Hallmark Financial Services, Inc. 2000 Second Quarter and Six Month Results
15 August 2000
Hallmark Financial Services, Inc. 2000 Second Quarter and Six Month Results
DALLAS - Hallmark Financial Services, Inc., a Dallas based financial services
company, today reported net income for the six months ended June 30, 2000 of
$548,973 or $0.05 per share. This compares to net income for the first six
months of 1999 of $502,493 or $0.05 per share. For the second quarter of 2000,
the Company reported net income of $195,127 ($0.02 per share) as compared to
$196,772 ($0.02 per share) for the same period of 1999.
Total revenues for the six months and quarter ending June 30, 2000 were
$12,953,450 and $6,724,555 respectively. For the comparable periods ended
June 30, 1999, the six months total revenues were $9,048,325 with the
quarter's total revenues at $4,778,078. Profit expectations for the six
months were met while revenues exceeded management's projections. Market
fragmentation and capital over-capacity in the insurance industry over the
last several years have depressed premium rates. The cumulative effect of
inadequate rates, coupled with hail storm claims in the first half of the
year, mitigated the impact of increased revenues on profitability.
Although market trends of the past several years may continue to adversely
affect profits in the near-term, current indicators reflect that higher
premium rates and a decrease in active competitors may be expected to
strengthen profitability for the longer term. To optimize underwriting
profits, Hallmark has been strategically increasing premium rates since
November 1999. Hallmark is actively working to increase the profitability of
business produced by its agent base through further targeted rate increases,
more stringent underwriting guidelines and heightened agent performance
requirements.
The expectation of increased premium rates in the Texas marketplace is
largely the result of recent tightening in the availability of reinsurance on
acceptable terms. Partially as a result of this development, effective
July 1, 2000, Hallmark entered into a new reinsurance agreement with one of
the two primary reinsurers under its prior treaty arrangement. Under the new
reinsurance agreement, Hallmark has increased its risk retention to 35% (from
25%) and the sole reinsurer has increased its participation to 65% (from
37.5%). In addition, the new agreement increases the provisional ceding
commission, decreases the minimum ceding commission, increases the ratio for
computing earned ceding commissions above the minimum, and continues the
retention of 100% of policy fees.
"We believe the new reinsurance agreement is advantageous to Hallmark in
light of the current reinsurance market," stated Ramon D. Phillips, Chairman
and CEO. Mr. Phillips explained, "Although the new reinsurance terms expose
Hallmark to reduced commission income in the near term, we believe the
agreement will favorably impact liquidity and provide the potential for
enhancing future profits."
Hallmark previously announced plans to strengthen its information
technology capabilities. The thrust of the first phase of this program is to
enhance Company and agency relationships by improving content and timeliness
of information to support agents in servicing their customers. This phase is
currently being tested internally and is expected to be further tested by
select agencies during the third quarter of fiscal 2000. The final phase will
implement point-of-sale technology to support agents in more promptly and
efficiently producing new business, as well as improving the quality and
timeliness of service to policyholders. Testing of this phase is scheduled
for early 2001. When fully implemented, these enhancements should result in
cost savings and improved customer service for both Hallmark and its
participating agents.
"We are encouraged by recent trends in the Texas marketplace and believe
they provide a foundation for increasing our future profitability," said
Mr. Phillips. "Hallmark has programs currently under way which will enhance
our technology capabilities and further heighten our potential for increased
profitability," Mr. Phillips continued.
Hallmark Financial Services, Inc. engages primarily in the marketing and
financing of non-standard automobile insurance in the State of Texas. Other
activities include fee-based claims handling as well as administrative and
financial services for unrelated parties. The Company is headquartered in
Dallas, Texas and its common stock is listed on the American Stock Exchange
under the symbol "HAF.EC".
HALLMARK FINANCIAL SERVICES, INC.
AND CONSOLIDATED SUBSIDIARIES
Selected Operating Results
Three Months Ended June 30
2000 1999
Gross Premiums Written $ 12,870,742 $ 8,241,565
Total Revenues 6,724,555 4,778,078
Pretax Income 315,489 336,413
Income Tax Expense 120,362 139,641
Net Income 195,127 196,772
Basic and diluted EPS $ 0.02 $ 0.02
Six Months Ended June 30
2000 1999
Gross Premiums Written $ 26,098,589 $ 18,407,258
Total Revenues 12,953,450 9,048,325
Pretax Income 873,062 832,300
Income Tax Expense 324,089 329,807
Net Income 548,973 502,493
Basic and diluted EPS $ 0.05 $ 0.05