CONFORMED COPY

                      SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C. 20549

                                 FORM 10-QSB

              Quarterly report under Section 13 or 15(d) of the

                       Securities Exchange Act of 1934

                For the quarterly period ended March 31, 2003

                        Commission file number 0-16090

                      Hallmark Financial Services, Inc.
                      ---------------------------------
      (Exact name of small business issuer as specified in its charter)


                Nevada                                 87-0447375
     -------------------------------               -------------------
     (State or other jurisdiction of                (I.R.S. Employer
     Incorporation or organization)                Identification No.)

     14651 Dallas Parkway, Suite 900 Dallas, Texas         75254
     ---------------------------------------------       ---------
       (Address of principal executive offices)          (Zip Code)


    Issuer's telephone number, including area code:  (972) 404-1637

   Check whether the issuer (1) has filed all  reports required to be filed
   by Section 13  or 15(d) of the  Securities Exchange Act during  the past
   12 months (or  for such shorter period that the  registrant was required
   to  file  such  reports), and  (2)  has  been  subject  to  such  filing
   requirements for the past 90 days.

                            Yes   X       No


                     APPLICABLE ONLY TO CORPORATE ISSUERS

   State the number  of shares outstanding of each of  the issuer's classes
   of common equity,  as of the latest practicable date:  Common Stock, par
   value  $.03 per share  -  11,170,800 shares  outstanding as  of May  12,
   2003.

<PAGE>

                                      PART I
                               FINANCIAL INFORMATION

 Item 1.   Financial Statements


                   INDEX TO FINANCIAL STATEMENTS

                                                           Page Number
                                                           -----------

 Consolidated Balance Sheets (unaudited) at                      3
 March 31, 2003 and December 31, 2002

 Consolidated Statements of Operations (unaudited) for           4
 the three months ended March 31, 2003 and March 31, 2002

 Consolidated Statements of Cash Flows (unaudited) for           5
 the three months ended March 31, 2003 and March 31, 2002

 Notes to Consolidated Financial Statements                      6
 (unaudited)

<PAGE>

              HALLMARK FINANCIAL SERVICES, INC. AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS
                                (Unaudited)
                               (In thousands)
                         ---------------------------
                                                      March 31    December 31
                    ASSETS                              2003          2002
                    ------                           ----------    ----------
 Investments:
    Debt securities, available-for-sale,
      at market value                               $    16,001   $     7,679
    Equity securities, available-for-sale,
      at market value                                     2,251           122
    Short-term investments, available-for-sale,
      at market value                                     4,831         8,927
                                                     ----------    ----------
             Total investments                           23,083        16,728

 Cash and cash equivalents                               26,774         8,453
 Restricted cash                                          1,088         1,072
 Prepaid reinsurance premiums                             8,764         8,550
 Receivable from lender for financed premiums
   (net of allowance for doubtful accounts of
   $124 in 2003 and $115 in 2002)                        12,564        11,593
 Premiums receivable                                      2,765         1,012
 Accounts receivable                                      2,869         2,129
 Prepaid agent commission                                 4,243         3,899
 Reinsurance recoverable                                 18,678        12,929
 Deferred policy acquisition costs                        2,192         1,367
 Excess of cost over net assets acquired                  4,883         5,171
 Intangible assets                                          534           540
 Note receivable                                              -         6,500
 Current federal income tax recoverable                       -            33
 Deferred federal income taxes                            4,386         1,021
 Other assets                                             1,831         1,832
                                                     ----------    ----------
                                                    $   114,654   $    82,829
                                                     ==========    ==========

     LIABILITIES AND STOCKHOLDERS' EQUITY
     ------------------------------------
 Liabilities:
   Notes payable                                    $     1,565   $     1,803
   Note payable to related party                          8,600         8,600
   Net advances from lender for financed premiums        10,235        10,905
   Unpaid losses and loss adjustment expenses            34,186        17,667
   Unearned premiums                                     20,410        15,551
   Reinsurance balances payable                           4,041         3,764
   Unearned revenue                                       7,715         6,872
   Accrued agent profit sharing                             174           450
   Accrued ceding commission payable                      2,412         2,536
   Pension liability                                        604           604
   Current federal income tax payable                       483             -
   Accounts payable and other accrued expenses            7,100         5,542
                                                     ----------    ----------
                                                         97,525        74,294
                                                     ----------    ----------
 Stockholders' equity:
    Common stock, $.03 par value, authorized
     100,000,000 shares; issued 11,856,610
     shares at March 31, 2003 and 11,855,610
     shares at December 31, 2002                            356           356
    Capital in excess of par value                       10,725        10,875
    Retained (deficit) earnings                           7,067        (1,491)
    Accumulated other comprehensive loss                   (127)         (162)
    Treasury stock, 689,810 shares at
      March 31, 2003 and 806,477 shares
      at December 31, 2002, at cost                        (892)       (1,043)
                                                     ----------    ----------
             Total stockholders' equity                  17,129         8,535
                                                     ----------    ----------
                                                    $   114,654   $    82,829
                                                     ==========    ==========

                 The accompanying notes are an integral part
                  of the consolidated financial statements

<PAGE>

              HALLMARK FINANCIAL SERVICES, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (Unaudited)
                  (In thousands, except earnings per share)
                        ----------------------------
                                                       Three Months Ended
                                                             March 31
                                                     ------------------------
                                                        2003          2002
                                                     ----------    ----------
  Revenues:
    Gross premiums earned                           $    20,353   $    12,312
    Ceded premiums earned                                (8,015)       (8,164)
                                                     ----------    ----------
        Net premiums earned                              12,338         4,148

  Investment income, net of expenses                        194           126
  Finance charges                                         1,253           655
  Commission income                                       3,350            -
  Processing and service fees                             1,308           143
  Other income                                              277            76
                                                     ----------    ----------
         Total revenues                                  18,720         5,148
                                                     ----------    ----------
  Losses and expenses:
    Losses and loss adjustment expenses                  14,060         8,033
    Reinsurance recoveries                               (5,170)       (4,784)
                                                     ----------    ----------
         Net losses and loss adjustment expenses          8,890         3,249

  Acquisition costs, net                                   (251)         (419)
  Other acquisition and underwriting expenses
    (net of ceding commission of $2,206 in 2003
    and $2,240 in 2002)                                   8,240         1,363
  Operating expenses                                        781           451
  Interest expense                                          443           205
  Amortization of intangible assets                           7             -
                                                     ----------    ----------
      Total benefits, losses and expenses                18,110          4,849
                                                     ----------    ----------

  Income from operations before federal income
    taxes, cumulative effect of change in
    accounting principle and extraordinary gain             610           299

