 Hallmark Yahoo Photo Hallmark Yahoo PhotoDALLAS, Aug. 10, 2020 GLOBE NEWSWIRE -- Hallmark Financial Services, Inc. Hallmark Financial NASDAQ: HALL today announced financial results for the second quarter and six months ended June 30, 2020. Second Quarter Year-to-Date 2020 2019 2020 2019 in millions unaudited: Net Income Loss6.7 13.0 57.628.1 Operating Earnings 15.1 7.6 9.7 13.2 per diluted share: Net Income Loss0.37 0.71 3.181.54 Operating Earnings 10.28 0.42 0.53 0.73 1 See Non-GAAP Financial Measures below Second Quarter 2020 Highlights all comparisons to same prior year period: Hallmark Financial reported a net combined ratio of 98.4 as compared to 94.5 for the second quarter of 2019. During the first quarter of 2020, the Company announced its decision to exit the Binding Primary Auto business. The second quarter net combined ratio was negatively impacted by 2.6 points from this discontinued line of business. Hallmark Financial saw continued momentum on rate increases, as rates were up an average of 18 for all lines and 23 for the Specialty Commercial Segment. Gross premiums written decreased 16 to 183.6 million Net premiums written decreased 12 to 109.0 million Net premiums earned increased 18 to 125.6 million Net income of 6.7 million, or 0.37 per diluted share, compared to net income of 13.0 million, or 0.71 per diluted share Operating earnings of 5.1 million, or 0.28 per diluted share, compared to 7.6 million, or 0.42 per diluted share see Non-GAAP Financial Measures below Net investment gains of 2.1 million compared to net investment gains of 6.8 million Net catastrophe losses of 6.6 million, inclusive of 3.7 million net losses for COVID-19 claims, contributed 5.2 points to the net combined ratio compared to 2.0 million contributing 1.9 pointsYear-to-Date 2020 Highlights all comparisons to same prior year period: Hallmark Financial reported a net combined ratio of 98.0 as compared to 95.4 for the first six months of 2019. During the first quarter of 2020, the Company announced its decision to exit the Binding Primary Auto business. The year-to-date combined ratio was negatively impacted by 5.0 points from this discontinued line of business. Hallmark Financial saw continued momentum on rate increases, as rates were up an average of 15 for all lines and 19 for the Specialty Commercial Segment. Gross premiums written decreased 5 to 385.2 million Net premiums written decreased 2 to 235.5 million Net premiums earned increased 21 to 249.5 million Net loss of 57.6 million, or 3.18 per diluted share, compared to net income of 28.1 million, or 1.54 per diluted share Operating earnings of 9.7 million, or 0.53 per diluted share, compared to 13.2 million, or 0.73 per diluted share see Non-GAAP Financial Measures below Net investment losses of 27.3 million compared to net investment gains of 18.8 million Net catastrophe losses of 12.6 million, inclusive of 5.0 million net losses for COVID-19 claims, contributed 5.0 points to the net combined ratio compared to 4.0 million contributing 2.0 points In connection with its normal process for evaluating impairment triggering events during the first quarter of 2020, the Company determined that a significant decline in its market capitalization below its stockholders equity indicated the impairment of the goodwill and indefinite-lived intangible assets included in its balance sheet. As a result, the Company took a 44.7 million charge to goodwill and a 1.3 million charge to indefinite-lived assets as of March 31, 2020.Naveen Anand, President and Chief Executive Officer, commented, While the Company has had numerous challenges to overcome this year, through the efforts of our employees, board of directors, and business partners, we have worked to onboard a new auditor, regain Nasdaq compliance, and timely file our second quarter financial results. It is no small feat that this was all accomplished in the midst of the COVID-19 challenges, where the Company transitioned quickly and effectively to become an almost entirely remote workforce. It is quite remarkable what our employees have been able to accomplish.Our exit from the Binding Primary Auto business, following growing severity in claims from prior years, combined with our efforts to secure reinsurance on the prior year reserves associated with this business, will serve to limit the Companys future exposure and reduce the volatility associated with a book of business that has been responsible for the vast majority of the Companys net unfavorable prior year reserve development over the past 5 years, continued Mr. Anand.Additionally, while we have reduced premium targets in certain lines of