Hallmark Announces Third Quarter 2022 Results
11/14/2022 - 04:05 PM
DALLAS, Nov. 14, 2022 (GLOBE NEWSWIRE) -- Hallmark Financial Services, Inc. (“Hallmark”) (NASDAQ: HALL) today filed its Form 10-Q and announced financial results for the third quarter and nine months ended September 30, 2022.
Third Quarter Year-to-Date 2022 2021 2022 2021 $ in millions: Net loss from continuing operations $ (29.3 ) $ (2.0 ) $ (104.9 ) $ (3.9 ) Net income from discontinued operations $ 1.1 $ 5.5 $ 4.2 $ 15.4 Net (loss) income $ (28.2 ) $ 3.4 $ (100.8 ) $ 11.6 Operating loss (1) $ (20.6 ) $ (1.6 ) $ (69.2 ) $ (11.1 ) $ per diluted share: Net loss from continuing operations $ (1.61 ) $ (0.11 ) $ (5.77 ) $ (0.21 ) Net income from discontinued operations $ 0.06 $ 0.30 $ 0.23 $ 0.85 Net (loss) income $ (1.55 ) $ 0.19 $ (5.54 ) $ 0.64 Operating loss (1) $ (1.13 ) $ (0.09 ) $ (3.81 ) $ (0.61 )
(1) See “Non-GAAP Financial Measures” belowHighlights:
On October 7, 2022, Hallmark completed the sale of substantially all of its excess and surplus lines operations, for $40.0 million cash consideration, plus an estimated $19.2 million consideration for the acquisition costs associated with certain net unearned premium reserves. As a result, the results of operations for the affected lines of business are included in discontinued operations for all periods shown in its Consolidated Statement of Operations and the corresponding assets and liabilities are presented separately as single line items in the asset and liability sections of its Consolidated Balance Sheet at September 30, 2022. Net loss from continuing operations of $29.3 million , or $1.61 per share, in the third quarter of 2022 as compared to a net loss of $2.0 million , or $0.11 per share, for the same period of 2021. Year-to-date net loss from continuing operations of $104.9 million , or $5.77 per share, as compared to net loss from continuing operations of $3.9 million , or $0.21 per share, for the same period of 2021. Net income from discontinued operations of $1.1 million , or $0.06 per share, in the third quarter of 2022 as compared to net income from discontinued operations of $5.5 million , or $0.30 per share, for the same period of 2021. Year-to-date net income from discontinued operations of $4.2 million , or $0.23 per share, as compared to net income from discontinued operations of $15.4 million , or $0.85 per share, for the same period of 2021. Net loss of $28.2 million , or $1.55 per share, in the third quarter of 2022 as compared to net income of $3.4 million , or $0.19 per share, for the same period of 2021. Year-to-date net loss of $100.8 million , or $5.54 per share, as compared to net income of $11.6 million , or $0.64 per share, for the same period of 2021. Net loss from continuing operations and net loss included an additional valuation allowance against net deferred tax assets of $6.5 million for the third quarter of 2022 resulting in a full valuation allowance against net deferred tax assets of $30.4 million year-to-date primarily due to recent net losses, including the current period net loss. Net loss from continuing operations and net loss for the third quarter included a $12.4 million after-tax impact from the previously exited contract binding business driven by unfavorable prior year loss reserve development of $14.0 million during the quarter. Net combined ratio of 177.1% and 184.1% for the three and nine months ended September 30, 2022, compared to 105.5% and 108.8% for the same periods the prior year. Underlying combined ratio (excluding net prior year development and catastrophe losses) of 115.5% and 114.0% for the three and nine months ended September 30, 2022, compared to 110.8% and 107.5% for the same periods the prior year. See Non-GAAP Financial Measures below. Gross premiums written for the three and nine months ended September 30, 2022 decreased 5.0% and 10.0% , respectively, compared to the same period the prior year. Net catastrophe losses were $1.8 million in the third quarter of 2022, or 4.9 points of the net combined ratio, as compared to $0.6 million , or 1.4 points of the net combined ratio, for the same period the prior