AM Best removes Hallmark ratings from under review; planned IPO has no impact
AM Best has removed Hallmark Financial Services from ‘under review with developing implications’ and affirmed the company’s long-term issuer credit rating (ICR) of “bbb-” and the long-term issue credit ratings (long-term IR).
The ratings agency also lifted the review and affirmed Hallmark’s financial strength rating (FSR) of A-, as well as the long-term ICRs of “a-” of Hallmark Insurance Group members. The outlook assigned to these ratings is negative.
The Dallas, Texas, company’s ratings were placed under review on April 20, after Hallmark Financial announced plans to spin off its specialty business in an IPO. The Nasdaq-listed parent will remain in control of the entity, retaining a majority of common shares.
The ratings were removed from under review after AM Best determined the IPO would have no immediate rating implications.
AM Best said the ratings reflect Hallmark Group’s balance sheet strength, which the agency assessed as strong, as well as its adequate operating performance and appropriate enterprise risk management.
Hallmark on Monday posted a Q3 2021 operating profit of $3.9mn, reversing a $10.8mn loss in the same period in 2020.
Its combined ratio improved by 36.8 points to 95.9% from 132.7% last year, reflecting lower catastrophe losses, reduced unfavorable prior year reserve development and investment gains, reversing investment losses last year.
AM Best said the negative outlook reflects the volatility of Hallmark Insurance Group’s operating performance.
“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 warned, adding that it “will continue to monitor the group’s balance sheet for volatility.”