A.M. Best Affirms Ratings of Hallmark Insurance Group

Business Wire, April 30, 2009

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A- (Excellent) and issuer credit ratings (ICR) of “a-” of Hallmark Insurance Group (Hallmark Group) (Fort Worth, TX) and its operating members. Additionally, A.M. Best has affirmed the ICR of “bbb-” of the group’s holding company parent, Hallmark Financial Services, Inc. (Hallmark Financial) (Nevada) (NASDAQ: HALL). The outlook for all ratings is stable. (See below for a detailed listing of the companies and ratings.)

The affirmation of the ratings reflects Hallmark Group’s favorable risk-adjusted capitalization, sustained operating profitability and the financial flexibility afforded by Hallmark Financial. Furthermore, the ratings consider Hallmark Group’s organic surplus growth through profitable underwriting performance in recent years and consistent favorable loss reserve development. In addition, the acquisitions of various agency production sources by Hallmark Financial have resulted in a greater geographic and product spread of risk for the group.

These rating factors are partially offset by Hallmark Group’s above average net underwriting leverage and continued execution risk associated with the development of various parent company acquisitions. Since more than half of Hallmark Group’s direct written premium is concentrated in three key states, earnings remain susceptible to increased competition and changes in the regulatory, judicial and legislative environments.

The FSR of A- (Excellent) and ICRs of “a-” have been affirmed for the Hallmark Insurance Group and its following members:

• American Hallmark Insurance Company of Texas
• Hallmark Insurance Company
• Hallmark Specialty Insurance Company

For Best’s Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.