87-0447375
|
||
(State
or other jurisdiction of
Incorporation or organization) |
(I.R.S.
Employer
Identification No.) |
|
777
Main Street, Suite 1000, Fort Worth, Texas
|
76102
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Page
Number
|
||||
Consolidated
Balance Sheets at June 30, 2007 (unaudited) and December 31,
2006
|
3
|
|||
Consolidated
Statements of Operations (unaudited) for the three months and six
months
ended June 30, 2007 and June 30, 2006
|
4
|
|||
Consolidated
Statements of Stockholders’ Equity and Comprehensive Income (Loss)
(unaudited) for the three months and six months ended June 30, 2007
and
June 30, 2006
|
5
|
|||
Consolidated
Statements of Cash Flows (unaudited) for the six months ended June
30,
2007 and June 30, 2006
|
6
|
|||
Notes
to Consolidated Financial Statements (unaudited)
|
7
|
June
30
|
December 31
|
||||||
|
2007
|
2006
|
|||||
|
|
|
(unaudited)
|
(audited )
|
|||
ASSETS
|
|||||||
Investments:
|
|||||||
Debt
securities, available-for-sale, at market value
|
$
|
160,547
|
$
|
133,030
|
|||
Equity
securities, available-for-sale, at market value
|
30,192
|
4,580
|
|||||
Short-term
investments, available-for-sale, at market value
|
64,086
|
25,275
|
|||||
Total
investments
|
254,825
|
162,885
|
|||||
Cash
and cash equivalents
|
41,792
|
81,474
|
|||||
Restricted
cash and cash equivalents
|
10,042
|
24,569
|
|||||
Premiums
receivable
|
54,569
|
44,644
|
|||||
Accounts
receivable
|
12,441
|
13,223
|
|||||
Prepaid
reinsurance premium
|
1,773
|
1,629
|
|||||
Reinsurance
recoverable
|
6,505
|
5,930
|
|||||
Deferred
policy acquisition costs
|
20,214
|
17,145
|
|||||
Excess
of cost over fair value of net assets acquired
|
31,427
|
31,427
|
|||||
Intangible
assets
|
24,927
|
26,074
|
|||||
Prepaid
expenses
|
1,187
|
1,769
|
|||||
Other
assets
|
10,639
|
5,184
|
|||||
Total
assets
|
$
|
470,341
|
$
|
415,953
|
|||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
Liabilities:
|
|||||||
Notes
payable
|
$
|
35,130
|
$
|
35,763
|
|||
Structured
settlements
|
9,794
|
24,587
|
|||||
Unpaid
losses and loss adjustment expenses
|
104,388
|
77,564
|
|||||
Unearned
premiums
|
107,859
|
91,606
|
|||||
Unearned
revenue
|
3,777
|
5,734
|
|||||
Reinsurance
balances payable
|
1,271
|
1,060
|
|||||
Accrued
agent profit sharing
|
1,256
|
1,784
|
|||||
Accrued
ceding commission payable
|
7,059
|
3,956
|
|||||
Pension
liability
|
2,895
|
3,126
|
|||||
Deferred
federal income taxes
|
1,225
|
2,310
|
|||||
Current
federal income tax payable
|
4,652
|
2,132
|
|||||
Accounts
payable and other accrued expenses
|
26,768
|
15,600
|
|||||
|
|||||||
Total
liabilities
|
306,074
|
265,222
|
|||||
Commitments
and Contingencies
|
|||||||
Stockholders'
equity:
|
|||||||
|
|||||||
Common
stock, $.18 par value (authorized 33,333,333 shares in 2007 and
2006;
issued 20,776,080 shares in 2007 and 2006)
|
3,740
|
3,740
|
|||||
Additional
paid in capital
|
118,085
|
117,932
|
|||||
Retained
earnings
|
45,265
|
31,480
|
|||||
Accumulated
other comprehensive loss
|
(2,746
|
)
|
(2,344
|
)
|
