FORT WORTH, Texas, Aug. 6, 2012 (GLOBE NEWSWIRE) -- Hallmark Financial Services, Inc. (Nasdaq:HALL) ("Hallmark") today reported second quarter 2012 net loss of $1.8 million, or $0.10 per share, compared to a net loss of $0.1 million, or $0.00 per share reported for second quarter 2011. Year to date, Hallmark reported a net loss of $1.7 million, or $0.09 per share, compared to a net loss of $11.3 million, or $0.56 per share reported for the same period the prior year. Total revenues were $84.6 million for the second quarter 2012 as compared to $78.5 million for the second quarter of 2011. Year to date total revenues for 2012 were $167.6 million, up 7% from the $155.9 million reported for the same period the prior year.
Mark J. Morrison, President and Chief Executive Officer, said, "Our pre-tax results for the second quarter are greatly improved from the prior year due to various actions taken over the past several months to improve the profitability of our books of business including meaningful rate increases, and exiting unprofitable states and product lines. However, the results are not what we planned to be reporting this quarter due to significant net catastrophe losses of $5.6 million incurred during the quarter and adverse prior year loss reserve development of $1.6 million. These events impacted the quarterly results by $0.25 per diluted share."
Mr. Morrison continued, "Although we are disappointed that catastrophe losses have again over-shadowed improvements made in the profitability of our operating units during the quarter, we are in the business of insuring risks that expose us to catastrophic events. Near term volatility from such events is to be expected. We try to mitigate such volatility with appropriate reinsurance protection, but we have no control over the frequency and timing of these events. Absent any further events over the coming quarters, we expect to see underwriting margins begin to reflect the impact of the mid to upper-single digit rate increases that continue across nearly all of our operating units and product lines."
Mark E. Schwarz, Executive Chairman of Hallmark, stated, "Book value per share was $11.08 at the end of the second quarter, a decrease of 1% year over year and a decrease of 1% year to date. Cash flow from operations was $12.4 million in the second quarter and $17.2 million year to date. Total cash and investments increased 4% year to date to $527 million, or $27.35 per share. Hallmark continues to have significant cash of $87.0 million as of June 30, 2012."
|
Three Months Ended June 30, |
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| 2012 | 2011 | % Change | |
| ($ in thousands, unaudited) | |||
| Gross premiums written | 100,815 | 91,371 | 10% |
| Net premiums written | 85,137 | 78,956 | 8% |
| Net premiums earned | 78,249 | 71,578 | 9% |
| Investment income, net of expenses | 3,932 | 3,778 | 4% |
| Net realized gains | 991 | 1,664 | -40% |
| Total revenues | 84,571 | 78,513 | 8% |
| Net loss (1) | (1,843) | (87) | NM |
| Net loss per share - basic | $ (0.10) | $ -- | NM |
| Net loss per share - diluted | $ (0.10) | $ -- | NM |
| Book value per share | $ 11.08 | $ 11.20 | -1% |
| Cash flow from operations | $ 12,409 | $ 16,972 | -27% |
|
Six Months Ended June 30, |
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| 2012 | 2011 | % Change | |
| ($ in thousands) | |||
| Gross premiums written | 198,210 | 181,083 | 9% |
| Net premiums written | 170,099 | 155,190 | 10% |
| Net premiums earned | 155,457 | 141,691 | 10% |
| Investment income, net of expenses | 7,778 | 7,785 | 0% |
| Net realized gains | 872 | 2,783 | -69% |
| Total revenues | 167,557 | 155,921 | 7% |
| Net loss (1) | (1,672) | (11,300) | NM |
| Net loss per share - basic | $ (0.09) | $ (0.56) | NM |
| Net loss per share - diluted | $ (0.09) | $ (0.56) | NM |
| Book value per share | $ 11.08 | $ 11.20 | -1% |
| Cash flow from operations | $ 17,222 | $ 10,992 | 57% |
| (1) Net loss is net loss attributable to Hallmark Financial Services, Inc. as reported in the consolidated statements of operations as determined in accordance with GAAP. | |||
During the three and six months ended June 30, 2012, total revenues were $84.6 million and $167.6 million, representing an 8% and 7% increase, respectively, from the $78.5 million and $155.9 million in total revenues for the same period of 2011. This increase in revenue was primarily attributable to increased earned premium largely from increased production by the E&S Commercial business unit and the acquisition of the Workers Compensation business unit during the third quarter of 2011. These increases in revenue were partially offset by lower net realized gains and lower finance charges and earned premium in the Personal Lines business unit due mostly to the impact of rate increases, the reduction of premium written in Florida, and exiting certain other underperforming states and programs.