  Federal income tax expense                                207           104
                                                     ----------    ----------
  Income before cumulative effect of change in
    accounting principle and extraordinary gain     $       403   $       195
      Cumulative effect of change
        in accounting principle                               -        (1,694)
      Extraordinary gain                                  8,152             -
                                                     ----------    ----------
                Net income (loss)                   $     8,555   $    (1,499)
                                                     ==========    ==========

  Basic earnings per share (11,166,800 shares
    outstanding in 2003 and 11,049,133 shares
    outstanding in 2002):
       Income before cumulative effect of
         change in accounting principle and
         extraordinary gain                         $      0.04   $      0.02
         Cumulative effect of change in
           accounting principle                               -         (0.16)
         Extraordinary gain                                0.73             -
                                                     ----------    ----------
         Net income (loss)                          $      0.77   $     (0.14)
                                                     ==========    ==========

  Diluted earnings per share (11,444,911 shares
    in 2003 and 11,251,500 shares in 2002):
       Income before cumulative effect of
         change in accounting principle and
         extraordinary gain                         $      0.04   $      0.02
         Cumulative effect of change in
           accounting principle                               -         (0.15)
         Extraordinary gain                                0.71             -
                                                     ----------    ----------
         Net income (loss)                          $      0.75   $     (0.13)
                                                     ==========    ==========

                 The accompanying notes are an integral part
                  of the consolidated financial statements

<PAGE>

              HALLMARK FINANCIAL SERVICES, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
                                 (In thousands)
                          ----------------------------

                                                        Three Months Ended
                                                            March 31
                                                     ------------------------
                                                        2003          2002
                                                     ----------    ----------
 Cash flows from operating activities:
    Net income (loss)                               $     8,555   $    (1,499)

 Adjustments to reconcile net income (loss) to cash
   provided by (used in) operating activities:
    Cumulative effect of change
      in accounting principle                                 -         1,694
    Extraordinary gain on acquisition of subsidiary      (8,152)            -
    Depreciation and amortization expense                   159            40
    Change in deferred federal income taxes                   -            86
    Change in prepaid reinsurance premiums                 (175)         (345)
    Change in premiums receivable                            (8)         (402)
    Change in accounts receivable                          (740)            -
    Change in deferred policy acquisition costs            (825)         (420)
    Change in unpaid losses and loss
      adjustment expenses                                 1,132        (1,987)
    Change in unearned premiums                           1,264         1,602
    Change in unearned revenue                              843             -
    Change in accrued agent profit sharing                 (393)            -
    Change in reinsurance recoverable                     4,655         2,201
    Change in reinsurance balances payable                  959           801
    Change in excess of cost over
      net assets acquired                                   288             -
    Change in current federal income tax
      payable/recoverable                                   516            19
    Change in accrued ceding commission payable            (124)       (3,090)
    Change in all other liabilities                         642           429
    Change in all other assets                              331           167
                                                     ----------    ----------
           Net cash provided by (used in)
             operating activities                         8,927          (704)
                                                     ----------    ----------
 Cash flows from investing  activities:
    Purchases of property and equipment                    (203)          (46)
    Cash of acquired company                              6,944             -
    Premium finance notes originated                    (10,896)      (13,090)
    Premium finance notes repaid                          9,925        12,166
    Change in restricted cash                               (16)          297
    Purchases of debt securities                              -        (3,000)
    Maturities and redemptions of
      investment securities                                 114            77
    Purchase of short-term investments                      (16)       (7,996)
    Maturities of short-term investments                  4,450        14,242
                                                     ----------    ----------
       Net cash provided by investing activities         10,302         2,650
                                                     ----------    ----------
 Cash flows from financing activities:
    Net advances from lender                              (670)           10
    Repayment of borrowings                               (238)            -
                                                     ----------    ----------
         Net cash (used in) provided
           by financing activities                         (908)           10
                                                     ----------    ----------
 Increase in cash and cash equivalents                   18,321         1,956
 Cash and cash equivalents at beginning of period         8,453         5,533
                                                     ----------    ----------
 Cash and cash equivalents at end of period         $    26,774   $     7,489
                                                     ==========    ==========

                 The accompanying notes are an integral part
                  of the consolidated financial statements

<PAGE>

              HALLMARK FINANCIAL SERVICES, INC. AND SUBSIDIARIES

 Item 1.  Notes to Consolidated Financial Statements (Unaudited).


 Note 1 - Summary of Accounting Policies

     In the  opinion of management,  the accompanying consolidated  financial
 statements contain  all adjustments,  consisting  only of  normal  recurring
 adjustments, necessary for  a fair statement  of the  financial position  of
 Hallmark Financial Services, Inc.  ("HFS") and subsidiaries (the  "Company")
 as of March  31, 2003 and  the consolidated results  of operations and  cash
 flows for the periods presented.  The accompanying financial statements have
 been prepared by the Company without audit.

     Certain  information  and disclosures  normally  included  in  financial
 statements prepared  in  accordance  with  accounting  principles  generally
 accepted in the  United States of  America ("GAAP") have  been condensed  or
 omitted.  Reference is made to  the Company's annual consolidated  financial
 statements for  the  year ended  December  31,  2002 for  a  description  of
 accounting policies and  certain other disclosures.   Certain  items in  the
 2002 interim financial statements have been  reclassified to conform to  the
 2003 presentation.

     The results of  operations for the period ended  March 31, 2003 are  not
 necessarily indicative of the operating results to be expected for the  full
 year.

 Recently Adopted Accounting Pronouncements

     In  December 2002,  the Financial  Accounting Standards  Board  ("FASB")
 issued Statement of Financial Accounting Standards No. 148, "Accounting  for
 Stock-Based Compensation  -  Transition and  Disclosure" ("SFAS  148").  The
 Statement amends SFAS 123 to provide  alternative methods of transition  for
 voluntary change to  the fair value  based method of  accounting for  stock-
 based employee compensation.   In addition, SFAS  148 amends the  disclosure
 requirements of SFAS 123 to require prominent disclosures in both annual and
 interim financial statements about the method of accounting for  stock-based
 employee compensation and the effect of the method used on reported results.
 SFAS  148  is effective  for financial  statements for  fiscal years  ending
 after December 15, 2002.  Effective January 1, 2003, the Company adopted the
 prospective method provisions of SFAS 148. See further discussion in Note 6.


 Note 2 - Reinsurance

     American Hallmark  Insurance Company of  Texas ("Hallmark") is  involved
 in the assumption and cession of  reinsurance from/to other companies.   The
 Company remains  obligated  to  its policyholders  in  the  event  that  the
 reinsurers do not meet their obligations under the reinsurance agreements.

