Hallmark Financial Services, Inc. (“Hallmark”) (NASDAQ: HALL) today
filed its Form 10-K and announced financial results for the fourth
quarter and fiscal year ended December 31, 2022.
|
Fourth Quarter |
|
Year-to-Date |
|
2022 |
2021 |
|
2022 |
2021 |
$ in
millions: |
|
|
|
|
|
Net loss from continuing operations |
$ |
(30.0 |
) |
$ |
(5.9 |
) |
|
$ |
(134.9 |
) |
$ |
(9.8 |
) |
Net income from discontinued operations |
$ |
22.7 |
|
$ |
3.3 |
|
|
$ |
26.8 |
|
$ |
18.8 |
|
Net (loss) income |
$ |
(7.3 |
) |
$ |
(2.6 |
) |
|
$ |
(108.1 |
) |
$ |
9.0 |
|
Operating loss (1) |
$ |
(30.3 |
) |
$ |
(6.8 |
) |
|
$ |
(99.6 |
) |
$ |
(17.9 |
) |
|
|
|
|
|
|
$ per diluted share
(2): |
|
|
|
|
|
Net loss from continuing
operations |
$ |
(16.48 |
) |
$ |
(3.26 |
) |
|
$ |
(74.22 |
) |
$ |
(5.38 |
) |
Net income from discontinued operations |
$ |
12.46 |
|
$ |
1.84 |
|
|
$ |
14.75 |
|
$ |
10.34 |
|
Net
(loss) income |
$ |
(4.02 |
) |
$ |
(1.42 |
) |
|
$ |
(59.47 |
) |
$ |
4.96 |
|
Operating loss (1) |
$ |
(16.68 |
) |
$ |
(3.74 |
) |
|
$ |
(54.78 |
) |
$ |
(9.83 |
) |
(1) See “Non-GAAP
Financial Measures” below(2) Per share amounts have
been restated to reflect one-for-ten reverse stock split
Highlights:
- On October 7, 2022, Hallmark completed the sale of
substantially all of its excess and surplus lines operations, for
$40.0 million cash consideration, plus an estimated $19.9 million
consideration for the acquisition costs associated with certain net
unearned premium reserves. As a result, the results of
operations for the affected lines of business are included in
discontinued operations for all periods shown in its Consolidated
Statement of Operations, including a $33.5 million pre-tax gain on
sale during the fourth quarter of 2022.
- Net loss from continuing operations of $30.0 million, or $16.48
per share, in the fourth quarter of 2022 as compared to a net loss
of $5.9 million, or $3.26 per share, for the same period of
2021. Year-to-date net loss from continuing operations of
$134.9 million, or $74.22 per share, as compared to net loss from
continuing operations of $9.8 million, or $5.38 per share, for the
same period of 2021.
- Net income from discontinued operations of $22.7 million, or
$12.46 per share, in the fourth quarter of 2022 as compared to net
income from discontinued operations of $3.3 million, or $1.84 per
share, for the same period of 2021. Year-to-date net income
from discontinued operations of $26.8 million, or $14.75 per share,
as compared to net income from discontinued operations of $18.8
million, or $10.34 per share, for the same period of 2021.
- Net loss of $7.3 million, or $4.02 per share, in the fourth
quarter of 2022 as compared to net loss of $2.6 million, or $1.42
per share, for the same period of 2021. Year-to-date net loss
of $108.1 million, or $59.47 per share, as compared to net income
of $9.0 million, or $4.96 per share, for the same period of
2021.
- Net loss from continuing operations and net loss included an
additional valuation allowance against net deferred tax assets of
$0.8 million for the fourth quarter of 2022 resulting in a full
valuation allowance against net deferred tax assets of $31.2
million year-to-date primarily due to recent net losses, including
the current period net loss.
- Net loss from continuing operations and net loss for the fourth
quarter included an $18.3 million after-tax impact from the
previously exited contract binding business driven by unfavorable
prior year loss reserve development of $14.3 million during the
quarter.
- Net combined ratio of 183.9% and 185.9% for the three months
and fiscal year ended December 31, 2022, compared to 125.3% and
113.6% for the same periods the prior year.
- Underlying combined ratio (excluding net prior year development
and catastrophe losses) of 132.0% and 120.1% for the three months
and fiscal year ended December 31, 2022, compared to 112.1% and
109.2% for the same periods the prior year. See Non-GAAP
Financial Measures below.
- Gross premiums written for the three months and fiscal year
ended December 31, 2022 increased 4.0% and decreased 7.0%,
respectively, compared to the same period the prior year.
- Net catastrophe losses were $2.6 million in the fourth quarter
of 2022, or 7.3 points of the net combined ratio, as compared to
$0.7 million, or 1.3 points of the net combined ratio, for the same
period the prior year. Net catastrophe losses were $5.8
million for the fiscal year ended 2022, or 3.9 points of the
net combined ratio, as compared to $7.3 million, or 3.6 points of
the net combined ratio, for the same period the prior year.
- Net investment income was $4.8 million and $13.5 million during
the three months and fiscal year ended December 31, 2022, as
compared to $2.1 million and $9.7 million during the same periods
in 2021.
