U.S. Markets closed

Edited Transcript of HALL earnings conference call or presentation 8-Aug-19 12:30pm GMT

Q2 2019 Hallmark Financial Services Inc Earnings Call

FORT WORTH Aug 30, 2019 (Thomson StreetEvents) -- Edited Transcript of Hallmark Financial Services Inc earnings conference call or presentation Thursday, August 8, 2019 at 12:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* David Webb

Hallmark Financial Services, Inc. - Senior VP of Corporate Development & Strategy

* Jeffrey Ray Passmore

Hallmark Financial Services, Inc. - Senior VP, CAO, Secretary & CFO

* Naveen Anand

Hallmark Financial Services, Inc. - President & CEO

================================================================================

Conference Call Participants

================================================================================

* Charles Gregory Peters

Raymond James & Associates, Inc., Research Division - Equity Analyst

* Robert Edward Farnam

Boenning and Scattergood, Inc., Research Division - MD and Analyst of Property & Casualty Insurance

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Greetings, and welcome to the Hallmark Financial 2019 Second Quarter Conference call. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, David Webb, Senior Vice President, Corporate Development and Strategy. Thank you. You may begin.

--------------------------------------------------------------------------------

David Webb, Hallmark Financial Services, Inc. - Senior VP of Corporate Development & Strategy [2]

--------------------------------------------------------------------------------

Thank you, and good morning, everyone. It is my pleasure to welcome you to the Hallmark Financial Second Quarter 2019 Earnings Call. This is the first time the company is hosting an earnings call, and we currently anticipate having these on a quarterly basis going forward. Joining me on the call today are Naveen Anand, President and CEO; and Jeff Passmore, Chief Financial Officer.

During the call, we will be making forward-looking statements. These statements may reflect certain assumptions, expectations, beliefs and intentions, which are subject to various risks and uncertainties. Investors are cautioned that actual results may differ materially from such forward-looking statements. Please refer to our most recent Form 10-K and other filings made with the SEC for additional details on some of the risk factors that may materially affect our results.

We may also reference certain non-GAAP financial measures in the call today. A copy of the press release containing a reconciliation of GAAP to these measures and an updated quarterly investor presentation is available on the company's website at www.hallmarkgrp.com.

I will now turn the call over to Naveen Anand, President and Chief Executive Officer of Hallmark Financial.

--------------------------------------------------------------------------------

Naveen Anand, Hallmark Financial Services, Inc. - President & CEO [3]

--------------------------------------------------------------------------------

Thank you, David, and good morning, everyone. I'll begin the call today with some background on the company's transformation over the last past 4 years, focusing on how these changes have driven meaningful improvements in our results. I will then provide a view of our results, considering the current market environment. Next, Jeff will provide some additional details on our results for the quarter, and then we'll open the call up for questions.

After several years of operating as a public company, we've decided to initiate quarterly conference calls. We felt the timing was appropriate, given the progress we've made to reshape our culture and transform the company into a diversified specialty insurance company.

To place this in historical perspective, when I joined the company in late 2014, Hallmark Financial was predominantly a regional auto writer with substantial concentration of business in commercial auto and the nonstandard auto lines. However, we saw an opportunity to derive significant benefit from developing new Specialty products, particularly in the small and medium enterprise space, investing in talent and technology and modernizing our infrastructure and processes.

Our business units today are now organized by product and distribution channel, led by experienced underwriting teams and supported by actuaries and data scientists. Our claims function is managed in-house, comprised of experts in their areas of specialty and structured to close claims quickly and effectively. We target niche products and niche markets, where there are typically fewer competitors and the need for specialized market knowledge creates a barrier for successful entry. In these specialty markets, we derive value by identifying and evaluating and pricing and limiting risks and by the quality of service we provide our clients. Through our diversified product offering, we achieved scale and importance to our distribution partners. And as a result, we believe we can achieve results that drive double-digit ROEs.

Now it took time to implement our strategy without major disruption to our agency partners. However, we are now beginning to see the positive impact from our efforts, as seen in the favorable operating results for 2018 and continuing through the first half of 2019. In 2018, our combined ratio was 97.1%, and we continue to see improvement in -- over the first half of 2019 with a year-to-date combined ratio of 95.4% and a second quarter 2019 combined ratio of 94.5%. Ultimately, we believe that our long-term strategy is beginning to materialize in the form of consistent underwriting performance.