     Effective  March   1,  1992,   Hallmark  entered   into  a   reinsurance
 arrangement with  State &  County Mutual  Fire Insurance  Company ("State  &
 County"), an unaffiliated company,  to assume 100%  of the nonstandard  auto
 business  produced  by  American   Hallmark  General  Agency  ("AHGA")   and
 underwritten by State  & County.   Under a  separate retrocession  agreement
 effective July  1, 2000  between Hallmark  and Dorinco  Reinsurance  Company
 ("Dorinco"), Hallmark may, with the consent of Dorinco, elect on a quarterly
 basis to retain  30% to 45%  of the underwriting  risk.  Hallmark  currently
 retains 45%  of  the premium  and  losses  assumed from  State  and  County,
 retroceding 55% of the premium and  losses to Dorinco. In addition,  Dorinco
 unconditionally guarantees Hallmark's obligation to State & County.

     Effective  April  1, 2001,  the  Company's  reinsurance  agreement  with
 Dorinco was amended to include a provision whereby the Company retains  100%
 of losses in a loss ratio corridor of a threshold of 65% to a ceiling of 77%
 on policies effective after April 1, 2001.  As of July 1, 2001, the  ceiling
 of the loss ratio corridor was increased to 80% on policies effective on  or
 after that date.   Dorinco and the Company  executed an agreement  effective
 July 1, 2001,  that among other  things, imposes on  the Company  additional
 financial and operational covenants under the Dorinco reinsurance agreements
 (including additional surplus requirements, rate increases and  cancellation
 provisions), provides remedies for the breach  of such covenants and  grants
 to Dorinco  certain  options  to  maintain or  increase  the  level  of  its
 reinsurance of  Hallmark  policies.   Effective  October  1,  2002,  Dorinco
 modified the reinsurance agreement with improved terms, including increasing
 the threshold of  the loss  corridor to 65.5%  and lowering  the ceiling  to
 75.5%.

     Under  its reinsurance  arrangements  with Dorinco,  the  Company  earns
 ceding commissions based on Dorinco's loss  ratio experience on the  portion
 of policies ceded to Dorinco.  The Company receives a provisional commission
 as policies are produced  as an advance against  the later determination  of
 the commission  actually earned.   The  provisional commission  is  adjusted
 annually on a sliding scale based on annual loss ratios.


 Note 3 - Intangible Assets

      When Hallmark, AHGA, Hallmark Finance Corporation ("HFC") and  Hallmark
 Claim Service, Inc. ("HCS") were purchased by HFS, the excess cost over  the
 fair value of the net  assets acquired was recorded  as goodwill.  Prior  to
 2002, this goodwill was amortized on a straight-line basis over forty years.
  Other intangible  assets consisted  of a  trade  name, a  managing  general
 agent's  license  and  non-compete  agreements,  all  of  which  were  fully
 amortized.

     On  January  1,  2002,  the  Company  adopted  Statement  of   Financial
 Accounting Standards No.  142 ("SFAS  142"), Goodwill  and Other  Intangible
 Assets".  SFAS  142 supersedes APB  17, "Intangible  Assets", and  primarily
 addresses the accounting  for goodwill and  intangible assets subsequent  to
 their initial  recognition.   SFAS 142  (1)  prohibits the  amortization  of
 goodwill and  indefinite-lived intangible  assets, (2)  requires testing  of
 goodwill and  indefinite-lived  intangible assets  on  an annual  basis  for
 impairment  (and  more  frequently  if  the   occurrence  of  an  event   or
 circumstance indicates an impairment), (3) requires that reporting units  be
 identified for  the purpose  of assessing  potential future  impairments  of
 goodwill and  (4)  removes the  forty-year  limitation on  the  amortization
 period of intangible assets that have finite lives.

     Pursuant to SFAS 142, the Company identified two components of goodwill
 and assigned  the carrying  value of  these components  into two  reporting
 units:   the  insurance company  reporting  unit  and the  finance  company
 reporting unit.  During  2002, the Company  completed the two  step process
 prescribed by  SFAS 142  for  testing for  impairment  and determining  the
 amount of impairment  loss related  to goodwill associated  with these  two
 reporting units.  Accordingly, during  2002, the Company recorded  a charge
 to earnings  that is  reported as  a  cumulative effect  of  the change  in
 accounting principle of $1.7 million to reflect the adjustment to goodwill.
 Since  goodwill is a  permanent difference, the  charge to earnings  has no
 tax impact.  This goodwill adjustment was made during the fourth quarter of
 2002, but is  required to  be disclosed in  the first  quarter of  2002 for
 comparative purposes.


 Note 4 - Acquisitions

     On  January 27,  2003,  the Company  received  final approval  from  the
 Arizona Department of  Insurance ("AZDOI")  for the  acquisition of  Phoenix
 Indemnity  Insurance  Company ("Phoenix"), effective as  of January 1, 2003.
 The acquisition of Phoenix expanded the  Company's geographic reach in  non-
 standard automobile  insurance from  its traditional  base in  Texas to  the
 states of New Mexico and Arizona.  The results of operations of Phoenix  are
 included in the Consolidated Statement of Operations from the effective date
 of the acquisition  (January 1, 2003).   The pro  forma information for  the
 corresponding prior  period is  not provided  as it  is not  practicable  to
 obtain.

     The  acquisition  of  Phoenix  was  accounted  for  in  accordance  with
 Statement of Financial Accounting Standards No. 141, "Business Combinations"
 ("SFAS 141").  This  statement requires that the  Company estimate the  fair
 value of assets acquired  and liabilities assumed by  the Company as of  the
 date of the acquisition.   In accordance with  the application of SFAS  141,
 the Company  recognized  an extraordinary  gain  of $8.2  million  from  the
 acquisition of Phoenix in its Consolidated  Statement of Operations for  the
 three months ending March 31, 2003.


 Note 5 - Segment Information

     The  Company   pursues  its  business   activities  through   integrated
 insurance groups handling  non-standard personal  automobile insurance  (the
 "Personal Lines  Group") and  commercial  insurance (the  "Commercial  Lines
 Group").  The members  of the Personal Lines  group are an authorized  Texas
 property and  casualty insurance  company, Hallmark;  an authorized  Arizona
 property and casualty insurance company, Phoenix; a managing general agency,
 AHGA; a premium  finance company,  HFC; and  a claims  administrator, HCS.
 Effective December  1,  2002, the  Company  purchased the  Commercial  Lines
 Group.  The  members of the  Commercial Lines Group  are a managing  general
 agency,  Millers   General  Agency,   Inc.  ("Millers   GA");  a   financial
 administrative service  company,  Financial and  Actuarial  Resources,  Inc.
 ("FAR");  and  a   third  party  claims   administrator,  Effective   Claims
 Management, Inc. ("ECM"), formerly known as Effective Litigation Management.

