William Blair & Company Initiates Coverage of Hallmark Financial Services, Inc. With Outperform Rating

Business Wire, Dec 19, 2006

CHICAGO -- William Blair & Company initiated research coverage of Hallmark Financial Services, Inc. (Nasdaq:HALL) ($9.70), a specialty property-casualty insurance underwriter based in Fort Worth, Texas, with an Outperform rating and company profile of Aggressive Growth.

Analyst Mark Lane estimated that the company, which competes in the standard commercial, excess and surplus (E&S), nonstandard personal auto, and nonstandard aviation markets, would generate operating earnings per share of $1.05 in 2007 and $1.20 in 2008 (excluding net realized investment gains/losses).

"We believe Hallmark represents a unique and opportunistic small-capitalization investment opportunity in the property-casualty insurance industry," Lane said. "Given a limited capital base, Hallmark had been heavily dependent on the reinsurance market before its October equity offering. With the capital received from this offering, the company is in better position to significantly increase underwriting retentions, which should drive more visible growth at the company over the intermediate term, in our opinion. In addition, we believe the company can profitably take market share in its various lines of business given its overall tiny market share."

William Blair & Company, L.L.C. has received compensation for investment banking services from the company within the past 12 months, or expects to receive or intends to seek compensation for investment banking services in the next 3 months.

William Blair & Company, L.L.C. was a manager or co-manager of a public offering of equity securities within the prior 12 months.

William Blair & Company, L.L.C. is a market maker in the security of this company and may have a long or short position.

William Blair & Company, L.L.C. (www.williamblair.com) is a Chicago-based investment firm offering investment banking, asset management, equity research, institutional and private brokerage, and private capital to individual, institutional, and issuing clients. Since 1935, we have been committed to helping clients achieve their financial objectives. As an independent, employee-owned firm, our philosophy is to serve our clients' interests first and foremost.

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