year. Net catastrophe losses were $3.2 million for the first nine months of 2022, or 2.8 points of the net combined ratio, as compared to $6.6 million , or 4.3 points of the net combined ratio, for the same period the prior year. Net investment income was $3.7 million and $8.7 million during the three and nine months ended September 30, 2022, as compared to $2.2 million and $7.6 million during the same periods in 2021. Net investment losses of $2.8 million during the third quarter of 2022 as compared to net investment losses of $0.5 million during the same period the prior year. Net investment losses of $6.8 million for the nine months ended September 30, 2022 as compared to net investment gains of $9.1 million during the same period the prior year. Third Quarter and Year-to-Date 2022 Financial Review
Third Quarter Year-to-Date 2022 2021 2022 2021 ($ in thousands) Gross premiums written $ 52,520 $ 55,128 $ 167,857 $ 185,738 Net premiums written $ 36,618 $ 33,540 $ 115,325 $ 124,729 Net premiums earned $ 36,380 $ 42,703 $ 112,732 $ 151,343 Investment income, net of expenses $ 3,721 $ 2,213 $ 8,700 $ 7,576 Investment (losses) gains, net $ (2,821 ) $ (533 ) $ (6,764 ) $ 9,122 Net (loss) from continuing operations $ (29,253 ) $ (2,044 ) $ (104,943 ) $ (3,864 ) Net income from discontinued operations $ 1,100 $ 5,489 $ 4,154 $ 15,435 Net (loss) income $ (28,153 ) $ 3,445 $ (100,789 ) $ 11,571 Operating (loss) income $ (20,553 ) $ (1,623 ) $ (69,240 ) $ (11,070 ) Net (loss) income per share - from continuing operations basic & diluted $ (1.61 ) $ (0.11 ) $ (5.77 ) $ (0.21 ) Net income per share from discontinued operations - basic & diluted $ 0.06 $ 0.30 $ 0.23 $ 0.85 Net loss per share - basic & diluted $ (1.55 ) $ 0.19 $ (5.54 ) $ 0.64 Operating (loss) per share - basic & diluted (1) $ (1.13 ) $ (0.09 ) $ (3.81 ) $ (0.61 ) Book value per share $ 3.62 $ 9.78 $ 3.62 $ 9.78
(1) See “Non-GAAP Financial Measures” below
Gross Premiums Written $52.5 million and $167.9 million during the three and nine months ended September 30, 2022, representing a decrease of 5% and 10% from the $55.1 million and $185.7 in gross premiums written for the same periods in 2021.
Net Premiums Written $36.6 million and $115.3 million during the three and nine months ended September 30, 2022, representing an increase of 9% and a decrease of 8% , respectively, from the $33.5 million and $124.7 million in net premiums written for the same periods in 2021.
Net Premiums Earned $36.4 million and $112.7 million for the three and nine months ended September 30, 2022, representing a decrease of 15% and 26% from the $42.7 million and $151.3 million in net premiums earned for the same periods in 2021.
Investments 0.6% and -2.0% for the three and nine months ended September 30, 2022.
Despite significant outperformance relative to market benchmarks, severe declines in markets have precluded positive contribution from investments in the quarter and year to date periods. Year to date, the total return on Hallmark’s equity portfolio was -10.2% compared to -23.9% for the S&P 500 Stock Index. Year to date, the total return on Hallmark’s fixed income portfolio was -1.8% compared to -14.6% for the Bloomberg Aggregate Bond Index.
Net investment income was $3.7 million and $8.7 million during the three and nine months ended September 30, 2022, as compared to $2.2 million and $7.6 million during the same periods in 2021. The 68% increase in net investment income during the third quarter of 2022 was due to a greater amount of income generating securities and to higher yields.
Net investment losses were $2.8 million for the third quarter of 2022 as compared to net investment losses of $0.5 million for the same period in 2021. In the current quarter, net investment losses include $3.3 million unrealized losses on common and preferred stocks.
Net investment losses were $6.8 million for the nine months ended September 30, 2022 as compared to net investment gains of $9.1 million for the same period in 2021. Year to date, net investment losses include $1.1 million realized gains on common stocks and $8.4 million unrealized losses on common and preferred stocks.