Fourth Quarter and Year-to-Date 2022
Financial Review
|
Fourth Quarter |
|
Year-to-Date |
|
2022 |
2021 |
|
2022 |
2021 |
($ in thousands) |
|
|
|
|
|
Gross premiums written |
$ |
49,520 |
|
$ |
47,740 |
|
|
$ |
217,377 |
|
$ |
233,478 |
|
Net premiums written |
$ |
35,234 |
|
$ |
41,929 |
|
|
$ |
150,559 |
|
$ |
166,658 |
|
Net premiums earned |
$ |
35,192 |
|
$ |
50,810 |
|
|
$ |
147,924 |
|
$ |
202,153 |
|
Investment income, net of expenses |
$ |
4,754 |
|
$ |
2,139 |
|
|
$ |
13,454 |
|
$ |
9,715 |
|
Investment (losses) gains, net |
$ |
1,474 |
|
$ |
1,100 |
|
|
$ |
(5,290 |
) |
$ |
10,222 |
|
Net (loss) from continuing operations |
$ |
(29,984 |
) |
$ |
(5,911 |
) |
|
$ |
(134,927 |
) |
$ |
(9,775 |
) |
Net income from discontinued operations |
$ |
22,663 |
|
$ |
3,344 |
|
|
$ |
26,817 |
|
$ |
18,779 |
|
Net (loss) income |
$ |
(7,321 |
) |
$ |
(2,567 |
) |
|
$ |
(108,110 |
) |
$ |
9,004 |
|
Operating (loss) income |
$ |
(30,346 |
) |
$ |
(6,780 |
) |
|
$ |
(99,586 |
) |
$ |
(17,850 |
) |
Net (loss) income per share - from continuing operations basic
& diluted (1) |
$ |
(16.48 |
) |
$ |
(3.26 |
) |
|
$ |
(74.22 |
) |
$ |
(5.38 |
) |
Net income per share from discontinued operations - basic &
diluted |
$ |
12.46 |
|
$ |
1.84 |
|
|
$ |
14.75 |
|
$ |
10.34 |
|
Net loss per share - basic & diluted |
$ |
(4.02 |
) |
$ |
(1.42 |
) |
|
$ |
(59.47 |
) |
$ |
4.96 |
|
Operating (loss) per share - basic & diluted (2) |
$ |
(16.68 |
) |
$ |
(3.74 |
) |
|
$ |
(54.78 |
) |
$ |
(9.83 |
) |
Book value per share |
$ |
33.16 |
|
$ |
96.59 |
|
|
$ |
33.16 |
|
$ |
96.59 |
|
(1) Per
share amounts have been restated for a reverse stock split(2)
See “Non-GAAP Financial Measures” below
Gross Premiums WrittenGross premiums written
were $49.5 million and $217.4 million during the three months and
fiscal year ended December 31, 2022, representing an increase of 4%
and a decrease of 7% from the $47.7 million and $233.5 in gross
premiums written for the same periods in 2021.
Net Premiums WrittenNet premiums written were
$35.2 million and $150.6 million during the three months and fiscal
year ended December 31, 2022, representing a decrease of 16% and
10%, respectively, from the $41.9 million and $166.7 million
in net premiums written for the same periods in 2021.
Net Premiums EarnedNet premiums earned were
$35.2 million and $147.9 million for the three months and fiscal
year ended December 31, 2022, representing a decrease of 31% and
27% from the $50.8 million and $202.2 million in net premiums
earned for the same periods in 2021.
InvestmentsNet investment income was $4.8
million and $13.5 million during the three months and fiscal year
ended December 31, 2022, as compared to $2.1 million and $9.7
million during the same periods in 2021. The 122% increase in
net investment income during the fourth quarter of 2022 was due to
a greater amount of income generating securities and to higher
yields.
Net investment gains were $1.5 million for the
fourth quarter of 2022 as compared to net investment gains of $1.1
million for the same period in 2021.
Net investment losses were $5.3 million for the
fiscal year ended December 31, 2022, as compared to net investment
gains of $10.2 million for the same period in 2021. Year to date,
net investment losses include $3.1 million realized gains on common
stocks and $8.4 million unrealized losses on common and preferred
stocks.
Fixed-income securities were $426.6 million as
of December 31, 2022, with a tax equivalent book yield of 3.7%
compared to 2.4% as of December 31, 2021. As of December 31,
2022, the fixed-income portfolio had an average modified duration
of 0.8 years and 86% of the securities had remaining time to
maturity of five years or less. As of December 31, 2022, 6%
of the investment portfolio was invested in equity securities.
Total investments were $454.8 million as of
December 31, 2022. Total investments, cash and cash equivalents,
and restricted cash were $543.4 million or $29.89 per share.
Cash and cash equivalents, restricted cash, and short-term
investments in U.S. Treasury Securities were $155 million.
There are no debt securities classified as held-to-maturity.