We continue to manage our products as a portfolio, allocating our capital to those areas where we view the best opportunity for return and having the ability to increase or decrease production in any one area or segment. As each of our niche product markets are influenced by unique set of market dynamics, our ability to be flexible and scale our business accordingly is an advantage for Hallmark Financial.

While there have been improved market conditions in many of our lines, we've seen greater dislocation in our Specialty Commercial products, which represent about 79% of our gross premiums written. Almost all of this business is produced for wholesale brokers with the majority of it being written on the E&S basis.

The market dislocation seems to be the greatest in lines that have experienced more industry-wide losses, such as catastrophe-exposed property lines. This market segment, in particular, has experienced losses over the last couple of years driven by the hurricanes, of course, of 2017 and 2018 as well as the wildfires in the west. As a result, capacity for these type of risk has been reduced as companies have retreated from certain classes of business or have reduced the amount of coverage they will provide. In some instances, we are seeing new submissions appear in the market. Though previously win by a single carrier, they are now being syndicated with rates that are up significantly.

In our shared & layered property book, we are well positioned to take advantage of this dislocation. Not only does it provide us the opportunity to really push rates, at the same time, we can diversify our portfolio, be more selective and compress limits. We are seeing very similar opportunities on the casualty side in our E&S Casualty portfolio as well as in our professional lines, product lines. In total, our Specialty businesses are seeing 25% to 30% increases in new submissions and rate increases overall in the double digits.

In Personal lines, we produced a solid 91.5% combined ratio. Those of you that have tracked Hallmark now know that our results in this portfolio have been challenged in the past. As part of our strategic transformation, we retooled everything in this business, from the technology platform through our pricing as well as our approach to claims management. Now we are positioned to manage this portfolio more effectively and grow or shrink the business based on profit opportunities.

We reallocated capital for growth in this business starting in the third quarter of 2018, and we saw an overall favorable rate environment. This quarter is a continuation of that profitable growth trajectory. However, we are seeing this easing as the year progresses. Competitors are now generally filing for rate decreases in most states. Our focus is on preserving our bottom line results, which we have worked hard to achieve. So if the pricing opportunity does indeed become limited, we will reduce our writings accordingly in this portfolio.

Our Standard Commercial business was flat for the quarter, and our combined ratio was good, a result of 94.2%, which includes 4 points of catastrophe losses. Net premiums in this segment were down 22% driven by a change in the reinsurance structure that we made last year, which Jeff will provide more details on in a few minutes. Overall, rate increases were modest but starting to head in the right direction in this portfolio as well.

I believe, overall, we're well positioned to take advantage of the current market opportunities, particularly in our Specialty Commercial products, which now comprise nearly 80% of our portfolio. We have the expertise in place to better underwrite risks and to push for additional rate. We enjoy strong relationships with our agents and brokers who drive access to the business we want to write. And overall, I'm very pleased with how we balanced our growth while still maintaining and driving pricing discipline.

I'd like to take the opportunity here to congratulate Jeff Passmore on his promotion to Chief Financial Officer earlier this year. With that, I'll turn the call over to Jeff for a review of our financial results in more detail.

--------------------------------------------------------------------------------

Jeffrey Ray Passmore, Hallmark Financial Services, Inc. - Senior VP, CAO, Secretary & CFO [4]

--------------------------------------------------------------------------------

Thank you, Naveen, and good morning, everyone. We continue to be very pleased with our quarterly results, which continues to reflect the improvements we have made in our businesses. For the second quarter of 2019, we reported net income of $13 million, a 156% increase as compared to $5.1 million in the same quarter last year. Removing the impact of unrealized changes in the market value of equity securities, our operating earnings for the second quarter of 2019 were $7.6 million, a 64% increase as compared to $4.7 million the same quarter last year.

Gross premium written increased 26% to $218.2 million during the quarter compared to $173.2 million the same quarter last year. This improvement relative to last year is attributable to multiple factors, including growth, particularly in our Specialty businesses as we continue to gain scale and as we've been effective at taking advantage of the current market opportunities and the achievement of significant additional rate in many of our lines of business. Overall, we see continued runway for new policy growth and rate increases in many of our product lines. On a gross basis, our Specialty Commercial segment represented 76% of our portfolio, and our Standard Commercial and Personal segment, each represented 12% of our total portfolio for year-to-date 2019.