Fixed-income securities were $417.1 million at September 30, 2022, with a tax equivalent book yield of 3.3% compared to 2.4% as of December 31, 2021. As of September 30, 2022, the fixed-income portfolio had an average modified duration of 1.0 years and 85% of the securities had remaining time to maturity of five years or less. As of September 30, 2022, 9% of the investment portfolio was invested in equity securities.
Total investments were $458.1 million at September 30, 2022. Cash and cash equivalents, including restricted cash were $138.3 million . Total investments, cash and cash equivalents, and restricted cash were $596.4 million or $32.79 per share.
Pre-Tax (Loss) Income from Continuing Operations $30.3 million for the three months ended September 30, 2022, as compared to a pre-tax loss from continuing operations of $1.9 million reported during the same period in 2021. The decline in pre-tax results from continuing operations for the third quarter of 2022 compared to the same period of the prior year was driven by higher losses and LAE of $21.6 million , lower net premiums earned of $6.3 million , higher net investment losses of $2.3 million , higher interest expense of $0.3 million and lower finance charges of $0.1 million , partially offset by higher net investment income of $1.5 million and lower operating expenses of $0.7 million .
Pre-tax loss from continuing operations was $99.7 million for the nine months ended September 30, 2022, as compared to a pre-tax loss from continuing operations of $3.0 million reported for the same period the prior year. The decline in pre-tax results from continuing operations for the nine months ended September 30, 2022, was driven by higher losses and LAE of $49.6 million , lower net premiums earned of $38.6 million , net investment losses of $6.8 million compared to net investment gains of $9.1 million the prior year, lower finance charges of $0.4 million and higher interest expense of $0.4 million , partially offset by lower operating expenses of $7.1 million and higher net investment income of $1.1 million .
Loss and Loss Adjustment Expenses (“LAE”) from Continuing Operations $21.6 million to $49.1 million for the three months ended September 30, 2022, as compared to the same period of the previous year. The increase in losses and LAE during the third quarter 2022 was primarily due to $20.6 million of adverse prior year loss reserve development, $14.0 million of which was from the exited contract binding line of the primary commercial automobile business, as compared to $2.9 million of favorable prior year loss reserve development for the same period the prior year, as well as higher catastrophe loss. Losses and LAE for the third quarter of 2022 included $1.8 million of net catastrophe losses as compared to $0.6 million during the same period of the prior year.
Losses and LAE increased by $49.6 million to $161.2 million for the nine months ended September 30, 2022, as compared to the same period of the previous year. The increase in losses and LAE for the first nine months of 2022 was primarily due to $75.8 million of unfavorable prior year loss reserve development, $58.4 million of which was from the exited contract binding line of the primary commercial automobile business, as compared to $4.6 million of favorable prior year loss reserve development for the prior year period, partially offset by lower net catastrophe losses. Losses and LAE for the nine months ended September 30, 2022, included $3.2 million of net catastrophe losses as compared to $6.6 million during the same period of the prior year.
Net (Loss) Income $29.3 million and $104.9 million for the three and nine months ended September 30, 2022 as compared to net loss from continuing operations of $2.0 million and $3.9 million for the same periods during 2021. On a diluted basis per share, net loss from continuing operations was $1.61 per share and $5.77 per share for the three and nine months ended September 30, 2022 as compared to a net loss from continuing operations of $0.11 per share and $0.21 per share for the three and nine months ended September 30, 2021.
Net income from discontinued operations was $1.1 million and $4.2 million for the three and nine months ended September 30, 2022 as compared to net income from discontinued operations of $5.5 million and $15.4 million for the same periods during 2021. On a diluted basis per share, net income from discontinued operations was $0.06 per share and $0.23 per share for the three and nine months ended September 30, 2022 as compared to a net income from discontinued operations of $0.30 per share and $0.85 per share for the three and nine months ended September 30, 2021.
Total net loss was $28.2 million and $100.8 million for the three and nine months ended September 30, 2022 as compared to total net income of $3.4 million and $11.6 million for the same periods during 2021. On a diluted basis per share, total net loss was $1.55 per share and $5.54 per share for the three and nine months ended September 30, 2022 as compared to net income of $0.19 per share and $0.64 per share for the three and nine months ended September 30, 2021.
