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Hallmark Financial (HALL) Q3 Earnings Miss, Revenues Beat

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Hallmark Financial Services Inc. (HALL - Free Report) posted operating earnings of 27 cents per share in the third quarter of 2016. The quarterly earnings missed the Zacks Consensus Estimate by 15.6% and also plunged 22.9% year over year.
 

 

The company witnessed catastrophe losses of $2.2 million or 8 cents per share in the quarter. In the Personal segment, Auto line of business continues to face headwinds, which have been weighing on its results. Nonetheless, the Specialty Commercial segment and Standard Commercial segment continued to deliver solid performances.

Behind the Headlines

Hallmark Financial generated operating revenues of $95 million, up 3.2% year over year. Higher net premiums earned drove the upside. Operating revenues surpassed the Zacks Consensus Estimate of $92 million.

Total expense of Hallmark Financial increased 7.9% year over year to $90.4 million due to higher losses and loss adjustment expenses and interest expenses.

Net loss ratio deteriorated 540 basis points (bps) year over year to 68.7%. Combined ratio of Hallmark Financial was 96.6%, deteriorated 560 bps.

Segment Update

Specialty Commercial: Total revenue increased 3.9% year over year to $65.8 million due to higher net premiums earned.

Pre-tax income plunged 27.4% to $8.2 million in the quarter.

Combined ratio deteriorated 570 bps to 91.8%.

Standard Commercial: Total revenue was down 1% year over year to $18.3 million due to decrease in net premiums earned.

Pre-tax income increased 10.3% year over year to $3.2 million in the quarter.

Combined ratio improved 180 bps over year at 89.2%.

Personal Segment: Total revenue inched up 0.8% year over year to $12.8 million in the quarter due to higher net premiums earned.

Pre-tax loss of $1.8 million was wider than a loss of $0.2 million incurred in the year-ago quarter. Increase in losses and loss adjustment expenses resulted in the wider loss.

Combined ratio deteriorated 1410 bps to 119.4%.

Corporate: Total revenue was $0.8 million compared with ($0.9) million in the year-ago quarter.

Pre-tax loss of $2.5 million was narrower than a loss of $4.1 million in the year-ago quarter.

Financial Details

Hallmark Financial exited the quarter with total investments of $649.6 million, up 12.2% from year-end 2015.

Cash and cash equivalents declined 34% to $69.9 million in the quarter.

Cash flow from operations soared 127% year over year to $23.5 million in the reported quarter.

As of Sep 30, 2016, Hallmark Financial’s book value per share was $14.53, up 7% year over year. Stockholder’s equity was $270 million, up 3.4% from year-end 2015.

Zacks Rank

Hallmark Financial carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here

HALLMARK FINL Price, Consensus and EPS Surprise

 

Performance of Other P&C Insurers

The bottom line at The Travelers Companies, Inc. (TRV - Free Report) and AXIS Capital Holdings Limited (AXS - Free Report) beat the Zacks Consensus Estimate, while earnings of RLI Corp. (RLI - Free Report) missed the same in the third quarter.

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