Exhibit 99.1
Hub International Posts Strong Growth for Third Quarter 2003;
Company Narrows Guidance to Lower End of Published Range
CHICAGO--(BUSINESS WIRE)--Oct. 30, 2003--Hub International Limited
(NYSE:HBG)(TSX:HBG):
Highlights:
-- Strong growth despite decline in financial institutions
business in the U.S.
-- Revenue increases 31% in quarter, 33% YTD
-- Net earnings grow 26% in quarter, 23% YTD
-- Diluted EPS totals $0.22 for quarter; $0.81 YTD
-- Organic growth totals 11% for quarter, 13% YTD
-- Full-year diluted EPS anticipated at lower end of $1.13-$1.18
guidance range
Hub International Limited (NYSE/TSX:HBG) today reported a 31%
increase in revenue and 26% growth of net earnings for the third
quarter ended September 30, 2003, due to both organic growth of 11%
and the impact of acquisitions. Diluted earnings per share increased
16% to $0.22 from $0.19 in the prior year third quarter. All
financials are reported in U.S. dollars.
"We achieved strong organic growth in most of our regional hubs
during the quarter," said Martin P. Hughes, Chairman and Chief
Executive Officer. "In Canada, we posted organic growth of 24% - a
solid 10% growth rate after removing the impact of foreign currency
exchange. In the United States, organic growth was a disappointing 1%,
but that seemingly low level was skewed by a sharp decline in a single
financial institutions product line. Absent that individual product
impact, U.S. organic growth would have been approximately 11%.
"One of our financial institutions products - creditor-placed
insurance - suffered from the convergence of several external factors.
Due in part to poor economic conditions, many banks tightened their
credit practices, leading to an acceleration of policy cancellations.
Although policy cancellations are a normal component of this product
line, the pace of policy cancellations in the third quarter
accelerated abnormally, leading to a significant drop in revenue and
profit for this product line."
Hughes noted that Hub has not lost any of its financial
institution relationships for this product line, but also noted that
the change in bank credit practices will impact this line of business
through the fourth quarter of 2003 and into the first quarter of 2004,
after which it is expected to return to its historically profitable
level.
Third Quarter Earnings Rise 26% on 31% Revenue Increase
In the third quarter ended September 30, 2003, revenue increased
31% to $64.7 million from $49.6 million a year earlier, reflecting
both an organic growth rate of 11% and the benefits of an active
acquisition program. A stronger Canadian dollar added 6 percentage
points to organic growth. In the third quarter, U.S. operations
represented 59% and Canadian operations represented 41% of total
revenue.
Organic growth, roughly the equivalent of same-store sales, was a
solid 11% in the third quarter, including a 1% growth rate in the
United States and a 24% growth rate in Canada. Absent currency
exchange effects, the Canadian organic growth rate was 10% and
consolidated organic growth was 5%. In the United States, the negative
impact of the financial institutions business reduced organic growth
by approximately $2.5 million or 10 percentage points; otherwise, U.S.
organic growth would have been approximately 11%.
Core commission income grew 30% to $60.8 million from $46.9
million in the prior year quarter, reflecting an organic growth rate
of 9% - or 3% after removing the impact of foreign currency exchange.
Contingent commissions and volume overrides, which are additional
payments from insurers based on profitability and volume, grew 145% to
$1.9 million from $0.8 million.
U.S. revenue increased 34% to $38.0 million from $28.3 million.
Core commission income grew 34% to $35.0 million, including a negative
organic growth rate of 2%, while contingent commissions and volume
overrides increased 126% to $1.6 million from $0.7 million.
Canadian revenue increased 26% to $26.7 million from $21.3
million, with 14% of the growth rate attributable to a stronger
Canadian dollar. Core commission income grew 24% to $25.8 million,
including organic growth of 23%, while contingent commissions and
volume overrides increased 348% to $0.3 million from $0.1 million.
Compensation increased both nominally and as a percentage of
revenue, climbing to 57% in the third quarter of 2003 from 54% in the
same period of 2002. A significant portion of the negative trend
resulted from the fact that compensation in the creditor-placed
insurance business is fixed, for the most part, and as a result did
not mirror the decline in revenue in that line of business for the
quarter. Selling, occupancy and administration expense held steady as
a percentage of revenue - 22% in the third quarter in both years.
Net earnings before income taxes grew 17% to $10.0 million from
$8.6 million, leading to a small decline in the pre-tax margin to 16%
from 17% a year earlier. The tax rate declined to 32% from 37% a year
earlier, reflecting in part the non-taxable nature of proceeds from a
company-owned life insurance policy.
