |
|
|
45,476 |
|
|
|
117,613 |
|
|
171,412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss adjustment expenses |
|
49,141 |
|
|
27,549 |
|
|
|
161,168 |
|
|
111,570 |
|
|
Operating expenses |
|
17,816 |
|
|
18,558 |
|
|
|
51,967 |
|
|
59,114 |
|
|
Interest expense |
|
1,528 |
|
|
1,245 |
|
|
|
4,158 |
|
|
3,743 |
|
|
Amortization of intangible assets |
|
7 |
|
|
7 |
|
|
|
21 |
|
|
21 |
|
|
Total expenses |
|
68,492 |
|
|
47,359 |
|
|
|
217,314 |
|
|
174,448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before tax |
|
(30,260 |
) |
|
(1,883 |
) |
|
|
(99,701 |
) |
|
(3,036 |
) |
|
Income tax expense (benefit) from continuing operations |
|
(1,007 |
) |
|
161 |
|
|
|
5,242 |
|
|
828 |
|
|
Net (loss) income from continuing operations |
$ |
(29,253 |
) |
$ |
(2,044 |
) |
|
$ |
(104,943 |
) |
$ |
(3,864 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
Total pretax income from discontinued operations |
$ |
2,801 |
|
$ |
6,274 |
|
|
$ |
10,573 |
|
$ |
17,644 |
|
|
Income tax expense on discontinued operations |
|
1,701 |
|
|
785 |
|
|
|
6,419 |
|
|
2,209 |
|
|
Income from discontinued operations, net of tax |
$ |
1,100 |
|
$ |
5,489 |
|
|
$ |
4,154 |
|
$ |
15,435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
$ |
(28,153 |
) |
$ |
3,445 |
|
|
$ |
(100,789 |
) |
$ |
11,571 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) basic income per share: |
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
$ |
(1.61 |
) |
$ |
(0.11 |
) |
|
$ |
(5.77 |
) |
$ |
(0.21 |
) |
|
Income from discontinued operations |
|
0.06 |
|
$ |
0.30 |
|
|
|
0.23 |
|
|
0.85 |
|
|
Basic income per share |
$ |
(1.55 |
) |
$ |
0.19 |
|
|
$ |
(5.54 |
) |
$ |
0.64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) diluted income per share: |
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
$ |
(1.61 |
) |
$ |
(0.11 |
) |
|
$ |
(5.77 |
) |
$ |
(0.21 |
) |
|
Income from discontinued operations |
|
0.06 |
|
|
0.30 |
|
|
|
0.23 |
|
|
0.85 |
|
|
Diluted (loss) income per share |
$ |
(1.55 |
) |
$ |
0.19 |
|
|
$ |
(5.54 |
) |
$ |
0.64 |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Hallmark
Financial Services, Inc. and Subsidiaries |
| Consolidated
Segment Data |
|
|
|
|
|
Three Months Ended Sep. 30 |
|
|
|
|
|
|
|
|
|
|
|
|
Standard Commercial Segment |
Personal Segment |
Runoff Specialty Segment |
Corporate |
Consolidated |
|
($ in thousands, unaudited) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
Gross premiums written |
$ |
34,556 |
|
$ |
34,274 |
|
$ |
15,638 |
|
$ |
17,453 |
|
$ |
2,326 |
|
$ |
3,401 |
|
$ |
- |
|
$ |
- |
|
$ |
52,520 |
|
$ |
55,128 |
|
|
Ceded premiums written |
|
(15,801 |
) |
|
(16,245 |
) |
|
(76 |
) |
|
(72 |
) |
|