The increase in revenue for the three months and six months ended June 30, 2012 was complemented by slightly decreased loss and loss adjustment expenses due primarily to lower current accident year loss trends. During the three months ended June 30, 2012, Hallmark recorded $1.6 million unfavorable prior year loss development. During the six months ended June 30, 2012 Hallmark recorded $1.4 million of favorable prior year loss development. During the three and six months ended June 30, 2011 Hallmark recorded $0.7 million and $15.8 million, respectively, of unfavorable prior year loss development. Of the $15.8 million unfavorable development recognized for the six months ended June 30, 2011, $9.5 million was a result of adverse prior year loss reserve development in the Personal Lines Segment in Florida. In addition, the results for the six months ended June 30, 2012 and 2011 include $10.4 million and $9.4 million in net losses from weather related claims.
Hallmark reported a $1.8 million net loss for the three months ended June 30, 2012 as compared to $87 thousand net loss for the same period during 2011. Hallmark reported a net loss of $1.7 million for the six months ended June 30, 2012, which was $9.6 million lower than the $11.3 million net loss reported for the six months ended June 30, 2011. On a diluted basis per share, Hallmark reported a net loss of $0.10 per share for the three months ended June 30, 2012, as compared to net loss of $0.00 per share for the same period in 2011. On a diluted basis, net loss per share was $0.09 for the six months ended June 30, 2012 as compared to net loss per share of $0.56 for the same period during 2011.
Hallmark's consolidated net loss ratio was 78.2% and 74.6% for the three and six months ended June 30, 2012 as compared to 86.5% and 88.7% for the same periods in 2011. Hallmark's net expense ratio was 30.5% for the three and six months ended June 30, 2012 as compared to 31.9% and 31.2% for the same periods in 2011. Hallmark's net combined ratio was 108.7% and 105.1% for the three and six months ended June 30, 2012 as compared to 118.4% and 119.9% for the same periods in 2011.
Hallmark Financial Services, Inc. is an insurance holding company which, through its subsidiaries, engages in the sale of property/casualty insurance products to businesses and individuals. Hallmark's business involves marketing, distributing, underwriting and servicing commercial insurance, personal insurance and general aviation insurance, as well as providing other insurance related services. The Company is headquartered in Fort Worth, Texas and its common stock is listed on NASDAQ under the symbol "HALL."
The Hallmark Financial Services, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4395
Forward-looking statements in this release are made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that actual results may differ substantially from such forward-looking statements. Forward-looking statements involve risks and uncertainties including, but not limited to, continued acceptance of the Company's products and services in the marketplace, competitive factors, interest rate trends, general economic conditions, the availability of financing, underwriting loss experience and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission.
| Hallmark Financial Services, Inc. and Subsidiaries | ||
| Consolidated Balance Sheets | ||
| ($ in thousands, except share amounts) | ||
| ASSETS |
June 30 2012 |
December 31 2011 |
| (unaudited) | (as adjusted) | |
| Investments: | ||
| Debt securities, available-for-sale, at fair value (cost: $397,052 in 2012 and $380,578 in 2011) | $ 399,069 | $ 380,469 |
| Equity securities, available-for-sale, at fair value (cost: $30,119 in 2012 and $30,465 in 2011) | 40,715 | 44,159 |
| Total investments | 439,784 | 424,628 |
| Cash and cash equivalents | 76,230 | 74,471 |
| Restricted cash | 10,793 | 9,372 |
| Ceded unearned premiums | 21,692 | 19,470 |
| Premiums receivable | 68,882 | 53,513 |
| Accounts receivable | 3,495 | 3,946 |