Pre-Tax (Loss) Income from Continuing
OperationsPre-tax loss from continuing operations was $27.4 million
for the three months ended December 31, 2022, as compared to a
pre-tax loss from continuing operations of $9.4 million reported
during the same period in 2021. The decline in pre-tax
results from continuing operations for the fourth quarter of 2022
compared to the same period of the prior year was driven by higher
losses and LAE of $6.4 million, lower net premiums earned of $15.6
million, higher interest expense of $0.5 million and lower finance
charges of $0.2 million, partially offset by higher net investment
income of $2.7 million, higher net investment gains of $0.4 million
and lower operating expenses of $1.7 million.
Pre-tax loss from continuing operations was
$127.1 million for the fiscal year ended December 31, 2022, as
compared to a pre-tax loss from continuing operations of $12.5
million reported for the same period the prior year. The
decline in pre-tax results from continuing operations for the
fiscal year ended December 31, 2022, was driven by higher losses
and LAE of $56.0 million, lower net premiums earned of $54.2
million, net investment losses of $5.3 million compared to net
investment gains of $10.2 million the prior year, lower finance
charges of $0.6 million and higher interest expense of $0.9
million, partially offset by lower operating expenses of $8.9
million and higher net investment income of $3.7 million.
Loss and Loss Adjustment Expenses (“LAE”) from
Continuing OperationsLosses and LAE increased by $10.4 million to
$48.0 million for the three months ended December 31, 2022, as
compared to the same period of the previous year. The
increase in losses and LAE during the fourth quarter of 2022 was
primarily due to $15.7 million of adverse prior year loss reserve
development, $14.3 million of which was from the exited contract
binding line of the primary commercial automobile business, as
compared to $6.0 million of unfavorable prior year loss reserve
development for the same period the prior year, as well as higher
catastrophe loss. Losses and LAE for the fourth quarter of
2022 included $2.6 million of net catastrophe losses as compared to
$0.7 million during the same period of the prior year.
Losses and LAE increased by $56.0 million to
$209.2 million for the fiscal year ended December 31, 2022, as
compared to the same period of the previous year. The
increase in losses and LAE for the fiscal year ended 2022 was
primarily due to $91.5 million of unfavorable prior year loss
reserve development, $72.6 million of which was from the exited
contract binding line of the primary commercial automobile
business, as compared to $1.6 million of unfavorable prior year
loss reserve development for the prior year period, partially
offset by lower net catastrophe losses. Losses and LAE for
the year ended December 31, 2022, included $5.8 million of net
catastrophe losses as compared to $7.3 million during the same
period of the prior year.
Net (Loss) Income Net loss from continuing
operations was $30.0 million and $134.9 million for the three
months and fiscal year ended December 31, 2022, as compared to net
loss from continuing operations of $5.9 million and $9.8 million
for the same periods during 2021. On a diluted basis per
share, net loss from continuing operations was $16.48 per share and
$74.22 per share for the three months and fiscal year ended
December 31, 2022, as compared to a net loss from continuing
operations of $3.26 per share and $5.38 per share for the three
months and fiscal year ended December 31, 2021.
Net income from discontinued operations was
$22.7 million and $26.8 million for the three months and fiscal
year ended December 31, 2022, as compared to net income from
discontinued operations of $3.3 million and $18.8 million for the
same periods during 2021. On a diluted basis per share, net
income from discontinued operations was $12.46 per share and $14.75
per share for the three months and fiscal year ended December 31,
2022 as compared to a net income from discontinued operations of
$1.84 per share and $10.34 per share for the three months and
fiscal year ended December 31, 2021.
Total net loss was $7.3 million and $108.1
million for the three months and fiscal year ended December 31,
2022, as compared to total net loss of $2.6 million and total net
income of $9.0 million for the same periods during 2021. On a
diluted basis per share, total net loss was $4.02 per share and
$59.47 per share for the three months and fiscal year ended
December 31, 2022, as compared to total net loss of $1.42 per share
and total net income of $4.96 per share for the three months and
fiscal year ended December 31, 2021.
The effective tax rate was -11.2% for the year
ended December 31, 2022, as compared to 21.7% for the same period
in 2021. During the fiscal year ended December 31, 2022, we
recorded a full valuation allowance of $31.2 million against our
net deferred tax assets primarily due to recent net losses,
including the current period net loss. The effective rate for
the twelve months ended December 31, 2021, varied from the
statutory tax rates primarily due to tax exempt interest
income.
Net Loss, Expense and Combined RatiosThe net
loss ratio for continuing operations was 136.4% and 141.4% for the
three months and fiscal year ended December 31, 2022, as compared
to 81.9% and 75.8% reported during the same periods in 2021.
Net unfavorable prior year loss reserve development contributed
44.6 points and 61.9 points to the net loss ratio for the three
months and fiscal year ended December 31, 2022, respectively, as
compared to net unfavorable prior year loss reserve development
increasing the net loss ratio 11.8 points and 0.8 points for the
same periods during 2021. Catastrophe losses contributed 7.3
points and 3.9 points to the net loss ratio for the three months
and fiscal year ended December 31, 2022, respectively, as compared
to 1.3 points and 3.6 points for the same periods during 2021.