Net premium written increased 38% to $123.8 million for the second quarter of 2019 compared to $89.8 million for the second quarter of 2018. While much of this is related to the growth in gross premiums, the higher rate of increase is being driven by the changes in our reinsurance program with the consolidation of our casualty business into a single treaty structure that began on October 1, 2018. For certain of our Specialty lines, cession rates in previous treaties were higher, which has resulted in a larger portion of the business being retained by the company, translating to a larger growth rate in net premiums. Business will continue to transition to the new treaty structure through the third quarter of 2019, after which this impact should begin to normalize.

Cash flow from operations was a positive $8.6 million inflow for the second quarter of 2019 and $6.7 million inflow for the first half of '19, a $6.6 million increase over the first half of 2018. The net cash outflows that the company has seen over the past few quarters was a direct and deliberate result of the improvements made in the claims organization.

Seeking to lower overall claim costs and reduce the possibility of unfavorable development, we implemented various measures with a focus on closing claims quickly. In the near term, this resulted in a change in the claims payment pattern, accelerating the payment of reserves and increasing cash outflows. We are now beginning to see this pattern settle after bringing this claim strategy to both new claims and over accident years and anticipate cash flows normalizing. However, due to these changes, the claim reserve and payment patterns for the current accident years will not be comparable to prior accident years.

Moving to underwriting. Our combined ratio for the second quarter of 2019 was 94.5% compared to 97% the same period the prior year. The company reported a loss ratio of 68.8% for the second quarter of 2019 compared to 70% in the prior period. Prior year development was minimal at 1.4% or $1.5 million for the second quarter of 2019 and is only 0.7% of net premiums on a year-to-date basis. We also avoided much of the cat activity for the quarter with our cat ratio for the second quarter of 2019 coming in at 1.9%.

The expense ratio was 25.7% for the second quarter of 2019. We continue to emphasize our expense ratio as a competitive advantage relative to our peers, which we believe is achieved by our careful management of expenses, intelligent uses of technology and external resources and our mix of business. We generally target an expense ratio that is 28% or lower.

Net investment income increased 23% to $5.4 million during the second quarter compared to $4.4 million in the same period the prior year. We continue to maintain significant liquidity in our investment portfolio with 26.9% of our portfolio or $188.4 million in cash, cash equivalents or securities maturing in 1 year or less.

In the second quarter of 2019, the market value of equity securities increased by 6% or $5.4 million. On a year-to-date basis for '19, the market value of equity securities increased by 16.2% or $13.1 million. The impact of the unrealized changes in the market value are excluded in our calculation of operating earnings.

Our book value per share was $15.98 at the end of the second quarter. This is an increase of 5.8% over the first quarter of '19 book value per share of $15.10 and a 12.8% increase over the book value per share of $14.17 at year-end '18. These percentages are not annualized and reflect the actual change in book value per share over the 3-month and 6-month time frame, respectively.

Additionally, annualized operating return on beginning tangible equity was 12.6% for the first half of '19 compared to 8.9% during the similar period the prior year.

And with that, I'd like to turn it back over to Naveen for closing remarks.

--------------------------------------------------------------------------------

Naveen Anand, Hallmark Financial Services, Inc. - President & CEO [5]

--------------------------------------------------------------------------------

Thank you, Jeff. I'd like to acknowledge this result didn't happen by accident. It's been the result of a lot of hard work learned by every member of Hallmark's team. And as we continue to see the impact of our execution of our strategy, and we expect that these results will continue as we move forward. We're pleased with the positive trend in our quarterly earnings results and are working to deliver consistent operating results while being disciplined in how we manage and grow the business.

And with that, let's open it up for questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Operator Instructions) Our first question comes from Greg Peters with Raymond James.

--------------------------------------------------------------------------------

Charles Gregory Peters, Raymond James & Associates, Inc., Research Division - Equity Analyst [2]

--------------------------------------------------------------------------------

A couple of questions for you on your comments regarding the strong price increases you're seeing in some of your Specialty lines of business. I'm curious how you feel about your accident year loss picks for the more recent years. If the market's giving rate to you, does that suggest that maybe your accident year loss picks are too low? Or maybe you can just provide some perspective around that.

