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Hallmark Financial (HALL) Down as Q1 Earnings, Revenues Miss

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Shares of Hallmark Financial Services, Inc. (HALL - Free Report) lost 3.1% in the last trading session as the insurer missed both top and bottom-line expectations for the first quarter of 2022. These metrics also compared unfavorably with the respective year-ago numbers.

Hallmark Financial incurred an operating loss of 18 cents per share, wider than the Zacks Consensus Estimate of a loss of 10 cents per share and the year-ago earnings of 27 cents per share.

The quarter witnessed lower premiums in Specialty Commercial, Standard Commercial and Personal segments. However, Hallmark Financial continued to achieve substantial rate increases, particularly in the Specialty Commercial segment.

Hallmark Financial Services, Inc. Price, Consensus and EPS Surprise

 

Quarterly Operational Update

Total revenues declined 21.3% year over year to $85 million in the quarter under review. The top line missed the Zacks Consensus Estimate by 13.2%.

Gross premiums written decreased 7% year over year to $151 million.

Net premiums written dropped 14% year over year to $78.3 million, attributable to lower premiums in Specialty Commercial, Standard Commercial and Personal segments.

Net investment income was $1.9 million, down 38% year over year, primarily due to a lower average amount of debt securities owned and a $0.5 million special common stock dividend received on an arbitrage trading position in the prior year.

The net combined ratio deteriorated 1060 basis points (bps) to 106.

The expense ratio of 28.4 deteriorated 1020 bps year over year.

Total expenses decreased 10.9% year over year to $89.8 million due to lower loss and loss adjustment expenses and operating expenses.

Net catastrophe losses were $1.1 million in the quarter, narrower than $5.9 million loss incurred in the year-ago quarter.

Segmental Update

Specialty Commercial: Net premiums written declined 19% year over year to $42.8 million. The combined ratio deteriorated 1230 bps to 100.4.

Standard Commercial: Net premiums written were down 3.6% year over year to $19.5 million. The combined ratio deteriorated 490 bps to 107.3.

Personal: Net premiums decreased 12.8% year over year to $16.8 million. The combined ratio improved 260 bps to 109.8.

Corporate: Total revenues were ($0.2) million versus $5.8 million in the year-ago quarter. The pretax loss was $5 million versus earnings of $1.1 million in the year-ago quarter.

Financial Position

As of first-quarter 2022 end, cash and cash equivalents were $187.6 million, down 47.4% from 2021 end.

Shareholder equity decreased 3.2% from 2021 end to $169.8 million at first-quarter 2022 end.

Book value per share decreased 4% year over year to $9.34 at first-quarter 2022 end.

Zacks Rank

Hallmark Financial currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Property & Casualty Insurers

Of the insurance industry players that have reported first-quarter results so far, The Travelers Companies (TRV - Free Report) and RLI Corporation (RLI - Free Report) beat the respective Zacks Consensus Estimate for earnings, while The Progressive Corporation (PGR - Free Report) missed the mark.

Travelers reported first-quarter 2022 core income of $4.22 per share, which beat the Zacks Consensus Estimate by 14% and increased 54.6% year over year. Total revenues increased 6.8% from the year-ago quarter to $8.8 billion, primarily due to higher premiums and fee income but missed the consensus estimate. Travelers’ combined ratio deteriorated 530 bps year over year to 91.3.

RLI’s first-quarter 2022 operating earnings of $1.43 per share beat the Zacks Consensus Estimate by 40.2% and improved 64.4% from the prior-year quarter. Operating revenues were $287 million, up 17.1% year over year and beat the Zacks Consensus Estimate by 0.8%. RLI’s gross premiums written increased 22% year over year to $359.2 million. The combined ratio improved 900 bps year over year to 77.9.

Progressive’s first-quarter 2022 earnings per share of $1.12 missed the Zacks Consensus Estimate of $1.24 and declined 34.9% from the year-ago quarter. Net premiums written were $13.2 billion in the quarter, up 12% from $11.7 billion a year ago. Progressive’s combined ratio deteriorated 520 bps from the prior-year quarter to 94.7.