Hallmark Financial Services has announced its financial results for the third quarter of 2023 reporting a net loss of $21.5 million, compared to the net loss of $28.1 million reported in the same period last year.
According to the firm, the Q3 2023 net loss includes $13.6 million of current accident year CAT related activity primarily related to the Maui wildfire event.
Hallmark also reported a year-to-date net loss of $72.6 million, or $39.91 per share for 2023, which includes $29.24 per share related to the DARAG write-off of $36.8 million to bad debt expense on the final definitive award declared on June 2, 2023 and $16.3 million, of current accident year CAT related activity primarily related to the Maui wildfire event, as compared to a net loss of $100.7 million for Q3 2022.
Some of Hallmark’s subsidiaries were parties to an arbitration proceeding relating to a Loss Portfolio Transfer Reinsurance Contract with DARAG Bermuda Ltd. and DARAG Insurance Limited, the firm explained.
On May 4, 2023, the arbitration panel rendered an interim final award, which resulted in a write-off of $32.9 million recognized during Q1 2023, subject to final determination of certain amounts under settlement which may increase or decrease the total write-off. An additional write-off of $3.9 million was added during Q2 2023,
Net loss from continuing operations in Q3 2023 was $16.7 million, which includes $13.6 million of current accident year CAT, which is also mainly related to the Maui wildfire event as compared to a net loss of $29.2 million in Q3 2022.
The firm also reported $4.8 million of net loss from discontinued operations, which compares to a net income from discontinued operations of $1.1 million reported in Q3 2022.
Hallmark’s net combined ratio for Q3 2023 was 150.1%, a slight improvement compared to the 177.1% reported for the same period last year.
Underlying combined ratio (excluding net prior year development, catastrophe losses and write-off of DARAG receivable) of 103.6% for this year’s third quarter, compared to 115.5% for Q3 2022.
Gross written premiums saw improvement this quarter, they went from $52.5 million in Q3 2022 to $54.3 million in Q3 2023. Net premium written saw growth as well, going from $36.6 in last year’s quarter, to $43.7 in Q3 2023. Net premiums earned saw a small improvement in the quarter, growing to $36.7 million from $36.3 million in Q3 2022.
In its announcement, Hallmark stated it has taken a number of actions to address the profitability and the overall volatility of the property results in its Commercial Accounts business unit within its Commercial Lines Segment.
“Our Commercial Accounts business unit continues to achieve rate increase including during the third quarter of 2023, a 6.2% property rate and 4.2% casualty rate increases. Additionally, effective February 1, 2023, our Commercial Accounts business filed an overall countrywide rate change of 24.4% in our property line of business,” the firm reported.
Adding: “Furthermore, our Commercial Accounts business unit is exiting certain unprofitable property classes and shifting marketing tactics in weather-prone states to industries and classes that are more casualty premium-driven accounts.”
Moreover, targeted rate increases have been ongoing since 2022 in Hallmark’s Personal Lines Segment which included an aggregate countrywide net increase of 40% and continued into 2023 including the third quarter of 2023 which experienced personal auto rate increases in eight US states aggregating a countrywide net increase of approximately 7%.
