 Hallmark Yahoo Photo Hallmark Yahoo PhotoDALLAS, July 23, 2020 GLOBE NEWSWIRE -- Hallmark Financial Services, Inc. Hallmark Financial NASDAQ: HALL today announced financial results for the first quarter ended March 31, 2020. First Quarter 2020 2019 in millions:unaudited unaudited Net Loss Income 64.3 15.0 Operating Earnings 1 4.6 5.6 per diluted share: Net Loss Income 3.55 0.83 Operating Earnings 1 0.25 0.31 1 See Non-GAAP Financial Measures belowFirst Quarter 2020 Highlights all comparisons to same prior year period: Hallmark Financial reported a net combined ratio of 97.6 as compared to 96.5 for the first quarter of 2019. During the quarter, as previously announced on March 2nd, the Company decided to exit the Binding Primary Auto business. The combined ratio was negatively impacted by 7.5 points from this discontinued line of business during the quarter. Hallmark Financial saw continued momentum on rate increases, as rates were up 13 for all lines and 16 for the Specialty Commercial Segment. Gross premiums written increased 8 to 201.6 million Net premiums written increased 8 to 126.5 million Net premiums earned increased 25 to 123.9 million Net combined ratio of 97.6 compared to 96.5 Net loss of 64.3 million, or 3.55 per diluted share, compared to net income of 15.0 million, or 0.83 per diluted share Operating earnings of 4.6 million, or 0.25 per diluted share, compared to 5.6 million, or 0.31 per diluted share see Non-GAAP Financial Measures below Net investment losses of 29.3 million compared to net investment gains of 11.9 million In connection with its normal process for evaluating impairment triggering events, the Company determined that a significant decline in its market capitalization below its stockholders equity during the quarter 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. First Quarter 20202019 Change in thousands, unaudited Gross premiums written201,589 187,3168 Net premiums written126,505 117,4038 Net premiums earned123,933 99,03025 Investment income, net of expenses4,458 5,111-13 Investment losses gains, net29,33011,937-346 Net loss income64,31015,025-528 Operating earnings 14,584 5,595-18 Net loss income per share - basic3.550.83-528 Net loss income per share - diluted3.550.83-528 Operating earnings per share - diluted 10.25 0.31-19 Book value per share10.39 15.10-31 1 See Non-GAAP Financial Measures belowFirst Quarter 2020 Financial ReviewGross Premiums Written During the three months ended March 31, 2020, Hallmark Financials gross premiums written were 201.6 million, representing an increase of 8 from the 187.3 million in gross premiums written for the same period in 2019.Net Premiums Written During the three months ended March 31, 2020, Hallmark Financials net premiums written were 126.5 million, representing an increase of 8 from the 117.4 million in net premiums written for the same period of 2019. Net Premiums Earned Hallmark Financials net premiums earned were 123.9 million for the three months ended March 31, 2020, representing a 25 increase from the 99.0 million in net premiums earned for the same period in 2019. Investments During the three months ended March 31, 2020, net investment income was 4.5 million as compared to 5.1 million during the same period in 2019. Net investment losses were 29.3 million for the three months ended March 31, 2020 as compared to net investment gains of 11.9 million for the same period the prior year. The total portfolio return was negative 5.4 for the three months ended March 31, 2020, primarily due to the historic first quarter market declines associated with the novel coronavirus COVID-19 pandemic.At March 31, 2020 fixed-income securities were 589.4 million, with a tax equivalent book yield of 2.4 compared to 3.7 as of March 31, 2019. As of March 31, 2020, the fixed-income portfolio had an average modified duration of 1.2 years and 89 of the securities had remaining time to maturity of five years or less. As of March 31, 2020, 2 of the investment portfolio was invested in equity securities.At March 31, 2020, total investments were 603.7 million. Cash and cash equivalents, including restricted cash were 68.9 million. Total investments, cash and cash equivalents, and restricted cash were 672.6 million or 37.08 per share.Pre-Tax Income Hallmark Financial had pre-tax loss of 69.6 million for the three months ended March 31, 2020, as compared to pre-tax income of 18.9 million reported during the same period in 2019. The decline in pre-tax results for the three months ended March 31, 2020 was predominately driven by the impairment of goodwill and other intangible assets of 46.0 million as well as net investment losses of 29.3 million as compared to net investment gains of 11.9 million reported during the same period in 2019.Loss and Loss Adjustment Expenses LAE and Net Combined Ratios Losses and LAE for the three months ended March 31, 2020 increased 23.3 million as compared to the prior year period due primarily to increased net premiums earned, as well as unfavorable net prior year reserve development. Hallmark Financial reported 8.6 million of net unfavorable prior year loss reserve development during the three months ended March 31, 2020 as compared to net favorable prior year loss reserve development of 0.1 million during the same period the prior year.Hallmark Financial had a net loss ratio of 75.4 for the three months ended March 31, 2020 as compared to 70.8 reported during the same period in 2019. Catastrophe losses contributed 4.9 to the net loss ratio for the three months ended March 31, 2020, as compared to 2.1 for the same period of the prior year. The expense ratio was 22.2 for the three months ended March 31, 2020 as compared to 25.7 reported during the same period in 2019. The Company reported a net combined ratio of 97.6 for the three months ended March 31, 2020 as compared to 96.5 during the same period in 2019. Net Income Hallmark Financial reported a net loss of 64.3 million for the three months ended March 31, 2020 as compared to net income of 15.0 million for the three months ended March 31, 2019. On a diluted basis per share, the Company reported a net loss of 3.55 per share for the three months ended March 31, 2020 as compared to net income of 0.83 per share for the three months ended March 31, 2019.Non-GAAP Financial MeasuresThe Companys 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 Companys GAAP financial statements. In addition, the Companys definitions of these items may not be comparable to the definitions used by other companies. Operating earnings and operating earnings per share are calculated by excluding net investment gains and losses and impairment of goodwill and other intangible assets from GAAP net income. Management believes that operating earnings and operating earnings per share provide useful information to investors about the performance of and underlying trends in the Companys core insurance operations. Net income and net income per share are the GAAP measures that are most directly comparable to operating earnings and operating earnings per share. A reconciliation of operating earnings and operating earnings per share to the most comparable GAAP financial measures is presented below. Weighted IncomeLess TaxNetAverageDiluted in thousandsBefore TaxEffectAfter TaxShares DilutedPer Share First Quarter 2020 Reported GAAP measures 69,586 5,276 64,31018,123 3.55 Excluded impairment of goodwill and other intangible assets 45,996 273 45,723 18,123 2.52 Excluded investment gainslosses 29,330 6,159 23,171 18,123 1.28 Operating earnings 5,740 1,156 4,584 18,123 0.25 First Quarter 2019 Reported GAAP measures 18,918 3,893 15,025 18,193 0.83 Excluded investment gainslosses 11,937 2,507 9,43018,193 0.52 Operating earnings 6,981 1,386 5,595 18,193 0.31 About Hallmark Financial Hallmark Financial is a specialty property and casualty insurance holding company with a diversified portfolio of insurance products written on a national platform. With six insurance subsidiaries and offices in DallasFort Worth, San Antonio, Chicago, Jersey City and Atlanta, Hallmark Financial markets, underwrites and services approximately 800 million annually in commercial and personal insurance premiums in select markets. Hallmark Financial 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. 