|||
Treasury
stock, at cost (7,828 shares in 2007 and 2006)
|
(77
|
)
|
(77
|
)
|
|||
Total
stockholders' equity
|
164,267
|
150,731
|
|||||
$
|
470,341
|
$
|
415,953
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30
|
June
30
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Gross
premiums written
|
$
|
66,577
|
$
|
47,876
|
$
|
131,235
|
$
|
95,611
|
|||||
Ceded
premiums written
|
(4,281
|
)
|
(2,484
|
)
|
(8,168
|
)
|
(4,440
|
)
|
|||||
Net
premiums written
|
62,296
|
45,392
|
123,067
|
91,171
|
|||||||||
Change
in unearned premiums
|
(6,986
|
)
|
(11,133
|
)
|
(16,109
|
)
|
(28,478
|
)
|
|||||
Net
premiums earned
|
55,310
|
34,259
|
106,958
|
62,693
|
|||||||||
Investment
income, net of expenses
|
3,047
|
2,236
|
6,037
|
4,593
|
|||||||||
Realized
gain (loss)
|
828
|
(1,283
|
)
|
881
|
(1,366
|
)
|
|||||||
Finance
charges
|
1,185
|
1,216
|
2,271
|
1,903
|
|||||||||
Commission
and fees
|
8,159
|
10,016
|
16,064
|
22,280
|
|||||||||
Processing
and service fees
|
203
|
727
|
475
|
1,584
|
|||||||||
Other
income
|
4
|
16
|
8
|
20
|
|||||||||
Total
revenues
|
68,736
|
47,187
|
132,694
|
91,707
|
|||||||||
Losses
and loss adjustment expenses
|
30,712
|
20,199
|
62,897
|
36,889
|
|||||||||
Other
operating expenses
|
23,723
|
20,027
|
46,424
|
41,053
|
|||||||||
Interest
expense
|
796
|
1,662
|
1,582
|
3,247
|
|||||||||
Interest
expense from amortization of discount on convertible notes
|
-
|
8,508
|
-
|
9,625
|
|||||||||
Amortization
of intangible asset
|
573
|
573
|
1,146
|
1,146
|
|||||||||
Total
expenses
|
55,804
|
50,969
|
112,049
|
91,960
|
|||||||||
Income
(loss) before tax
|
12,932
|
(3,782
|
)
|
20,645
|
(253
|
)
|
|||||||
Income
tax expense (benefit)
|
4,117
|
(940
|
)
|
6,860
|
163
|
||||||||
Net
income (loss)
|
$
|
8,815
|
$
|
(2,842
|
)
|
$
|
13,785
|
$
|
(416
|
)
|
|||
Common
stockholders net income (loss) per share:
|
|||||||||||||
Basic
|
$
|
0.42
|
$
|
(0.18
|
)
|
$
|
0.66
|
$
|
(0.03
|
)
|
|||
Diluted
|
$
|
0.42
|
$
|
(0.18
|
)
|
$
|
0.66
|
$
|
(0.03
|
)
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Common
Stock
|
|||||||||||||
Balance,
beginning of period
|
$
|
3,740
|
$
|
2,609
|
$
|
3,740
|
$
|
2,606
|
|||||
Conversion
of note payable to common stock
|
-
|
589
|
-
|
589
|
|||||||||
Issuance
of common stock upon option exercises
|
-
|
-
|
-
|
3
|
|||||||||
Balance,
end of period
|
3,740
|
3,198
|
3,740
|
3,198
|
|||||||||
Additional
Paid-In Capital
|
|||||||||||||
Balance,
beginning of period
|
117,983
|
69,034
|
117,932
|
62,907
|
|||||||||
Discount
on convertible notes, net of tax
|
-
|
34
|
-
|
6,066
|
|||||||||
Conversion
of note payable to common stock
|
-
|
24,562
|
-
|
24,562
|
|||||||||
Equity
based compensation
|
102
|
33
|
153
|
57
|
|||||||||
Exercise
of stock options
|
-
|
-
|
-
|
71
|
|||||||||
Balance,
end of period
|
118,085
|
93,663
|
118,085
|
93,663
|
|||||||||
Retained
Earnings
|
|||||||||||||
Balance,
beginning of period
|
36,450
|
24,715
|
31,480
|
22,289
|
|||||||||
Net
income (loss)
|
8,815
|
(2,842
|
)
|
13,785
|
(416
|
)
