Hallmark Insurance Group’s Rating Remains A-

August 16, 2010

Following the announcement of Hallmark Insurance Co.’s proposed acquisition of State Auto National Insurance Co., A.M. Best Co. has commented that the financial strength rating of A- (Excellent) and issuer credit ratings (ICR) of “a-” of Hallmark Insurance Group of Ft. Worth, Texas, and its operating members and the ICR of “bbb-” of its holding company parent, Hallmark Financial Services Inc. remain unchanged.

The operating members of Hallmark Group include Hallmark Insurance Co., American Hallmark Insurance Co. of Texas, Hallmark Specialty Insurance Co. and Hallmark County Mutual Insurance Co.

On August 10, 2010, Hallmark announced that State Auto National, a nonstandard personal automobile writer, will become a wholly owned subsidiary of Hallmark. “The acquisition is not expected to materially impact Hallmark Group’s risk-adjusted capitalization or earnings, nor the financial leverage of Hallmark Financial,” said A.M. Best. “The acquisition is expected to enhance Hallmark Group’s geographic diversification efforts by providing an increased agency platform in Tennessee, Kentucky, West Virginia, Ohio and Maryland. These positive factors are partially offset by Hallmark Group’s continued execution risk associated with the integration and development of its various acquisitions in recent years.”