Exhibit 99.1
HUB International Reports Record '02 Results, Affirms '03 Guidance;
Acquisitions and Organic Growth Enhance Prospects
CHICAGO--(BUSINESS WIRE)--March 6, 2003--Hub International Limited
(NYSE:HBG and TSX:HBG):
Highlights:
2002 Results
-- Revenue Increases 43% to US$220 million from US$154 million
-- Organic Commission Growth Increases to 13% from 5%
-- Net Earnings Rise 194% to US$29.4 million, or US $1.06 Per
Diluted Share
-- Pretax Margin Expands to 20% from 10%
-- Net Margin Grows to 13% from 6.5%
Fourth Quarter Results
-- Revenue Increases 20% to US$64 million from US$53 million
-- Organic Commission Growth Increases to 15% from 9%
-- Net Earnings Rise 182% to US$8.3 million, or US$0.26 Per
Diluted Share
-- Pretax Margin Expands to 21% from 8.5%
-- Net Margin Grows to 13% from 5.5%
Hub International Limited (NYSE:HBG and TSX:HBG), a leading North
American insurance brokerage, today reported record revenue and
earnings for both the fourth quarter and year ended December 31, 2002.
Martin P. Hughes, chairman and chief executive officer, said the
company benefited from both a hard pricing market and effective
selling in achieving the strong results. Acquisitions contributed
significantly to increasing revenue, while organic commission growth
improved to 13% for the year from 5% in 2001, and Hughes indicated
that the environment continues to be favorable for 2003.
"Insurance premium rates continue to rise in almost all areas,
while insurers continue to be selective about the coverage they
underwrite," he said. "This difficult environment provides an
opportunity for Hub to create increased value for both insurers and
clients."
Hughes said Hub's access to high quality insurers is increasingly
critical for clients seeking to maintain or obtain coverage, while
Hub's large and profitable book of business represents an attractive
and cost-efficient pipeline to these insurers.
"In this environment, it's most important that we increase our
customer base and provide the strong service levels that build client
retention," he added. "More customers create more opportunities for
expanded revenue over an extended period."
Annual Revenues US$220 million
Hub International, which operates through 11 hub brokerages in the
United States and Canada, recorded revenue of $220 million in 2002, up
43% from $154 million in 2001. U.S. revenue rose 78% to $134 million,
while revenue of Canadian operations grew 9% to $86 million. U.S.
subsidiaries represented 61% of consolidated revenue in 2002, up from
49% in 2001, while Canadian subsidiaries accounted for 39% of
consolidated revenue, down from 51%.
"We made progress in our efforts to expand our U.S. presence,
acquiring two U.S. hubs and six smaller brokerages in 2002," Hughes
said. "It's our goal to reach a total of 15 U.S. hubs over the next
five years, increasing both our revenue base and our geographic
coverage."
Commission income, which accounts for more than 91% of revenue,
increased 40% to $201 million from $143 million in 2001, while
non-commission income (contingent commissions, volume overrides and
other) increased 75% to $19.2 million, the company reported. Organic
growth in commission income, the equivalent of same-store sales,
increased to a 13% rate in 2002 from 5% in 2001 and 5-6% in the softer
pricing environments that preceded 2001, according to the company.
Organic commission growth rates for 2002 were 13% in the United States
and 13% in Canada.
"Organic growth was driven primarily by higher insurance premium
rates and new business, while a weak economy limited some demand for
insurance coverage," Hughes noted. "Many clients compensated for
higher insurance rates by reducing limits, increasing deductibles or
eliminating some coverage. At the same time, lower activity levels at
client companies reduced total spending on such volume-sensitive
coverage as employee benefits and general liability."
Hughes said the combination of higher insurance premium rates and
an economic rebound could yield significant organic growth
opportunities in the near future, although the specific timing of any
recovery is uncertain.
"As our acquisitions and organic growth lead to deeper market
penetration and higher customer counts, we position ourselves to
capitalize fully on the benefits of an economic recovery," Hughes
said.
