UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 11-K
| x | Annual report pursuant to section 15(d) of the Securities Exchange Act of 1934 |
For the fiscal year ended December 31, 2005.
OR
| ¨ | Transition report pursuant to section 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
Commission file number 333-44735
| A. | Full title of the plan and address of the plan, if different from that of the issuer below: |
HRH RETIREMENT SAVINGS PLAN
| B. | Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: |
HILB ROGAL & HOBBS COMPANY
4951 Lake Brook Drive, Suite 500
GLEN ALLEN, VIRGINIA 23060
(804) 747-6500
INDEX
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan Administrator has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
| | | | | | | | |
| | | | HRH RETIREMENT SAVINGS PLAN |
| | |
| | | | By: Hilb Rogal & Hobbs Company, Plan Administrator |
| | | | |
Date: | | June 29, 2006 | | | | By: | | /S/ MICHAEL DINKINS |
| | | | | | | | Michael Dinkins Executive Vice President and Chief Financial Officer Hilb Rogal & Hobbs Company |
HRH RETIREMENT SAVINGS PLAN
Financial Statements and Supplemental Schedules
December 31, 2005 and 2004 and year ended December 31, 2005
with Report of Independent Registered Public Accounting Firm
HRH RETIREMENT SAVINGS PLAN
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
December 31, 2005 and 2004 and year ended December 31, 2005
Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Plan Administrator
HRH Retirement Savings Plan
Glen Allen, Virginia
We have audited the accompanying statements of net assets available for benefits of the HRH Retirement Savings Plan as of December 31, 2005 and 2004 and the related statement of changes in net assets available for benefits for the year ended December 31, 2005. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the Standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the HRH Retirement Savings Plan as of December 31, 2005 and 2004 and the related statement of changes in net assets available for benefits for the year ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets held for investment purposes at the end of the year and delinquent participant contributions are presented for purposes of additional analysis and are not a required part of the basic financial statements but are supplementary disclosures required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ BDO Seidman, LLP
Richmond, Virginia
June 20, 2006
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HRH RETIREMENT SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
| | | | | | |
| | | December 31 |
| | | 2005 | | 2004 |
Assets | | | | | | |
Investments, at fair value: | | | | | | |
Mutual Funds | | $ | 126,249,096 | | $ | 107,518,993 |
Collective Trust Funds | | | 17,906,133 | | | 4,794,676 |
Cash | | | 420,888 | | | 10,005,593 |
HRH Common Stock | | | 10,846,804 | | | 13,674,588 |
Participant Loans | | | 4,285,126 | | | 4,834,256 |
Investment, at contract value: | | | | | | |
Group Annuity Contract | | | 47,562,947 | | | 42,483,248 |
| | | | | | |
Total investments | | | 207,270,994 | | | 183,311,354 |
Contribution receivable due from Hilb Rogal & Hobbs Company | | | 5,932,449 | | | 5,268,486 |
| | | | | | |
Net assets available for benefits | | $ | 213,203,443 | | $ | 188,579,840 |
| | | | | | |
See accompanying notes.
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HRH RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year ended December 31, 2005
| | | |
Additions | | | |
Investment income | | $ | 3,806,952 |
| |
Contributions: | | | |
Hilb Rogal & Hobbs Company | | | 5,932,094 |
Employees | | | 23,180,326 |
| | | |
| | | 29,112,420 |
| | | |
Total additions | | | 32,919,372 |
| |
Deductions | | | |
Benefit payments | | | 20,171,270 |
Transfers related to plan mergers | | | 312,554 |
Administrative expenses | | | 39,827 |
| | | |
Total deductions | | | 20,523,651 |
| |
Net realized and unrealized appreciation in fair value of investments | | | 12,227,882 |
| | | |
| |
Net increase | | | 24,623,603 |
Net assets available for benefits at beginning of year | | | 188,579,840 |
| | | |
Net assets available for benefits at end of year | | $ | 213,203,443 |
| | | |
See accompanying notes.
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HRH RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2005
1. Description of the Plan
The following description of the HRH Retirement Savings Plan (the Plan) provides only general information. Participants should refer to the summary plan description for a more complete description of the Plan’s provisions.
General
The Plan is a defined contribution plan covering substantially all employees of Hilb Rogal & Hobbs Company (the Company). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Diversified Investment Advisors (the Record Keeper) is the Plan’s record keeper.
On December 31, 2004, the Plan received a transfer of funds from the Zywave, Inc. Employees Profit Sharing Plan relating to participants who joined the Plan in 2004 as the result of a 2004 Company acquisition. The Plan assumed control of these assets as of that date with a value of $9,537,092. These assets were held as cash as of December 31, 2004. In January 2005, these assets were converted to Plan investments and allocated to the appropriate Plan participants.
