HALLMARK FINCL SVCS INC - HALL STOCK NEWS

AM Best has confirmed that the Long-Term Issuer Credit Rating (ICR) of Hallmark Financial Services, Inc. (HALL) remains at 'bbb-' while its Financial Strength Rating (FSR) stays at A- (Excellent). The credit ratings outlook is currently negative. This follows Hallmark's decision to explore the segregation of its specialty commercial segment into separate entities to enhance valuation and capital access. AM Best will monitor the situation closely, awaiting further details on the potential impact on credit quality and capital structure.

Hallmark Financial Services is considering separating its Specialty Commercial business to potentially unlock value by improving operational structures. The Board's initial evaluations suggest that this separation could enhance capital access and overall company valuation. The Specialty Commercial segment accounted for 75% of gross premiums and 68% of net premiums in the first three quarters of 2020, with rates increasing from 7% to over 20% in Q3 2020. The decision remains contingent on various approvals and no final structure has been determined.

AM Best has affirmed the Long-Term Issuer Credit Rating of “bbb-” and the Financial Strength Rating of A- (Excellent) for Hallmark Financial Services, Inc. (HALL), following the resignation of Naveen Anand as president and CEO. Mark E. Schwarz has been appointed to these roles effective February 27, 2021. Despite the management change, AM Best reports no immediate rating actions and maintains a negative outlook on the ratings.

Schwarz’s prior experience includes serving as CEO from 2003 to 2006. The financial results will be closely monitored during the transition.

Hallmark Financial Services reported a net loss of $28.0 million for Q3 2020, significantly down from net income of $5.3 million in Q3 2019. The loss was impacted by a $21.7 million charge from a loss portfolio transfer and adverse reserve developments totaling $13.9 million. Despite a 12% drop in gross premiums written year-over-year, the company achieved rate increases averaging 20% in its Specialty Commercial Segment. Additionally, net combined ratio stood at 108.9% for the year-to-date, up from 95.6% in 2019, indicating worsening profitability.

AM Best has removed Hallmark Financial Services' ratings from negative review, affirming its Long-Term Issuer Credit Rating of bbb- and Financial Strength Rating of A-. This follows the company's compliance with NASDAQ filing requirements after previous adverse pre-tax losses of $63.8 million. While the ratings reflect strong balance sheet strength, the negative outlook indicates concerns over declining risk-adjusted capital and potential reserve volatility despite actions taken to stabilize its financial operations.

Hallmark Financial Services, Inc. (NASDAQ: HALL) announced the resignation of CFO Jeff Passmore, effective October 9, 2020, after 18 years with the company. The firm is currently searching for a new CFO while Christopher Kenney, Chief Accounting Officer, will serve as the interim principal financial officer. CEO Naveen Anand acknowledged Passmore's contributions and emphasized the company's commitment to strengthening its executive team. Hallmark is a specialty property and casualty insurance company with a diverse product portfolio across the U.S.

Hallmark Financial reported its second quarter and year-to-date 2020 financial results, showing a net income of $6.7 million, down from $13.0 million in Q2 2019. For the first six months, the company reported a net loss of $57.6 million. Gross premiums written decreased by 16% to $183.6 million in Q2, while net premiums earned increased by 18%. The company's net combined ratio rose to 98.4%, up from 94.5% in Q2 2019, partly due to COVID-19 claims. Additionally, Hallmark exited its Binding Primary Auto business, which impacted results significantly.

Hallmark Financial has regained compliance with Nasdaq's periodic filing requirements, closing the compliance matter as confirmed by Nasdaq on July 27, 2020. This development reflects positively on Hallmark Financial, a specialty property and casualty insurance holding company with approximately $800 million in annual premiums. The company operates through six subsidiaries across major U.S. markets, emphasizing a stable presence in the insurance sector.

Hallmark Financial reported a net loss of $64.3 million for Q1 2020, a significant decline from a net income of $15 million in Q1 2019. The operating earnings decreased to $4.6 million, or $0.25 per diluted share, down 18% year-over-year. Despite the challenges, gross premiums written rose 8% to $201.6 million. The net combined ratio worsened to 97.6% from 96.5% due to a 7.5-point impact from exiting the Binding Primary Auto business. The company also faced net investment losses of $29.3 million, impacted by market declines associated with the COVID-19 pandemic.