Hub's strong revenue growth led to a 194% increase of net earnings
to $29.4 million in 2002 from $10.0 million in 2001, while diluted
earnings per share grew by 112% to $1.06 from $0.50. These numbers
were affected by two nonrecurring events. Hub sold its Old Lyme
insurance underwriting subsidiaries during 2002, recognizing a gain of
$2.6 million, or $0.09 cents per diluted share, on the sale. The
company also completed its initial public offering in the United
States, raising $88.1 million in net proceeds on the sale of 6.9
million shares of common stock. Those new shares, in addition to
shares utilized in making acquisitions, increased fully diluted shares
outstanding by 54% to 33.5 million at year end.
At the same time, profit margins widened dramatically during 2002.
Pre-tax margin increased 100% to 20% of revenue, while net margin rose
to 13% from 6.5%. Return on average equity expanded to 14% from 8% in
2001. Selling, general and administrative expenses declined to 20.4%
of revenue from 23% just a year earlier. Compensation expense declined
to 54% of revenue from 57% in the prior year. This change in
compensation reflected both the company's growth and a decision by key
managers to accept options to buy restricted common shares in lieu of
50% of their earned cash performance bonus for 2002. This decision
increased diluted earnings by $2.1 million, or $0.07 cents per diluted
share, due to the lower cost of stock option grants versus cash
compensation.
Hub's net earnings and diluted earnings per share were influenced
by a number of non-cash expenses. Hub began expensing stock options
during 2002, which led to a $1.1 million non-cash expense recognition
during the year, and the company adopted CICA Section 3062 and SFAS
142, "Goodwill and other Intangible Assets," leading to a cessation of
goodwill amortization. Netting out these and other non-cash items,
diluted cash earnings increased 126% to $31.8 million, or $1.05 per
diluted share, from $14.1 million, or $0.70 per share, respectively.
"Clearly, 2002 was a very strong year for Hub, both financially
and operationally," Hughes said. "We achieved strong growth from the
brokerages acquired in 2001 and we added new brokerages to our family
in 2002. We increased our importance to both underwriters and clients,
including the middle-market companies that are our primary targets and
the smaller brokerages that are serviced by our wholesale operations.
"The sale of Old Lyme made us more of a pure play in insurance
brokerage, while our U.S. IPO and positive cash flow enabled us to pay
down debt and finance expansion. The initial public offering, with a
listing on the New York Stock Exchange, helped raise our profile in
the U.S. market, and we continue to use share ownership to align key
managers with all our shareholders."
Hughes stated that Hub's earn-out obligation to the former
shareholders of Burnham Insurance Group has now been calculated and
will be paid in the first quarter of 2003. "The final earn-out of
$22.2 million, payable as to $8.4 million in cash and $13.8 million in
our common shares, is reflective of the tremendous success and future
potential of Burnham's financial institutions division. We were also
able to use the stock portion of the earn-out payment, about 1.2
million shares, to our advantage," added Hughes. "We negotiated a
release of all of the put option rights held by the former Burnham
shareholders and in exchange agreed to remove the contractual transfer
restrictions from both the earn-out shares and 1.4 million shares that
we previously issued when we acquired Burnham. The termination of the
put options allows us to remove them as a potential liability from our
balance sheet and eliminate the related earnings' volatility, so it
was a win for all parties."
Hughes added that the company made substantial progress in
coordination and consolidation efforts among its subsidiaries. During
the past two years, the company has implemented several programs to
eliminate redundancies and reduce spending in technology, purchasing
and other overhead functions. Hub also has linked its operations
through initiatives such as: Hub Academy, a training program for
producers now being expanded to include customer service
representatives; appointment of internal practice leaders who act as
global resources; and increased coordination of executives with
similar responsibilities.
"These measures have gained increased traction in the past year
and we look forward to greater coordination among our brokerages in
the future," Hughes said. "Although direct measurement is difficult,
we anticipate benefits in cost reductions, efficiencies and revenue
from these initiatives."
Fourth Quarter Revenue $63.6 Million
Fourth quarter growth was consistent with full-year performance,
the company reported. Revenue increased 20% to $63.6 million from
$53.0 million, while net earnings grew 182% to $8.3 million from $3.0
million. Diluted earnings per share increased 86% to $0.26 from $0.14.