business, we continue to capitalize on favorable market opportunities that have continued to accelerate throughout the current year. While seeking to reduce exposure through limits deployment and limiting terms and conditions, we also experienced continued momentum on rate increases, with rates up an average of 18 for all lines and 23 for the Specialty Commercial Segment in the second quarter of 2020 compared to last year. Excluding the Binding Primary Auto business presently in runoff, gross premiums declined by 3.4 in the quarter and increased by 5.7 on a year-to-date basis compared to 2019, said Mr. Anand. Second Quarter Year-to-Date 2020 2019 Change 2020 2019 Change in thousands, unaudited Gross premiums written 183,644 218,236 -16 385,233 405,552 -5 Net premiums written 108,987 123,843 -12 235,492 241,246 -2 Net premiums earned 125,596 106,499 18 249,529 205,529 21 Investment income, net of expenses 3,196 5,412 -41 7,654 10,523 -27 Investment gains losses, net 2,058 6,817 -70 27,272 18,754 -245 Net income loss 6,701 13,029 -49 57,609 28,054 -305 Operating earnings loss1 5,075 7,644 -34 9,659 13,238 -27 Net income loss per share - basic0.37 0.72 -49 3.181.55 -305 Net income loss per share - diluted0.37 0.71 -48 3.181.54 -306 Operating earnings loss per share - diluted 10.28 0.42 -33 0.53 0.73 -27 Book value per share11.14 15.98 -30 1 See Non-GAAP Financial Measures below Second Quarter and Year-to-Date 2020 Financial Review Gross Premiums Written During the three and six months ended June 30, 2020, Hallmark Financials gross premiums written were 183.6 million and 385.2 million, respectively, representing a decrease of 16 and 5, respectively, from the 218.2 million and 405.6 million in gross premiums written for the same periods in 2019.Net Premiums Written During the three and six months ended June 30, 2020, Hallmark Financials net premiums written were 109.0 million and 235.5 million, respectively, representing a decrease of 12 and 2, respectively, from the 123.8 million and 241.2 million in net premiums written for the same periods of 2019. Net Premiums Earned Hallmark Financials net premiums earned were 125.6 million and 249.5 million for the three and six months ended June 30, 2020, respectively, representing a 18 and 21 increase, respectively, from the 106.5 million and 205.5 million in net premiums earned for the same periods in 2019. Investments During the three and six months ended June 30, 2020, net investment income was 3.2 million and 7.7 million, respectively, as compared to 5.4 million and 10.5 million during the same periods in 2019. Net investment gains were 2.1 million for the three months ended June 30, 2020 as compared to net investment gains of 6.8 million for the same period the prior year. Net investment losses were 27.3 million for the six months ended June 30, 2020 as compared to net investment gains of 18.8 million for the same period the prior year. The declines in net investment income were primarily due to lower interest rates in the first half of 2020 compared to the prior year and an increase in the proportion of short-term investments held relative to longer maturity investments. The net investment losses in the first half of 2020 were primarily due to an overall reduction of investment in equity securities in the first quarter of 2020 during the historic market declines associated with the novel coronavirus COVID-19 pandemic.At June 30, 2020 fixed-income securities were 553.3 million, with a tax equivalent book yield of 2.2 compared to 3.6 as of June 30, 2019. As of June 30, 2020, the fixed-income portfolio had an average modified duration of 0.9 years and 90 of the securities had remaining time to maturity of five years or less. As of June 30, 2020, 3 of the investment portfolio was invested in equity securities.At June 30, 2020, total investments were 571.6 million. Cash and cash equivalents, including restricted cash were 128.5 million. Total investments, cash and cash equivalents, and restricted cash were 700.0 million or 38.59 per share.Pre-Tax Income Hallmark Financial had pre-tax income of 5.6 million for the three months ended June 30, 2020, as compared to pre-tax income of 16.5 million reported during the same period in 2019. Hallmark Financial had a pre-tax loss of 64.0 million for the six months ended June 30, 2020, as compared to pre-tax income of 35.4 million reported during the same period in 2019. The decline in pre-tax results for the three months ended June 30, 2020 was predominately driven by adverse prior year net loss reserve development of 10.8 million as compared to 1.5 million for the same period the prior year, as well as the 4. 