Hallmark Financial Services, Inc. Earnings
Results for 2000
DALLAS, March 28 Hallmark Financial Services, Inc.
(Amex: HAF.EC), a Dallas-based financial services company, today announced
earnings for the fourth quarter and year ended December 31, 2000. Without the
effect of a one-time charge to net income for litigation costs, the Company
had net income for the year of $74,347 ($0.01 per share) and a net loss for
the fourth quarter of $392,419 (-$0.04 per share). After the one-time charge,
the Company reported a net loss for the year of $233,370 (-$0.02 per share) on
total revenues of $23,885,406. This compares to 1999 annual net income of
$787,310 ($0.07 per share) on total revenues of $19,200,694. For the fourth
quarter of 2000, after the one-time charge, the Company reported a net loss of
$700,136 (-$0.06 per share), as compared to net income of $156,432 ($0.01 per
share) for the fourth quarter of 1999. Revenues for the fourth quarter of
2000 and 1999 were $5,558,907 and $5,192,235, respectively.
During the fourth quarter, the Company exhausted its appeals of a 1997
verdict involving indemnification claims by a former director and officer.
The increase in accrued litigation costs of $435,840 ($307,717 after-tax)
primarily represents additional post-judgment interest and legal fees
associated with the appeals. The judgment will be paid out of restricted
funds on deposit with the court and accruing interest since 1997.
During the last half of 2000, the Company's financial results have been
negatively impacted by (i) the continued impact of depressed auto premium
rates over the last several years, (ii) less favorable reinsurance terms due
to losses incurred by reinsurers generally as a result of industry-wide rate
inadequacies, and (iii) increasing claim costs primarily due to rising repair
and medical costs. The fourth quarter was further impacted by higher losses
due to ice-related claims and high cancellation rates principally resulting
from stricter enforcement of underwriting criteria. Over the past several
years excess capital of the insurance industry created a climate which allowed
small companies, backed 100% by reinsurance, to enter the marketplace. As a
result, competition increased and rates decreased. The unacceptable
underwriting results that ensued have created reserve deficiencies and
unsatisfactory loss ratios for many insurers and reinsurers. Unacceptable
underwriting performance has compelled reinsurers to aggressively tighten
treaty terms, thus forcing a number of companies out of the non-standard auto
market. This tightening of treaty terms has affected the entire Texas
non-standard market, including Hallmark.
Aggressive treaty changes by reinsurers are also beginning to have a
positive impact on the marketplace. Competition has been reduced and the
opportunity to increase rates to more acceptable levels is occurring. While
the negative impact of changes in reinsurance treaties are immediate and
harsh, the positive impact of rate revisions are more gradual as market
conditions allow, and are realized over time as premiums are earned. Changes
now occurring in the industry will have a positive long term effect on the
Company.
"The current Texas climate is marked by firming rates and fewer
competitors. Among other things, we have increased rates more than 20% which,
when fully realized, should offset less favorable reinsurance terms and rising
claim costs," stated CEO & President, Linda H. Sleeper. "Although the
aftermath of several years of depressed premium rates will continue to
challenge our Company in the near-term, our fundamentals are sound, our
reputation is excellent and the long-term outlook for the Company is
positive," concluded Ms. Sleeper.
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:
Ramon D. Phillips, Chairman at 972-404-1637
http://www.hallmarkgrp.com
HALLMARK FINANCIAL SERVICES, INC.
AND CONSOLIDATED SUBSIDIARIES
Selected Operating Results
Twelve Months Ended December 31,
2000 1999
Gross Premiums Written $50,468,652 $37,956,953
Total Revenues $23,885,406 $19,200,694
Pretax Income (Loss) $(261,714) $1,287,188
Income Tax Expense (Benefit) $(28,344) $499,878
Net Income (Loss) $(233,370) $787,310
Basic and Diluted Earnings Per Share $(.02) $.07
Weighted Average Shares Outstanding 11,049,133 11,048,133
Three Months Ended December 31,
2000 1999
Gross Premiums Written $12,017,700 $9,917,847
Total Revenues $5,558,907 $5,192,235
Pretax Income (Loss) $(1,029,414) $260,842
Income Tax Expense (Benefit) $(329,278) $104,410
Net Income (Loss) $(700,136) $156,432
Basic and Diluted Earnings Per Share $(.06) $0.01
Weighted Average Shares Outstanding 11,049,133 11,048,133