"Our fourth quarter results were exceptionally strong, due in
large part to organic growth and new business development, which
increased profit margins," Hughes said. "As we've noted previously, we
have some seasonality in our results, with our strongest performance
usually occurring in the 2nd and 4th quarters."
Looking Ahead
Hughes said the company is confirming its guidance, released in
January, for diluted earnings per share in the $1.08 - $1.17 range for
2003.
Net earnings are expected to increase at a faster rate than
earnings per share, he added, as the average level of shares
outstanding will be higher in 2003 than in 2002. The increase in
average shares outstanding will reflect the company's mid-2002 U.S.
IPO, shares used in 2002 acquisitions, shares issued as part of a
previously discussed earnout for the former shareholders of Burnham
and the issuance of restricted shares and restricted share units as
part of the company's equity incentive plan. It's also notable that
HUB gained $2.6 million, or $0.09 cents per diluted share, through the
sale of Old Lyme in the second quarter of 2002, a gain that will not
be repeated.
"We are pleased to have ended the year on a high note, and we are
extremely confident and enthusiastic about our prospects for 2003,"
Hughes said. "Our strategic growth plan has brought us a large number
of motivated, aggressive individuals who are building our business
across North America. Our acquisitions have proven to be accretive.
Finally, market conditions and sales prospects are better than they
have been in many years."
Earnings Conference Call and Webcast
Hub International will host a conference call and webcast at 10:30
AM EST, on Thursday, March 6, 2003, to discuss financial results,
industry conditions and guidance. To listen to the call, connect to
www.hubinternational.com approximately 10 minutes prior to its
scheduled start, providing ample time to register and download any
needed software. The webcast will be archived on the company's
website, http://www.hubinternational.com, for approximately 90 days
following the event.
Headquartered in Chicago, IL, Hub International is a leading North
American insurance brokerage that has grown rapidly since its
formation in 1998 through mergers, acquisitions and organic growth. It
provides a broad array of property and casualty, life and health,
employee benefits, investment and risk management products and
services through offices located in the United States and Canada. Hub
International's strategy is to expand its market share in the highly
fragmented U.S. insurance brokerage industry by acquiring quality
firms in key geographic regions that focus on servicing middle-market
commercial businesses. In addition, Hub plans to leverage its
decentralized approach, differentiate its service, and capitalize on
its scale to provide broader product offerings to its clients through
multiple distribution channels. Hub International currently has eleven
large "hub" brokerages that have significant market presence in their
geographic regions in the U.S. and Canada. Each hub provides insurance
brokerage services and manages the various other Hub International
offices in its territory. The hub brokerages are responsible for
growth through sales, service and fold-in acquisitions. The hub
offices report to the head office which, in addition to monitoring the
activity of each hub, retains responsibility for identifying and
acquiring additional hub brokerages.
This press release may contain forward-looking statements which
reflect our current views with respect to future events and financial
performance. These forward-looking statements relate, among other
things, to our plans and objectives for future operations and are
subject to uncertainties and other factors that could cause actual
results to differ materially from such statements. These uncertainties
and other factors include, but are not limited to, risks associated
with implementing our business strategies, identifying and