The effective tax rate was -13.1% for the first nine months of 2022 compared to 20.8% for the same period in 2021. During the first nine months of 2022, Hallmark recorded a full valuation allowance of $30.4 million against net deferred tax assets primarily due to recent net losses, including the current period net loss. The effective rate for the nine months ended September 30, 2021 varied from the statutory tax rates primarily due to tax exempt interest income.
Net Loss, Expense and Combined Ratios 135.1% and 143.0% for the three and nine months ended September 30, 2022, as compared to 64.5% and 73.7% reported during the same periods in 2021. Net unfavorable prior year loss reserve development contributed 56.7 points and 67.3 points to the net loss ratio for the three and nine months ended September 30, 2022, respectively, as compared to net favorable prior year loss reserve development reducing the net loss ratio 6.7 points and 3.0 points for the same periods during 2021. Catastrophe losses contributed 4.9 points and 2.8 points to the net loss ratio for the three and nine months ended September 30, 2022, respectively, as compared to 1.4 points and 4.3 points for the same periods during 2021.
The expense ratio was 42.0% and 41.1% for the three and nine months ended September 30, 2022, as compared to 41.0% and 35.1% during the same periods in 2021. The net combined ratio was 177.1% and 184.1% for the three and nine months ended September 30, 2022, as compared to 105.5% and 108.8% for the same periods during 2021. The exited contract binding business adversely impacted the net combined ratio by 35.3 points and 58.6 points during the three and nine months ended September 30, 2022.
Book Value Per Share 63% to $3.62 per share as of September 30, 2022 as compared to $9.66 per share as of December 31, 2021.
Non-GAAP Financial Measures
The Company’s financial statements are prepared in accordance with United States generally accepted accounting principles (“GAAP”). However, the Company also presents and discusses certain non-GAAP financial measures that it believes are useful to investors as measures of operating performance. Management may also use such non-GAAP financial measures in evaluating the effectiveness of business strategies and for planning and budgeting purposes. However, these non-GAAP financial measures should not be viewed as an alternative or substitute for the results reflected in the Company’s GAAP financial statements. In addition, the Company’s definitions of these items may not be comparable to the definitions used by other companies.
Operating income and operating income per share are calculated by excluding net investment gains and losses and asset impairments or valuation allowances from GAAP net income from continuing operations. Asset impairments and valuation allowances are unusual and infrequent charges for the Company. Management believes that operating income and operating income per share provide useful information to investors about the performance of and underlying trends in the Company’s core insurance operations. Net income from continuing operations and net income per share from continuing operations are the GAAP measures that are most directly comparable to operating earnings and operating earnings per share. A reconciliation of operating income and operating income per share to the most comparable GAAP financial measures is presented below.
Hallmark Financial Services, Inc. and Subsidiaries Non-GAAP Financial Measures Reconciliation ($ in thousands) Income (Loss) Less Tax Net Weighted Diluted Third Quarter 2022 Reported GAAP measures $ (30,260 ) $ (1,007 ) $ (29,253 ) 18,185 $ (1.61 ) Excluded deferred tax valuation allowance $ - $ (6,471 ) $ 6,471 18,185 $ 0.36 Excluded investment (gains)/losses $ 2,821 $ 592 $ 2,229 18,185 $ 0.12 Operating loss $ (27,439 ) $ (6,886 ) $ (20,553 ) 18,185 $ (1.13 ) Third Quarter 2021 Reported GAAP measures $ (1,883 ) $ 161 $ (2,044 ) 18,142 $ (0.11 ) Excluded investment (gains)/losses $ 533 $ 112 $ 421 18,142 $ 0.02 Operating loss $ (1,350 ) $ 273 $ (1,623 ) 18,142 $ (0.09 ) Year-to-Date 2022 Reported GAAP measures $ (99,701 ) $ 5,242 $ (104,943 ) 18,181 $ (5.77 ) Excluded deferred tax valuation allowance $ - $ (30,359 ) $ 30,359 18,181 $ 1.67 Excluded investment (gains)/losses $ 6,764 $ 1,420 $ 5,344 18,181 $ 0.29 Operating loss $ (92,937 ) $ (23,697 ) $ (69,240 ) 18,181 $ (3.81 ) Year-to-Date 2021 Reported GAAP measures $ (3,036 ) $ 828 $ (3,864 ) 18,157 $ (0.21 ) Excluded investment (gains)/losses $ (9,122 ) $ (1,916 ) $ (7,206 ) 18,157 $ (0.40 ) Operating income $ (12,158 ) $ (1,088 ) $ (11,070 ) 18,157 $ (0.61 )
Underlying combined ratio is calculated by excluding the impact of net favorable or unfavorable prior year loss development and catastrophe losses from the calculation of the net combined ratio. Management believes that the underlying combined ratio provides useful information to investors about the current performance of the Company's insurance operations absent historical developments and uncontrollable events. Combined ratio is the GAAP measure most comparable to underlying combined ratio. A reconciliation of the underlying combined ratio to the combined ratio is presented below.
