Hallmark Completes Phoenix Indemnity Acquisition

    DALLAS, Jan. 29 -- Hallmark Financial Services,
Inc. (Amex: HAF.EC) ("Hallmark") today announced the completion of its
previously announced acquisition of Phoenix Indemnity Insurance Company
("Phoenix Indemnity"), an Arizona based non-standard automobile insurance
company, from Millers American Group, Inc. ("Millers").
    Hallmark will accept the stock of Phoenix Indemnity in exchange for a
$7.0 million reduction in the balance of a promissory note owed to it by
Millers.  The stock of Millers Insurance Company will continue to be held by
Hallmark as collateral for the remaining balance of the note while the parties
evaluate the recapitalization or reorganization of Millers Insurance Company.
    Joseph G. Smith will continue as the President of Phoenix Indemnity and
the Company will continue to focus its operations on non-standard automobile
insurance in the states of Arizona and New Mexico.  For the first nine months
of 2002, Phoenix Indemnity had direct written premium of $19.2 million.
Policyholders' surplus at September 30, 2002 was $10.9 million.
    Hallmark Financial Services, Inc. is engaged primarily in underwriting,
marketing and financing non-standard automobile insurance in the Texas,
Arizona and New Mexico and in marketing commercial lines insurance in Texas,
New Mexico, Idaho, Oregon and Washington.  The Company is headquartered in
Dallas, 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, consummation of contemplated
transactions, 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:
             Timothy A. Bienek, President and COO at 972.866.5708
                             http://www.hallmarkgrp.com