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Hallmark Financial Services Inc. (HALL - Snapshot Report) has posted positive earnings surprises in 5 of the last 6 quarters with an average beat of 76.1%. Most recently, this property and casualty insurer delivered an earnings surprise of more than 150% for its third quarter. Additionally, with a price-to-book (P/B) ratio of just 0.81, this Zacks Rank # 1 (Strong Buy) stock appears to be a true value pick.

Rank Drivers

On Nov 7, Hallmark Financial reported third-quarter earnings of 18 cents per share, which surpassed the Zacks Consensus Estimate by a substantial 157% and also improved significantly from a penny earned last year. The upside was largely driven by an improved top-line along with lower loss and loss adjustment expenses, primarily attributable to better current accident year loss trends in the Personal Lines business.

Operating revenue was $84 million, which outpaced the Zacks Consensus Estimate by 7% and the year-ago number by 6.3%. The improvement stemmed from higher premiums, largely from the E&S Commercial business unit and from the acquisition of the Workers Compensation business.

Hallmark Financial expects to have mid single-digit to low double-digit rate increases across all operations. However, General Aviation might face stiff competition in a contracting market.

Additionally, management stated that the initiative to improve underwriting profitability, increase rates and exit unprofitable zones and product lines in the Personal Segment has been executed fruitfully.

Hallmark Financial has not yet announced its fourth-quarter earnings release date. The Zacks Consensus Estimate for the quarter is 11 cents on revenues of $87 million. The expected earnings represent a year-over-year improvement of 450%.

Earnings Estimates

For 2013, the Zacks Consensus Estimate increased 5.1% to 82 cents over the last 60 days, which would mark a year-over-year improvement as high as 266.7%.

Attractive Valuation

Along with a very attractive P/B multiple, Hallmark Financial has a price-to-earnings (P/E) ratio of 11.1 (a P/B ratio under 3.0 and a P/E ratio below 15.0 generally indicate value).

Headquartered in Fort Worth, Texas and founded in 1987, Hallmark Financial Group, through its subsidiaries, provides property and casualty insurance products to businesses and individuals in the United States. The company has a market cap of $176.8 million. Other Zacks Rank #1 stocks from the same industry include Cincinnati Financial Corp. (CINF), Fidelity National Financial, Inc. (FNF) and First American Financial Corporation (FAF).

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