3rdQ 2022 3rdQ 2021 YTD 2022 YTD 2021 Net combined ratio 177.1 % 105.5 % 184.1 % 108.8 % Impact on net combined ratio Net Unfavorable (Favorable) Prior Year Development 56.7 % -6.7 % 67.3 % -3.0 % Catastrophes, net of reinsurance 4.9 % 1.4 % 2.8 % 4.3 % Underlying combined ratio 115.5 % 110.8 % 114.0 % 107.5 %
About Hallmark
Hallmark is a property and casualty insurance holding company with a diversified portfolio of insurance products written on a national platform. With six insurance subsidiaries, Hallmark markets, underwrites and services commercial and personal insurance in select markets. Hallmark 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. 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, general economic conditions, the availability of financing, underwriting loss experience and other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission.
For further information, please contact:
Chris Kenneywww.hallmarkgrp.com
Hallmark Financial Services, Inc. and Subsidiaries Consolidated Balance Sheets ($ in thousands, except par value) Sep. 30 Dec. 31 ASSETS 2022 2021 Investments: (unaudited) Debt securities, available-for-sale, at fair value (amortized cost: $426,870 in 2022 and $288,175 in 2021) $ 417,053 $ 290,073 Equity securities (cost: $42,858 in 2022 and $42,120 in 2021) 41,002 48,695 Total investments 458,055 338,768 Cash and cash equivalents 129,468 352,867 Restricted cash 8,845 3,810 Ceded unearned premiums 30,473 29,207 Premiums receivable 74,920 90,621 Accounts receivable 5,749 6,914 Receivable from reinsurer 62,028 - Receivable for securities 883 1,326 Reinsurance recoverable 542,818 549,964 Deferred policy acquisition costs 5,341 6,811 Intangible assets, net 441 819 Federal income tax recoverable 2,378 18,217 Deferred federal income taxes, net - 8,906 Prepaid pension 172 - Prepaid expenses 2,320 2,173 Other assets 25,671 25,119 Assets held-for-sale 132,444 118,076 Total Assets $ 1,482,006 $ 1,553,598 LIABILITIES AND STOCKHOLDERS’ EQUITY Liabilities: Senior unsecured notes due 2029 (less unamortized debt issuance costs of $672 in 2022 and $746 in 2021) $ 49,328 $ 49,254 Subordinated debt securities (less unamortized debt issuance costs of $704 in 2022 and $744 in 2021) 55,998 55,959 Reserves for unpaid losses and loss adjustment expenses 858,888 816,681 Unearned premiums 86,595 82,736 Reinsurance payable 97,065 117,908 Pension liability - 174 Payable for securities - 3,280 Accounts payable and other liabilities 52,836 49,442 Liabilities held-for-sale 215,528 202,643 Total Liabilities 1,416,238 1,378,077 Commitments and contingencies Stockholders’ equity: Common stock, $.18 par value, authorized 33,333,333 shares; issued 20,872,831 shares in 2022 and 2021 3,757 3,757 Additional paid-in capital 122,959 122,844 (Accumulated deficit) retained earnings (26,086 ) 74,703 Accumulated other comprehensive loss (10,228 ) (1,035 ) Treasury stock (2,688,007 shares in 2022 and 2,700,364 shares in 2021), at cost (24,634 ) (24,748 ) Total Stockholders Equity 65,768 175,521 Total Liabilities & Stockholders Equity $ 1,482,006 $ 1,553,598
Hallmark Financial Services, Inc. and Subsidiaries Consolidated Statements of Operations Three Months Ended Year-to-Date ($ in thousands, except per share amounts, unaudited) September 30, September 30, 2022 2021 2022 2021 Gross premiums written $ 52,520 $ 55,128 $ 167,857 $ 185,738 Ceded premiums written (15,902 ) (21,588 ) (52,532 ) (61,009 ) Net premiums written 36,618 33,540 115,325 124,729 Change in unearned premiums (238 ) 9,163 (2,593 ) 26,614 Net premiums earned 36,380 42,703 112,732 151,343 Investment income, net of expenses 3,721 2,213 8,700 7,576 