     The following is additional  business segment information for the  three
 months ended March 31 (in thousands):

                                   2003            2002
                                 -------         -------
       Revenues
       --------
   Personal Lines Group         $ 14,033        $  5,148
   Commercial Lines Group          4,687               -
                                 -------         -------
       Consolidated             $ 18,720        $  5,148
                                 =======         =======

       Pre-tax Income
       --------------
   Personal Lines Group         $    948        $    274
   Commercial Lines Group            300               -
   Corporate                        (638)             25
                                 -------         -------
       Consolidated             $    610        $    299
                                 =======         =======



 Note 6 - Stock-based Compensation

     At  March   31,  2003,  the   Company  had   two  stock-based   employee
 compensation plans for employees and  a non-qualified plan for  non-employee
 directors, which are described more fully in  Note 11 to the Form 10KSB  for
 December 31, 2002.    Prior to 2003, the  Company accounted for those  plans
 under the  recognition and  measurement provisions  of APB  Opinion No.  25,
 "Accounting for Stock Issued to Employees", and related Interpretations.  No
 stock-based  employee  compensation cost  was reflected in  2002 net income.
 Effective January 1, 2003,  the Company adopted  the fair value  recognition
 provisions  of  FASB   Statement  No.  123,   "Accounting  for   Stock-Based
 Compensation"  ("SFAS  123").   Under the  prospective  method  of  adoption
 selected by the Company under the provisions of SFAS 148, compensation  cost
 is recognized for all  employee awards granted,  modified, or settled  after
 the beginning of  the fiscal year  in which the  recognition provisions  are
 first  applied.  Results  for  prior  years  have  not  been  restated.  The
 following table illustrates the effect on net income and earnings per  share
 if the  fair value  based method  had been  applied to  all outstanding  and
 unvested awards in each period.

                                                  3 Months Ended
                                                     March 31
     (in thousands)                             2003            2002
                                              -------         -------
     Net income (loss) as reported           $  8,555        $ (1,499)

     Add: Stock-based employee compensation
     expenses included in reported net
     income, net of related tax effects             -               -

     Deduct:  Total stock-based employee
     compensation expense determined under
     fair value based method for all
     awards, net of related tax effects            (9)             (8)
                                              -------         -------
     Pro forma net income (loss)             $  8,456        $ (1,507)
                                              =======         =======
     Earnings per share:
       Basic-as reported                     $   0.77        $  (0.14)
                                              =======         =======
       Basic-pro forma                       $   0.77        $  (0.14)
                                              =======         =======
       Diluted-as reported                   $   0.75        $  (0.13)
                                              =======         =======
       Diluted-pro forma                     $   0.75        $  (0.13)
                                              =======         =======


 Note 7 - Earnings per Share

 The Company has adopted the provisions of Statement of Financial  Accounting
 Standards  No.  128  ("SFAS  No.  128"),  "Earnings  Per  Share,"  requiring
 presentation of both basic and diluted earnings per share.  A reconciliation
 of the  numerators  and denominators  of  the basic  and  diluted  per-share
 computations (in thousands, except number of shares) as required by SFAS No.
 128 is presented below:

                                                Income       Shares    Per-Share
                                             (Numerator) (Denominator)  Amount
                                              ---------   -----------   ------
 For the three months ended March 31, 2003:
   Basic Earnings per Share
   Income available to common stockholders:
     Income before cumulative effect of
       change in accounting principle        $    403     11,166,800   $  0.04
     Cumulative effect of change in
       accounting Principle                         -     11,166,800         -
     Extraordinary gain                         8,152     11,166,800      0.73
                                              -------                   ------
     Net income                              $  8,555     11,166,800   $  0.77
                                              =======                   ======

   Diluted Earnings per Share
   Income available to common stockholders:
     Income before cumulative effect of
       change in accounting principle        $    403     11,166,800   $  0.04
   Effect of Dilutive Securities:
     Options and warrants                           -        278,111         -
                                              -------                   ------
     Income before cumulative effect of
       change in accounting principle             403     11,444,911      0.04
     Cumulative effect of change in
       accounting Principle                         -     11,444,911         -
     Extraordinary gain                         8,152     11,444,911      0.71
                                              -------                   ------
     Net income                              $  8,555     11,444,911   $  0.75
                                              =======                   ======

 For the three months ended March 31, 2002:
   Basic Earnings per Share
   Income available to common stockholders:
     Income before cumulative effect of
       change in accounting principle        $    195     11,049,133   $  0.02
     Cumulative effect of change in
       accounting principle                    (1,694)    11,049,133     (0.16)
     Extraordinary gain                             -     11,049,133         -
                                              -------                   ------
     Net loss                                $ (1,499)    11,049,133   $ (0.14)
                                              =======                   ======

  Diluted Earnings per Share
  Income available to common stockholders:
    Income before cumulative effect of
      change in accounting principle         $    195    11,049,133    $  0.02
  Effect of Dilutive Securities:
    Options and warrants                            -       202,367          -
                                              -------                   ------
   Income before cumulative effect of
     change in accounting principle               195    11,251,500       0.02
   Cumulative effect of change in
     accounting principle                      (1,694)   11,251,500      (0.15)
   Extraordinary gain                               -    11,251,500          -
                                              -------                   ------
   Net loss                                  $ (1,499)   11,251,500    $ (0.13)
                                              =======                   ======

 Options to purchase 771,000  shares of common stock  at prices ranging  from
 $0.65 to $1.00  and options to  purchase 477,550 shares  of common stock  at
 prices ranging from $0.69  to $1.00 were outstanding  at March 31, 2003  and
 2002, respectively,  but were  not included  in the  computation of  diluted
 earnings per share  because the inclusion  would result  in an  antidilutive
 effect in  periods where  the option  exercise  price exceeded  the  average
 market price per share for the period.


 Note 8 - Comprehensive Income

 A reconciliation between net income and  total comprehensive income for  the
 three months ended March  31, 2003 and 2002,  respectively, is provided  (in
 thousands) in the table below:

                                               March           March
                                                2003            2002
                                              -------         -------

    Net income (loss)                        $  8,555        $ (1,499)
         Unrealized gains/losses on fixed
          maturities available for sale            35               -
                                              -------         -------
    Total comprehensive income (loss)        $  8,590        $ (1,499)
                                              =======         =======


 A reconciliation of  the change in accumulated other comprehensive loss as
 of March 31, 2003 and December 31, 2002 is provided (in thousands) in the
 table below:

                                                           March      Dec.
                                                           2003       2002
                                                          ------     ------
 Accumulated other compr. loss at beginning of period:   $  (162)   $     -
   Unrealized gains/losses on fixed maturities
     available for sale                                       35          -
   Change in additional minimum pension liability              -       (162)
                                                          ------     ------
 Accumulated other comprehensive loss                    $  (127)   $  (162)
                                                          ======     ======


 Item 2.  Management's Discussion and Analysis or Plan of Operation.