Net earnings rose 26% to $6.8 million, or $0.22 per diluted share,
from $5.4 million, or $0.19 per diluted share. The current year
earnings included a non-taxable receipt of $1.0 million ($0.03 per
share) in company-owned life insurance proceeds. Excluding this item,
diluted earnings per share were $0.19 for both periods. Weighted
average shares outstanding (diluted) increased 7% to 33.8 million from
31.7 million a year earlier. The increase in shares resulted mostly
from shares issued for acquisitions and compensation programs.
Nine-Month Earnings Rise 23% on 33% Revenue Increase
For the nine months ended September 30, revenue increased 33% to
$207.7 million from $156.3 million a year earlier, reflecting both an
organic growth rate of 13% and the benefits of an active acquisition
program. A stronger Canadian dollar added 5 percentage points to
organic growth. In the first nine months of 2003, U.S. operations
represented 62% of total revenue, and Canadian operations represented
38% of revenue.
Organic growth was a solid 13% in the first nine months of 2003,
including a 6% growth rate in the United States and a 22% growth rate
in Canada. Absent currency exchange effects, the Canadian organic
growth rate was 11% and the consolidated organic growth rate was 8%.
Core commission income grew 32% to $184.7 million from $140.5
million, reflecting an organic growth rate of 12% - or 7% after
removing the impact of foreign currency exchange. Contingent
commissions and volume overrides, which are additional payments from
insurers based on profitability and volume, grew 68% to $17.2 million
from $10.2 million.
U.S. revenue increased 39% to $127.9 million from $92.0 million.
Core commission income grew 37% to $111.3 million, including organic
growth of 4%, while contingent commissions and volume overrides
increased 91% to $12.6 million from $6.6 million.
Canadian revenue increased 24% to $79.8 million from $64.3
million, with 11% of the growth rate attributable to a stronger
Canadian dollar versus the prior year period. Core commission income
grew 24% to $73.4 million from $59.3 million, including organic growth
of 22%, while contingent commissions and volume overrides increased
27% to $4.6 million from $3.6 million.
Compensation increased both nominally and as a percentage of
revenue, climbing to 55% of revenue in the first nine months of 2003
from 54% in the same period of 2002. The growth in compensation as a
percentage of revenue resulted primarily from the negative impact of
creditor-placed insurance. Selling, occupancy and administration
expense declined as a percentage of revenue to 20% from 21% in the
first nine months of 2002.
Net earnings before income taxes grew 32% to $39.9 million from
$30.4 million, leading to a stable pre-tax margin of 19% in both 2003
and 2002. Due in part to the non-taxable gain on the sale of insurance
subsidiaries last year, Hub's tax rate increased to 35% from 31% in
2002.
Net earnings grew 23% to $25.8 million in the first nine months of
2003 from $21.1 million a year earlier, leading to a net margin
decline to 12% in 2003 from 13% in the same period of 2002. Diluted
earnings per share grew 3% to $0.81 in the first nine months of 2003
from $0.79 a year earlier, including the $0.09 per share gain on the
sale of insurance subsidiaries in 2002 and $0.03 per share of life
insurance proceeds in 2003. Excluding these items, diluted earnings
per share increased 11%. Weighted average (diluted) shares outstanding
increased 16% to 33.9 million from 29.1 million, reflecting the
company's 2002 IPO and issuance of shares for acquisitions and
compensation programs.
Company Outlook
Hughes noted that third quarter results presented a complex mix of
positive and negative developments, most of them positive. However,
recent trends suggest continued weak results from creditor-placed
insurance into the first quarter of 2004 and an industry-wide slowing
of organic growth rates. Combining these factors into its budgets, Hub
now anticipates full-year diluted earnings for 2003 at the lower end
of its previously announced $1.13-$1.18 guidance range. In 2002,
full-year diluted earnings reached $1.06 per share, including a
one-time gain of $0.09 per share on the sale of two insurance
subsidiaries. Excluding that one-time gain, Hub's 2002 diluted
earnings per share were $0.97.
Company Schedules Conference Call and Webcast
The company will discuss third quarter results and updated
guidance on a conference call scheduled for 9:30 a.m. (CST), 10:30
a.m. (EST) on Thursday, October 30, 2003. The call may be accessed via
the internet by logging onto www.hubinternational.com and will be
available for replay for 90 days on Hub's website,
www.hubinternational.com. Participants can access the teleconference
by calling 800.901.5213, passcode 96135042.
Headquartered in Chicago, IL, Hub International is a leading North
American insurance brokerage that 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.