| Receivable for securities | 2,334 | 2,617 |
| Reinsurance recoverable | 47,808 | 42,734 |
| Deferred policy acquisition costs | 25,481 | 22,554 |
| Goodwill | 44,695 | 44,695 |
| Intangible assets, net | 24,861 | 26,654 |
| Deferred federal income taxes, net | 1,940 | -- |
| Federal income tax recoverable | 1,119 | 6,738 |
| Prepaid expenses | 1,651 | 1,458 |
| Other assets | 12,579 | 13,209 |
| Total assets | $ 783,344 | $ 746,059 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Liabilities: | ||
| Revolving credit facility payable | $ 1,550 | $ 4,050 |
| Subordinated debt securities | 56,702 | 56,702 |
| Reserves for unpaid losses and loss adjustment expenses | 314,109 | 296,945 |
| Unearned premiums | 163,371 | 146,104 |
| Unearned revenue | 63 | 55 |
| Reinsurance balances payable | 6,189 | 3,139 |
| Accrued agent profit sharing | 929 | 959 |
| Accrued ceding commission payable | 1,200 | 1,071 |
| Pension liability | 3,660 | 3,971 |
| Payable for securities | 6,419 | 203 |
| Deferred federal income taxes, net | -- | 135 |
| Accounts payable and other accrued expenses | 14,354 | 15,869 |
| Total liabilities | 568,546 | 529,203 |
| Commitments and Contingencies | ||
| Redeemable non-controlling interest | 1,274 | 1,284 |
| Stockholders' equity: | ||
| Common stock, $.18 par value, authorized 33,333,333 shares in 2012 and 2011; issued 20,872,831 in 2012 and 2011 | 3,757 | 3,757 |
| Additional paid-in capital | 122,669 | 122,487 |
| Retained earnings | 92,768 | 94,440 |
| Accumulated other comprehensive income | 5,888 | 6,446 |
| Treasury stock (1,609,374 shares in 2012 and 2011), at cost | (11,558) | (11,558) |
| Total stockholders' equity | 213,524 | 215,572 |
| $ 783,344 | $ 746,059 | |
| Hallmark Financial Services, Inc. and Subsidiaries | ||||
| Consolidated Statements of Operations | ||||
| (Unaudited) | ||||
| ($ in thousands, except per share amounts) | ||||
|
Three Months Ended June 30 |
Six Months Ended June 30 |
|||
| 2012 | 2011 | 2012 | 2011 | |
| (as adjusted) | (as adjusted) | |||
| Gross premiums written | $ 100,815 | $ 91,371 | $ 198,210 | $ 181,083 |
| Ceded premiums written | (15,678) | (12,415) | (28,111) | (25,893) |
| Net premiums written | 85,137 | 78,956 | 170,099 | 155,190 |
| Change in unearned premiums | (6,888) | (7,378) | (14,642) | (13,499) |
| Net premiums earned | 78,249 | 71,578 | 155,457 | 141,691 |
| Investment income, net of expenses | 3,932 | 3,778 | 7,778 | 7,785 |
| Net realized gains | 991 | 1,664 | 872 | 2,783 |
| Finance charges | 1,524 | 1,725 | 3,164 | 3,465 |
| Commission and fees | (184) | (243) | (4) | 172 |
| Other income | 59 | 11 | 290 | 25 |
| Total revenues | 84,571 | 78,513 | 167,557 | 155,921 |
| Losses and loss adjustment expenses | 61,229 | 61,920 | 116,020 | 125,705 |
| Other operating expenses | 25,419 | 23,887 | 51,351 | 47,040 |
| Interest expense | 1,178 | 1,153 | 2,327 | 2,311 |
| Amortization of intangible assets | 896 | 896 | 1,793 | 1,793 |
| Total expenses | 88,722 | 87,856 | 171,491 | 176,849 |
| Loss before tax | (4,151) | (9,343) | (3,934) | (20,928) |
| Income tax benefit | (2,351) | (9,264) | (2,328) | (9,650) |
| Net loss | (1,800) | (79) | (1,606) | (11,278) |
| Less: Net income attributable to non-controlling interest | 43 | 8 | 66 | 22 |
| Net loss attributable to Hallmark Financial Services, Inc. | $ (1,843) | $ (87) | $ (1,672) | $ (11,300) |
| Net loss per share attributable to Hallmark Financial Services, Inc. common stockholders: | ||||
| Basic | $ (0.10) | $ -- | $ (0.09) | $ (0.56) |
| Diluted | $ (0.10) | $ -- | $ (0.09) | $ (0.56) |
| Hallmark Financial Services, Inc | |||||
| Consolidated Segment Data | |||||
| Three Months Ended June 30, 2012 | |||||
|
Standard Commercial Segment |
Specialty Commercial Segment |
Personal Segment |
Corporate |
Consolidated |
|
| Gross premiums written | $ 20,739 | $ 61,456 | $ 18,620 | -- | $ 100,815 |
| Ceded premiums written | (1,730) | (13,749) | (199) | -- | (15,678) |
| Net premiums written | 19,009 | 47,707 | 18,421 | -- | 85,137 |
| Change in unearned premiums | (2,369) | (7,017) | 2,498 | -- | (6,888) |