consummating acquisitions, integrating acquired brokerages, attaining
greater market share, developing and implementing effective
information technology systems, recruiting and retaining qualified
employees, fluctuations in the premiums charged by insurance companies
with corresponding fluctuations in our premium-based revenue, any loss
of services of key executives, industry consolidation, increased
competition in the industry, fluctuations in the demand for insurance
products and the passage of new legislation subjecting our business to
regulation in jurisdictions where we operate. We caution readers not
to place undue reliance on these forward-looking statements, which
speak only as of the date of this press release. Additional
information regarding these risks and other factors that could cause
Hub International's actual results to differ materially from our
expectations is contained in the company's filings with the Securities
and Exchange Commission. Except as otherwise required by federal
securities laws, Hub International undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
HUB INTERNATIONAL LIMITED
Consolidated Statements of Earnings
For the three months and twelve months ended
December 31, 2002 and 2001
(in thousands of U.S. dollars, except per share amounts)
Fourth quarter Twelve months
---------------------- ---------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
(unaudited) (unaudited) (unaudited)
Revenue
Commission income $ 60,675 $ 51,082 $ 200,792 $ 143,063
Contingent commissions
and volume overrides 1,266 575 11,464 5,899
Other 1,687 1,296 7,704 5,031
---------- ---------- ---------- ----------
63,628 52,953 219,960 153,993
---------- ---------- ---------- ----------
Expenses
Compensation 34,544 30,140 118,678 88,015
Selling, occupancy and
administration 11,575 12,622 44,932 35,276
Depreciation 1,414 1,551 5,492 3,940
Interest Expense 1,109 2,867 7,317 7,447
Goodwill and other
intangible asset
amortization 524 1,839 1,671 4,940
(Gain) loss on disposal of
investment held for sale,
property, equipment and
other assets (101) 113 (2,679) (173)
Loss (gain) on put
option liability 762 (719) (186) (719)
Non-cash stock option
compensation 503 - 1,078 -
---------- ---------- ---------- ----------
50,330 48,413 176,303 138,726
---------- ---------- ---------- ----------
Net earnings before
income taxes 13,298 4,540 43,657 15,267
---------- ---------- ---------- ----------
Provision for income tax expense
Current 2,006 (399) 12,851 4,967
Future 2,964 1,989 1,405 295
---------- ---------- ---------- ----------
4,970 1,590 14,256 5,262
---------- ---------- ---------- ----------
Net earnings 8,328 2,950 29,401 10,005
Interest on subordinated
convertible debentures 457 - 2,520 -
---------- ---------- ---------- ----------
Net diluted earnings $ 8,785 $ 2,950 $ 31,921 $ 10,005
========== ========== ========== ==========
Earnings per share
Basic $ 0.31 $ 0.15 $ 1.27 $ 0.53
Diluted $ 0.26 $ 0.14 $ 1.06 $ 0.50
Weighted average shares
outstanding - Basic
(000's) 26,508 19,543 23,181 19,012
Weighted average shares
outstanding - Diluted
(000's) 33,334 21,666 30,199 20,105
HUB INTERNATIONAL LIMITED
Reconciliation to Diluted Cash Earnings and
Diluted Cash Earnings per Share
For the three months and twelve months ended
December 31, 2002 and 2001
(in thousands of U.S. dollars, except per share amounts)
Fourth quarter Twelve months
---------------------- ---------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
(unaudited) (unaudited) (unaudited)(unaudited)
Diluted net earnings $ 8,785 $ 2,950 $ 31,921 $ 10,005
Amortization 524 1,839 1,671 4,940
(Gain) loss on disposal
of investment held for
sale, property, equipment
and other assets (101) 113 (2,679) (173)
Loss (gain) on put
option liability 762 (719) (186) (719)
Non-cash stock option
compensation 503 - 1,078 -
---------- ---------- ---------- ----------
Diluted cash earnings $ 10,473 $ 4,183 $ 31,805 $ 14,053
========== ========== ========== ==========
Diluted cash earnings
