Core Specialty Completes Acquisition of Hallmark Financial

• Hallmark E&S produced $436 million gross premiums written over the 12-month interval ended June 30, 2022
• Furthers Core Specialty’s momentum in constructing the main specialty insurance firm
• Elevates Core Specialty’s participation in extra & surplus strains; mixed business could be among the many 20 largest E&S teams based mostly on 2021 knowledge

CINCINNATI, Oct. 07, 2022 (GLOBE NEWSWIRE) — Core Specialty Insurance Holdings, Inc. and its subsidiaries (“Core Specialty” or the “Company”) introduced at this time that it has accomplished the acquisition of Hallmark Financial Services, Inc.’s Excess & Surplus Lines operations for roughly $40 million in money.  The business acquired from Hallmark Financial Services, Inc. (“Hallmark”) represents that portion of Hallmark’s Specialty Commercial Segment that’s distributed via the wholesale insurance brokerage channel (“Hallmark E&S”).  Hallmark E&S produced $436 million of wholesale distributed extra & surplus strains business within the twelve-month interval ended June 30, 2022. 

Core Specialty is not going to purchase any insurance firm entities as half of the transaction and the transaction excludes loss reserves related to the Hallmark E&S business which shall be retained by Hallmark.

Management and the roughly 176 workers of the Hallmark E&S business, based mostly in Dallas, Atlanta and Jersey City, New Jersey, will transition to Core Specialty.  Well-regarded business veteran Gerald A. Dupre, Jr., at the moment President and Chief Underwriting Officer of Hallmark’s Specialty Commercial Segment, will be a part of Core Specialty as half of the transaction in a management function inside the mixed extra & surplus strains business.

Core Specialty expects the transaction to be accretive to its earnings per share and return on fairness in 2023.  Core Specialty has drawn $130.0 million underneath its Unsecured Revolving Credit Facility to help future business to be underwritten by Hallmark E&S and to pay the $40.0 million money buy worth.

Jeff Consolino, Core Specialty’s Founder, President and Chief Executive Officer, mentioned: “Core Specialty’s vision is to become the leading specialty insurer and the Hallmark E&S acquisition continues our very strong progress in our mission.  Core Specialty has the capital to take on risk, the underwriting talent in place, a proven and decisive leadership team and a track record of making things happen fast. Collectively and in each of our specialist niche business units, we intend to operate with strong entrepreneurial spirit and drive, speed, agility, and empowered decision-making.  Hallmark has done an admirable job of assembling and nurturing this profitable business which strongly complements Core Specialty’s business.  The combined businesses are well aligned for continued profitable growth.  Hallmark E&S has an excellent team and I would like to welcome Gerald Dupre and all of our new colleagues to Core Specialty.”

The Hallmark Excess & Surplus Lines Operations

The Hallmark Excess & Surplus Lines Operations (“Hallmark E&S”) are the subset of Hallmark’s Specialty Commercial Segment that distributes via the wholesale insurance brokerage channel and are comprised of the Commercial Auto business unit which presents major and extra industrial automobile insurance services and products; the E&S Casualty business unit which presents major and extra legal responsibility, extra public entity legal responsibility and E&S bundle and storage legal responsibility insurance services and products; the E&S Property business unit which presents major and extra industrial property insurance for each disaster and non-catastrophe exposures; and the Professional Liability business unit which presents healthcare and monetary strains skilled legal responsibility insurance services and products primarily for companies, medical professionals, medical services and senior care services. 

Hallmark E&S underwrites specialty insurance coverages via wholesale brokers and producers. Hallmark E&S ranks within the prime 50 extra & surplus underwriters based mostly on 2021 web premiums written as reported by AM Best and has persistently generated underwriting earnings since its inception. For the year-ended December 31, 2021, Hallmark E&S had generated gross premiums written of $420 million and, for the twelve month interval ended June 30, 2022, gross premiums written of $436 million.  See the desk later on this press launch for abstract monetary outcomes of Hallmark E&S.

Core Specialty Transaction Benefits

Based on AM Best’s publication of 2021 knowledge, the mixed business would rank among the many prime 20 extra & surplus strains teams within the United States with $992 million in direct premiums written.

Core Specialty operates via a business unit philosophy that permits its Divisions native decision-making for underwriting, claims, and coverage servicing with a excessive diploma of autonomy and full accountability.  The Hallmark E&S business strains complement Core Specialty’s Directors & Officers Management Professional Liability, Excess Casualty, Lancer Commercial Auto, Healthcare Professional Liability and Property Divisions and shall be built-in into the present Core Specialty Business Units.  In addition, Hallmark E&S brings Core Specialty a brand new E&S Contract Binding functionality.