|
|||||||
Balance,
end of period
|
45,265
|
21,873
|
45,265
|
21,873
|
|||||||||
Accumulated
Other Comprehensive Loss
|
|||||||||||||
Balance,
beginning of period
|
(1,982
|
)
|
(3,417
|
)
|
(2,344
|
)
|
(2,597
|
)
|
|||||
Additional
minimum pension liability, net of tax
|
64
|
32
|
64
|
32
|
|||||||||
Unrealized
losses on securities, net of tax
|
(828
|
)
|
(283
|
)
|
(466
|
)
|
(1,103
|
)
|
|||||
Balance,
end of period
|
(2,746
|
)
|
(3,668
|
)
|
(2,746
|
)
|
(3,668
|
)
|
|||||
Treasury
Stock
|
|||||||||||||
Balance,
beginning of period
|
(77
|
)
|
(77
|
)
|
(77
|
)
|
(17
|
)
|
|||||
Acquisition
of treasury shares
|
-
|
-
|
-
|
(100
|
)
|
||||||||
Exercise
of stock options
|
-
|
-
|
-
|
40
|
|||||||||
Balance,
end of period
|
(77
|
)
|
(77
|
)
|
(77
|
)
|
(77
|
)
|
|||||
Stockholders'
Equity
|
$
|
164,267
|
$
|
114,989
|
$
|
164,267
|
$
|
114,989
|
|||||
Net
income (loss)
|
$
|
8,815
|
$
|
(2,842
|
)
|
$
|
13,785
|
$
|
(416
|
)
|
|||
Additional
minimum pension liability, net of tax
|
64
|
32
|
64
|
32
|
|||||||||
Unrealized
losses on securities, net of tax
|
(828
|
)
|
(283
|
)
|
(466
|
)
|
(1,103
|
)
|
|||||
Comprehensive
Income (Loss)
|
$
|
8,051
|
$
|
(3,093
|
)
|
$
|
13,383
|
$
|
(1,487
|
)
|
Six
Months Ended
|
|||||||
June
30
|
|||||||
2007
|
2006
|
||||||
Cash
flows from operating activities:
|
|||||||
Net
income (loss)
|
$
|
13,785
|
$
|
(416
|
)
|
||
Adjustments
to reconcile net income (loss) to cash provided by operating
activities:
|
|||||||
Depreciation
and amortization expense
|
1,564
|
1,605
|
|||||
Amortization
of beneficial conversion feature
|
-
|
9,625
|
|||||
Amortization
of discount on structured settlement
|
207
|
523
|
|||||
Deferred
federal income tax benefit
|
(916
|
)
|
(5,671
|
)
|
|||
Realized
(gain) loss on investments
|
(881
|
)
|
1,366
|
||||
Change
in prepaid reinsurance premiums
|
(144
|
)
|
(818
|
)
|
|||
Change
in premiums receivable
|
(9,925
|
)
|
(20,346
|
)
|
|||
Change
in accounts receivable
|
796
|
(269
|
)
|
||||
Change
in deferred policy acquisition costs
|
(3,069
|
)
|
(3,400
|
)
|
|||
Change
in unpaid losses and loss adjustment expenses
|
26,824
|
16,288
|
|||||
Change
in unearned premiums
|
16,253
|
29,293
|
|||||
Change
in unearned revenue
|
(1,957
|
)
|
(4,088
|
)
|
|||
Change
in accrued agent profit sharing
|
(528
|
)
|
(920
|
)
|
|||
Change
in reinsurance recoverable
|
(575
|
)
|
(446
|
)
|
|||
Change
in reinsurance balances payable
|
211
|
(252
|
)
|
||||
Change
in current federal income tax payable
|
2,520
|
751
|
|||||
Change
in accrued ceding commission payable
|
3,103
|
8
|
|||||
Excess
tax benefits from share-based payments
|
-
|
(25
|
)
|
||||
Change
in all other liabilities
|
2,059
|
6,331
|
|||||
Change
in all other assets
|
(4,733
|
)
|
534
|
||||
|
|||||||
Net
cash provided by operating activities
|
44,594
|
29,673
|
|||||
Cash
flows from investing activities:
|
|||||||
Purchases
of property and equipment
|
(269
|
)
|
(249
|
)
|
|||
Premium
finance notes repaid, net of finance notes originated
|
(633
|
)
|
(2,368
|
)
|
