June 25, 2019
Jeffrey R. Passmore
Chief Financial Officer
HALLMARK FINANCIAL SERVICES INC
777 Main Street
Suite 1000
Fort Worth, TX 76102
Re: HALLMARK FINANCIAL SERVICES INC
Form 10-K for the Fiscal Year Ended December 31, 2018
Filed March 14, 2019
File No. 001-11252
Dear Mr. Passmore:
We have reviewed your filing and have the following comment. In our
comment, we
may ask you to provide us with information so we may better understand your
disclosure.
Please respond to the comment within ten business days by providing the
requested
information or advise us as soon as possible when you will respond. If you do
not believe our
comment applies to your facts and circumstances, please tell us why in your
response.
After reviewing your response to the comment, we may have additional
comments.
Form 10-K for the Year Ended December 31, 2018
Consolidated Financial Statements
Note 6. Reserves for Losses and Loss Adjustment Expenses, page F-23
1. You disclose on page F-25 that you have evaluated the disaggregation
criteria of ASU
2015-09 and concluded that the basis for your disaggregation of this
information required
by ASC 944-40-50-4B and 4D is by each of your three reportable segments.
The
descriptions of the various insurance business lines within each of your
three segments
makes it seem likely that some of these business lines are likely to
experience different
loss trends. Further, your disclosure of the trend information on pages
39 and F-24
includes significant offsetting trends of favorable versus unfavorable
development
which raises questions as to whether the level of aggregation is
appropriate. Please
address the following:
Tell us how you considered the guidance of ASC 944-40-50-4H when
determining to
aggregate your short duration loss tables at the reportable segment
level, including the
Jeffrey R. Passmore
HALLMARK FINANCIAL SERVICES INC
June 25, 2019
Page 2
prohibition of aggregating items that have significantly different
characteristics.
Specifically address how you considered the respective
characteristics of your contract
binding business unit versus those of your specialty commercial
operating unit that are
aggregated within your specialty commercial segment and determined
that they did
not have significantly different characteristics. As part of your
response, provide us
with a breakdown quantifying the net premiums, losses incurred,
loss development
and ending reserve liabilities for the last two years by each of
these two business
units. Also, provide us with the average annual percentage payout
of incurred claims
of incurred loss and ALAE, that is the history of claims duration
by age, for each of
these two business units.
Further, within your specialty commercial operating unit, you have
aggregated various
product lines including general aviation, satellite launch,
commercial umbrella and
primary/excess liability, medical and financial professional
liability, and
primary/excess commercial property insurance products. Tell us how
you determined
that these lines do not have significantly different
characteristics. As part of your
response, provide us with a breakdown quantifying the net
premiums, losses incurred,
loss development and ending reserve liabilities for the last two
years by each of the
product line categories within your specialty commercial operating
unit. Also, provide
us with the average annual percentage payout of incurred claims of
incurred loss and
ALAE, that is the history of claims duration by age, for each of
the product line
categories within your specialty commercial operating unit.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact Christine Torney at 202-551-3652 or Kevin Vaughn at
202-551-
3494 with any questions.
FirstName LastNameJeffrey R. Passmore Sincerely,
Comapany NameHALLMARK FINANCIAL SERVICES INC
Division of Corporation Finance
June 25, 2019 Page 2 Office of Healthcare & Insurance
FirstName LastName