The expense ratio was 47.5% and 44.5% for the
three months and fiscal year ended December 31, 2022, as compared
to 43.4% and 37.8% during the same periods in 2021. The net
combined ratio was 183.9% and 185.9% for the three months and
fiscal year ended December 31, 2022, as compared to 125.3% and
113.6% for the same periods during 2021. The exited contract
binding business adversely impacted the net combined ratio by 52.3
points and 51.5 points during the three months and fiscal year
ended December 31, 2022.
Book Value Per ShareBook value per share
decreased 65% to $33.16 per share as of December 31, 2022, as
compared to $96.59 per share as of December 31, 2021.
Non-GAAP Financial Measures
The Company’s financial statements are prepared
in accordance with United States generally accepted accounting
principles (“GAAP”). However, the Company also presents and
discusses certain non-GAAP financial measures that it believes are
useful to investors as measures of operating performance.
Management may also use such non-GAAP financial measures in
evaluating the effectiveness of business strategies and for
planning and budgeting purposes. However, these non-GAAP
financial measures should not be viewed as an alternative or
substitute for the results reflected in the Company’s GAAP
financial statements. In addition, the Company’s definitions
of these items may not be comparable to the definitions used by
other companies.
Operating income and operating income per share
are calculated by excluding net investment gains and losses and
asset impairments or valuation allowances from GAAP net income from
continuing operations. Asset impairments and valuation
allowances are unusual and infrequent charges for the
Company. Management believes that operating income and
operating income per share provide useful information to investors
about the performance of and underlying trends in the Company’s
core insurance operations. Net income from continuing
operations and net income per share from continuing operations are
the GAAP measures that are most directly comparable to operating
earnings and operating earnings per share. A reconciliation
of operating income and operating income per share to the most
comparable GAAP financial measures is presented below.
Hallmark
Financial Services, Inc. and Subsidiaries |
Non-GAAP
Financial Measures Reconciliation |
|
|
|
|
|
|
|
Income (Loss) |
|
|
Weighted |
|
|
from Continuing Operations |
Less Tax |
Net |
Average |
Diluted |
($ in thousands) |
Before Tax |
Effect |
After Tax |
Shares Diluted |
Per Share |
Fourth Quarter 2022 |
|
|
|
|
|
Reported GAAP measures |
$ |
(27,370 |
) |
$ |
2,614 |
|
$ |
(29,984 |
) |
1,819 |
$ |
(16.48 |
) |
Excluded
deferred tax valuation allowance |
$ |
- |
|
$ |
(803 |
) |
$ |
803 |
|
1,819 |
$ |
0.44 |
|
Excluded
investment (gains)/losses |
$ |
(1,474 |
) |
$ |
(309 |
) |
$ |
(1,165 |
) |
1,819 |
$ |
(0.64 |
) |
Operating loss |
$ |
(28,844 |
) |
$ |
1,502 |
|
$ |
(30,346 |
) |
1,819 |
$ |
(16.68 |
) |
|
|
|
|
|
|
Fourth Quarter 2021 |
|
|
|
|
|
Reported GAAP measures |
$ |
(9,427 |
) |
$ |
(3,516 |
) |
$ |
(5,911 |
) |
1,814 |
$ |
(3.26 |
) |
Excluded
investment (gains)/losses |
$ |
(1,100 |
) |
$ |
(231 |
) |
$ |
(869 |
) |
1,814 |
$ |
(0.48 |
) |
Operating loss |
$ |
(10,527 |
) |
$ |
(3,747 |
) |
$ |
(6,780 |
) |
1,814 |
$ |
(3.74 |
) |
|
|
|
|
|
|
Year-to-Date 2022 |
|
|
|
|
|
Reported GAAP measures |
$ |
(127,071 |
) |
$ |
7,856 |
|
$ |
(134,927 |
) |
1,818 |
$ |
(74.22 |
) |
Excluded
deferred tax valuation allowance |
$ |
- |
|
$ |
(31,162 |
) |
$ |
31,162 |
|
1,818 |
$ |
17.14 |
|
Excluded
investment (gains)/losses |
$ |
5,290 |
|
$ |
1,111 |
|
$ |
4,179 |
|
1,818 |
$ |
2.30 |
|
Operating loss |
$ |
(121,781 |
) |
$ |
(22,195 |
) |
$ |
(99,586 |
) |
1,818 |
$ |
(54.78 |
) |
|
|
|
|
|
|
Year-to-Date 2021 |
|
|
|
|
|
Reported GAAP measures |
$ |
(12,463 |
) |
$ |
(2,688 |
) |
$ |
(9,775 |
) |
1,816 |
$ |
(5.38 |
) |
Excluded
investment (gains)/losses |
$ |
(10,222 |
) |
$ |
(2,147 |
) |
$ |
(8,075 |
) |
1,816 |
$ |
(4.45 |
) |
Operating income |
$ |
(22,685 |
) |
$ |
(4,835 |
) |
$ |
(17,850 |
) |
1,816 |
$ |
(9.83 |
) |
|
|
|
|
|
|
Underlying combined ratio is calculated by
excluding the impact of net favorable or unfavorable prior year
loss development and catastrophe losses from the calculation of the
net combined ratio. Management believes that the underlying
combined ratio provides useful information to investors about the
current performance of the Company’s insurance operations absent
historical developments and uncontrollable events. Combined
ratio is the GAAP measure most comparable to underlying combined
ratio. A reconciliation of the underlying combined ratio to
the combined ratio is presented below.
