HRH Sees 53 Percent Profit Increase

By Mark E. Ruquet

NU Online News Service, July 22, 7:27 p.m.EDT?Hilb, Rogal & Hamilton Co. today reportedsecond-quarter profits rose 53 percent over the same period lastyear, with a revenue increase of 46 percent compared to the sameperiod last year.

For the three months ending June 30, the Richmond, Va.-basedinsurance broker reported net income rose $6.7 million, going from$12.5 million for the second quarter of 2002 to $19.1 million.Revenue increased $43.8 million, going from $95.7 million to $139.5million for this quarter. Earnings per share for the quarter rose12 cents, from 40 cents to 52 cents a share.

The firm attributed its results to a combination of growth fromacquisitions, new business and continued premium rate growth in theinsurance industry.

For the six months, revenue rose 44 percent or $86 million, from$195.6 million for the first half of 2002 to $281.5 million. Netincome rose 18 percent or $5.5 million, from $31.6 million to $37.2million.

Last week, the firm declared a quarterly dividend of 9.25 centsa share payable on Sept. 30 to shareholders of record as of Sept.15.

In a conference call today, Martin L. Vaughan III, the firm'schairman and chief executive officer, reaffirmed the broker'sfull-year guidance for growth for this year at between 9 and 11percent.

Mr. Vaughan said growth would occur despite the moderation inprice increases the insurance industry is seeing. He added that noone "expected increases to continue this year at last year'slevels."

The firm is looking to continue to grow especially in the areaof its excess and surplus lines business, he said. Mr. Vaughn saidthe firm is looking to grow this side of the business throughacquisitions and/or creation of new offices "if we can find theright person."

In line with this, HRH recently announced it acquired theremaining 49 percent interest in Stamford, Conn.-based New WorldE&S, LLC.

New World is a casualty E&S lines firm specializing inexcess general liability and umbrella coverages. The E&S firmalso specializes in risks associated with the railroad serviceindustry.

Hobbs Group, which was acquired by HRH in July of 2002,developed New World. Stephen Hambsch will continue to manage NewWorld, HRH said.

Mr. Vaughn said during the conference call that he did not wantto reveal the revenue size of New World.

He did say that the acquisition is part of a plan to establishE&S offices in places such as Texas, California, New York orConnecticut, and possibly Chicago. Dominion Specialty Group isheadquartered in Florida. He added that the E&S line isexpected to account for $25 million in revenue by next year, ofwhich New World would be a very small portion.

One area Mr. Vaughn said the firm is experiencing problems in isits commercial transportation line that is suffering from acapacity problem. He said the firm's capacity shortage is notunique, and as a managing general agent in this line, the firm ishoping to get back to pre-hard market levels within the next 4 to 6months.

To finalize the firm's acquisition of Hobbs Group, Mr. Vaughnsaid the firm plans to issue $50 million in HRH stock to Hobbsshareholders on Aug. 14. He said he believes it will be theintention of the shareholders to hold onto their stock and continueto help build the HRH business.