|||
Acquisition
of subsidiaries, net of cash acquired
|
-
|
(25,964
|
)
|
||||
Change
in restricted cash
|
14,527
|
180
|
|||||
Purchases
of debt and equity securities
|
(106,636
|
)
|
(60,430
|
)
|
|||
Maturities
and redemptions of investment securities
|
62,506
|
13,268
|
|||||
Net
purchases of short-term investments
|
(38,771
|
)
|
(37,776
|
)
|
|||
Net
cash used in investing activities
|
(69,276
|
)
|
(113,339
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Proceeds
from exercise of employee stock options
|
-
|
40
|
|||||
Payment
of structured settlement
|
(15,000
|
)
|
-
|
||||
Proceeds
from issuance of convertible debt
|
-
|
25,000
|
|||||
Proceeds
from note payable to related party
|
-
|
12,500
|
|||||
Proceeds
from revolving loan on credit facility
|
-
|
15,000
|
|||||
Net
cash (used in) provided by financing activities
|
(15,000
|
)
|
52,540
|
||||
Decrease
in cash and cash equivalents
|
(39,682
|
)
|
(31,126
|
)
|
|||
Cash
and cash equivalents at beginning of period
|
81,474
|
44,528
|
|||||
Cash
and cash equivalents at end of period
|
$
|
41,792
|
$
|
13,402
|
|||
Supplemental
Cash Flow Information:
|
|||||||
Interest
paid
|
$
|
1,372
|
$
|
2,384
|
|||
Taxes
paid
|
$
|
5,256
|
$
|
5,082
|
TGA
|
Aerospace
|
||||||
Operating
Unit
|
Operating
Unit
|
||||||
Fair
value of tangible assets excluding cash and cash
equivalents
|
$
|
52,906
|
$
|
8,391
|
|||
Fair
value of intangible assets acquired
|
31,585
|
12,575
|
|||||
Capitalized
direct expenses
|
232
|
36
|
|||||
Structured
settlement
|
(23,542
|
)
|
-
|
||||
Liabilities
assumed
|
(48,522
|
)
|
(7,697
|
)
|
|||
Cash
and cash equivalents used in acquisitions
|
$
|
12,659
|
$
|
13,305
|
Average
|
Contractual
|
Intrinsic
|
|||||||||||
Number of
|
Exercise
|
Term
|
Value
|
||||||||||
Shares
|
Price
|
(Years)
|
($000)
|
||||||||||
Outstanding
at January 1, 2007
|
332,334
|
$
|
7.04
|
||||||||||
Granted
|
500,000
|
$
|
12.52
|
||||||||||
Exercised
|
-
|
$
|
-
|
||||||||||
Forfeited
or expired
|
(1,834
|
)
|
$
|
5.05
|
|||||||||
Outstanding
at June 30, 2007
|
830,500
|
$
|
10.35
|
8.3
|
$
|
1,674
|
|||||||
Exercisable
at June 30, 2007
|
138,751
|
$
|
4.79
|
3.9
|
$
|
1,017
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Intrinsic
value of options exercised
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
103
|
|||||
Cost
of share-based payments (non-cash)
|
$
|
102
|
$
|
33
|
$
|
153
|
$
|
57
|
|||||
Income
tax benefit of share-based payments recognized in
income
|
$
|
36
|
$
|
11
|
$
|
54
|
$
|
20
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Grant
date fair value per share
|
$
|
4.04
|
$
|
6.26
|
$
|
4.04
|
$
|
6.26
|
|||||
Expected
term (in years)
|
6.4
|
5.0
|
6.4
|
5.0
|
|||||||||
Expected
volatility
|
19.4
|
%
|
59.1
|
%
|
19.4
|
%
|
59.1
|
%
|
|||||
Risk
free interest rate
|
4.5
|
%
|
4.9
|
%
|
4.5
|
%
|
4.9
|
%
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Revenues:
|
|||||||||||||
Standard
Commercial Segment
|
$
|
20,003
|
$
|
19,264
|
$
|
41,770
|
$
|
36,804
|
|||||
Specialty
Commercial Segment