|
|
|
|
|
|
4thQ 2022 |
4thQ 2021 |
YTD 2022 |
YTD 2021 |
Net combined ratio |
183.9 |
% |
125.3 |
% |
185.9 |
% |
113.6 |
% |
Impact on
net combined ratio |
|
|
|
|
Net Unfavorable
(Favorable) Prior Year Development |
44.6 |
% |
11.8 |
% |
61.9 |
% |
0.8 |
% |
Catastrophes, net of
reinsurance |
7.3 |
% |
1.3 |
% |
3.9 |
% |
3.6 |
% |
Underlying combined ratio |
132.0 |
% |
112.1 |
% |
120.1 |
% |
109.2 |
% |
|
|
|
|
|
About Hallmark
Hallmark is a property and casualty insurance
holding company with a diversified portfolio of insurance products
written on a national platform. With six insurance
subsidiaries, Hallmark markets, underwrites and services commercial
and personal insurance in select markets. Hallmark is
headquartered in Dallas, Texas and its common stock is listed on
NASDAQ under the symbol “HALL.”
Forward-looking statements in this release are
made pursuant to the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995. Investors are
cautioned that actual results may differ materially 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, general
economic conditions, the availability of financing, underwriting
loss experience and other risks detailed from time to time in the
Company’s filings with the Securities and Exchange Commission.
For further information, please
contact:
Chris KenneyChief Executive Officer
817.348.1600www.hallmarkgrp.com
Hallmark Financial Services, Inc. and
Subsidiaries |
Consolidated Balance
Sheets |
|
|
|
|
($ in thousands, except par value) |
Dec. 31 |
Dec. 31 |
ASSETS |
2022 |
2021 |
Investments: |
|
|
|
Debt securities, available-for-sale, at fair value (amortized cost:
$434,119 in 2022 and $288,175 in 2021) |
$ |
426,597 |
|
$ |
290,073 |
|
Equity securities (cost: $30,058 in 2022 and $42,120 in 2021) |
|
28,199 |
|
|
48,695 |
|
Total investments |
|
454,796 |
|
|
338,768 |
|
Cash and cash equivalents |
|
59,133 |
|
|
352,867 |
|
Restricted cash |
|
29,486 |
|
|
3,810 |
|
Ceded unearned premiums |
|
237,086 |
|
|
146,433 |
|
Premiums receivable |
|
78,355 |
|
|
90,621 |
|
Accounts receivable |
|
10,859 |
|
|
6,914 |
|
Receivable from reinsurer |
|
58,882 |
|
|
- |
|
Receivable for securities |
|
945 |
|
|
1,326 |
|
Reinsurance recoverable |
|
578,424 |
|
|
549,964 |
|
Deferred policy acquisition costs |
|
8 |
|
|
6,811 |
|
Intangible assets, net |
|
- |
|
|
819 |
|
Federal income tax recoverable |
|
2,668 |
|
|
18,217 |
|
Deferred federal income taxes, net |
|
- |
|
|
8,906 |
|
Prepaid pension assets |
|
163 |
|
|
- |
|
Prepaid expenses |
|
1,508 |
|
|
2,389 |
|
Other assets |
|
24,389 |
|
|
25,753 |
|
Total Assets |
$ |
1,536,702 |
|
$ |
1,553,598 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
Liabilities: |
|
|
|
|
Senior unsecured notes due 2029 (less unamortized debt issuance
costs of $648 in 2022 and $746 in 2021) |
$ |
49,352 |
|
$ |
49,254 |
|
Subordinated debt securities (less unamortized debt issuance costs
of $691 in 2022 and $744 in 2021) |
|
56,011 |
|
|
55,959 |
|
Reserves for unpaid losses and loss adjustment expenses |
|
880,869 |
|
|
816,681 |
|
Unearned premiums |
|
292,691 |
|
|
284,427 |
|
Reinsurance payable |
|
128,950 |
|
|
117,908 |
|
Pension liability |
|
- |
|
|
174 |
|
Payable for securities |
|
- |
|
|
3,280 |
|
Accounts payable and other liabilities |
|
68,535 |
|
|
50,394 |
|
Total Liabilities |
|
1,476,408 |
|
|
1,378,077 |
|
Commitments and contingencies |
|
|
|
|
Stockholders’ equity: |
|
|
|
|
Common stock, $1.00 par value, authorized 3,333,333 shares; issued
