Mark J. Morrison
Chief Operating Officer & Chief Financial Officer
817-348-1600
http://www.hallmarkgrp.com
FORT WORTH,
Texas -- June 21, 2005 -- Hallmark Financial Services, Inc. (Amex: HAF.EC)
today announced the completion of the private placement of $30 million in trust
preferred securities by a newly formed and wholly owned trust subsidiary. The
proceeds of this placement, together with $45 million in proceeds from the Company's
recently completed shareholder rights offering, have been contributed to the
Company's two insurance subsidiaries, American Hallmark Insurance Company of
Texas and Phoenix Indemnity Insurance Company, in order to strengthen their
financial condition and underwriting capacity.
The $30 million
in trust preferred securities bears interest at a fixed annual rate of 7.725%
for the first ten years and at a floating annual rate of LIBOR plus 3.250% thereafter
until maturity or redemption. Interest on the trust preferred securities is
payable quarterly in arrears, but may be deferred from time to time at the election
of the Company for up to 20 consecutive quarters. The trust preferred securities
have a 30-year term, but are redeemable by the Company at par commencing in
June 2010.
In a related development,
the Company also announced that A.M. Best Co. has raised the financial strength
ratings of both insurance subsidiaries. In light of the improved operating performance
and enhanced capital surplus of each insurer, A.M. Best has upgraded the financial
strength rating of American Hallmark Insurance Company of Texas from "B
(Fair)" to "A- (Excellent)" and has upgraded the financial strength
rating of Phoenix Indemnity Insurance Company from "B- (Fair)" to
"B+ (Very Good)".
"The issuance
of these trust preferred securities represents a significant additional step
in implementing our strategic plan to enhance the structure and broaden the
scope of our insurance operations," stated Mark E. Schwarz, Hallmark's
President and Chief Executive Officer. "We continue to pursue the regulatory
process necessary to consolidate our non-standard automobile insurance business
into one insurance subsidiary and to convert our other personal lines insurance
subsidiary to a commercial lines insurance carrier. We expect to begin underwriting
commercial lines insurance in Texas and Oregon early in the third quarter,"
Mr. Schwarz continued.
Mark J. Morrison,
Hallmark's Chief Operating Officer and Chief Financial Officer, stated, "We
are gratified that A.M. Best has recognized the strong operating performance
and enhanced financial strength of our insurance subsidiaries. With the infusion
of this $75 million in additional working capital and the significant improvement
in our A.M. Best ratings, we believe that we are well positioned to write and
retain additional personal lines business and to directly write commercial lines
business upon completing the realignment of our insurance operations."
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.
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