|
32,978
|
17,146
|
61,076
|
33,114
|
|||||||||
Personal
Segment
|
14,696
|
11,890
|
28,469
|
22,687
|
|||||||||
Corporate
|
1,059
|
(1,113
|
)
|
1,379
|
(898
|
)
|
|||||||
Consolidated
|
$
|
68,736
|
$
|
47,187
|
$
|
132,694
|
$
|
91,707
|
|||||
Pre-tax
income (loss):
|
|||||||||||||
Standard
Commercial Segment
|
$
|
2,664
|
$
|
2,773
|
$
|
5,423
|
$
|
6,133
|
|||||
Specialty
Commercial Segment
|
9,441
|
3,439
|
14,127
|
5,058
|
|||||||||
Personal
Segment
|
2,176
|
2,393
|
4,294
|
4,444
|
|||||||||
Corporate
|
(1,349
|
)
|
(12,387
|
)
|
(3,199
|
)
|
(15,888
|
)
|
|||||
Consolidated
|
$
|
12,932
|
$
|
(3,782
|
)
|
$
|
20,645
|
$
|
(253
|
)
|
June
30,
2007
|
December 31,
2006
|
||||||
Assets
|
|||||||
Standard
Commercial Segment
|
$
|
132,303
|
$
|
130,764
|
|||
Specialty
Commercial Segment
|
235,178
|
167,675
|
|||||
Personal
Segment
|
87,465
|
85,391
|
|||||
Corporate
|
15,395
|
32,123
|
|||||
$
|
470,341
|
$
|
415,953
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
|
June
30,
|
June
30,
|
|||||||||||
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|||
Ceded
earned premiums
|
$
|
4,144
|
$
|
2,199
|
$
|
8,024
|
$
|
3,596
|
|||||
Reinsurance
recoveries
|
$
|
2,349
|
$
|
118
|
$
|
3,436
|
$
|
894
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Deferred
|
$
|
(12,606
|
)
|
$
|
(8,678
|
)
|
$
|
(24,966
|
)
|
$
|
(17,590
|
)
|
|
Amortized
|
11,321
|
6,653
|
21,897
|
14,190
|
|||||||||
Net
|
$
|
(1,285
|
)
|
$
|
(2,025
|
)
|
$
|
(3,069
|
)
|
$
|
(3,400
|
)
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Weighted
average shares - basic
|
20,768
|
15,780
|
20,768
|
15,133
|
|||||||||
Effect
of dilutive securities
|
-
|
-
|
-
|
-
|
|||||||||
Weighted
average shares - assuming dilution
|
20,768
|
15,780
|
20,768
|
15,133
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Interest
cost
|
$
|
180
|
$
|
172
|
$
|
360
|
$
|
343
|
|||||
Amortization
of net loss
|
50
|
40
|
100
|
80
|
|||||||||
Expected
return on plan assets
|
(160
|
)
|
(157
|
)
|
(321
|
)
|
(314
|
)
|
|||||
Net
periodic pension cost
|
$
|
70
|
$
|
55
|
$
|
139
|
$
|
109
|
· |
Standard
Commercial Segment.
Our Standard Commercial Segment includes the standard lines commercial
property/casualty insurance products and services handled by our
HGA
Operating Unit which is comprised of our Hallmark General Agency,
Inc. and
Effective Claims Management, Inc. subsidiaries.
|
· |
Specialty
Commercial Segment.
Our Specialty Commercial Segment includes the excess and surplus
lines
commercial property/casualty insurance products and services handled
by
our TGA Operating Unit and the general aviation insurance products
and
services handled by our Aerospace Operating Unit. Our TGA Operating
Unit
is comprised of our Texas General Agency, Inc., Pan American Acceptance
Corporation and TGA Special Risk, Inc. subsidiaries. Our Aerospace
Operating Unit is comprised of our Aerospace Insurance Managers,
Inc.,
Aerospace Special Risk, Inc. and Aerospace Claims Management Group,
Inc.
subsidiaries.
|
· |
Personal
Segment.