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 and Canadian Securities Commissions. 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 Organic Growth
For the three and nine months ended September 30, 2003
(in thousands of U.S. dollars, except percentages)
Net
Adjustments
Revenue For
----------------- Total (Acquisitions) Organic
Third quarter Total Growth And Growth
2003 2002 Change($) (%) Disposals (%)
--------------------------------------------------------
Total
- -----
Commission
Income $60,772 $46,872 $13,900 30% $(9,663) 9%
Contingent
Commissions
and Volume
Overrides 1,884 767 1,117 145% 8 146%
Other Income 2,015 1,913 102 5% (98) 0%
--------------------------------------------------------
Total $64,671 $49,552 $15,119 31% $(9,753) 11%
--------------------------------------------------------
USA
- ---
Commission
Income $35,031 $26,188 $8,843 34% $(9,330) -2%
Contingent
Commissions
and Volume
Overrides 1,580 700 880 126% 9 127%
Other Income 1,369 1,409 (40) -3% (98) -10%
--------------------------------------------------------
Total $37,980 $28,297 $9,683 34% $(9,419) 1%
--------------------------------------------------------
Canada
- ------
Commission
Income $25,741 $20,684 $5,057 24% $(333) 23%
Contingent
Commissions
and Volume
Overrides 304 67 237 348% (1) 347%
Other Income 646 504 142 28% - 28%
--------------------------------------------------------
Total $26,691 $21,255 $5,436 26% $(334) 24%
--------------------------------------------------------
Net
Adjustments
Revenue For
----------------- Total (Acquisitions) Organic
First nine months Total Growth And Growth
2003 2002 Change($) (%) Disposals (%)
--------------------------------------------------------
Total
- -----
Commission
Income $184,755 $140,498 $44,257 32% $(27,944) 12%
Contingent
Commissions
and Volume
Overrides 17,150 10,198 6,952 68% (2,849) 40%
Other Income 5,798 5,636 162 3% (314) -3%
--------------------------------------------------------
Total $207,703 $156,332 $51,371 33% $(31,107) 13%
--------------------------------------------------------
USA
- ---
Commission
Income $111,324 $81,198 $30,126 37% $(26,999) 4%
Contingent
Commissions
and Volume
Overrides 12,575 6,588 5,987 91% (2,769) 49%
Other Income 4,032 4,211 (179) -4% (319) -12%
--------------------------------------------------------
Total $127,931 $91,997 $35,934 39% $(30,087) 6%
--------------------------------------------------------
Canada
- ------
Commission
Income $73,431 $59,300 $14,131 24% $(945) 22%
Contingent
Commissions
and Volume
Overrides 4,575 3,610 965 27% (80) 25%
Other Income 1,766 1,425 341 24% 5 24%
--------------------------------------------------------
Total $79,772 $64,335 $15,437 24% $(1,020) 22%
--------------------------------------------------------
HUB INTERNATIONAL LIMITED
Consolidated Statements of Earnings
For the three months and nine months ended September 30, 2003 and 2002
(in thousands of U.S. dollars, except per share amounts)
Third quarter First nine months
2003 2002 2003 2002
--------------------------------------------
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Revenue
Commission income $60,772 $46,872 $184,755 $140,498
Contingent commissions
and volume overrides 1,884 767 17,150 10,198
Other 2,015 1,913 5,798 5,636
--------------------------------------------
64,671 49,552 207,703 156,332
--------------------------------------------
Expenses
Compensation 36,855 26,612 113,744 84,126
Selling, occupancy and
administration 13,974 11,103 40,888 33,357
Depreciation 1,551 1,444 4,462 4,078
Interest expense 1,269 1,110 4,152 6,208
Intangible asset
amortization 840 389 2,397 1,147
(Gain) on disposal of
property, equipment and
other assets (290) (6) (281) (2,578)
Loss/(gain) on put
option liability 73 (270) (167) (948)
Non-cash stock based
compensation 1,355 583 3,575 583
Proceeds from life
insurance (1,000) - (1,000) -
--------------------------------------------
54,627 40,965 167,770 125,973
--------------------------------------------
Net earnings before income
taxes 10,044 8,587 39,933 30,359
--------------------------------------------
Provision for income tax
expense (benefit)
Current 6,074 4,831 15,339 10,845
Future (2,850) (1,666) (1,239) (1,559)
--------------------------------------------
3,224 3,165 14,100 9,286
--------------------------------------------
Net earnings 6,820 5,422 25,833 21,073
Interest on subordinated
convertible debentures 471 460 1,414 2,063
Cash in lieu of dividends
on restricted share units 36 - 76 -
--------------------------------------------
Diluted net earnings $7,327 $5,882 $27,323 $23,136
============================================
Earnings per share
Basic $0.23 $0.21 $0.88 $0.96