Investment (losses) gains, net (2,821 ) (533 ) (6,764 ) 9,122 Finance charges 937 1,076 2,900 3,318 Commission and fees 1 2 3 3 Other income 14 15 42 50 Total revenues 38,232 45,476 117,613 171,412 Losses and loss adjustment expenses 49,141 27,549 161,168 111,570 Operating expenses 17,816 18,558 51,967 59,114 Interest expense 1,528 1,245 4,158 3,743 Amortization of intangible assets 7 7 21 21 Total expenses 68,492 47,359 217,314 174,448 (Loss) income from continuing operations before tax (30,260 ) (1,883 ) (99,701 ) (3,036 ) Income tax expense (benefit) from continuing operations (1,007 ) 161 5,242 828 Net (loss) income from continuing operations $ (29,253 ) $ (2,044 ) $ (104,943 ) $ (3,864 ) Discontinued operations: Total pretax income from discontinued operations $ 2,801 $ 6,274 $ 10,573 $ 17,644 Income tax expense on discontinued operations 1,701 785 6,419 2,209 Income from discontinued operations, net of tax $ 1,100 $ 5,489 $ 4,154 $ 15,435 Net (loss) income $ (28,153 ) $ 3,445 $ (100,789 ) $ 11,571 Net (loss) basic income per share: Loss from continuing operations $ (1.61 ) $ (0.11 ) $ (5.77 ) $ (0.21 ) Income from discontinued operations 0.06 $ 0.30 0.23 0.85 Basic income per share $ (1.55 ) $ 0.19 $ (5.54 ) $ 0.64 Net (loss) diluted income per share: Loss from continuing operations $ (1.61 ) $ (0.11 ) $ (5.77 ) $ (0.21 ) Income from discontinued operations 0.06 0.30 0.23 0.85 Diluted (loss) income per share $ (1.55 ) $ 0.19 $ (5.54 ) $ 0.64
Hallmark Financial Services, Inc. and Subsidiaries Consolidated Segment Data Three Months Ended Sep. 30 Standard Commercial Personal Segment Runoff Specialty Corporate Consolidated ($ in thousands, unaudited) 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 Gross premiums written $ 34,556 $ 34,274 $ 15,638 $ 17,453 $ 2,326 $ 3,401 $ - $ - $ 52,520 $ 55,128 Ceded premiums written (15,801 ) (16,245 ) (76 ) (72 ) (25 ) (5,271 ) - - (15,902 ) (21,588 ) Net premiums written 18,755 18,029 15,562 17,381 2,301 (1,870 ) - - 36,618 33,540 Change in unearned premiums (206 ) 959 38 (417 ) (70 ) 8,621 - - (238 ) 9,163 Net premiums earned 18,549 18,988 15,600 16,964 2,231 6,751 - - 36,380 42,703 Total revenues 18,950 19,693 16,754 18,316 2,477 7,315 51 152 38,232 45,476 Losses and loss adjustment expenses 14,484 11,553 14,735 16,735 19,922 (739 ) - - 49,141 27,549 Pre-tax income (loss) (2,386 ) 2,192 (3,412 ) (3,887 ) (19,364 ) 4,343 (5,098 ) (4,531 ) (30,260 ) (1,883 ) Net loss ratio (1) 78.1 % 60.8 % 94.5 % 98.7 % 893.0 % -10.9 % 135.1 % 64.5 % Net expense ratio (1) 37.9 % 31.2 % 30.3 % 26.1 % 45.1 % 36.0 % 42.0 % 41.0 % Net combined ratio (1) 116.0 % 92.0 % 124.8 % 124.8 % 938.1 % 25.1 % 177.1 % 105.5 % Impact on net combined ratio Net Unfavorable (Favorable) Prior Year Development 1.6 % -5.1 % 11.6 % 7.1 % 830.5 % -45.7 % 56.7 % -6.7 % Catastrophes, net of reinsurance 9.8 % 0.2 % 0.5 % 19.3 % 0.0 % 0.0 % 4.9 % 1.4 % Underlying combined ratio (1) 104.6 % 96.9 % 112.7 % 98.4 % 107.6 % 70.8 % 115.5 % 110.8 % Net Unfavorable (Favorable) Prior Year Development 300 (973 ) 1,810 1,197 18,528 (3,088 ) - - 20,638 (2,864 )
(1) The net loss ratio is calculated as incurred losses and loss adjustment expenses divided by net premiums earned, each determined in accordance with GAAP. The net expense ratio is calculated as total underwriting expenses offset by agency fee income divided by net premiums earned, each determined in accordance with GAAP. The net combined ratio is calculated as the sum of the net loss ratio and the net expense ratio. The underlying combined ratio is the net combined ratio excluding the impact of net prior year reserve development and catastrophes.