Our Personal Segment includes the non-standard personal automobile
insurance products and services handled by our Phoenix Operating
Unit
which is comprised solely of American Hallmark General Agency,
Inc., which
does business as Phoenix Indemnity Insurance
Company.
|
· |
American
Hallmark Insurance Company of Texas (“AHIC”) presently
retains all of the risks on the commercial property/casualty policies
marketed by our HGA Operating Unit, assumes a portion of the risks
on the
commercial property/casualty policies marketed by our TGA Operating
Unit
and assumes a portion of the risks on the aviation property/casualty
products marketed by our Aerospace Operating Unit.
|
· |
Gulf
States Insurance Company (“GSIC”)
presently assumes a portion of the risks on the commercial
property/casualty policies marketed by our TGA Operating
Unit.
|
· |
Phoenix
Indemnity Insurance Company (“PIIC”)
presently
assumes all of the risks on the non-standard personal automobile
policies
marketed by our Phoenix Operating Unit and assumes a portion of
the risks
on the aviation property/casualty products marketed by our Aerospace
Operating Unit.
|
Three
Months Ended June 30, 2007
|
||||||||||||||||
Standard
|
Specialty
|
|||||||||||||||
Commercial
|
Commercial
|
Personal
|
||||||||||||||
Segment
|
Segment
|
Segment
|
Corporate
|
Consolidated
|
||||||||||||
Produced
premium
|
24,751
|
40,956
|
13,298
|
-
|
79,005
|
|||||||||||
Gross
premiums written
|
24,740
|
28,540
|
13,297
|
-
|
66,577
|
|||||||||||
Ceded
premiums written
|
(2,804
|
)
|
(1,477
|
)
|
-
|
-
|
(4,281
|
)
|
||||||||
Net
premiums written
|
21,936
|
27,063
|
13,297
|
-
|
62,296
|
|||||||||||
Change
in unearned premiums
|
(1,731
|
)
|
(5,474
|
)
|
219
|
-
|
(6,986
|
)
|
||||||||
Net
premiums earned
|
20,205
|
21,589
|
13,516
|
-
|
55,310
|
|||||||||||
Total
revenues
|
20,003
|
32,978
|
14,696
|
1,059
|
68,736
|
|||||||||||
Losses
and loss adjustment expenses
|
11,267
|
10,635
|
8,813
|
(3
|
)
|
30,712
|
||||||||||
Pre-tax
income (loss)
|
2,664
|
9,441
|
2,176
|
(1,349
|
)
|
12,932
|
||||||||||
Net
loss ratio (1)
|
55.8
|
%
|
49.3
|
%
|
65.2
|
%
|
55.5
|
%
|
||||||||
Net
expense ratio (1)
|
27.0
|
%
|
32.0
|
%
|
22.8
|
%
|
27.9
|
%
|
||||||||
Net
combined ratio (1)
|
82.8
|
%
|
81.3
|
%
|
88.0
|
%
|
83.4
|
%
|
||||||||
Three
Months Ended June 30, 2006
|
||||||||||||||||
Standard
|
|
Specialty
|
|
|
|
|
|
|
|
|||||||
|
|
Commercial
|
|
Commercial
|
|
Personal
|
|
|
|
|
|
|||||
|
|
Segment
|
|
Segment
|
|
Segment
|
|
Corporate
|
|
Consolidated
|
||||||
Produced
premium
|
23,488
|
35,285
|
10,739
|
-
|
69,512
|
|||||||||||
Gross
premiums written
|
23,453
|
13,684
|
10,739
|
-
|
47,876
|
|||||||||||
Ceded
premiums written
|
(2,067
|
)
|
(417
|
)
|
-
|
-
|
(2,484
|
)
|
||||||||
Net
premiums written
|
21,386
|
13,267
|
10,739
|
-
|
45,392
|
|||||||||||
Change
in unearned premiums
|
(4,532
|
)
|
(6,258
|
)
|
(343
|
)
|
-
|
(11,133
|
)
|
|||||||
Net
premiums earned
|
16,854
|
7,009
|
10,396
|
-
|
34,259
|
|||||||||||
Total
revenues
|
19,264
|
17,146
|
11,890
|
(1,113
|
)
|
47,187
|
||||||||||
Losses
and loss adjustment expenses
