Hallmark Financial Services, Inc. Announces Shareholder Rights Offering FORT WORTH, Texas, April 11 /PRNewswire-FirstCall/ -- Hallmark Financial Services, Inc. (AMEX:HAF.EC) today announced the distribution to its shareholders of subscription rights to purchase an aggregate of 50,000,000 additional shares of common stock of the Company. Hallmark also announced that it has filed a registration statement with the Securities and Exchange Commission relating to the shareholder rights offering. Upon the effectiveness of the registration statement, the Company will distribute to its shareholders of record as of April 20, 2005, non-transferable rights containing a basic subscription privilege and an over-subscription privilege. The basic subscription privilege entitles a shareholder to purchase 1.37 shares of Hallmark common stock for each share of the common stock owned as of the record date. If all shareholders do not fully exercise their basic subscription rights, the over-subscription privilege entitles shareholders who have fully exercised their basic subscription right to purchase additional shares on a pro rata basis. Hallmark anticipates that the rights offering will begin promptly following the effectiveness of the registration statement filed with the SEC and will continue for thirty days thereafter. "The purpose of the rights offering is to strengthen the financial condition and underwriting capacity of the Company sufficiently to enhance the structure and broaden the scope of its operations," stated Mark E. Schwarz, Hallmark's President and Chief Executive Officer. "Hallmark has initiated the regulatory process necessary to consolidate the underwriting of all of its non-standard automobile insurance into one insurance subsidiary and to convert its other personal lines insurance subsidiary to a commercial lines insurance carrier," Mr. Schwarz continued. Hallmark's Chief Financial Officer, Mark J. Morrison, stated, "The $45.0 million in new equity capital expected to be raised in the rights offering, together with $30.0 million in proceeds from new debt sought to be obtained, will be used as working capital for the Company's business and general corporate purposes. The Company believes that the infusion of this additional working capital and realignment of its insurance operations will allow it to write and retain additional personal lines business, permit it to directly write commercial lines business presently being sold as agent for a third party insurer, and enable both insurance subsidiaries to achieve more favorable financial strength ratings from our rating agencies." Neither Hallmark, its board of directors, nor any committee of the board of directors is making any recommendation to shareholders as to whether to exercise their subscription rights. Further information regarding the rights offering, including the process for exercising subscription rights, will be communicated after the registration statement filed with the SEC becomes effective. When available, a written prospectus may be obtained by contacting Hallmark Financial Services, Inc., 777 Main Street, Suite 1000, Fort Worth, Texas 76102, Attention: Investor Relations. The registration statement filed with the SEC relating to these securities has not yet become effective. These securities may not be sold and offers may not be accepted prior to the time the registration statement becomes effective. The rights offering will only be made by means of prospectus. This press release does not constitute an offer to sell or the solicitation of an offer to buy these securities, and there will not be any sale of these securities in any state in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under securities laws of such state. Hallmark Financial Services, Inc. engages primarily in the sale of property and casualty insurance products. The Company's business involves marketing and underwriting of non-standard personal automobile insurance primarily in Texas, Arizona and New Mexico, marketing commercial insurance primarily in Texas, New Mexico, Idaho, Oregon and Washington, third party claims administration, and other insurance related services. The Company is headquartered in Fort Worth, Texas, and its common stock is listed on the American Stock Exchange under the symbol "HAF.EC". Forward-looking statements in this release are made pursuant to the "safe harbor" provisions of the Private Securities Litigation 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, the availability of financing, underwriting loss experience and other risks detailed from time to time in the Company's registration statement and periodic reports filed with the Securities and Exchange Commission. For further information, please contact: Mark J. Morrison, Chief Financial Officer 817.348.1600 http://www.hallmarkgrp.com/ DATASOURCE: Hallmark Financial Services, Inc. CONTACT: Mark J. Morrison, Chief Financial Officer of Hallmark Financial Services, Inc., +1-817-348-1600 Web site: http://www.hallmarkgrp.com/

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