Chronicle Journal: Finance

AM Best Removes From Under Review With Developing Implications and Affirms Credit Ratings of Hallmark Financial Services, Inc. and Its Subsidiaries

AM Best has removed from under review with developing implications and affirmed the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb-” (Good) and the Long-Term Issue Credit Ratings (Long-Term IR) of Hallmark Financial Services, Inc. (Hallmark Financial) [NASDAQ: HALL]. Concurrently, AM Best has removed from under review with developing implications and affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term ICRs of “a-” (Excellent) of the members of Hallmark Insurance Group (Hallmark Group). The outlook assigned to these Credit Ratings (ratings) is negative. The companies’ operations are headquartered in Dallas, TX. (See below for a detailed listing of the companies and ratings.)

The ratings were placed under review with developing implications on April 20, 2021, following the announcement by Hallmark Financial that it intends to pursue an initial public offering (IPO) of its specialty commercial business.

The ratings have been removed from under review as AM Best has determined the IPO would have no immediate rating implications.

The ratings reflect Hallmark Group’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The negative outlooks reflect the volatility in the group’s operating performance, with five-year operating metrics comparing unfavorable with the commercial casualty composite driven by natural catastrophe losses and adverse reserve development. AM Best expects improvement in the operating performance as the group transitions from a commercial auto writer to a specialty lines writer. While the group’s risk-adjusted capitalization has stabilized, a further deterioration in risk-adjusted capital or operating metrics falling short of management projections could result in negative rating actions. AM Best will continue to monitor the group’s balance sheet for volatility.

The FSR of A- (Excellent) and the Long-Term ICRs of “a-” (Excellent) have been removed from under review with developing implications and affirmed for the following members of Hallmark Insurance Group:

  • American Hallmark Insurance Company of Texas
  • Hallmark Insurance Company
  • Hallmark Specialty Insurance Company
  • Hallmark County Mutual Insurance Company
  • Hallmark National Insurance Company

The following Long-Term IR has been removed from under review with developing implications and affirmed:

Hallmark Financial Services, Inc.—
--“bbb-” (Good) on $50 million 6.25% senior unsecured notes, due 2029

The following indicative Long-Term IRs for securities available under the shelf registration have been removed from under review with developing implications and affirmed:

Hallmark Financial Services, Inc.—
--“bbb-” (Good) on senior unsecured debt
--“bb+” (Fair) on subordinated debt
--“bb” (Fair) on preferred stock

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2021 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Contacts:

Daniel Mangano
Senior Financial Analyst
+1 908 439 2200, ext. 5547
daniel.mangano@ambest.com

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