|
10,018
|
3,707
|
6,482
|
(8
|
)
|
20,199
|
||||||||||
Pre-tax
income (loss)
|
2,773
|
3,439
|
2,393
|
(12,387
|
)
|
(3,782
|
)
|
|||||||||
Net
loss ratio (1)
|
59.4
|
%
|
52.9
|
%
|
62.4
|
%
|
59.0
|
%
|
||||||||
Net
expense ratio (1)
|
28.9
|
%
|
22.4
|
%
|
26.2
|
%
|
26.8
|
%
|
||||||||
Net
combined ratio (1)
|
88.3
|
%
|
75.3
|
%
|
88.6
|
%
|
85.8
|
%
|
||||||||
Six
Months Ended June 30, 2007
|
||||||||||||||||
Standard
|
Specialty
|
|||||||||||||||
Commercial
|
Commercial
|
Personal
|
||||||||||||||
Segment
|
Segment
|
Segment
|
Corporate
|
Consolidated
|
||||||||||||
Produced
premium
|
48,301
|
80,313
|
28,374
|
-
|
156,988
|
|||||||||||
Gross
premiums written
|
48,221
|
54,641
|
28,373
|
-
|
131,235
|
|||||||||||
Ceded
premiums written
|
(5,439
|
)
|
(2,729
|
)
|
-
|
-
|
(8,168
|
)
|
||||||||
Net
premiums written
|
42,782
|
51,912
|
28,373
|
-
|
123,067
|
|||||||||||
Change
in unearned premiums
|
(2,655
|
)
|
(11,230
|
)
|
(2,224
|
)
|
|
(16,109
|
)
|
|||||||
Net
premiums earned
|
40,127
|
40,682
|
26,149
|
-
|
106,958
|
|||||||||||
Total
revenues
|
41,770
|
61,076
|
28,469
|
1,379
|
132,694
|
|||||||||||
Losses
and loss adjustment expenses
|
24,108
|
21,716
|
17,080
|
(7
|
)
|
62,897
|
||||||||||
Pre-tax
income (loss)
|
5,423
|
14,127
|
4,294
|
(3,199
|
)
|
20,645
|
||||||||||
Net
loss ratio (1)
|
60.1
|
%
|
53.4
|
%
|
65.3
|
%
|
58.8
|
%
|
||||||||
Net
expense ratio (1)
|
27.5
|
%
|
31.8
|
%
|
23.2
|
%
|
28.1
|
%
|
||||||||
Net
combined ratio (1)
|
87.6
|
%
|
85.2
|
%
|
88.5
|
%
|
86.9
|
%
|
Six
Months Ended June 30, 2006
|
||||||||||||||||
Standard
|
Specialty
|
|||||||||||||||
Commercial
|
Commercial
|
Personal
|
||||||||||||||
Segment
|
Segment
|
Segment
|
Corporate
|
Consolidated
|
||||||||||||
Produced
premium
|
47,152
|
74,290
|
21,838
|
-
|
143,280
|
|||||||||||
Gross
premiums written
|
46,917
|
26,856
|
21,838
|
-
|
95,611
|
|||||||||||
Ceded
premiums written
|
(3,852
|
)
|
(588
|
)
|
-
|
-
|
(4,440
|
)
|
||||||||
Net
premiums written
|
43,065
|
26,268
|
21,838
|
-
|
91,171
|
|||||||||||
Change
in unearned premiums
|
(11,899
|
)
|
(14,880
|
)
|
(1,699
|
)
|
-
|
(28,478
|
)
|
|||||||
Net
premiums earned
|
31,166
|
11,388
|
20,139
|
-
|
62,693
|
|||||||||||
Total
revenues
|
36,804
|
33,114
|
22,687
|
(898
|
)
|
91,707
|
||||||||||
Losses
and loss adjustment expenses
|
17,818
|
6,519
|
12,568
|
(16
|
)
|
36,889
|
||||||||||
Pre-tax
income (loss)
|
6,133
|
5,058
|
4,444
|
(15,888
|
)
|
(253
|
)
|
|||||||||
Net
loss ratio (1)
|
57.2
|
%
|
57.3
|
%
|
62.4
|
%
|
58.8
|
%
|
||||||||
Net
expense ratio (1)
|
29.8
|
%
|
24.3
|
%
|
26.4
|
%
|
27.7
|
%
|
||||||||
Net
combined ratio (1)
|
87.0
|
%
|
81.6
|
%
|
88.8
|
%
|
86.5
|
%
|
Votes
For
|
Votes Withheld
|
||||||
Mark
E. Schwarz
|
17,245,440
|
36,172
|
|||||
Scott
T. Berlin
|
18,023,770
|
36,172
|
|||||
James
H. Graves
|
18,969,765
|
36,172
|
|||||
18,023,068
|
36,172
|
Exhibit
Number
|
Description
|
|
3(a)
|
Articles
of Incorporation of the registrant, as amended (incorporated
by reference
to Exhibit 3(a) to the registrant’s Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1993).
