Hallmark mulls break-up of company to 'unlock' value & boost capital access

Property and casualty insurer Hallmark Financial Services is exploring the separation of its specialty commercial business, citing that the move may "unlock significant value" for the company.

Hallmark currently has three business segments - specialty commercial, standard commercial, and personal.

The company's board believes that segregating the operational structures of its segments and establishing two separate companies may achieve a more appropriate aggregate valuation and improve access to capital.

The insurer reported that its specialty commercial segment represented 75 percent of its gross premium written through the first three quarters of 2020. The business has experienced substantial rate increases over the past 12 quarters, rising from approximately 7 percent to over 20 percent in Q3 2020.

The specialty commercial business is a diversified portfolio of products placed through wholesale brokers, with the vast majority written on an excess & surplus lines basis.

Hallmark stated that no final decision has yet been made with respect to the structure of the proposed establishment of a stand-alone specialty commercial company.

The company's board of directors and executive management team are working with financial, business and legal advisors Raymond James & Associates, Willis Re, Olshan Frome Wolosky and McGuire, Craddock & Strother to evaluate its current structure and the strategic, operational, capital and tax implications of the potential separation.

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