Hallmark Financial Services Inc. HALL delivered net earnings of 33 cents per share in the second quarter of 2014, which breezed past the Zacks Consensus Estimate of 7 cents. Earnings improved nearly fourfold from 9 cents earned in the year-ago quarter.
The outperformance came on the back of higher premiums and investment income. The quarter witnessed solid underwriting results thanks to its prudent underwriting practices, positive rate momentum and effective capital deployment.
Behind the Headlines
Hallmark Financial generated total revenues of $92 million, up 15% year over year. However, revenues missed the Zacks Consensus Estimate of $93 million. The improvement was fueled by higher net premiums earned (up 13% year over year) and net investment income (up 24% year over year).
Total expenses at Hallmark Financial amounted to $97.2 million, 11.6% higher year over year. The increase was due to higher loss and loss adjustment expenses and other operating expenses.
Net loss ratio was 67.5% against 67.3% in the prior-year quarter. Combined ratio of Hallmark Financial was 96.1%, reflecting an improvement from 97.4% a year ago.
Segment Update
Standard Commercial: Total revenues came in at $20 million, up 3.8% year over year.
The segment reported pretax income of $2.5 million, rebounding from a loss of $3.1 million in the year-ago quarter.
Combined ratio improved 2,270 basis points (bps) to 93.3%.
Specialty Commercial: Total revenues improved 6.3% year over year to $62.4 million.
Pretax income declined 18.9% year over year to $7.7 million in the quarter.
Combined ratio deteriorated 340 bps to 92.3%.
Personal Segment: Total revenues increased nearly threefold year over year to $11.7 million in the quarter.
Pretax loss was $0.1 million against income of $1.3 million in the year-ago quarter.
Combined ratio deteriorated 3,010 bps to 108.4%.
Corporate: Total revenues reported were $2.9 million compared with ($2.1) million in the comparable year-ago period.
Pretax loss of $0.4 million narrowed from a loss of $5.6 million in the year-ago quarter.
Financial Details
Hallmark Financial exited the quarter with cash and investments of $681.9 million, up 5% year over year.
Cash from operations of Hallmark Financial was $29.2 million, more than double year over year.
Hallmark Financial’s book value per share was $13.63 as of Jun 30, 2015, up 7% year over year.
Business Update
On Jun 30, Hallmark Financial closed the agreement to sell the renewal rights to its small, non-core, mono-line workers’ compensation business.
Zacks Rank and Others
Hallmark Financial carries a Zacks Rank #3 (Hold). The bottom line at RLI Corporation RLI, The Travelers Companies Inc. TRV and Progressive Corp. PGR outperformed their respective Zacks Consensus Estimate in the second quarter.
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