|
|
3(b)
|
Restated
By-Laws of the registrant, as amended (incorporated by reference
to
Exhibit 3.2 to the registrant’s Registration Statement on Form S-1 filed
August 8, 2006).
|
|
4(a)
|
Specimen
certificate for Common Stock, $0.18 par value per share, of the
registrant
(incorporated by reference to Exhibit 4.1 to the registrant’s
Post-Effective Amendment No. 1 to Registration Statement on Form
S-1 filed
October 3, 2006).
|
|
4(b)
|
Indenture
dated as of June 21, 2005, between Hallmark Financial Services,
Inc. and
JPMorgan Chase Bank, National Association (incorporated by reference
to
Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed June 27,
2005).
|
|
4(c)
|
Amended
and Restated Declaration of Trust of Hallmark Statutory Trust
I dated as
of June 21, 2005, among Hallmark Financial Services, Inc., as
sponsor,
Chase Bank USA, National Association, as Delaware trustee, and
JPMorgan
Chase Bank, National Association, as institutional trustee, and
Mark
Schwarz and Mark Morrison, as administrators (incorporated by
reference to
Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed June 27,
2005).
|
|
4(d)
|
Form
of Junior Subordinated Debt Security Due 2035 (incorporated by
reference
to Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed June
27, 2005).
|
|
4(e)
|
Form
of Capital Security Certificate (incorporated by reference to
Exhibit 4.2
to the registrant’s Current Report on Form 8-K filed June 27,
2005).
|
|
Exhibit
Number
|
Description
|
|
4(f)
|
Form
of Registration Rights Agreement dated January 27, 2006, between
Hallmark
Financial Services, Inc. and Newcastle Special Opportunity Fund
I, L.P.
and Newcastle Special Opportunity Fund II, L.P. (incorporated
by reference
to Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed
February 2, 2006).
|
|
31(a)
|
Certification
of principal executive officer required by Rule 13a-14(a) or
Rule
15d-14(a).
|
|
31(b)
|
Certification
of principal financial officer required by Rule 13a-14(a) or
Rule
15d-14(a).
|
|
32(a)
|
Certification
of principal executive officer Pursuant to 18 U.S.C.
1350.
|
|
32(b)
|
Certification
of principal financial officer Pursuant to 18 U.S.C. 1350.
|
|
99(a)
|
Third
Amendment to First Restated Credit Agreement among Hallmark Financial
Services, Inc. and its subsidiaries and The Frost National Bank
dated May
31, 2007 (incorporated by reference to Exhibit 99.1 to the registrant’s
Current Report on Form
8-K
filed June 8, 2007).
|
HALLMARK
FINANCIAL SERVICES, INC.
(Registrant)
|
||
|
|
|
Date:
August 9, 2007
|
/s/ Mark J. Morrison | |
|
||
Mark
J.
Morrison, Chief Executive Officer and President
(Principal
Executive Officer)
|
Date:
August 9, 2007
|
/s/ Jeffrey R. Passmore | |
|
||
Jeffrey
R. Passmore, Chief Accounting Officer and Senior Vice
President
(Principal
Financial Officer)
|
||