     Introduction.  HFS and its wholly owned subsidiaries (collectively,  the
 "Company")  engage  in the sale of property and casualty insurance products.
 The  Company's   business  involves  marketing,  underwriting  and   premium
 financing of non-standard automobile insurance primarily in Texas,  Arizona,
 and New  Mexico, marketing  of commercial  insurance in  Texas, New  Mexico,
 Idaho, Oregon and Washington, and other insurance related services.

     On January 27, 2003, the Company received final approval from the  AZDOI
 for the  acquisition of  Phoenix,  effective  as  of  January  1, 2003.  The
 acquisition of  Phoenix  expanded the  Company's  geographic reach  in  non-
 standard automobile  insurance from  its traditional  base in  Texas to  the
 states of New Mexico and Arizona.

     The  Company   pursues  its  business   activities  through   integrated
 insurance groups handling  non-standard personal  automobile insurance  (the
 "Personal Lines  Group") and  commercial  insurance (the  "Commercial  Lines
 Group").

     The Personal Lines Group provides non-standard automobile liability  and
 physical damage insurance through  Hallmark and Phoenix  for drivers who  do
 not qualify for or cannot obtain standard-rate insurance.  Hallmark  assumes
 100% of  the premium  and  losses on  business  produced by  its  affiliated
 managing  general  agency,  AHGA  through  a  reinsurance  arrangement  with
 an unaffiliated  company State  &  County.  Under  a  separate  retrocession
 agreement, Hallmark retains 45% of the premium and losses assumed from State
 and County and  retrocedes 55% of  the premium and  losses to its  principal
 reinsurer, Dorinco.  HFC  finances  Hallmark's annual  and six-month  policy
 premiums through  its premium  finance program.  AHGA manages the  marketing
 of  Hallmark  policies  through  independent  agents.  HCS  provides  claims
 adjustment,  salvage,  subrogation  recovery  and  litigation  services   to
 Hallmark.   Phoenix  underwrites  non-standard auto  insurance  produced  by
 independent agents appointed by the company and retains 100% of the  premium
 and losses for the business it writes.

     The  Commercial Lines  Group,  through Millers  GA,  markets  commercial
 insurance policies through independent agents.  Millers GA produces policies
 on behalf of Clarendon National Insurance  Company ("CNIC") under a  general
 agency agreement where it receives a commission based on the premium written
 with CNIC.  FAR provides financial and administrative services to Millers GA
 and an unaffiliated third party.  ECM provides fee-based claims  adjustment,
 salvage and subrogation recovery, and litigation services on behalf of  CNIC
 and another unaffiliated third party.


 Financial Condition and Liquidity

     The Company's  sources of funds are  principally derived from  insurance
 related operations.  Major sources of funds from operations include premiums
 collected  (net  of  policy   cancellations  and  premiums  ceded),   ceding
 commissions,  premium  finance  service  charges  and  service  fees.  Other
 sources of funds are from financing and investment activities.

     On a consolidated basis, the Company's total cash, cash equivalents  and
 investments (excluding restricted cash) at March  31, 2003 and December  31,
 2002 were  $49.9  million and  $25.2  million, respectively.  The  Company's
 liquidity increased during the first quarter of 2003 as compared to December
 31, 2002  principally  as a  result  of  the acquisition  of  Phoenix  which
 increased cash and investments of $22.8 million.  The remaining increase  of
 $1.9 million is attributable to Hallmark's  increased level of retention  of
 business under its retrocession agreement with Dorinco coupled with improved
 underwriting results driven by loss ratio improvements.

     Net cash  provided by  the Company's  consolidated operating  activities
 was $8.9 million for the first quarter of 2003 compared to net cash used  by
 operating activities of  $0.7 million  for the  first quarter  of 2002.  The
 acquisition of Phoenix effective January 1, 2003 and the acquisition of  the
 Commercial Lines Group effective December 1, 2002 played a significant  role
 in  the  Company's  increased  cash  flow  from  operations.   Additionally,
 improved underwriting results have further contributed to the Company's cash
 flow from operations.

     Cash provided by investing  activities during the first quarter of  2003
 increased $7.7  million as  compared to  the  first  quarter  of  2002.  The
 acquisition of Phoenix produced  a net cash increase  of $6.9  million.  The
 remaining increase was  primarily attributable to  maturities of  short-term
 investments during the first quarter of 2003.

     Cash  used in  financing activities  increased by  $0.9 million  in  the
 first quarter  of 2003  as compared  to the  same period  of 2002  due to  a
 decrease in net advances from the  Company's premium finance lender and  the
 repayment of notes payable to Dorinco during the first quarter of 2003.

     HFS  is dependent  on dividend  payments and  management fees  from  its
 insurance companies and  free cash flow  of its  non-insurance companies  to
 meet operating expenses and  debt obligations.  As  of March 31, 2003,  cash
 and invested assets of HFS were $0.3  million.  Cash and invested assets  of
 non-insurance subsidiaries were $0.9 million as of March 31, 2003.  Property
 and casualty insurance companies domiciled in the State of Texas are limited
 in the  payment  of dividends  to  their shareholders  in  any  twelve-month
 period, without the prior written consent of the Commission of Insurance, to
 the greater of statutory net  income for the prior  calendar year or 10%  of
 its statutory policyholders' surplus  as of the prior  year end.   Dividends
 may only be  paid from unassigned  surplus funds.   During 2003,  Hallmark's
 ordinary dividend capacity is $0.8 million.   Hallmark paid $0.2 million  of
 dividends to HFS during  the first quarter of  2003.  Phoenix, domiciled  in
 Arizona, is limited  in the payment  of dividends to  the lesser  of 10%  of
 prior year policyholder's  surplus or  prior year's  net investment  income,
 without prior  written approval  from the  AZDOI.   During  2003,  Phoenix's
 ordinary dividend capacity is $0.6 million.   Phoenix paid $0.15 million  of
 dividends to HFS during the first quarter of 2003.

     The   Texas  Department   of  Insurance   ("TDI")  regulates   financial
 transactions between  Hallmark, HFS  and affiliated  companies.   Applicable
 regulations required  TDI's  approval  of  management  and  expense  sharing
 contracts and similar  transactions.  Although  TDI has approved  Hallmark's
 payment of management fees to HFS and commissions to AHGA, since the  second
 half of  2000 management  has elected  not  to pay  all the  commissions  or
 management fees.  Hallmark paid only  nominal management fees to HFS  during
 the first quarter of 2002 and did not pay any management fees to HFS  during
 the first quarter of 2003.

     The  AZDOI   regulates  financial  transactions   between  Phoenix   and
 affiliated companies.  Applicable  regulations required AZDOI's approval  of
 management and expense sharing contracts and similar transactions.  Although
 the AZDOI has approved  payments of management fees  to HFS, management  has
 elected to not pay a management fee to HFS in the first quarter of 2003.