2,087,283 shares in 2022 and 2021 |
2,087 |
|
|
2,087 |
|
Additional paid-in capital |
|
124,740 |
|
|
124,514 |
|
(Accumulated deficit) retained earnings |
|
(33,407 |
) |
|
74,703 |
|
Accumulated other comprehensive loss |
|
(8,492 |
) |
|
(1,035 |
) |
Treasury stock (268,801 shares in 2022 and 270,036 shares in 2021),
at cost |
|
(24,634 |
) |
|
(24,748 |
) |
Total Stockholders Equity |
|
60,294 |
|
|
175,521 |
|
Total Liabilities & Stockholders Equity |
$ |
1,536,702 |
|
$ |
1,553,598 |
|
|
Hallmark Financial Services, Inc. and
Subsidiaries |
Consolidated Statements of Operations |
Three Months Ended |
|
Year-to-Date |
($ in thousands, except per share amounts) |
December 31, |
|
December 31, |
|
2022 |
2021 |
|
2022 |
2021 |
Gross premiums
written |
$ |
49,520 |
|
$ |
47,740 |
|
|
$ |
217,377 |
|
$ |
233,478 |
|
Ceded premiums
written |
|
(14,286 |
) |
|
(5,811 |
) |
|
|
(66,818 |
) |
|
(66,820 |
) |
Net premiums written |
|
35,234 |
|
|
41,929 |
|
|
|
150,559 |
|
|
166,658 |
|
Change in unearned
premiums |
|
(42 |
) |
|
8,881 |
|
|
|
(2,635 |
) |
|
35,495 |
|
Net premiums earned |
|
35,192 |
|
|
50,810 |
|
|
|
147,924 |
|
|
202,153 |
|
|
|
|
|
|
|
|
|
|
|
Investment income, net of expenses |
|
4,754 |
|
|
2,139 |
|
|
|
13,454 |
|
|
9,715 |
|
Investment (losses) gains, net |
|
1,474 |
|
|
1,100 |
|
|
|
(5,290 |
) |
|
10,222 |
|
Finance charges |
|
874 |
|
|
1,026 |
|
|
|
3,774 |
|
|
4,344 |
|
Commission and fees |
|
0 |
|
|
2 |
|
|
|
3 |
|
|
5 |
|
Other income |
|
11 |
|
|
13 |
|
|
|
53 |
|
|
63 |
|
Total revenues |
|
42,305 |
|
|
55,090 |
|
|
|
159,918 |
|
|
226,502 |
|
|
|
|
|
|
|
|
|
|
|
Losses and loss adjustment expenses |
|
48,002 |
|
|
41,592 |
|
|
|
209,170 |
|
|
153,162 |
|
Operating expenses |
|
19,925 |
|
|
21,669 |
|
|
|
71,892 |
|
|
80,783 |
|
Interest expense |
|
1,744 |
|
|
1,250 |
|
|
|
5,902 |
|
|
4,993 |
|
Amortization of
intangible assets |
|
4 |
|
|
6 |
|
|
|
25 |
|
|
27 |
|
Total expenses |
|
69,675 |
|
|
64,517 |
|
|
|
286,989 |
|
|
238,965 |
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before tax |
|
(27,370 |
) |
|
(9,427 |
) |
|
|
(127,071 |
) |
|
(12,463 |
) |
Income tax expense
(benefit) from continuing operations |
|
2,614 |
|
|
(3,516 |
) |
|
|
7,856 |
|
|
(2,688 |
) |
Net (loss) income from
continuing operations |
$ |
(29,984 |
) |
$ |
(5,911 |
) |
|
$ |
(134,927 |
) |
$ |
(9,775 |
) |
|
|
|
|
|
|
|
|
|
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
Total pretax income from
discontinued operations |
$ |
19,299 |
|
$ |
6,314 |
|
|
$ |
29,872 |
|
$ |
23,958 |
|
Income tax (benefit) expense on discontinued operations |
|
(3,364 |
) |
|
2,970 |
|
|
|
3,055 |
|
|
5,179 |
|
Income from discontinued operations, net of tax |
$ |
22,663 |
|
$ |
3,344 |
|
|
$ |
26,817 |
|
$ |
18,779 |
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
$ |
(7,321 |
) |
$ |
(2,567 |
) |
|
$ |
(108,110 |
) |
$ |
9,004 |
|
|
|
|
|
|
|
|
|
|
|
Net (loss) basic income per
share: |
|
|
|
|
|
|
|
|
|
Net loss from continuing operations |
$ |
(16.48 |
) |
$ |
(3.26 |
) |
|
$ |
(74.22 |
) |
$ |
(5.38 |
) |
Net income from discontinued operations |
|
12.46 |
|
|
1.84 |
|
|
|
14.75 |
|
|
10.34 |
|
Basic net (loss) income per share |
$ |
(4.02 |
) |
$ |
(1.42 |
) |
|
$ |
(59.47 |
) |
$ |
4.96 |
|
|
|
|
|
|
|
|
|
|
|
Net (loss) diluted income per
share: |
|
|
|
|
|
|
|
|
|
Net loss from continuing operations |
$ |
(16.48 |
) |
$ |
(3.26 |
) |
|
$ |
(74.22 |
) |
$ |
(5.38 |
) |
Net income from discontinued operations |
|
12.46 |
|
|
1.84 |
|
|
|
14.75 |
|
|