Contributions
The Plan includes a before-tax savings feature pursuant to Section 401(k) of the Internal Revenue Code (IRC). Under the before-tax savings feature, participants may elect to contribute from 1% to 100% of their salary on a before-tax basis but at no time shall this contribution exceed limits established by the IRC. Effective June 1, 2005, this feature was amended to permit a contribution range from 1% to 50%. Participants may also contribute amounts representing distributions from other qualified defined benefit or contribution plans. Each year the Company makes a minimum matching contribution from current or accumulated profits of 100% of the first 3% of compensation contributed by a participant. In addition, each year the Company may contribute additional amounts from current or accumulated profits at the option of the Company’s Board of Directors based on a percentage of participants’ compensation. No such contributions were made for 2005.
Participants can elect among several available options for investing their share of Company contributions and voluntary contributions. The accounts of those participants who do not make an investment election are automatically invested in the HRH Conservative Allocation Fund.
Participant Accounts
Each participant’s account is credited with the participant’s contributions and allocations of (a) the Company’s contributions and (b) Plan earnings, and is charged with an allocation of administrative expenses. These allocations are based upon a participant’s earnings or account balance, as defined. Forfeited balances of terminated participants’ nonvested accounts are used to reduce future Company contributions.
Vesting
Participants immediately vest in their voluntary contributions and earnings thereon. Vesting in the Company’s contribution plus actual earnings thereon is based on their years of continuous service. A participant is 100% vested after five years of credited service. Should the Plan terminate at some future time, participants will become 100% vested in their accounts.
4
HRH RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS—(Continued)
Loans to Participants
The administrator may make loans to a participant from the participant’s account. Loans are secured by the participant’s remaining account balance. Loans of terminated participants and loans in default are treated as distributions to the participant. Principal and interest are repaid ratably through semi-monthly payroll deductions.
Participants may obtain loans based on the vested value of their account balances; however, loans cannot exceed the lesser of 50% of the participant’s account value or a maximum of $50,000 in accordance with the Department of Labor’s regulations on loans to participants. Loans shall bear a reasonable rate of interest established by the Plan Administrator based on local prevailing rates, and must be repaid over a period not to exceed 5 years unless the loan is used to purchase the participant’s primary residence, in which case the loan term may not exceed 15 years.
Payment of Benefits
Upon termination of service, a participant, subject to Plan limitations, may elect to receive either a lump-sum amount equal to the value of his or her account, or monthly, quarterly, semi-annual or annual installments.
Administrative Expenses
Substantially all investment and administrative expenses of the Plan are paid by the Plan.
2. Significant Accounting Policies
The accounting records of the Plan are maintained on the accrual basis.
The Plan’s investments are stated at fair value except for its group annuity contract in the Stable Value 5 (Transamerica) Fund which is stated at contract value. Collective trust funds are reported at current unit value which is based on quoted market prices. Shares of mutual funds are valued at quoted market prices which represent the net asset value of shares held by the Plan at year end. HRH common stock is valued at the quoted market price on the last business day of the Plan year. The participant loans are valued at their outstanding balances.
The Stable Value 5 (Transamerica) Fund is reported at contract value, which approximates fair value, as the group annuity contract has been deemed to be fully benefit responsive. Contract value represents contributions plus earnings, less withdrawals or transfers by participants. Beginning with the contract’s inception on December 1, 2004, interest is guaranteed at a crediting interest rate of 4.10% through December 31, 2005. Subsequent to December 31, 2005, the crediting interest rate may be reset quarterly, semi-annually or annually as elected by the Plan. The crediting interest rate is determined by the issuer based on several agreed-upon criteria, but cannot be less than 0%. The average effective yield for this fund in 2005 approximated 4.10%.
The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
3. Investments
All of the Plan’s investments are held by Investors Bank and Trust Company, trustee of the Plan.