     At March 31, 2003, Hallmark  reported statutory capital and surplus of
 $8.4 million, unchanged as compared to December 31, 2002.  Hallmark reported
 a statutory net income of $0.3 million during the first quarter of 2003  and
 paid dividends of $0.2 million to  HFS during the same quarter.   Hallmark's
 premium-to-surplus ratio  for the  twelve months  ended March  31, 2003  was
 increased to 2.78  to 1, as  compared to 2.63  for the  twelve months  ended
 December 31, 2002, primarily  as a result of  increases in its retention  of
 underwriting risk in the  second and fourth quarters  of 2002.  The  minimum
 statutory  capital  and  surplus  required  for  Hallmark  by  the  TDI   is
 $2,000,000.  Hallmark's statutory capital and  surplus as of March 31,  2003
 exceeds the minimum requirements by 322%.

     At March  31, 2003, Phoenix  reported statutory capital  and surplus  of
 $10.3 million, up from $10.1 million at December 31, 2002.  Phoenix reported
 a de minimis statutory net loss during the first quarter of 2003, paid $0.15
 million in dividends to  HFS during the first  quarter of 2003 and  reversed
 certain previously non-admitted  receivables.  Phoenix's  premium-to-surplus
 ratio for the twelve months ended March 31, 2003 was 2.52 to 1.  The minimum
 statutory capital and  surplus required  for Phoenix  by the  AZDOI is  $1.5
 million.   Phoenix's statutory  capital and  surplus as  of March  31,  2003
 exceeds the minimum requirements by 587%.

     The  Company believes  that  it has  sufficient  liquidity to  meet  its
 ongoing  insurance,  operational  and  capital  expenditure  needs  for  the
 foreseeable  future.   However,  management  is  continuing  to  investigate
 opportunities for future growth  and additional capital  may be required  to
 fund expansion of the Company.  Further, the acquisitions of the  Commercial
 Lines Group  and Phoenix  were  financed by  a  bridge loan  from  Newcastle
 Partners, L.P. ("Newcastle"), an affiliate of the Company's Chairman of  the
 Board of Directors and Chief Executive Officer, Mark E. Schwarz. The Company
 has previously announced its intention to retire this debt through a  rights
 offering  of its common stock  to its existing shareholders during 2003.  If
 the Company is unable to complete the rights offering, reschedule payment of
 the  bridge loan from  Newcastle, or find  alternative methods to reduce the
 bridge loan debt, the Company may be unable to repay the bridge loan when it
 matures in the fourth quarter of 2003.


 Results of Operations

     Net income before  cumulative effect of  change in accounting  principle
 and extraordinary gain  was $0.4  million for  the quarter  ended March  31,
 2003, compared to $0.2 million  for the quarter ended  March 31, 2002.   The
 improvement in operating earnings for the first quarter of 2003 compared  to
 the first quarter  of 2002  reflects improved  loss ratios  of the  Personal
 Lines Group  (including the acquisition of Phoenix)  and the acquisition  of
 the Commercial Lines Group.

     The following is additional  business segment information for the  three
 months ended March 31 (in thousands):


                                   2003            2002
                                 -------         -------
       Revenues
       --------
   Personal Lines Group         $ 14,033        $  5,148
   Commercial Lines Group          4,687               -
                                 -------         -------
       Consolidated             $ 18,720        $  5,148
                                 =======         =======

       Pre-tax Income
       --------------
   Personal Lines Group         $    948        $    274
   Commercial Lines Group            300               -
   Corporate                        (638)             25
                                 -------         -------
       Consolidated             $    610        $    299
                                 =======         =======

     A.M.  Best  is  a rating  agency  which  offers  comprehensive  data  to
 insurance professionals and  is the  world's oldest  and most  authoritative
 source of insurance company ratings and information.  Its Best's Ratings are
 the industry's standard measure of insurer financial performance.  In  April
 2003, A.  M. Best  upgraded Hallmark's  rating from  C+ to  B- and  upgraded
 Phoenix from D to B-.


 Personal Lines Group

     Gross premiums written (prior  to reinsurance) for the first quarter  of
 2003 increased 56%, and net  premiums written (after reinsurance)  increased
 147%, in  relation to  the same  period  in  2002.  The  increase  in  gross
 premiums written  and  net  premiums  written  is  principally  due  to  the
 acquisition of Phoenix  effective January  1, 2003,  which contributed  $6.6
 million to gross and  net premiums written.   The disproportionate  increase
 between gross premiums written and net  premiums written is attributable  to
 (i) Hallmark's increased retention of underwriting risk from 35% during  the
 first quarter of 2002 to 45% during the first quarter of 2003,  and (ii) the
 acquisition  of  Phoenix,  which  does not  cede any current portion  of its
 written  premiums.  Hallmark's ability to increase its risk retention during
 the  past  twelve months  is  directly related  to its improved underwriting
 results  which  have  generated  increased  statutory surplus  and a capital
 contribution made by HFS to Hallmark in the fourth quarter  of  2002.  Under
 its current reinsurance agreement with Dorinco,  Hallmark is at its  maximum
 risk retention of 45%.

     Gross premiums  earned (prior to reinsurance)  for the first quarter  of
 2003 increased 65%,  and net premiums  earned (after reinsurance)  increased
 197%.  The  increase in  gross premiums earned  and net  premiums earned  is
 principally due  to the  acquisition of  Phoenix effective  January 1,  2003
 which  contributed  $6.1 million  to  gross and  net  premiums  earned.  The
 disproportionate increase  between gross  premiums earned  and net  premiums
 earned is  attributable to  Hallmark's increased  retention of  underwriting
 risk and the acquisition of Phoenix..

     Finance charges of $1.2 million for the first quarter of 2003  increased
 85% ($0.6  million) from  the same  quarter of  2002.   Finance charges  are
 composed of two components:  premium  finance note interest and direct  bill
 fee income.   The increase  in finance charges  is principally  due to  $0.5
 million in direct  bill fee  income from Phoenix  for the  first quarter  of
 2003.

     Processing  and service  fees represent  fees earned  on processing  and
 servicing contracts with unaffiliated  managing general agencies ("MGAs").
 Processing and service fees declined 77% as a result of the  discontinuation
 of all unaffiliated MGA programs.

     Other income increased $0.2 million as a result of the sale of all  four
 retail captive insurance offices of the Company effective February 28, 2003.
 The four offices were sold for a total purchase price of $0.2 million.