--------------------------------------------------------------------------------

Naveen Anand, Hallmark Financial Services, Inc. - President & CEO [3]

--------------------------------------------------------------------------------

Sure, Greg. This is Naveen. Overall, we think our accident year loss ratios are appropriate. We think the market dislocation is obviously going on, and we're taking advantage of the market dislocation, which would kind of be with the perspective that we're earning good rate into the portfolio.

And overall, we think our accident years have been relatively flat and relatively conservative from an accident year selection. If you kind of look at the trend of accident year results at 67 for this quarter, again, in line with where we've been. And rate overall has exceeded plan, which was obviously going to be helpful in terms of improving loss ratios as we move forward, as we earn that rate in.

--------------------------------------------------------------------------------

Charles Gregory Peters, Raymond James & Associates, Inc., Research Division - Equity Analyst [4]

--------------------------------------------------------------------------------

So what's the dislocation you're seeing?

--------------------------------------------------------------------------------

Naveen Anand, Hallmark Financial Services, Inc. - President & CEO [5]

--------------------------------------------------------------------------------

Well, we're seeing in a lot of different areas, right, so combination of changes at Lloyds and the business that Lloyds has made with the syndicate changes, changes that have made -- have been made with certain carriers in terms of the large limits they were putting up against large swaps of limits, in some cases, $10 million, $25 million of limits on individual accounts. And now those companies are tending to compress those limits, syndicate those limits. And so what was being done by one carrier before is now available for 4 to 5 carriers to participate on.

And overall, we're seeing certain markets leave the market out for certain -- some of our product lines, particularly in E&S Property, some -- E&S Casualty lines. And when you kind of look at all, it's not just one area. It's really a combination of all those things that is going on that's resulting in the overall dislocation, particularly in the E&S markets.

--------------------------------------------------------------------------------

Charles Gregory Peters, Raymond James & Associates, Inc., Research Division - Equity Analyst [6]

--------------------------------------------------------------------------------

If so, it's -- going forward, property is clearly under pressure from what's going on in the reinsurance market, should we presume that because of the changes in some aspects of the market that you might have more earnings volatility going forward due to increased property exposures? And can you also dovetail that with a comment around what kind of limits are you guys out there offering in these lines of business that you're talking about?

--------------------------------------------------------------------------------

Naveen Anand, Hallmark Financial Services, Inc. - President & CEO [7]

--------------------------------------------------------------------------------

Sure. So in terms -- we are still relatively conservative in terms of our approach to our reinsurance program. And so that -- it does mitigate some of the volatility from that standpoint.

Just as a reminder to everyone, we have a $5 million retention on our corporate catastrophe program today. And that's something we've maintained for the last few years. We also -- on our E&S property business have a quota share where we cede about 70% of that portfolio today overall. So again, relatively conservative from an overall approach perspective.

In terms of limits offered, our maximum critical cat capacity that we offer is $5 million on a gross basis. Again, that's ceded out to about 70% of it. And then obviously, we have the corporate catastrophe program that sits on top of it. But that's the maximum capacity we offer. But generally, our working capacity is a lot lower than that, and our working capacity tends to be in the $1 million to $2 million range from a cat capacity standpoint.

--------------------------------------------------------------------------------

Charles Gregory Peters, Raymond James & Associates, Inc., Research Division - Equity Analyst [8]

--------------------------------------------------------------------------------

Great. Just last question. Can you pivot to, I think, it's Slide 20 of your investor deck that I got last night. And Jeff, I know you commented a little bit about this in your prepared remarks, and there was a lot to digest in that. So I'm looking forward to rereading the transcript.

But I was struck by the operating cash flow column, where you run through the company's operating cash flow since 2004, and specifically, this negative operating cash flow last year. And you -- I think you cited changing claim payment patterns. But I don't think the paid loss numbers have materially changed. So maybe you can help bridge the gap there for me or just help me to understand what's going on.

--------------------------------------------------------------------------------

Jeffrey Ray Passmore, Hallmark Financial Services, Inc. - Senior VP, CAO, Secretary & CFO [9]

--------------------------------------------------------------------------------

Sure, Greg. Our paid loss pattern has significantly changed, particularly on a gross basis, the past several quarters since the end of 2017. And that's really what you're seeing happening in the negative operating cash flow in 2018 is the shift and as we cleared out the older inventory of our claims, as our clients were really working those claims to get them off of our inventory as well as just a shift in the mix to get out of the development and the tail, to avoid any future negative development, to really position our reserves from that standpoint. And that's what we're seeing. In this year, with that's kind of getting behind us, so we're kind of starting to see the normalization of our cash flow. But no, the -- go ahead.

