Exhibit 99.1
FOR IMMEDIATE RELEASE
HALLMARK FINANCIAL SERVICES, INC.
THIRD QUARTER 2004 EARNINGS RESULTS
FORT WORTH, Texas, (November 11, 2004) - Hallmark Financial Services, Inc.
today reported operating results for the third quarter of fiscal 2004. Net
income for the quarter ended September 30, 2004 increased 601% to $1.5
million, or $0.04 per diluted share, as compared to net income of $0.2
million, or $0.01 per diluted share, for the same period in 2003. Net
income before extraordinary gain for the nine months ended September 30,
2004 increased 320% to $4.4 million, or $0.12 per diluted share, as compared
to net income before extraordinary gain of $1.1 million, or $0.08 per
diluted share, for the same period in 2003. Total net income for the nine
months ended September 30, 2004 was $4.4 million, or $0.12 per diluted
share, as compared to $9.2 million, or $0.71 per diluted share for the same
period in 2003.
The extraordinary gain of $8.1 million in fiscal 2003 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 nine months of fiscal 2004, compared to 12.8 million
diluted shares during the first nine months of fiscal 2003, primarily as a
result of a successful shareholder rights offering completed in the third
quarter of fiscal 2003.
"For the third consecutive quarter, we are pleased to report the highest
operating earnings in the Company's history for the quarter and year to date
periods. The continued improvement in financial results for the third
quarter is indicative of the quality of our core books of business. The
Company's record third quarter 2004 earnings were driven by continued bottom
line improvement across both of our reporting segments and demonstrate that
our on-going strategic initiatives are working to create greater shareholder
value," stated Mark E. Schwarz, Chief Executive Officer. "These results
continue to reflect benefits achieved through ongoing initiatives directed
at improving performance, as well as sustained favorable market conditions.
As we go forward, we will continue to execute our strategy of disciplined
underwriting and expense controls, while focusing on selectively expanding
the business in areas that offer the best opportunities to increase
profitability."
"Our strong financial results reflect improved underwriting performances 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 nine months ended September 30, 2004, was 60% compared to
68% for the same period of 2003, resulting in an increase in income before
tax and extraordinary gain of more than 86% for the period. 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
nine month period ended September 30, 2004, increased by more than 22% over
the same period in 2003. This improvement is a result of increased premium
production arising mostly from premium rate increases on renewal business
and increased commission rates as a result of improved underwriting
performance on policies produced on behalf of the outside insurance carrier.
We anticipate that these favorable trends will continue at moderating levels
for the balance of 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
www.hallmarkgrp.com
HALLMARK FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands)
Three Months Ended Nine Months Ended
September 30 September 30
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2004 2003 2004 2003
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Gross premiums written $ 7,410 $ 6,640 $ 23,174 $ 36,404
Ceded premiums written - 246 25 (6,934)
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Net premiums written 7,410 6,886 23,199 29,470
Change in net unearned premiums 54 2,509 473 3,855
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Net premiums earned 7,464 9,395 23,672 33,325
Investment income, net of expenses 371 360 994 822
Realized gain (loss) (57) (305) (57) (313)
Finance charges 561 856 1,644 2,936
Commission and fees 5,745 4,709 16,235 12,406
Processing and service fees 1,556 1,224 4,560 3,509
Other income 6 127 21 446
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Total revenues 15,646 16,366 47,069 53,131
Losses and loss adjustment expenses 4,451 6,155 14,100 22,596
Other operating costs and expenses 8,903 9,559 26,346 27,724
Interest expense 16 359 61 1,234
Amortization of intangible asset 7 7 21 21
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Total expenses 13,377 16,080 40,528 51,575
Income before income tax and
extraordinary gain 2,269 286 6,541 1,556
Income tax expense 726 66 2,093 498
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Income before extraordinary gain $ 1,543 $ 220 $ 4,448 $ 1,058
Extraordinary gain - - - 8,116
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Net income $ 1,543 $ 220 $ 4,448 $ 9,174
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Basic earnings per share:
Income before extraordinary
gain $ 0.04 $ 0.01 $ 0.12 $ 0.08
Extraordinary gain - - - 0.65
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Net income $ 0.04 $ 0.01 $ 0.12 $ 0.73
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Diluted earnings per share:
Income before extraordinary
gain $ 0.04 $ 0.01 $ 0.12 $ 0.08
Extraordinary gain - - - 0.63
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Net income $ 0.04 $ 0.01 $ 0.12 $ 0.71
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