(25 |
) |
|
(5,271 |
) |
|
- |
|
|
- |
|
|
(15,902 |
) |
|
(21,588 |
) |
|
Net premiums written |
|
18,755 |
|
|
18,029 |
|
|
15,562 |
|
|
17,381 |
|
|
2,301 |
|
|
(1,870 |
) |
|
- |
|
|
- |
|
|
36,618 |
|
|
33,540 |
|
|
Change in unearned premiums |
|
(206 |
) |
|
959 |
|
|
38 |
|
|
(417 |
) |
|
(70 |
) |
|
8,621 |
|
|
- |
|
|
- |
|
|
(238 |
) |
|
9,163 |
|
|
Net premiums earned |
|
18,549 |
|
|
18,988 |
|
|
15,600 |
|
|
16,964 |
|
|
2,231 |
|
|
6,751 |
|
|
- |
|
|
- |
|
|
36,380 |
|
|
42,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
18,950 |
|
|
19,693 |
|
|
16,754 |
|
|
18,316 |
|
|
2,477 |
|
|
7,315 |
|
|
51 |
|
|
152 |
|
|
38,232 |
|
|
45,476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss adjustment expenses |
|
14,484 |
|
|
11,553 |
|
|
14,735 |
|
|
16,735 |
|
|
19,922 |
|
|
(739 |
) |
|
- |
|
|
- |
|
|
49,141 |
|
|
27,549 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax income (loss) |
|
(2,386 |
) |
|
2,192 |
|
|
(3,412 |
) |
|
(3,887 |
) |
|
(19,364 |
) |
|
4,343 |
|
|
(5,098 |
) |
|
(4,531 |
) |
|
(30,260 |
) |
|
(1,883 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss ratio (1) |
|
78.1 |
% |
|
60.8 |
% |
|
94.5 |
% |
|
98.7 |
% |
|
893.0 |
% |
|
-10.9 |
% |
|
|
|
135.1 |
% |
|
64.5 |
% |
|
Net expense ratio (1) |
|
37.9 |
% |
|
31.2 |
% |
|
30.3 |
% |
|
26.1 |
% |
|
45.1 |
% |
|
36.0 |
% |
|
|
|
42.0 |
% |
|
41.0 |
% |
|
Net combined ratio (1) |
|
116.0 |
% |
|
92.0 |
% |
|
124.8 |
% |
|
124.8 |
% |
|
938.1 |
% |
|
25.1 |
% |
|
|
|
177.1 |
% |
|
105.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact on net combined ratio |
|
|
|
|
|
|
|
|
|
|
|
Net Unfavorable (Favorable) Prior Year Development |
|
1.6 |
% |
|
-5.1 |
% |
|
11.6 |
% |
|
7.1 |
% |
|
830.5 |
% |
|
-45.7 |
% |
|
|
|
56.7 |
% |
|
-6.7 |
% |
|
Catastrophes, net of reinsurance |
|
9.8 |
% |
|
0.2 |
% |
|
0.5 |
% |
|
19.3 |
% |
|
0.0 |
% |
|
0.0 |
% |
|
|
|
4.9 |
% |
|
1.4 |
% |
|
Underlying combined ratio (1) |
|
104.6 |
% |
|
96.9 |
% |
|
112.7 |
% |
|
98.4 |
% |
|
107.6 |
% |
|
70.8 |
% |
|
|
|
115.5 |
% |
|
110.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Unfavorable (Favorable) Prior Year Development |
|
300 |
|
|
(973 |
) |
|
1,810 |
|
|
1,197 |
|
|
18,528 |
|
|
(3,088 |
) |
|
- |
|
|
- |
|
|
20,638 |
|
|
(2,864 |
) |
(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 |
|
|
|
|
| Nine
Months Ended Sep. 30 |
|
|
|
|
|
|
|
|
|
|
|
|
Standard CommercialSegment |
Personal Segment |
Runoff Specialty Segment |
Corporate |
Consolidated |
|
($ in thousands, unaudited) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
Gross premiums written |
$ |
110,013 |
|
$ |
107,516 |
|
$ |
47,589 |
|
$ |
52,560 |
|
$ |
10,255 |
|
$ |
25,662 |
|