      Incurred loss  ratios prior to and  after reinsurance, for the  quarter
 ended March 31, 2003  were approximately 69.1%  and 72.1%, respectively,  as
 compared to 65.2% prior to and  78.3% after reinsurance for the same  period
 of  2002.  The converse  movements of  the loss  ratios prior  to and  after
 reinsurance are the  result of the  acquisition of Phoenix,  which does  not
 reinsure  any  of  its  current primary underwriting  risk.  Phoenix's  loss
 ratios prior to and after reinsurance were 69.1% and 69.5%, respectively for
 the  first  quarter  of 2003.  Hallmark's incurred loss ratios  prior to and
 after reinsurance for  the  first  quarter  of  2003  were  69.1% and 74.5%,
 respectively.  Hallmark's improvement in its loss  ratio  after  reinsurance
 is  primarily the  result  of  increases  in  net premiums earned due to the
 Company's increased retention from 35% to 45%, which  lessens the impact  of
 loss corridor amounts (as discussed in Note 2).

     Acquisition costs, net represents the amortization of acquisition  costs
 (and credits)  deferred over  the past  twelve months  and the  deferral  of
 acquisition costs (and credits)  incurred in the current  period.  The  $0.2
 million decrease in acquisition costs, net is primarily due to the  combined
 effect of a  (i) decrease in  ceding commission income  as Hallmark  retains
 more underwriting risk and (ii) the acquisition of Phoenix which deferred  a
 percentage of its net acquisition costs during the first quarter of 2003.

     Other  acquisition  and underwriting  expenses  increased  $2.5  million
 during the first quarter of 2003  as compared to the  same period of 2002.
 Expenses increased  approximately $2.2  million due  to the  acquisition  of
 Phoenix.   Approximately $0.3  million of  the increase  is attributable  to
 increased variable costs such as commissions,  front fees and premium  taxes
 as a result of increased premium volume of Hallmark.


 Commercial Lines Group

     Commission income  represents net commissions  earned by the  Commercial
 Lines Group on  insurance policies serviced  by Millers GA  for CNIC.   This
 $3.4 million was a  new source of revenue for the Company as a result of the
 acquisition of the companies in the Commercial Lines Group in December 2002.

     Processing and  service fees represent  fees earned by  FAR and ECM  for
 claims and accounting administration for CNIC and another unaffiliated third
 party.  This $1.3  million was a new  source of revenue as  a result of  the
 acquisition of the companies in the Commercial Lines Group in December 2002.


     Other acquisition  and underwriting expenses  of $4.4 million  represent
 the expenses  associated  with the  production  and servicing  of  insurance
 policies for  CNIC, the  largest component  of  which is  independent  agent
 commissions.


 Corporate

     Operating  expenses  include  expenses  related  to  general   corporate
 overhead.   Operating  expenses  increased $0.3  million  during  the  first
 quarter of 2003 as  compared to the same  period of 2002.   The majority  of
 this increase  is  related to  legal  and consulting  fees  associated  with
 acquisitions and  other  corporate  matters.   Additionally,  the  shift  in
 management structure  from 2002  to 2003  has increased  salaries and  other
 overhead during the first quarter of 2003.

     Interest  expense increased  $0.2 million  during the  first quarter  of
 2003 as compared to 2002.  This increase is related to the interest  expense
 on the note payable to Newcastle.  This note payable was used to finance the
 acquisition of the Commercial Lines Group and Phoenix.


 Item 3.  Controls and Procedures.

     The Chief Executive Officer  and Chief Financial Officer of the  Company
 have evaluated the Company's disclosure controls and procedures as of a date
 within 90 days of  the filing date  of this report  and have concluded  that
 such controls and procedures are effective.  There have been no  significant
 changes in the Company's  internal controls or in  other factors that  could
 significantly  affect  these  controls  subsequent  to  the  date  of  their
 evaluation.

 Risks Associated with Forward-Looking Statements Included in this Form
 10-QSB

     This Form 10-QSB contains certain forward-looking  statements within the
 meaning of Section 27A of the Securities Act of 1933 and Section 21E of  the
 Securities Exchange Act  of 1934, which  are intended to  be covered  by the
 safe harbors  created  thereby.   These  statements include  the  plans  and
 objectives  of  management  for  future  operations,  including  plans   and
 objectives relating to  future growth of  the Company's business  activities
 and availability of funds.   The forward-looking statements included  herein
 are  based  on  current  expectations   that  involve  numerous  risks   and
 uncertainties.  Assumptions relating to the foregoing involve judgments with
 respect to,  among other  things, future  economic, competitive  and  market
 conditions, regulatory framework, weather-related events and future business
 decisions, all of which  are difficult or  impossible to predict  accurately
 and many of  which are  beyond the  control of  the Company.   Although  the
 Company  believes  that  the  assumptions  underlying  the   forward-looking
 statements are reasonable, any of the  assumptions could be inaccurate  and,
 therefore, there can  be no  assurance that  the forward-looking  statements
 included in this Form  10-QSB will prove to  be accurate.   In light of  the
 significant  uncertainties  inherent   in  the  forward-looking   statements
 included herein, the inclusion of such information should not be regarded as
 a representation by the Company or any other person that the objectives  and
 plans of the Company will be achieved.

<PAGE>

                                   PART II

                              OTHER INFORMATION


      Item 1.      Legal Proceedings.

                   Except  for  routine  litigation  incidental  to the
                   business of  the Company,  neither the  Company, nor
                   any of the properties  of the Company was subject to
                   any material pending or threatened legal proceedings
                   as of the date of this report.


      Item 2.      Changes in Securities.

                   None.


      Item 3.      Defaults on Senior Securities.

                   None.


      Item 4.      Submission of Matters to a Vote of Security-Holders.

                   None


      Item 5.      Other Information.

                   None.


      Item 6.      Exhibits and Reports on Form 8-K.

               (a) The exhibits listed in  the Exhibit Index following
                   the signature page are filed herewith.

               (b) Reports on Form 8-K.  The registrant filed a current
                   report  on Form 8-K on  January 27, 2002, disclosing
                   its   acquisition  of  Phoenix  Indemnity  Insurance
                   Company.   The  registrant filed an  amended current
                   report on Form 8-K/A on February 14, 2003, providing
                   financial statements required in connection with its
                   acquisition  of Millers  GA, FAR, and  ECM, formerly
                   known  as  Effective  Litigation  Management.    The
                   registrant filed a current report on March 14, 2003,
                   disclosing   its  fourth  quarter   and  year  ended
                   earnings for December 31, 2002.


<PAGE>

                                  SIGNATURES

 In accordance with the requirements of the Exchange Act, the registrant  has
 caused this report to be signed on its behalf by the undersigned,  thereunto
 duly authorized.