10.34 |
|
Diluted net (loss) income per share |
$ |
(4.02 |
) |
$ |
(1.42 |
) |
|
$ |
(59.47 |
) |
$ |
4.96 |
|
|
|
|
|
|
|
|
|
|
|
Hallmark
Financial Services, Inc. and Subsidiaries |
Consolidated Segment Data |
Three
Months Ended Dec. 31 |
|
Commercial LinesSegment |
Personal LinesSegment |
RunoffSegment |
Corporate |
Consolidated |
($ in
thousands, unaudited) |
2022 |
2021 |
2022 |
2021 |
2022 |
2021 |
2022 |
2021 |
2022 |
2021 |
Gross premiums written |
$ |
34,816 |
|
$ |
31,171 |
|
$ |
13,527 |
|
$ |
14,653 |
|
$ |
1,177 |
|
$ |
1,916 |
|
$ |
- |
|
$ |
- |
|
$ |
49,520 |
|
$ |
47,740 |
|
Ceded
premiums written |
|
(14,217 |
) |
|
(15,069 |
) |
|
(73 |
) |
|
(69 |
) |
|
4 |
|
|
9,327 |
|
|
- |
|
|
- |
|
|
(14,286 |
) |
|
(5,811 |
) |
Net premiums written |
|
20,599 |
|
|
16,102 |
|
|
13,454 |
|
|
14,584 |
|
|
1,181 |
|
|
11,243 |
|
|
- |
|
|
- |
|
|
35,234 |
|
|
41,929 |
|
Change
in unearned premiums |
|
(1,749 |
) |
|
2,962 |
|
|
1,599 |
|
|
1,696 |
|
|
108 |
|
|
4,223 |
|
|
- |
|
|
- |
|
|
(42 |
) |
|
8,881 |
|
Net premiums earned |
|
18,850 |
|
|
19,064 |
|
|
15,053 |
|
|
16,280 |
|
|
1,289 |
|
|
15,466 |
|
|
- |
|
|
- |
|
|
35,192 |
|
|
50,810 |
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
19,329 |
|
|
19,797 |
|
|
16,224 |
|
|
17,579 |
|
|
1,599 |
|
|
16,004 |
|
|
5,153 |
|
|
1,710 |
|
|
42,305 |
|
|
55,090 |
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss adjustment
expenses |
|
12,874 |
|
|
13,794 |
|
|
17,800 |
|
|
13,984 |
|
|
17,328 |
|
|
13,814 |
|
|
- |
|
|
- |
|
|
48,002 |
|
|
41,592 |
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax income (loss) |
|
571 |
|
|
(672 |
) |
|
(6,507 |
) |
|
(1,680 |
) |
|
(18,574 |
) |
|
(3,695 |
) |
|
(2,860 |
) |
|
(3,380 |
) |
|
(27,370 |
) |
|
(9,427 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net loss ratio (1) |
|
68.3 |
% |
|
72.4 |
% |
|
118.2 |
% |
|
85.9 |
% |
|
1344.3 |
% |
|
89.3 |
% |
|
|
|
136.4 |
% |
|
81.9 |
% |
Net
expense ratio (1) |
|
32.2 |
% |
|
36.6 |
% |
|
28.3 |
% |
|
27.9 |
% |
|
233.8 |
% |
|
49.8 |
% |
|
|
|
47.5 |
% |
|
43.4 |
% |
Net combined ratio
(1) |
|
100.5 |
% |
|
109.0 |
% |
|
146.5 |
% |
|
113.8 |
% |
|
1578.1 |
% |
|
139.1 |
% |
|
|
|
183.9 |
% |
|
125.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
Impact on net combined
ratio |
|
|
|
|
|
|
|
|
|
|
Net Unfavorable (Favorable)
Prior Year Development |
|
-2.7 |
% |
|
4.8 |
% |
|
8.9 |
% |
|
3.3 |
% |
|
1153.6 |
% |
|
29.5 |
% |
|
|
|
44.6 |
% |
|
11.8 |
% |
Catastrophes, net of
reinsurance |
|
9.2 |
% |
|
2.9 |
% |
|
1.0 |
% |
|
0.6 |
% |
|
0.0 |
% |
|
0.0 |
% |
|
|
|
7.3 |
% |
|
1.3 |
% |
Underlying combined
ratio (1) |
|
94.1 |
% |
|
101.2 |
% |
|
136.6 |
% |
|
109.9 |
% |
|
424.5 |
% |
|
109.6 |
% |
|
|
|
132.0 |
% |
|
112.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
Net Unfavorable (Favorable) Prior Year Development |
|
(518 |
) |
|
912 |
|
|
1,341 |
|
|
535 |
|
|
14,870 |
|
|
4,565 |
|
|
- |
|
|
- |
|
|
15,693 |
|
|
6,012 |
|
(1) The net loss ratio is
calculated as incurred losses and loss adjustment expenses divided
by net premiums earned, each determined in accordance with
GAAP. The net expense ratio is calculated as total
underwriting expenses offset by agency fee income divided by net
premiums earned, each determined in accordance with GAAP. The
net combined ratio is calculated as the sum of the net loss ratio
and the net expense ratio. The underlying combined ratio is
the net combined ratio excluding the impact of net prior year
reserve development and catastrophes.
