Mark J. Morrison
Chief Financial Officer
817-348-1600
FORT WORTH,
Texas -- August 12, 2004 -- Hallmark Financial Services, Inc. today
reported operating results for the second quarter of fiscal 2004. Income
for the quarter ended June 30, 2004 increased 274% to $1.5 million, or $0.04
per diluted share, as compared to net income of $0.4 million, or $0.03 per
diluted share, for the same period in 2003. Income before extraordinary
gain for the six months ended June 30, 2004 increased 247% to $2.9 million,
or $0.08 per diluted share, as compared to income before extraordinary gain
of $0.8 million, or $0.07 per diluted share, for the same period in 2003.
Total net income for the six months ended June 30, 2004 was $2.9 million,
or $0.08 per diluted share, as compared to $9.0 million, or $0.77 per diluted
share for the same period in 2003.
The
extraordinary gain of $8.1 million in fiscal 2003 is related to the acquisition
of Phoenix Indemnity Insurance Company ("Phoenix"). Hallmark's weighted
average shares outstanding increased to 36.6 million diluted shares during
the first six months of fiscal 2004, compared to 11.5 million diluted shares
during the first six months of fiscal 2003, primarily as a result of a successful
shareholder rights offering completed in the third quarter of fiscal 2003.
"We
are again pleased to report the highest operating earnings in the Company's
history for the quarter and six month periods. The Company's record second
quarter 2004 earnings, which eclipsed the first quarter 2004 record earnings,
are as a result of the continuing bottom line improvement across both of our
reporting segments. Our results continue to reflect benefits achieved through
ongoing initiatives directed at improving performance as well as sustained
favorable market conditions," stated Mark E. Schwarz, Chief Executive
Officer. "We are very encouraged by what we've seen through the second
quarter. The decisive actions that we undertook in our personal lines segment
starting in 2003 have resulted in significantly improved underwriting results.
The loss and loss adjustment expense ratio for this segment for the six months
ended June 30, 2004, was 60% compared to 69% for the same period of 2003,
resulting in an increase in income before extraordinary gain of 72% for the
segment for the period. In the commercial segment, commission revenue for
the six month period ended June 30, 2004, has increased by more than 20% over
the same period in 2003 as a result of increased premium production arising
mostly from premium rate increases on renewal business. We anticipate that
premium rate increases will continue at a moderating level throughout 2004."
Hallmark
Financial Services, Inc. engages primarily in sale of property and casualty
insurance products. The Company's business involves marketing, underwriting
and premium financing 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
(Unaudited)
(In thousands, except per share amount)
(In thousands)
Three Months Ended Six Months Ended
June 30 June 30
2004 2003 2004 2003
Gross premiums written $7,011 $7,849 $15,764 $29,764
Ceded premiums written 1 1,218 25 (7,180)
Net premiums written 7,012 9,067 15,789 22,584
Change in unearned premiums 932 2,361 419 1,346
Net premiums earned 7,944 11,428 16,208 23,930
Investment income, net
of expenses 344 260 623 454
Finance charges 536 991 1,083 2,080
Commission and fees 5,295 4,347 10,490 7,697
Processing and service fees 1,524 977 3,004 2,285
Other income 7 42 15 319
Total revenues 15,650 18,045 31,423 36,765
Losses and loss adjustment
expenses 4,422 7,551 9,649 16,441
Other operating costs and
expenses 9,004 9,395 17,443 18,165
Interest expense 21 432 45 875
Amortization of intangible asset 7 7 14 14
Total expenses 13,454 17,385 27,151 35,495
Income before income tax
and extraordinary gain 2,196 660 4,272 1,270
Income tax expense 703 225 1,367 432
Income before extraordinary
gain $1,493 $435 $2,905 $838
Extraordinary gain --- (36) --- 8,116
Net income $1,493 $399 $2,905 $8,954
Basic earnings per share:
Income before extraordinary
gain $0.04 $0.04 $0.08 $0.07
Extraordinary gain --- --- --- 0.73
Net income $0.04 $0.04 $0.08 $0.80
Diluted earnings per share:
Income before extraordinary
gain $0.04 $0.04 $0.08 $0.07
Extraordinary gain --- (0.01) --- 0.70
Net income $0.04 $0.03 $0.08 $0.77
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