                          HALLMARK FINANCIAL SERVICES, INC.
                                    (Registrant)



 Date: May 15, 2003   /s/ Mark E. Schwarz
                      -------------------
                      Mark E. Schwarz, Chairman (Chief Executive Officer)


 Date: May 15, 2003   /s/ Timothy A. Bienek
                      ---------------------
                      Timothy A. Bienek, President (Chief Operating Officer)


 Date: May 15, 2003   /s/ Scott K. Billings
                      ---------------------
                      Scott K. Billings, Vice President
                      (Chief Financial Officer/Principal Accounting Officer)

<PAGE>


                                CERTIFICATIONS


 I, Mark E. Schwarz, Chief Executive Officer of Hallmark Financial  Services,
 Inc. (the "Company"), certify that:

     1.    I have  reviewed  this quarterly  report  on Form  10-QSB  of  the
 Company;

     2.    Based on my knowledge, this quarterly report does not contain  any
 untrue statement  of  a material  fact  or omit  to  state a  material  fact
 necessary to make the statements made,  in light of the circumstances  under
 which such statements were made, not  misleading with respect to the  period
 covered by this quarterly report;

     3.    Based  on  my  knowledge,  the  financial  statements,  and  other
 financial information included in this  quarterly report, fairly present  in
 all material respects  the financial  condition, results  of operations  and
 cash flows of  the Company as  of, and for,  the periods  presented in  this
 quarterly report;

     4.    The Company's other certifying officers and I are responsible  for
 establishing and maintaining disclosure controls and procedures (as  defined
 in Exchange Act Rules 13a-14 and 15d-14) for the Company and have:

       a)  designed such disclosure  controls and procedures  to ensure  that
 material information  relating to  the Company,  including its  consolidated
 subsidiaries,  is  made  known  to  us  by  others  within  those  entities,
 particularly during  the period  in which  this  quarterly report  is  being
 prepared;

       b)  evaluated the effectiveness of  the Company's disclosure  controls
 and procedures as of a date within 90 days prior to the filing date of  this
 quarterly report (the "Evaluation Date"); and

       c)  presented in  this  quarterly  report our  conclusions  about  the
 effectiveness of  the  disclosure  controls  and  procedures  based  on  our
 evaluation as of the Evaluation Date;

     5.    The Company's  other certifying  officers  and I  have  disclosed,
 based on our most recent evaluation, to the Company's auditors and the audit
 committee of the  Company's board of  directors (or  persons performing  the
 equivalent functions):

       a)  all  significant  deficiencies  in  the  design  or  operation  of
 internal controls  which could  adversely affect  the Company's  ability  to
 record, process, summarize and report financial data and have identified for
 the Company's auditors any material weaknesses in internal controls; and

       b)  any fraud, whether  or not material,  that involves management  or
 other employees who  have a significant  role in  the registrant's  internal
 controls; and

     6.    The Company's other  certifying officers and  I have indicated  in
 this quarterly report  whether there  were significant  changes in  internal
 controls or  in  other  factors that  could  significantly  affect  internal
 controls subsequent to the date of our most recent evaluation, including any
 corrective actions  with regard  to  significant deficiencies  and  material
 weaknesses.

 Date: May 15, 2003

                               /s/ Mark E. Schwarz
                               -------------------
                               Mark E. Schwarz, Chief Executive Officer

<PAGE>

                                CERTIFICATIONS


 I,  Scott  K.  Billings,  Chief  Financial  Officer  of  Hallmark  Financial
 Services, Inc. (the "Company"), certify that:

     1.    I have  reviewed  this quarterly  report  on Form  10-QSB  of  the
 Company;

     2.    Based on my knowledge, this quarterly report does not contain  any
 untrue statement  of  a material  fact  or omit  to  state a  material  fact
 necessary to make the statements made,  in light of the circumstances  under
 which such statements were made, not  misleading with respect to the  period
 covered by this quarterly report;

     3.    Based  on  my  knowledge,  the  financial  statements,  and  other
 financial information included in this  quarterly report, fairly present  in
 all material respects  the financial  condition, results  of operations  and
 cash flows of  the Company as  of, and for,  the periods  presented in  this
 quarterly report;

     4.    The Company's other certifying officers and I are responsible  for
 establishing and maintaining disclosure controls and procedures (as  defined
 in Exchange Act Rules 13a-14 and 15d-14) for the Company and have:

       a)  designed such disclosure  controls and procedures  to ensure  that
 material information  relating to  the Company,  including its  consolidated
 subsidiaries,  is  made  known  to  us  by  others  within  those  entities,
 particularly during  the period  in which  this  quarterly report  is  being
 prepared;

       b)  evaluated the effectiveness of  the Company's disclosure  controls
 and procedures as of a date within 90 days prior to the filing date of  this
 quarterly report (the "Evaluation Date"); and

       c)  presented in  this  quarterly  report our  conclusions  about  the
 effectiveness of  the  disclosure  controls  and  procedures  based  on  our
 evaluation as of the Evaluation Date;

     5.    The Company's  other certifying  officers  and I  have  disclosed,
 based on our most recent evaluation, to the Company's auditors and the audit
 committee of the  Company's board of  directors (or  persons performing  the
 equivalent functions):

       a)  all  significant  deficiencies  in  the  design  or  operation  of
 internal controls  which could  adversely affect  the Company's  ability  to
 record, process, summarize and report financial data and have identified for
 the Company's auditors any material weaknesses in internal controls; and

       b)  any fraud, whether  or not material,  that involves management  or
 other employees who  have a significant  role in  the registrant's  internal
 controls; and

     6.    The Company's other  certifying officers and  I have indicated  in
 this quarterly report  whether there  were significant  changes in  internal
 controls or  in  other  factors that  could  significantly  affect  internal
 controls subsequent to the date of our most recent evaluation, including any
 corrective actions  with regard  to  significant deficiencies  and  material
 weaknesses.

 Date: May 15, 2003

                               /s/ Scott K. Billings
                               ---------------------
                               Scott K. Billings, Chief Financial Officer

<PAGE>

                                Exhibit Index


 Exhibit                         Description
 -------                         -----------

 10 ( a )     Tenth Amendment  to  Office Lease  for  14651  Dallas Parkway,
              Suite 900,  dated  May 5th,  2003,  between  American Hallmark
              Insurance Company  of Texas and  Fults Management  Company, as
              agent for The Prudential Insurance Company of America.

 10 ( b )     General Agency Agreement  between Millers  General Agency, Inc
              and Clarendon National Insurance Company, effective August 15,
              2001.

 10 ( c )     Claims  Administration   Agreement  between   Millers  General
              Agency,  Inc.   and  Clarendon  National   Insurance  Company,
              effective August 15, 2001.

 10 ( d )     Claims Services Agreement between Millers General Agency, Inc.
              and Effective  Claims  Management, Inc.,  effective  March 25,
              2003.

 99.1         Certification of Chief Executive Officer Pursuant to 18 U.S.C.
              1350 Enacted by Section 906 of the Sarbanes-Oxley Act of 2002.

 99.2         Certification of Chief Financial Officer Pursuant to 18 U.S.C.
              1350 Enacted by Section 906 of the Sarbanes-Oxley Act of 2002.