5
HRH RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS—(Continued)
Individual investments representing 5 percent or more of the fair value of net assets available for benefits were as follows:
| | | | | | |
| | | December 31 |
| | | 2005 | | 2004 |
Mutual Funds: | | | | | | |
Diversified Stock Index Fund | | $ | 11,963,654 | | $ | 11,780,005 |
Diversified Value & Income Fund | | | 12,213,883 | | | 10,026,483 |
American Funds Growth of America R4 | | | 22,073,341 | | | 17,413,710 |
American Funds Euro Pacific Growth Fund R4 | | | 16,466,399 | | | 13,999,836 |
Federated Capital Appreciation Fund A | | | 10,679,648 | | | 12,585,911 |
Transamerica Premier Balanced Fund | | | 12,581,628 | | | 14,173,744 |
Cash | | | 420,888 | | | 10,005,593 |
Common Stock Fund: | | | | | | |
HRH Common Stock Fund | | | 10,846,804 | | | 13,674,588 |
Group Annuity Contract: | | | | | | |
Stable Value 5 (Transamerica) | | | 47,562,947 | | | 42,483,248 |
During 2005, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated (depreciated) in value as follows:
| | | |
Mutual Funds | | $ | 9,946,949 |
HRH Common Stock | | | 624,451 |
Collective Trust Funds | | | 1,656,482 |
| | | |
| | $ | 12,227,882 |
| | | |
4. Income Tax Status
The Plan received a determination letter from the Internal Revenue Service dated April 20, 2006, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (IRC) and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the IRC to maintain its qualification. The plan administrator believes the Plan currently is designed and being operated in compliance with the applicable requirements of the IRC and therefore, believes that the Plan continues to qualify under Section 401(a) and the related trust continues to be tax exempt.
5. Related-Party Transactions
Certain plan assets are invested in funds sponsored by the Record Keeper and stock of the Company. Transactions involving these investments are considered to be party-in-interest transactions for which statutory exemption exists under the Department of Labor Regulations.
6. Delinquent Participant Contributions
During 2005, the Company failed to remit certain employee deferrals to the Plan aggregating $1,500 in a timely manner according to U.S. Department of Labor regulations.
The Company computed lost earnings of $86 on this 2005 deposit and subsequently remitted the deposits and made a contribution for lost earnings to the Plan.
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SUPPLEMENTAL SCHEDULES
HRH RETIREMENT SAVINGS PLAN
EIN 54-1194795, PLAN 001
SCHEDULE H, LINE 4i — SCHEDULE OF ASSETS (HELD AT END OF YEAR)
December 31, 2005
| | | | | |
Identity of Issue, Borrower, Lessor or Similar Party | | Description of Investment, Including Maturity Date, Rate of Interest, Par or Maturity Value | | Current Value |
Mutual Funds: | | | | | |
Diversified Core Bond Fund* | | 934,706 shares | | $ | 9,692,905 |
Diversified Stock Index * | | 1,436,213 shares | | | 11,963,654 |
Diversified Value & Income Fund* | | 1,050,205 shares | | | 12,213,883 |
American Funds Growth of America R4 | | 719,470 shares | | | 22,073,341 |
American Funds Euro Pacific Growth Fund R4 | | 405,277 shares | | | 16,466,399 |
Baron Small Cap Fund | | 349,127 shares | | | 8,089,270 |
Calamos Growth A Fund | | 132,498 shares | | | 7,295,318 |
Federated Capital Appreciation Fund A | | 425,823 shares | | | 10,679,648 |
Oppenheimer Developing Markets N Fund | | 222,780 shares | | | 7,979,994 |
Transamerica Premier Balanced Fund* | | 532,443 shares | | | 12,581,628 |
Royce Opportunity Fund | | 594,646 shares | | | 7,213,056 |
| | | | | |
| | | | | 126,249,096 |
Collective Trust Funds: | | | | | |
Diversified Real Estate Fund* | | 319,456 shares | | | 5,466,720 |
HRH Conservative Allocation Portfolio | | 128,814 shares | | | 1,378,731 |
HRH Moderate Allocation Portfolio | | 497,145 shares | | | 5,371,158 |
HRH Aggressive Allocation Portfolio | | 506,113 shares | | | 5,689,524 |
| | | | | |
| | | | | 17,906,133 |
Cash | | — | | | 420,888 |
| | |
Group Annuity Contract: | | | | | |
Stable Value 5 (Transamerica)* | | — | | | 47,562,947 |
| | |
HRH Common Stock* | | 977,877 shares | | | 10,846,804 |
| | |
Participant Loans* | | Interest rates ranging from 5.10% to 10.50%; maturity dates vary with remaining terms from 1 to 14 years. | | | 4,285,126 |
| | | | | |
Total investments | | | | $ | 207,270,994 |
| | | | | |
| * | Indicates party-in-interest to the Plan. |
7
HRH RETIREMENT SAVINGS PLAN
EIN 54-1194795, PLAN 001
SCHEDULE OF DELINQUENT PARTICIPANT CONTRIBUTIONS
December 31, 2005
| | | | | | | | | | |
| | | Participant Contributions Transferred Late to Plan During Year | | Not Corrected | | Corrected | | Pending Correction | | Total That Constitute Non-Exempt Prohibited Transactions |
2005 | | $1,500 | | — | | $1,500 | | — | | $1,500 |
| | | | | | | | | | |
8