Hallmark Financial Services, Inc. and Subsidiaries Consolidated Segment Data Nine Months Ended Sep. 30 Standard Commercial Personal Segment Runoff Specialty Corporate Consolidated ($ in thousands, unaudited) 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 Gross premiums written $ 110,013 $ 107,516 $ 47,589 $ 52,560 $ 10,255 $ 25,662 $ - $ - $ 167,857 $ 185,738 Ceded premiums written (51,434 ) (49,694 ) (226 ) (234 ) (872 ) (11,081 ) - - (52,532 ) (61,009 ) Net premiums written 58,579 57,822 47,363 52,326 9,384 14,581 - - 115,325 124,729 Change in unearned premiums (3,584 ) (2,326 ) (350 ) (72 ) 1,341 29,012 - - (2,593 ) 26,614 Net premiums earned 54,995 55,496 47,013 52,254 10,724 43,593 - - 112,732 151,343 Total revenues 56,183 57,536 50,621 56,390 11,554 45,306 (745 ) 12,180 117,613 171,412 Losses and loss adjustment expenses 40,398 39,769 41,408 47,379 79,362 24,422 - - 161,168 111,570 Pre-tax income (loss) (3,143 ) 1,261 (7,257 ) (8,275 ) (73,099 ) 5,212 (16,202 ) (1,234 ) (99,701 ) (3,036 ) Net loss ratio (1) 73.5 % 71.7 % 88.1 % 90.7 % 740.0 % 56.0 % 143.0 % 73.7 % Net expense ratio (1) 35.7 % 30.8 % 30.3 % 27.9 % 40.3 % 34.2 % 41.1 % 35.1 % Net combined ratio (1) 109.2 % 102.5 % 118.4 % 118.6 % 780.3 % 90.2 % 184.1 % 108.8 % Impact on net combined ratio Net Unfavorable (Favorable) Prior Year Development 0.5 % -4.3 % 11.1 % 8.3 % 656.1 % -15.0 % 67.3 % -3.0 % Catastrophes, net of reinsurance 5.4 % 10.4 % 0.4 % 1.6 % 0.0 % 0.0 % 2.8 % 4.3 % Underlying combined ratio (1) 103.3 % 96.3 % 106.9 % 108.7 % 124.2 % 105.2 % 114.0 % 107.5 % Net Unfavorable (Favorable) Prior Year Development 250 (2,371 ) 5,218 4,356 70,365 (6,543 ) 75,833 (4,558 )
(1) The net loss ratio is calculated as incurred losses and loss adjustment expenses divided by net premiums earned, each determined in accordance with GAAP. The net expense ratio is calculated as total underwriting expenses offset by agency fee income divided by net premiums earned, each determined in accordance with GAAP. The net combined ratio is calculated as the sum of the net loss ratio and the net expense ratio. The underlying combined ratio is the net combined ratio excluding the impact of net prior year reserve development and catastrophes.
A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/a204b59d-618d-45a4-823f-f2fc7a049fbd