Diluted $0.22 $0.19 $0.81 $0.79
Weighted average shares
outstanding
- Basic (000's) 29,327 26,416 29,326 22,060
Weighted average shares
outstanding
- Diluted (000's) 33,830 31,696 33,927 29,139
HUB INTERNATIONAL LIMITED
Consolidated Balance Sheets
As of September 30, 2003 and December 31, 2002
(in thousands of U.S. dollars)
2003 2002
--------- ---------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $79,061 $40,642
Trust cash 43,975 53,648
Accounts and other receivables 106,334 136,573
Income taxes receivable 458 2,153
Future income taxes 4,786 3,324
Prepaid expenses 1,889 1,587
--------- ---------
Total current assets 236,503 237,927
Goodwill 298,550 281,712
Other intangible assets 42,673 44,164
Property and equipment 23,894 21,298
Future income taxes 5,600 3,715
Other assets 6,986 8,060
--------- ---------
Total assets $614,206 $596,876
========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $156,625 $187,034
Contingent consideration payable - 8,423
Income taxes payable 959 1,198
Future income taxes 762 1,164
Current portion long-term debt and capital leases 3,582 3,029
--------- ---------
Total current liabilities 161,928 200,848
Long-term debt and capital leases 84,152 69,009
Subordinated convertible debentures 35,000 35,000
Future income taxes 9,658 7,745
--------- ---------
Total liabilities 290,738 312,602
--------- ---------
Commitments and Contingencies
Shareholders' equity
Share capital 247,110 235,197
Issuable shares 50 13,743
Contributed surplus 3,979 1,234
Cumulative translation account 19,133 2,185
Retained earnings 53,196 31,915
--------- ---------
Total shareholders' equity 323,468 284,274
--------- ---------
Total liabilities and shareholders' equity $614,206 $596,876
========= =========
HUB INTERNATIONAL LIMITED
Consolidated Statements of Cash Flows
For the three months and nine months ended September 30, 2003 and 2002
(in thousands of U.S. dollars)
Third quarter First nine months
--------------------------------------------
2003 2002 2003 2002
--------------------------------------------
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Operating activities
Net earnings $6,820 $5,422 $25,833 $21,073
Items not affecting
working capital:
Amortization and
depreciation 2,391 1,833 6,859 5,225
(Gain) on disposal of
property, equipment
and other assets (290) (6) (281) (2,578)
Loss/(gain) on put
option liability 73 (270) (167) (948)
Non-cash stock based
compensation 1,355 583 3,575 583
Future income taxes (2,850) (1,666) (1,239) (1,559)
Non-cash working capital items
Trust cash 106 (639) 9,673 5,025
Accounts and other
receivables 50,028 37,773 38,626 17,482
Prepaid expenses 283 (650) (185) (348)
Accounts payable and
accrued liabilities (44,340) (36,760) (38,463) (39,171)
Other assets 129 - (2,191) -
Income taxes 4,165 2,986 1,318 2,231
--------------------------------------------
Net cash flows from
operating activities 17,870 8,606 43,358 7,015
--------------------------------------------
Investing activities
Property and equipment -
purchases (1,547) (1,155) (4,589) (2,798)
Property and equipment -
proceeds on sale 17 - 44 -
Proceeds from investment
held for sale - - - 43,521
Purchase of
subsidiaries, net of
cash received 452 (3,245) (11,935) (4,553)
Sale of subsidiaries 613 18 1,064 2,029
Other assets 176 103 (539) 117
--------------------------------------------
Net cash flows from
(used for) investing
activities (289) (4,279) (15,955) 38,316
--------------------------------------------
Financing activities
Bank debt - - - (55,000)
Long-term debt -
advances 250 14,101 65,250 14,101
Long-term debt and
capital leases -
repayments (688) (4,503) (52,184) (46,609)
Subordinated convertible
debenture - repayment - - - (26,800)
Share capital - issued
for cash, net of issue
costs (28) 7 (59) 88,098
Proceeds from sale of
executive purchase plan
shares 222 - 222 -
Dividends paid (1,514) (1,263) (4,552) (3,213)
--------------------------------------------
Net cash flows from
(used for) financing
activities (1,758) 8,342 8,677 (29,423)
--------------------------------------------
Effect of exchange rate
changes on cash and cash
equivalents 160 - 2,339 -
--------------------------------------------
Change in cash and cash
equivalents 15,983 12,669 38,419 15,908
Cash and cash equivalents
- Beginning of period 63,078 30,218 40,642 26,979
--------------------------------------------
Cash and cash equivalents
- End of period $79,061 $42,887 $79,061 $42,887
============================================
CONTACT: Hub International Limited
Dennis J. Pauls, 312-279-4880 (Media Contact)
dpauls@hubinternational.com
or
Rosenbaum Advisors
Michael Rosenbaum, 847-749-1010 (Investor Contact)