per share $ 0.31 $ 0.19 $ 1.05 $ 0.70
HUB INTERNATIONAL LIMITED
Pro-forma impact of implementation of CICA Sec 3062 and SFAS 142
For the three months and twelve months ended
December 31, 2002 and 2001
(in thousands of U.S. dollars, except per share amounts)
Fourth quarter Twelve months
---------------------- ---------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
(unaudited) (unaudited) (unaudited)
Net earnings $ 8,328 $ 2,950 $ 29,401 $ 10,005
Add back:
Goodwill amortization - 1,329 - 3,996
---------- ---------- ---------- ----------
Net earnings adjusted
for goodwill $ 8,328 $ 4,279 $ 29,401 $ 14,001
---------- ---------- ---------- ----------
Basic EPS - Reported $ 0.31 $ 0.15 $ 1.27 $ 0.53
Basic EPS - Adjusted
for goodwill $ 0.31 $ 0.22 $ 1.27 $ 0.74
Diluted EPS - Reported $ 0.26 $ 0.14 $ 1.06 $ 0.50
Diluted EPS - Adjusted
for goodwill $ 0.26 $ 0.20 $ 1.06 $ 0.70
HUB INTERNATIONAL LIMITED
Consolidated Organic Growth
For the year ended December 31, 2002
(in thousands of U.S. dollars, except percentages)
Adjustment
Total for
Net (Acquisitions)
YTD Revenue Total Net Growth and Organic
2002 2001 Change($) (%) Disposals Growth(%)
------------------ --------- ------ ------------- ----------
Total
- -----
Commission
Income $200,792 $143,063 $ 57,729 40% $ (39,213) 13%
Contingent
Profits 11,464 5,899 5,565 94% (4,194) 23%
Other
Income 7,704 5,031 2,673 53% (2,702) -1%
------------------ --------- ------ ------------- ----------
Total $219,960 $153,993 $ 65,967 43% $ (46,109) 13%
------------------ --------- ------ ------------- ----------
USA
- ---
Commission
Income $120,557 $ 71,202 $ 49,355 69% $ (39,906) 13%
Contingent
Profits 7,780 1,693 6,087 360% (4,214) 111%
Other
Income 5,812 2,534 3,278 129% (2,729) 22%
------------------ --------- ------ ------------- ----------
Total $134,149 $ 75,429 $ 58,720 78% $ (46,849) 16%
------------------ --------- ------ ------------- ----------
Canada
- ------
Commission
Income $ 80,235 $ 71,861 $ 8,374 12% $ 693 13%
Contingent
Profits 3,684 4,206 (522) -12% 20 -12%
Other
Income 1,892 2,497 (605) -24% 27 -23%
------------------ --------- ------ ------------- ----------
Total $ 85,811 $ 78,564 $ 7,247 9% $ 740 10%
------------------ --------- ------ ------------- ----------
HUB INTERNATIONAL LIMITED
Consolidated Organic Growth
For the three months ended December 31, 2002
(in thousands of U.S. dollars, except percentages)
Adjustment
Total for
Net (Acquisitions)
4th Qtr Revenue Total Net Growth and Organic
2002 2001 Change($) (%) Disposals Growth(%)
------------------ --------- ------ ------------- ----------
Total
- -----
Commission
Income $ 60,675 $ 51,082 $ 9,593 19% $ (1,714) 15%
Contingent
Profits 1,266 575 691 120% (40) 113%
Other
Income 1,687 1,296 391 30% (62) 25%
------------------ --------- ------ ------------- ----------
Total $ 63,628 $ 52,953 $ 10,675 20% $ (1,816) 17%
------------------ --------- ------ ------------- ----------
USA
- ---
Commission
Income $ 39,489 $ 32,674 $ 6,815 21% $ (1,833) 15%
Contingent
Profits 1,192 243 949 391% (40) 374%
Other
Income 1,471 925 546 59% (67) 52%
------------------ --------- ------ ------------- ----------
Total $ 42,152 $ 33,842 $ 8,310 25% $ (1,940) 19%
------------------ --------- ------ ------------- ----------
Canada
- ------
Commission
Income $ 21,186 $ 18,408 $ 2,778 15% $ 119 16%
Contingent
Profits 74 332 (258) -78% - -78%
Other
Income 216 371 (155) -42% 5 -40%
------------------ --------- ------ ------------- ----------
Total $ 21,476 $ 19,111 $ 2,365 12% $ 124 13%
------------------ --------- ------ ------------- ----------
HUB INTERNATIONAL LIMITED
Consolidated Balance Sheets
As of December 31, 2002 and 2001
(in thousands of U.S. dollars)
2002 2001
---------- ----------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 40,642 $ 26,979
Trust cash 53,648 50,426
Accounts and other receivables 136,567 101,313
Investment held for sale - 40,772
Income taxes receivable 2,153 1,460
Future income taxes 3,324 1,999
