Hallmark shares up 8% after specialty commercial IPO plans pulled

Shares in Hallmark Financial Services were trading up almost 8 percent after it confirmed it is no longer actively seeking the separation of its specialty commercial business segment and will not proceed with the previously announced IPO.

In recent months sources had suggested the US carrier was cooling on the idea of spinning off the unit and that it was increasingly likely to remain part of the group and be the focus of its pivot to become a specialty carrier in a highly attractive E&S underwriting climate.

In a statement, the Dallas, Texas-based parent said its board of directors had noted the “significant progress” achieved over the past 18 months, with the successful completion of a loss portfolio transfer and improving underlying operating results.

The improved results included pre-tax income of $14.6mn and 6 percent growth in book value per share for the nine months ended 30 September 2021.

AM Best provided a welcome boost by affirming Hallmark’s financial strength rating of A- last month.

Commenting on the decision, Hallmark’s executive chairman, president and CEO Mark Schwarz said: “Hallmark and its subsidiaries are well positioned to benefit from current conditions in the insurance market, including a continuing favorable pricing environment.”

“Exacting focus on underwriting discipline and the long-term growth and profitability of each of our business segments represents the greatest opportunity to enhance and realize the significant inherent value in each of them,” he added.

In the statement, Hallmark said its board will continue to evaluate all actions that may enhance shareholder returns.

AM Best last month removed from under review the A- financial strength rating of Hallmark Financial as it highlighted the carrier’s volatile operating performance but said it expects improvement as it transitions to a specialty lines writer.

The carrier had just reported third quarter results that included a swing to an operating profit of $3.9mn from an operating loss of $10.8mn in the prior period.

Its financial strength and issuer credit ratings were placed under review with developing implications in April following Hallmark’s announcement that it intends to pursue an initial public offering (IPO) of its specialty commercial business.

Hallmark in April had unveiled plans to offer a non-controlling ownership stake in its core specialty commercial business segment, as a separate company called Hallmark Specialty Group.

That announcement followed Hallmark in January revealing that president and CEO Naveen Anand had resigned, citing family and personal reasons.

The roles were taken over by Mark Schwarz, who controls funds that are collectively the largest shareholders in the US specialty insurer. Schwarz has been executive chairman since August 2006 and was previously CEO and president.

Hallmark shares were up 7.58 percent at $4.40 in New York at 12.35 ET.