EXHIBIT 10(bs)


 December 30, 2002

 Dorinco Reinsurance Company
 1320 Waldo Avenue, Suite 200
 Midland, Michigan  48642

 Attention:  David E. Chamberlain

 RE:  Loan Agreement dated  March 10, 1997,  and amended by  Amendment No.  1
      executed August 14, 1998, Amendment No.  2 effective March 5, 1999  and
      Amendment No.  3  effective  November 19,  1999  and  Amendment  No.  4
      effective November 8, 2001 (as  amended, the "Loan Agreement")  between
      Hallmark Financial Services, Inc. ("Borrower") and Dorinco  Reinsurance
      Company ("Lender")

 Dear Mr. Chamberlain:

 The purpose of this letter is to obtain written acknowledgement of  Lender's
 consent to  a  restructuring  of Borrower's  ownership  in  certain  of  its
 subsidiaries and waiver of Sections 6.g.  and 7.h. of the Loan Agreement  in
 connection with such restructuring.  This  letter will further evidence  the
 termination of that certain Stock Pledge and Security Agreement (the "Pledge
 Agreement") dated  March 11,  1997, between  Lender and  ACO Holdings,  Inc.
 ("ACO") and the release of all collateral held by Lender therunder.

 Borrower's Board  of  Directors proposes  to  cause ACO  to  contribute  the
 outstanding  capital  stock  of  Hallmark  Finance  Corporation  ("HFC")  to
 American Hallmark Insurance  Company of Texas  ("AH").  As  a result of  the
 restructuring, HFC would be a wholly-owned subsidiary of AH rather than ACO.
 HFC would continue to be an indirect wholly-owned subsidiary of Borrower.  A
 primary purpose of this restructuring is  to enhance AH's Statutory  Capital
 and Surplus (as defined in the Loan Agreement).

 In accordance with the Loan Agreement,  the capital stock of HFC is  pledged
 to Lender pursuant to  the terms of that  certain Stock Pledge and  Security
 Agreement (the "Pledge  Agreement") dated March  11, 1997,  between ACO  and
 Lender.   In order  to permit  the equity  in  HFC to  be included  in  AH's
 Statutory Capital and  Surplus, Lender has  agreed to  terminate the  Pledge
 Agreement and release  all of the  Pledged Stock (as  defined in the  Pledge
 Agreement) from Lender's security  interest.  Lender  has further agreed  to
 return to ACO all  certificates representing the Pledged  Stock and to  file
 releases of any financing statements covering the Pledged Stock.


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 Page 2
 December 30, 2002
 Dorinco Reinsurance Company Lender's Consent


 Please acknowledge  Lender's  consent  to the  proposed  restructuring,  its
 waiver of  Sections  6.g. and  7.h.  of  the Loan  Agreement  in  connection
 therewith and its  termination of the  Pledge Agreement and  release of  the
 Pledged Stock by  executing and returning  to the  undersigned the  enclosed
 duplicate original  of  this  letter.   Thank  you  for  your  courtesy  and
 cooperation in this matter.

 Very truly yours,

 HALLMARK FINANCIAL SERVICES, INC.


 By: /s/ Mark E. Schwarz
     ----------------------------------
     Mark E. Schwarz,
     Chairman of the Board of Directors


 CONSENTED TO AND AGREED AS OF DECEMBER 30, 2002:


 By: /s/ David E. Chamberlain
     ----------------------------------
     David E. Chamberlain
     Vice President