--------------------------------------------------------------------------------

Charles Gregory Peters, Raymond James & Associates, Inc., Research Division - Equity Analyst [10]

--------------------------------------------------------------------------------

I'm sorry, I interrupted you, Jeff. Finish what you were going to say.

--------------------------------------------------------------------------------

Jeffrey Ray Passmore, Hallmark Financial Services, Inc. - Senior VP, CAO, Secretary & CFO [11]

--------------------------------------------------------------------------------

No, I was just going to repeat. I mean I was just going to say that we did see significant increase in our paid losses.

--------------------------------------------------------------------------------

Charles Gregory Peters, Raymond James & Associates, Inc., Research Division - Equity Analyst [12]

--------------------------------------------------------------------------------

So how should -- so you said -- I think you used the word -- the phrase clear out the inventory of old claims. Is there some sort of percentage of old claims that have been then closed out that you can cite or some metric that we can use to sort of gauge the inventory of claims?

--------------------------------------------------------------------------------

Jeffrey Ray Passmore, Hallmark Financial Services, Inc. - Senior VP, CAO, Secretary & CFO [13]

--------------------------------------------------------------------------------

Yes. Yes. Greg, it's also in that presentation that you have on the -- we talked specifically about the Commercial Auto. What we've done in the claims function of the Commercial Auto, it's on Slide 12, where we implemented the fast track claims process. We closed out from accident year 2016 and prior at the end of '18, roughly 69% of those claims. And then today, we closed out 85% of those claims. Those are no longer (inaudible). Yes.

--------------------------------------------------------------------------------

Operator [14]

--------------------------------------------------------------------------------

Our next question comes from Bob Farnam with Boenning and Scattergood.

--------------------------------------------------------------------------------

Robert Edward Farnam, Boenning and Scattergood, Inc., Research Division - MD and Analyst of Property & Casualty Insurance [15]

--------------------------------------------------------------------------------

Yes. I guess along those lines, Jeff, I just -- so you had a little bit of adverse development in the Specialty Commercial lines. Was it -- what was that attributed to?

--------------------------------------------------------------------------------

Jeffrey Ray Passmore, Hallmark Financial Services, Inc. - Senior VP, CAO, Secretary & CFO [16]

--------------------------------------------------------------------------------

Large losses, predominantly.

--------------------------------------------------------------------------------

Robert Edward Farnam, Boenning and Scattergood, Inc., Research Division - MD and Analyst of Property & Casualty Insurance [17]

--------------------------------------------------------------------------------

In any particular line or no?

--------------------------------------------------------------------------------

Jeffrey Ray Passmore, Hallmark Financial Services, Inc. - Senior VP, CAO, Secretary & CFO [18]

--------------------------------------------------------------------------------

Not any particular line. I mean we've seen some in -- on our casualty book and some on our property.

--------------------------------------------------------------------------------

Robert Edward Farnam, Boenning and Scattergood, Inc., Research Division - MD and Analyst of Property & Casualty Insurance [19]

--------------------------------------------------------------------------------

Okay. In terms of the digital transformation, Naveen, I know you've talked about that for a number of years now. It's kind of remarkable that your expense ratio was lower as it is. Like how much has the digital transformation cost? Is it -- how far through the process are you? I'm just trying to figure what kind of expense ratio impacts the transformation has had.

--------------------------------------------------------------------------------

Naveen Anand, Hallmark Financial Services, Inc. - President & CEO [20]

--------------------------------------------------------------------------------

Well -- so for the most part, our cost has -- is in -- is within our expense ratio. So it's already built into what we -- what you see from an expense ratio standpoint. Our major expenditures around the platform changes are behind us. So we made the 3 major platform investments over '15, '16 and '17. And those are, for the most part, complete at this point. And we are transitioning most of our lines to one of those 3 platforms, which is what's helping us decommission some of those legacy platforms that we have. We had over 25-plus legacy platforms in the company back in 2014. So from a CapEx perspective, it's already in that, sort of baked into our expense ratio at this point in terms of our run rate.

