Hallmark Financial Services Inc. (HALL) Accused of Misleading Shareholders
Throughout the relevant period, Hallmark Financial reported that its Specialty Commercial segment, which included its Commercial Auto Business, was experiencing a decrease or stabilization in its losses and loss adjustment expenses. Despite this improvement, on March 2, 2020, Hallmark Financial announced that it had exited from the Binding Primary Commercial Auto Business and revealed a $63.8 million loss development for prior underwriting years. Then, on March 11, 2020, the Company disclosed it had dismissed its independent auditor BDO due in large part to a disagreement regarding estimates for reserves on unpaid losses. Finally, on March 17, 2020, Hallmark Financial filed with the SEC a letter from BDO stating BDO had expanded the scope of its audit relating to the disagreement and that “a substantial portion of the requests had not been received and/or tested prior to our termination.” Following these disclosures, shares of Hallmark Financial fell from a closing price of $14.33 per share on March 2, 2020 to a closing price of $3.12 per share on March 18, 2020, representing a 78% decline.