$ |
- |
|
$ |
- |
|
$ |
167,857 |
|
$ |
185,738 |
|
|
Ceded premiums written |
|
(51,434 |
) |
|
(49,694 |
) |
|
(226 |
) |
|
(234 |
) |
|
(872 |
) |
|
(11,081 |
) |
|
- |
|
|
- |
|
|
(52,532 |
) |
|
(61,009 |
) |
|
Net premiums written |
|
58,579 |
|
|
57,822 |
|
|
47,363 |
|
|
52,326 |
|
|
9,384 |
|
|
14,581 |
|
|
- |
|
|
- |
|
|
115,325 |
|
|
124,729 |
|
|
Change in unearned premiums |
|
(3,584 |
) |
|
(2,326 |
) |
|
(350 |
) |
|
(72 |
) |
|
1,341 |
|
|
29,012 |
|
|
- |
|
|
- |
|
|
(2,593 |
) |
|
26,614 |
|
|
Net premiums earned |
|
54,995 |
|
|
55,496 |
|
|
47,013 |
|
|
52,254 |
|
|
10,724 |
|
|
43,593 |
|
|
- |
|
|
- |
|
|
112,732 |
|
|
151,343 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
56,183 |
|
|
57,536 |
|
|
50,621 |
|
|
56,390 |
|
|
11,554 |
|
|
45,306 |
|
|
(745 |
) |
|
12,180 |
|
|
117,613 |
|
|
171,412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss adjustment expenses |
|
40,398 |
|
|
39,769 |
|
|
41,408 |
|
|
47,379 |
|
|
79,362 |
|
|
24,422 |
|
|
- |
|
|
- |
|
|
161,168 |
|
|
111,570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax income (loss) |
|
(3,143 |
) |
|
1,261 |
|
|
(7,257 |
) |
|
(8,275 |
) |
|
(73,099 |
) |
|
5,212 |
|
|
(16,202 |
) |
|
(1,234 |
) |
|
(99,701 |
) |
|
(3,036 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss ratio (1) |
|
73.5 |
% |
|
71.7 |
% |
|
88.1 |
% |
|
90.7 |
% |
|
740.0 |
% |
|
56.0 |
% |
|
|
|
143.0 |
% |
|
73.7 |
% |
|
Net expense ratio (1) |
|
35.7 |
% |
|
30.8 |
% |
|
30.3 |
% |
|
27.9 |
% |
|
40.3 |
% |
|
34.2 |
% |
|
|
|
41.1 |
% |
|
35.1 |
% |
|
Net combined ratio (1) |
|
109.2 |
% |
|
102.5 |
% |
|
118.4 |
% |
|
118.6 |
% |
|
780.3 |
% |
|
90.2 |
% |
|
|
|
184.1 |
% |
|
108.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact on net combined ratio |
|
|
|
|
|
|
|
|
|
|
|
Net Unfavorable (Favorable) Prior Year Development |
|
0.5 |
% |
|
-4.3 |
% |
|
11.1 |
% |
|
8.3 |
% |
|
656.1 |
% |
|
-15.0 |
% |
|
|
|
67.3 |
% |
|
-3.0 |
% |
|
Catastrophes, net of reinsurance |
|
5.4 |
% |
|
10.4 |
% |
|
0.4 |
% |
|
1.6 |
% |
|
0.0 |
% |
|
0.0 |
% |
|
|
|
2.8 |
% |
|
4.3 |
% |
|
Underlying combined ratio (1) |
|
103.3 |
% |
|
96.3 |
% |
|
106.9 |
% |
|
108.7 |
% |
|
124.2 |
% |
|
105.2 |
% |
|
|
|
114.0 |
% |
|
107.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Unfavorable (Favorable) Prior Year Development |
|
250 |
|
|
(2,371 |
) |
|
5,218 |
|
|
4,356 |
|
|
70,365 |
|
|
(6,543 |
) |
|
|
|
75,833 |
|
|
(4,558 |
) |
(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.
A photo accompanying this announcement is available
at https://www.globenewswire.com/NewsRoom/AttachmentNg/a204b59d-618d-45a4-823f-f2fc7a049fbd
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