| Net premiums earned | 16,640 | 40,690 | 20,919 | -- | 78,249 |
| Total revenues | 17,924 | 43,046 | 22,905 | 696 | 84,571 |
| Losses and loss adjustment expenses | 13,013 | 28,286 | 19,930 | -- | 61,229 |
| Pre-tax income (loss), net of non-controlling interest | (710) | 2,929 | (4,211) | (2,202) | (4,194) |
| Net loss ratio (1) | 78.2% | 69.5% | 95.3% | 78.2% | |
| Net expense ratio (1) | 34.2% | 28.4% | 28.8% | 30.5% | |
| Net combined ratio (1) | 112.4% | 97.9% | 124.1% | 108.7% | |
| Three Months Ended June 30, 2011 | |||||
|
Standard Commercial Segment |
Specialty Commercial Segment |
Personal Segment |
Corporate |
Consolidated |
|
| Gross premiums written | $ 18,549 | $ 48,533 | $ 24,289 | -- | $ 91,371 |
| Ceded premiums written | (1,392) | (10,877) | (146) | -- | (12,415) |
| Net premiums written | 17,157 | 37,656 | 24,143 | -- | 78,956 |
| Change in unearned premiums | (1,796) | (5,171) | (411) | -- | (7,378) |
| Net premiums earned | 15,361 | 32,485 | 23,732 | -- | 71,578 |
| Total revenues | 16,241 | 34,476 | 25,869 | 1,927 | 78,513 |
| Losses and loss adjustment expenses | 15,789 | 23,549 | 22,582 | -- | 61,920 |
| Pre-tax income (loss), net of non-controlling interest | (4,767) | 812 | (4,620) | (776) | (9,351) |
| Net loss ratio (1) | 102.8% | 72.5% | 95.2% | 86.5% | |
| Net expense ratio (1) | 34.0% | 30.6% | 27.7% | 31.9% | |
| Net combined ratio (1) | 136.8% | 103.1% | 122.9% | 118.4% | |
| 1 The net loss ratio is calculated as incurred losses and LAE divided by net premiums earned, each determined in accordance with GAAP. The net expense ratio is 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. The net combined ratio is calculated as the sum of the net loss ratio and the net expense ratio. | |||||
| Hallmark Financial Services, Inc. | |||||
| Consolidated Segment Data | |||||
| Six Months Ended June 30, 2012 | |||||
|
Standard Commercial Segment |
Specialty Commercial Segment |
Personal Segment |
Corporate |
Consolidated |
|
| Gross premiums written | $ 39,586 | $ 116,341 | $ 42,283 | -- | $ 198,210 |
| Ceded premiums written | (3,187) | (24,563) | (361) | -- | (28,111) |
| Net premiums written | 36,399 | 91,778 | 41,922 | -- | 170,099 |
| Change in unearned premiums | (2,930) | (13,053) | 1,341 | -- | (14,642) |
| Net premiums earned | 33,469 | 78,725 | 43,263 | -- | 155,457 |
| Total revenues | 36,030 | 83,439 | 47,336 | 752 | 167,557 |
| Losses and loss adjustment expenses | 26,777 | 51,295 | 37,948 | -- | 116,020 |
| Pre-tax income (loss), net of non-controlling interest | (2,072) | 8,906 | (5,402) | (5,432) | (4,000) |
| Net loss ratio (1) | 80.0% | 65.2% | 87.7% | 74.6% | |
| Net expense ratio (1) | 34.0% | 28.7% | 28.1% | 30.5% | |
| Net combined ratio (1) | 114.0% | 93.9% | 115.8% | 105.1% | |
| Six Months Ended June 30, 2011 | |||||
|
Standard Commercial Segment |
Specialty Commercial Segment |
Personal Segment |
Corporate |
Consolidated |
|
| Gross premiums written | $ 36,004 | $ 88,615 | $ 56,464 | -- | $ 181,083 |
| Ceded premiums written | (2,564) | (18,597) | (4,732) | -- | (25,893) |
| Net premiums written | 33,440 | 70,018 | 51,732 | -- | 155,190 |
| Change in unearned premiums | (2,187) | (6,318) | (4,994) | -- | (13,499) |
| Net premiums earned | 31,253 | 63,700 | 46,738 | -- | 141,691 |
| Total revenues | 33,668 | 67,619 | 50,919 | 3,715 | 155,921 |
| Losses and loss adjustment expenses | 28,414 | 43,350 | 53,941 | -- | 125,705 |
| Pre-tax income (loss), net of non-controlling interest | (5,150) | 4,263 | (17,804) | (2,259) | (20,950) |
| Net loss ratio (1) | 90.9% | 68.1% | 115.4% | 88.7% | |
| Net expense ratio (1) | 32.7% | 30.4% | 25.8% | 31.2% | |
| Net combined ratio (1) | 123.6% | 98.5% | 141.2% | 119.9% | |
| 1 The net loss ratio is calculated as incurred losses and LAE divided by net premiums earned, each determined in accordance with GAAP. The net expense ratio is 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. The net combined ratio is calculated as the sum of the net loss ratio and the net expense ratio. | |||||