--------------------------------------------------------------------------------

Robert Edward Farnam, Boenning and Scattergood, Inc., Research Division - MD and Analyst of Property & Casualty Insurance [21]

--------------------------------------------------------------------------------

All right. So the -- yes, like if my question was the fact -- it sounds like you think the process is mostly through. So you're not going to get much of a benefit to the expense ratio going forward as those expenses have already occurred. Is that -- that's kind of what I was trying to get at.

--------------------------------------------------------------------------------

Naveen Anand, Hallmark Financial Services, Inc. - President & CEO [22]

--------------------------------------------------------------------------------

That's correct, yes. The future expense ratio benefit will come through a combination of continued scale in the business as we continue to scale our business. And the platforms now allow us to frankly scale our business at a much lower variable cost than before we put those platforms in place.

--------------------------------------------------------------------------------

Robert Edward Farnam, Boenning and Scattergood, Inc., Research Division - MD and Analyst of Property & Casualty Insurance [23]

--------------------------------------------------------------------------------

Right. Okay. So it sounds like you could be poised for a pretty good amount of growth if you're getting a lot of the submission system. So how do you guys ensure that the risks that you are taking are profitable. I mean I'm sure this -- it might be very tempting to have 25%, 30% increase in submissions, but you still have to be careful what you're writing.

--------------------------------------------------------------------------------

Jeffrey Ray Passmore, Hallmark Financial Services, Inc. - Senior VP, CAO, Secretary & CFO [24]

--------------------------------------------------------------------------------

Yes. I mean -- and Bob, that's a great question. At the end of the day, that's the most important part of our business, right, is to make sure that what we're putting on the books is appropriate. We have a lot of checks and balances and controls within the organization.

One of the controls that I think we've spoken about before, that I've I cited is when I got here, we had a handful of people in our actuarial group. Today, we have pricing actuaries embedded in each of our business units. They sit with each of our business units and provide sort of constant feedback, look -- evaluate accounts. It provides a check and balance in terms of how we're pricing against our technical models.

We've put technical models with hurdle rates in place with each of our business units in terms of allocating capital and what that capital impact is to that business and what hurdle rate we need to achieve from -- and that affects our pricing approach from that standpoint. And so we're continually monitoring those type of issues and then, on top of that, looking at the quality of underwriting that's taking place in the portfolios to make sure that the business we're writing is appropriate and in line with our overall mix and desire from an underwriting standpoint.

In addition to that, the one other thing that I think is -- that -- is benefiting us from this marketplace is it allows us to continue to compress limits. So we're actually seeing our average limit exposed come down in most of our lines of businesses, in the E&S lines. So we're actually putting out less limit and getting more price per million on the limit that we are putting out at this point.

--------------------------------------------------------------------------------

Robert Edward Farnam, Boenning and Scattergood, Inc., Research Division - MD and Analyst of Property & Casualty Insurance [25]

--------------------------------------------------------------------------------

Great. And I guess one last question for me. In terms of share repurchases. Now -- I guess 2 parts. One, did you repurchase any shares during the quarter? And two, with the potential growth ahead of you, are you less likely to do share repurchases because you're more concerned with keeping leverage in check?

--------------------------------------------------------------------------------

Jeffrey Ray Passmore, Hallmark Financial Services, Inc. - Senior VP, CAO, Secretary & CFO [26]

--------------------------------------------------------------------------------

Yes. I mean we have not purchased any shares this quarter, really haven't purchased any shares since January of this year, Bob. We're going to have to be mindful of our capital position, the opportunities we see in the marketplace. And that will just be part of our normal capital allocation decision, whether we continue to go to marketplace, see the valuation of our stock and just take advantage opportunistically from that standpoint.

--------------------------------------------------------------------------------

Operator [27]

--------------------------------------------------------------------------------

(Operator Instructions) Ladies and gentlemen, there are no further questions at this time. I'll turn it back to management for closing remarks.

--------------------------------------------------------------------------------

Naveen Anand, Hallmark Financial Services, Inc. - President & CEO [28]

--------------------------------------------------------------------------------

Thank you. Thank you. Thank you, again, for all of your participation this morning. We appreciate your time and your interest in Hallmark, and we look forward to speaking with you next quarter. Thank you very much.

--------------------------------------------------------------------------------

Operator [29]

--------------------------------------------------------------------------------

Thank you. Ladies and gentlemen, this concludes today's conference. All participants, disconnect. Have a great day.