Hallmark Announces Sale of its Excess and Surplus Lines Operations to Core Specialty Insurance Holdings, Inc.
October 07 2022 - 12:00PM
Hallmark Financial Services, Inc. (the “Company” or “Hallmark”;
NASDAQ: HALL), a property and casualty insurance company, today
announced the sale of its excess and surplus (“E&S”) lines
operations to Core Specialty Insurance Holdings, Inc. (“Core
Specialty”), a specialty property and casualty insurer, for $40.0
million cash consideration, plus an estimated $19.9 million
consideration for the acquisition costs associated with certain net
unearned premium reserves. The transaction is comprised of nine
business units within the Company’s Specialty Commercial business
segment, certain related assets and liabilities, and the immediate
transition to Core Specialty of approximately 200 employees who
produce and support these E&S lines businesses. Core
Specialty’s acquisition and assumption of the E&S businesses
and the related assets and liabilities will be effective as of
September 30, 2022.
Certain key terms of the transaction
include:
- Hallmark
insurance subsidiaries will enter into a quota share reinsurance
agreement with a Core Specialty insurance subsidiary to assume 100%
of Hallmark’s unearned premium reserves associated with the
acquired E&S businesses, net of inuring third party
reinsurance.
- The transaction
includes the acquisition of Hallmark’s agency subsidiary Heath XS,
LLC, which does business as Hallmark E&S, and all data, agency
relationships, intellectual property, lease arrangements and
personnel related to the acquired E&S businesses.
- Core Specialty
will not acquire any insurance company entities as part of the
transaction, and the transaction excludes loss reserves associated
with the acquired E&S businesses, which will be retained by
Hallmark.
The transaction does not include Hallmark’s
Standard Commercial business segment, Personal business segment,
Aerospace & Programs business unit, the exited Binding Primary
Auto business, or any business produced by third-party program
managers (which includes a senior care and a commercial auto
program), each of which will be retained by Hallmark.
Hallmark expects the approximate $59.9 million
increase in statutory capital (less transaction and other
expenses), gain on sale, and associated capital relief to
strengthen its balance sheet and result in a more disciplined and
streamlined company, better positioned to focus on the execution of
its business strategies.
Raymond James & Associates, Inc. (“Raymond
James”) rendered financial advisory services to the Company in
connection with the transaction. The Board of Directors of the
Company also engaged Raymond James to provide an opinion as to
whether the transaction consideration received by the Company is
fair, from a financial point of view, to Hallmark. Olshan Frome
Wolosky LLP served as legal counsel to Hallmark in connection with
the transaction.
Hallmark will file with the Securities and Exchange
Commission a Current Report on Form 8-K containing additional
information concerning the Core Specialty transaction.
About Hallmark FinancialHallmark Financial is a
property and casualty insurance company with a diversified
portfolio of insurance products written on a national platform.
Through its six insurance subsidiaries, Hallmark Financial markets,
underwrites and services commercial and personal insurance in
select markets. Hallmark Financial is headquartered in Dallas,
Texas and its common stock is listed on NASDAQ under the symbol
“HALL”.
This press release contains “forward-looking”
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. The use of words such as “anticipates,”
“expects,” “intends,” “plans” and “believes,” among others,
generally identify forward-looking statements. These
forward-looking statements are based on management’s current
expectations and assumptions about future events, which are
inherently subject to numerous risks, uncertainties and changes in
circumstances that are difficult to predict and could cause actual
results to differ materially from expectations, many of which are
beyond the control of the Company. Certain of these risks and
uncertainties are discussed in the Company’s filings with the
Securities and Exchange Commission. Although the Company believes
the assumptions underlying these forward-looking statements are
reasonable as of the date of this press release, any of the
assumptions could be inaccurate and, therefore, there can be no
assurance that any forward-looking statements will prove to be
correct. In light of the significant uncertainties inherent in
these forward-looking statements, the inclusion of such information
should not be regarded as a representation that the objectives and
plans of the Company will be achieved. You should not place undue
reliance on these forward‑looking statements, which only reflect
the views of the Company’s management as of the date of this press
release. The Company does not undertake to update these
forward-looking statements, except as may be required by law.
Investor ContactChris KenneyPresident &
CFO817.348.1600www.hallmarkgrp.com
A photo accompanying this announcement is available
at https://www.globenewswire.com/NewsRoom/AttachmentNg/4fb87372-b7a9-47e0-969b-94291b3c6287
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