Hallmark
Financial Services, Inc. and Subsidiaries |
Consolidated Segment Data |
Fiscal
Year Ended Dec. 31 |
|
Commercial LinesSegment |
Personal LinesSegment |
RunoffSegment |
Corporate |
Consolidated |
($ in
thousands, unaudited) |
2022 |
2021 |
2022 |
2021 |
2022 |
2021 |
2022 |
2021 |
2022 |
2021 |
Gross premiums written |
$ |
144,829 |
|
$ |
138,687 |
|
$ |
61,115 |
|
$ |
67,213 |
|
$ |
11,433 |
|
$ |
27,578 |
|
$ |
- |
|
$ |
- |
|
$ |
217,377 |
|
$ |
233,478 |
|
Ceded
premiums written |
|
(65,651 |
) |
|
(64,763 |
) |
|
(299 |
) |
|
(303 |
) |
|
(868 |
) |
|
(1,754 |
) |
|
- |
|
|
- |
|
|
(66,818 |
) |
|
(66,820 |
) |
Net premiums written |
|
79,178 |
|
|
73,924 |
|
|
60,816 |
|
|
66,910 |
|
|
10,565 |
|
|
25,824 |
|
|
- |
|
|
- |
|
|
150,559 |
|
|
166,658 |
|
Change
in unearned premiums |
|
(5,332 |
) |
|
636 |
|
|
1,249 |
|
|
1,624 |
|
|
1,448 |
|
|
33,235 |
|
|
- |
|
|
- |
|
|
(2,635 |
) |
|
35,495 |
|
Net premiums earned |
|
73,846 |
|
|
74,560 |
|
|
62,065 |
|
|
68,534 |
|
|
12,013 |
|
|
59,059 |
|
|
- |
|
|
- |
|
|
147,924 |
|
|
202,153 |
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
75,513 |
|
|
77,333 |
|
|
66,845 |
|
|
73,969 |
|
|
13,153 |
|
|
61,310 |
|
|
4,407 |
|
|
13,890 |
|
|
159,918 |
|
|
226,502 |
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss adjustment
expenses |
|
53,271 |
|
|
53,563 |
|
|
59,208 |
|
|
61,363 |
|
|
96,691 |
|
|
38,236 |
|
|
- |
|
|
- |
|
|
209,170 |
|
|
153,162 |
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax income (loss) |
|
(2,572 |
) |
|
589 |
|
|
(13,765 |
) |
|
(9,955 |
) |
|
(91,674 |
) |
|
1,517 |
|
|
(19,060 |
) |
|
(4,614 |
) |
|
(127,071 |
) |
|
(12,463 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net loss ratio (1) |
|
72.1 |
% |
|
71.8 |
% |
|
95.4 |
% |
|
89.5 |
% |
|
804.9 |
% |
|
64.7 |
% |
|
|
|
141.4 |
% |
|
75.8 |
% |
Net
expense ratio (1) |
|
34.6 |
% |
|
32.3 |
% |
|
29.8 |
% |
|
27.9 |
% |
|
69.1 |
% |
|
35.2 |
% |
|
|
|
44.5 |
% |
|
37.8 |
% |
Net combined ratio
(1) |
|
106.7 |
% |
|
104.1 |
% |
|
125.2 |
% |
|
117.4 |
% |
|
874.0 |
% |
|
99.9 |
% |
|
|
|
185.9 |
% |
|
113.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
Impact on net combined
ratio |
|
|
|
|
|
|
|
|
|
|
Net Unfavorable (Favorable)
Prior Year Development |
|
-0.4 |
% |
|
-2.0 |
% |
|
10.6 |
% |
|
7.1 |
% |
|
709.5 |
% |
|
-3.2 |
% |
|
|
|
61.9 |
% |
|
0.8 |
% |
Catastrophes, net of
reinsurance |
|
7.4 |
% |
|
8.5 |
% |
|
0.5 |
% |
|
1.4 |
% |
|
0.0 |
% |
|
0.0 |
% |
|
|
|
3.9 |
% |
|
3.6 |
% |
Underlying combined
ratio (1) |
|
99.7 |
% |
|
97.6 |
% |
|
114.1 |
% |
|
108.9 |
% |
|
164.5 |
% |
|
103.1 |
% |
|
|
|
120.1 |
% |
|
109.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
Net Unfavorable (Favorable) Prior Year Development |
|
(268 |
) |
|
(1,459 |
) |
|
6,559 |
|
|
4,891 |
|
|
85,235 |
|
|
(1,873 |
) |
|
|
|
91,526 |
|
|
1,559 |
|
(1) The net loss ratio is
calculated as incurred losses and loss adjustment expenses divided
by net premiums earned, each determined in accordance with
GAAP. The net expense ratio is calculated as total
underwriting expenses offset by agency fee income divided by net
premiums earned, each determined in accordance with GAAP. The
net combined ratio is calculated as the sum of the net loss ratio
and the net expense ratio. The underlying combined ratio is
the net combined ratio excluding the impact of net prior year
reserve development and catastrophes.
A photo accompanying this announcement is available
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Hallmark Financial Servi... (NASDAQ:HALL)
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Hallmark Financial Servi... (NASDAQ:HALL)
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