Hallmark Financial Services, Inc. Commences Shareholder Rights Offering FORT WORTH, Texas, April 28 /PRNewswire-FirstCall/ -- Hallmark Financial Services, Inc. (AMEX:HAF.EC) today announced that the Securities and Exchange Commission has declared effective the registration statement with respect to its previously announced shareholder rights offering. On or about April 29, 2005, the Company will mail the prospectus and related materials to its shareholders of record as of the close of business on April 20, 2005. Hallmark expects to generate gross proceeds of $45,000,000 from the issuance of 50,000,000 additional shares of its common stock in the rights offering. The subscription period for the rights offering will continue through May 31, 2005, unless extended by Hallmark. Hallmark previously distributed to its shareholders of record as of April 20, 2005, one non-transferable subscription right for each share of common stock owned as of the close of business on such record date. Each right includes a basic subscription privilege and an over-subscription privilege. The basic subscription privilege entitles the shareholder to purchase 1.37 shares of Hallmark common stock for $0.90 per share. If all shareholders do not fully exercise their basic subscription rights, the over- subscription privilege entitles shareholders who have fully exercised their basic subscription right to purchase additional shares at the same $0.90 per share subscription price. If insufficient shares are available to fully satisfy all over-subscription privilege requests, the available shares will be distributed proportionately among rights holders who exercise their over- subscription privilege based on the number of shares each rights holder subscribed for under the basic subscription privilege. All subscription rights will expire to the extent not exercised before 5:00 p.m., Dallas, Texas time, on May 31, 2005, unless the subscription period is extended by Hallmark. "The purpose of the rights offering is to strengthen the financial condition and underwriting capacity of the Company sufficiently to enhance the structure and broaden the scope of its operations," stated Mark E. Schwarz, Hallmark's President and Chief Executive Officer. "Hallmark has initiated the regulatory process necessary to consolidate the underwriting of all of its non-standard automobile insurance into one insurance subsidiary and to convert its other personal lines insurance subsidiary to a commercial lines insurance carrier," Mr. Schwarz continued. Mark J. Morrison, Hallmark's Chief Operating Officer and Chief Financial Officer, stated, "The $45.0 million in new equity capital expected to be raised in the rights offering, together with $30.0 million in proceeds from new debt sought to be obtained, will be used as working capital for the Company's business and general corporate purposes. The Company believes that the infusion of this additional working capital and realignment of its insurance operations will allow it to write and retain additional personal lines business, permit it to directly write commercial lines business presently being sold as agent for a third party insurer, and enable both insurance subsidiaries to achieve more favorable financial strength ratings from our rating agencies." The complete terms and conditions of the shareholder rights offering are set forth in the prospectus and accompanying subscriptions materials being mailed to shareholders. Shareholders may also obtain a copy of the prospectus by contacting Hallmark Financial Services, Inc., 777 Main Street, Suite 1000, Fort Worth, Texas 76102, Attention: Investor Relations, telephone (817) 348-1600. Shareholders who hold their shares through a broker, bank or other nominee should contact the broker, bank or nominee for further information concerning the non-transferable rights and the exercise of their subscription privileges. Neither Hallmark, its board of directors, nor any committee of the board of directors is making any recommendation to shareholders as to whether to exercise their subscription rights. This press release is for informational purposes only and is not an offer to sell or a solicitation of an offer to buy shares of Hallmark's common stock. Shareholders should carefully read the prospectus and accompanying materials, which contain important information concerning the rights offering. Hallmark Financial Services, Inc. engages primarily in the sale of property and casualty insurance products. The Company's business involves marketing and underwriting of non-standard personal automobile insurance primarily in Texas, Arizona and New Mexico, marketing commercial insurance primarily in Texas, New Mexico, Idaho, Oregon and Washington, third party claims administration, and other insurance related services. The Company is headquartered in Fort Worth, Texas, and its common stock is listed on the American Stock Exchange under the symbol "HAF.EC". Forward-looking statements in this release are made pursuant to the "safe harbor" provisions of the Private Securities Litigation Act of 1995. Investors are cautioned that actual results may differ substantially from such forward-looking statements. Forward-looking statements involve risks and uncertainties including, but not limited to, continued acceptance of the Company's products and services in the marketplace, competitive factors, interest rate trends, the availability of financing, underwriting loss experience and other risks detailed from time to time in the Company's registration statement and periodic reports filed with the Securities and Exchange Commission. For further information, please contact: Mark J. Morrison Chief Operating Officer & Chief Financial Officer 817.348.1600 http://www.hallmarkgrp.com/ DATASOURCE: Hallmark Financial Services, Inc. CONTACT: Mark J. Morrison, Chief Operating Officer & Chief Financial Officer, +1-817-348-1600 Web site: http://www.hallmarkgrp.com/

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