Mark E. Schwarz
Chairman and Chief Executive Officer
817-348-1600
FORT WORTH,
Texas -- March 30, 2005 -- Hallmark Financial Services, Inc. (Amex: HAF.EC)
today reported operating results for the fourth quarter and year ended December
31, 2004. Net income for the quarter ended December 31, 2004 was $1.4 million
as compared to a net loss of $0.4 million for the same period in 2003. Income
before extraordinary gain for the year ended December 31, 2004 increased 785%
to $5.8 million, or $0.16 per diluted share, as compared to Income before extraordinary
gain of $0.7 million, or $0.03 per diluted share, for the same period in 2003.
"Total net income
for the year ended December 31, 2004 was $5.8 million, or $0.16 per diluted
share, as compared to $8.7 million, or $0.46 per diluted share for the same
period in 2003. Fiscal 2003 included an extraordinary gain of $8.1 million related
to the acquisition of Phoenix Indemnity Insurance Company. Hallmark's weighted
average shares outstanding also increased to 36.7 million diluted shares during
fiscal 2004, compared to 18.8 million diluted shares during fiscal 2003, primarily
as a result of a successful shareholder rights offering completed in the third
quarter of fiscal 2003.
"With these
fourth quarter results, we concluded the year with the highest operating earnings
in the Company's history. The fourth quarter reflects solid financial results
and is indicative of the quality of our core books of business. The Company's
record 2004 operating earnings were driven by continued strength across both
of our reporting segments," stated Mark E. Schwarz, Chief Executive Officer.
"These results continue to reflect sustained favorable market conditions
and ongoing initiatives directed at improving profitability through disciplined
underwriting and policy pricing, improved agency relations and expense management.
As we go forward, we intend to continue to focus on these initiatives, while
selectively expanding the business in areas that offer the best opportunities
to increase profitability," Mr. Schwarz continued.
"Our strong
financial results in 2004 reflect improved underwriting performance in both
of our business segments," stated Mark J. Morrison, Executive Vice-President
& Chief Financial Officer. "In our personal lines segment, the actions
commenced in 2003 to restructure the existing book of business have resulted
in significantly improved underwriting results and increased statutory surplus.
The loss and loss adjustment expense ratio for this segment for the year ended
December 31, 2004, was 59% compared to 72% for 2003, resulting in an increase
in income before tax and extraordinary gain of more than 315% year over year.
These results have allowed us to decrease our use of outside reinsurance and
to leverage our increasing statutory surplus base, thus providing additional
margin on business produced going forward. In the commercial segment, revenue
for the year ended December 31, 2004, increased by more than 18% over 2003.
This improvement is a result of increased premium production arising largely
from premium rate increases on renewal business, increased commission rates
because of improved underwriting performance on policies produced, and enhanced
compensation provisions agreed to with our outside insurance carrier effective
on July 1, 2004. Despite flattening rate increases in 2005, we anticipate that
these favorable trends will continue at moderating levels," Mr. Morrison
concluded.
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 periodic report filings with the Securities and Exchange
Commission.
For further information,
please contact:
Mark J. Morrison, Chief Financial Officer at 817.348.1600
http://www.hallmarkgrp.com
HALLMARK FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except earnings per share)
Three Months Ended Twelve Months Ended
December 31 December 31
2004 2003 2004 2003
Gross premiums written $10,215 $6,934 $33,389 $43,338
Ceded premiums written (347) 165 (322) (6,769)
Net premiums written 9,868 7,099 33,067 36,569
Change in net unearned
premiums (1,095) 1,551 (622) 5,406
Net premiums earned 8,773 8,650 32,445 41,975
Investment income, net of
expenses 392 376 1,386 1,198
Realized gain (loss) 30 225 (27) (88)
Finance charges 539 608 2,183 3,544
Commission and fees 4,865 5,138 21,100 17,544
Processing and service fees 1,443 1,391 6,003 4,900
Other income 10 40 31 486
Total revenues 16,052 16,428 63,121 69,559
Losses and loss adjustment
expenses 5,037 7,592 19,137 30,188
Other operating costs and
expenses 8,944 9,662 35,290 37,386
Interest expense 3 37 64 1,271
Amortization of intangible
asset 7 7 28 28
Total expenses 13,991 17,298 54,519 68,873
Income before income tax
expense (benefit) and
extraordinary gain 2,061 (870) 8,602 686
Income tax expense (benefit) 660 (473) 2,753 25
Income (loss) before
extraordinary gain (loss) $1,401 $(397) $5,849 $661
Extraordinary gain (loss) --- (32) --- 8,084
Net income (loss) $1,401 $(429) $5,849 $8,745
Basic earnings per share:
Income (loss) before
extraordinary gain $0.04 $(0.01) $0.16 $0.03
Extraordinary gain --- --- --- 0.44
Net income (loss) $0.04 $(0.01) $0.16 $0.47
Diluted earnings per share:
Income (loss) before
extraordinary gain $0.04 $(0.01) $0.16 $0.03
Extraordinary gain --- --- --- 0.43
Net income (loss) $0.04 $(0.01) $0.16 $0.46
###
Suite #1000