Prepaid expenses 1,587 2,471
---------- ----------
Total current assets 237,921 225,420
Goodwill 281,727 220,848
Other intangible assets 44,164 25,331
Property and equipment 21,298 20,935
Future income taxes 3,715 2,671
Other assets 8,051 7,091
---------- ----------
Total assets $ 596,876 $ 502,296
========== ==========
Liabilities
Current liabilities:
Bank debt $ - $ 55,000
Accounts payable and accrued liabilities 187,034 164,094
Contingent consideration payable 8,423 -
Income taxes payable 1,198 -
Future income taxes 1,164 1,387
Current portion long-term debt and
capital leases 3,029 4,169
---------- ----------
Total current liabilities 200,848 224,650
Long-term debt and capital leases 69,009 76,159
Subordinated convertible debentures 35,000 61,624
Future income taxes 7,745 4,592
---------- ----------
Total liabilities 312,602 367,025
---------- ----------
Commitments and Contingencies
Shareholders' equity
Share capital 235,197 125,506
Contingently issuable shares 13,743 -
Contributed surplus 1,234 -
Cumulative translation account 2,185 2,770
Retained earnings 31,915 6,995
---------- ----------
Total shareholders' equity 284,274 135,271
---------- ----------
Total liabilities and shareholders'
equity $ 596,876 $ 502,296
========== ==========
HUB INTERNATIONAL LIMITED
Consolidated Statements of Cash Flows
For the three months and twelve months ended
December 31, 2002 and 2001
(in thousands of U.S. dollars)
Fourth quarter Twelve months
---------------------- ---------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
(unaudited) (unaudited) (unaudited)
Operating activities
Net earnings $ 8,328 $ 2,950 $ 29,401 $ 10,005
Items not affecting
working capital:
Amortization and
depreciation 1,938 3,390 7,163 8,880
(Gain) loss on disposal
of investment held for
sale, property, equipment
and other assets (101) 113 (2,679) (173)
Loss (gain) on put
option liability 762 (719) (186) (719)
Non-cash stock option
compensation 503 - 1,078 -
Future income taxes 2,964 1,989 1,405 295
Non-cash working capital items
Trust cash (8,247) (22,609) (3,222) (38,070)
Accounts and other
receivables (44,266) (31,076) (26,665) (5,511)
Prepaid expenses 1,635 272 1,287 (299)
Accounts payable and
accrued liabilities 50,966 48,898 11,684 32,571
Income taxes (2,433) (765) (202) 1,863
---------- ---------- ---------- ----------
Net cash flows from
operating activities 12,049 2,443 19,064 8,842
---------- ---------- ---------- ----------
Investing activities
Property and equipment -
purchases (1,671) (3,218) (4,469) (10,298)
Property and equipment -
proceeds on sale 6 96 6 96
Proceeds from investment
held for sale - - 43,521 -
Purchase of subsidiaries,
net of cash received (46,160) (462) (50,713) (123,365)
Sale of subsidiaries 594 - 2,623 -
Other assets 567 168 684 (646)
---------- ---------- ---------- ----------
Net cash flows used for
investing activities (46,664) (3,416) (8,348) (134,213)
---------- ---------- ---------- ----------
Financing activities
Bank debt - 1,622 (55,000) 55,122
Long-term debt -
advances 37,074 636 51,175 21,096
Subordinated convertible
debentures - advances - - - 61,624
Long-term debt and
capital leases -
repayments (3,485) (1,648) (50,094) (5,154)
Subordinated convertible
debenture - repayment - - (26,800) -
Share capital - issued
for cash, net of
issue costs 49 - 88,147 3,621
Share capital -
repurchases - 4 - (281)
Dividends (1,268) (958) (4,481) (3,597)
---------- ---------- ---------- ----------
Net cash flows from
(used for) financing
activities 32,370 (344) 2,947 132,431
---------- ---------- ---------- ----------
Change in cash and
cash equivalents (2,245) (1,317) 13,663 7,060
Cash and cash equivalents
- Beginning of year 42,887 28,296 26,979 19,919
---------- ---------- ---------- ----------
Cash and cash equivalents
- End of year $ 40,642 $ 26,979 $ 40,642 $ 26,979
========== ========== ========== ==========
CONTACT: Hub International Limited
Vice President, Secretary and General Counsel
W. Kirk James, 312/279-4881
kjames@hubinternational.com