UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
8-K
CURRENT
REPORT PURSUANT
TO
SECTION 13 OR 15(D) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date of report (Date of earliest event
reported):
December
31,
2010
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HALLMARK
FINANCIAL SERVICES, INC.
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(Exact
Name of Registrant as Specified in Its Charter)
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Nevada
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(State
or Other Jurisdiction of
Incorporation)
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001-11252
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87-0447375
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(Commission
File Number)
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(IRS
Employer Identification
No.)
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777
Main Street, Suite 1000, Fort Worth, Texas
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76102
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(Address
of Principal Executive Offices)
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(Zip
Code)
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817-348-1600
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(Registrant’s
Telephone Number, Including Area Code)
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Not
Applicable
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(Former
Name or Former Address, if Changed Since Last
Report)
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Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation of
the registrant under any of the following provisions (see General Instruction A.2.
below):
¨ Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
¨ Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
¨ Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
¨ Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
7.01 Regulation FD Disclosure
On January 3, 2011, the Registrant
issued a press release announcing the completion of the acquisition of State
Auto National Insurance Company. A copy of the Registrant’s press
release is attached as Exhibit 99.1 to this Current Report.
Item
8.01 Other Events
On December 31, 2010, Hallmark
Insurance Company (the “Buyer”), a wholly-owned subsidiary of Hallmark Financial
Services, Inc. (the “Registrant”), completed the acquisition of 100% of the
issued and outstanding capital stock of State Auto National Insurance Company
(“SAN”) from State Auto Financial Corporation (the “Seller”). SAN is
an Ohio domiciled insurance company which writes non-standard personal
automobile policies through independent agents in 21 states. Prior to
the transaction, there was no material relationship between the Seller, SAN or
any of their affiliates, on the one hand, and the Buyer, the Registrant or any
of their affiliates, on the other hand.
The Buyer acquired SAN for initial
consideration of $14.0 million paid in cash on January 3, 2011, from working
capital of the Buyer. The cash purchase price is subject to
post-closing adjustment to the extent the statutory capital and surplus of SAN
as of the closing date was greater or less than $10.0 million. In
addition, an earnout of up to $2.0 million is payable to Seller quarterly in an
amount equal to 2% of gross collected premiums on new or renewal personal lines
insurance policies written by SAN agents during the three years following
closing.
Simultaneous with the closing of the
acquisition of SAN by the Buyer, SAN entered into a Loss Portfolio Transfer
Reinsurance Contract and a Quota Share Reinsurance Contract with an affiliate of
the Seller, State Auto Property & Casualty Insurance Company (the
“Reinsurer”), pursuant to which the Reinsurer will handle all claims and assume
all liabilities arising under policies issued by SAN prior to the closing or
during a transition period of up to six months following the
closing. The parties are also subject to restrictive covenants
pursuant to which, for a period of up to three years, (a) the Seller will be
limited in its ability to write non-standard personal automobile insurance
policies in the states presently served by SAN, and (b) the Buyer will not
encroach on the Seller’s relationships with SAN agents except with respect to
non-standard personal automobile insurance.
Item
9.01 Financial Statements and Exhibits
(c) Exhibits.
99.1 Press
release dated January 3, 2011.
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned duly authorized.
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HALLMARK
FINANCIAL SERVICES, INC.
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Date:
January 4, 2011
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By:
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/s/ Jeffrey R. Passmore
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Jeffrey
R. Passmore, Chief Accounting
Officer
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