Core Specialty and Hallmark will work collectively to make sure all policyholders proceed to obtain business main services and products, and to align the mixed operations in the very best pursuits of clients, brokers, brokers, and workers. 

Transaction Structure

Core Specialty has accomplished the acquisition of Heath XS, LLC (“Heath XS”), the Dallas, Texas-based extra & surplus underwriting company subsidiary of Hallmark Financial Services, Inc. and sure different working property of Hallmark associated to Hallmark E&S for roughly $40 million in money. Heath XS does business as Hallmark E&S and Hallmark E&S Insurance Services, LLC. 

In addition to Core Specialty’s acquisition of Heath XS, Core Specialty has acquired the rights to the continued wholesale distributed extra & surplus strains business underwritten by Heath XS for insurance firm associates of Hallmark and, via its wholly owned subsidiary, StarStone National Insurance Company (“StarStone National”), the web unearned premium reserve portfolio of roughly $82 million associated to Hallmark E&S.  Heath XS will proceed to underwrite insurance policies issued by insurance firm associates of Hallmark and such insurance policies shall be totally reinsured by StarStone National throughout a transition interval set to run out after the third quarter of 2023, at which level StarStone Specialty Insurance Company, Core Specialty’s extra & surplus strains subsidiary, is anticipated to turn into the policy-issuing service.

The transaction excludes loss reserves related to business beforehand underwritten by Heath XS for insurance associates of Hallmark.  Core Specialty is not going to purchase any insurance firm entities as half of the transaction.

Transaction Advisors

Core Specialty is being suggested by J.P. Morgan as monetary advisor and Skadden, Arps, Slate, Meagher & Flom LLP as transaction counsel.

About Core Specialty

Core Specialty presents a diversified vary of property and casualty insurance merchandise for small to midsized companies. From its underwriting workplaces spanning the U.S., the Company focuses on area of interest markets, native distribution, and superior underwriting information; providing conventional in addition to modern insurance options to satisfy the wants of its clients and brokers. Core Specialty is an insurance holding firm working via StarStone Specialty Insurance Company, a U.S. extra & surplus strains insurer, and StarStone National Insurance Company, Lancer Insurance Company, and Lancer Insurance Company of New Jersey, every of which is a U.S. admitted markets insurer. The Company is rated A- XII (Excellent) by AM Best. For additional details about Core Specialty, please go to www.corespecialty.com.  

Contact:
Lynn Tetley
(513) 295-1698
[email protected]

SUMMARY UNAUDITED HISTORICAL FINANCIAL DATA OF BUSINESS ACQUIRED

The following desk units forth abstract unaudited historic monetary knowledge for Hallmark E&S, the business acquired, which is the subset of Hallmark’s Specialty Commercial Segment that distributes via the wholesale insurance brokerage channel and is comprised of the Commercial Auto business unit which presents major and extra industrial automobile insurance services and products; the E&S Casualty business unit which presents major and extra legal responsibility, extra public entity legal responsibility and E&S bundle and storage legal responsibility insurance services and products; the E&S Property business unit which presents major and extra industrial property insurance for each disaster and non-catastrophe exposures; and the Professional Liability business unit which presents healthcare and monetary strains skilled legal responsibility insurance services and products primarily for companies, medical professionals, medical services and senior care services.  Hallmark E&S differs from Hallmark’s Specialty Commercial Segment as Hallmark’s Specialty Commercial Segment consists of an Aerospace & Programs business unit which presents basic aviation and, till discontinued throughout 2020, satellite tv for pc launch property and casualty insurance services and products, in addition to sure specialty packages. 

The abstract unaudited historic monetary knowledge for Hallmark E&S is derived from Hallmark’s monetary statements for every of the durations indicated. The abstract unaudited historic monetary knowledge for every of the three years ended December 31, 2021, 2020 and 2019 have been derived from Hallmark’s audited monetary statements. The abstract historic monetary knowledge for every of the six months ended June 30, 2022 and June 30, 2021 have been derived from Hallmark’s unaudited monetary statements. Historical outcomes will not be essentially indicative of the outcomes to be anticipated for any future interval.

Core Specialty believes the abstract unaudited monetary knowledge introduced under are helpful as a result of it presents the historic outcomes of operations for the durations introduced for Hallmark E&S giving impact to the separation from Hallmark and the Hallmark Specialty Commercial Segment.  The abstract unaudited monetary knowledge are introduced for informational functions solely and don’t purport to characterize outcomes of Hallmark E&S had the transactions occurred on or as of the dates introduced or to mission the outcomes for any future date or interval. Actual outcomes could differ from the abstract unaudited monetary knowledge.