Fort Worth, Texas-based Hallmark Financial Services Inc. reported quarterly net income of $5.0 million for the first quarter ended March 31, 2007, representing a 105 percent increase over net income of $2.4 million for the first quarter of 2006.
During the quarter ended March 31, 2007, Hallmark reported total revenues of $64.0 million, representing a 44 percent increase over the $44.5 million in total revenues for the first quarter of 2006.
Hallmark, through its subsidiaries, provides commercial insurance in Texas, New Mexico, Idaho, Oregon, Montana, Louisiana, Oklahoma, Arkansas and Washington; non-standard personal automobile insurance in Texas, New Mexico, Arizona, Oklahoma, Arkansas, Idaho, Oregon and Washington; and general aviation insurance in 47 states.
The company said the increase in net income was largely due to the improved results of its Specialty Commercial Segment and additional investment income from a larger investment portfolio, in both cases primarily as the result of increased retention of premiums. In addition, the first quarter of 2006 was adversely impacted by $1.1 million of interest expense from amortization attributable to the deemed discount on convertible promissory notes issued in January 2006 and subsequently converted to common stock during the second quarter of 2006. These increases in net income were partially offset by lower results from the Standard Commercial Segment during the first quarter of 2007.
Increased retention of business produced by its Specialty Commercial Segment was the primary cause of the increase in revenue. Specialty Commercial Segment revenues increased $12.1 million, or 76 percent, during the three months ended March 31, 2007 as compared to the same period of 2006. Increased retention of business was also the primary reason for the $4.2 million increase in revenue from the Standard Commercial Segment during the first quarter of 2007. Earned premiums from the Personal Segment also contributed $2.9 million to the increase in revenue for the three months ended March 31, 2007.
Hallmark’s net losses and loss adjustment expenses and its net loss ratio for the three months ended March 31, 2007 were $32.2 million and 62.3 percent, respectively, compared to $16.7 million and 58.7 percent, respectively, for the same period in 2006. Hallmark did not recognize any development of prior years’ loss reserve estimates during either the first quarter 2007 or 2006. The increase in the net loss ratio is primarily due to a decrease in incurred losses inuring to our reinsurance coverage for the first quarter of 2007 as compared to the first quarter of 2006. Hallmark’s other operating costs and expenses and its expense ratio for the three months ended March 31, 2007 were $22.7 million and 28.2 percent, respectively, compared to $21.0 million and 28.8 percent, respectively, for the same period in 2006.
Source: Hallmark Financial Services Inc., http://www.hallmarkgrp.com/
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