Hub Not Happy With Earnings

By Mark E. Ruquet

NU Online News Service, Oct. 30, 3 :11 p.m.EST?Chicago-based insurance broker Hub International Ltd. reportednet profit for the third quarter grew 26 percent, but the firm'shead said he was not happy with the results.

Martin P. Hughes, chairman and chief executive officer for Hub,said while the brokerage firm saw strong organic growth in itsbrokerage business, its creditor-placed insurance business sufferedfrom changes in bankers' tightening of loan policies, and thataffected earnings.

Creditor-placed insurance, Mr. Hughes explained, is insurancebanks purchase for borrowers, primarily in the homeowners market,until borrowers prove they have purchased insurance.

"We are just a bit dissatisfied," said Mr. Hughes in aninvestors conference call. "We are in a race. It's not a 100-yarddash, but a marathon. Our goal is not to be in the middle of thepack; our goal is to be a pack leader. We know that is going totake consistent and sustainable performance. We are doing this notjust to avoid complacency, but because it reflects the reality thatthe market is becoming a bit more difficult."

He said his comments did not reflect a softening of the marketplace, but that Hub's people needed to be more aggressive infinding opportunities for growth. He added that property premiumprices now appeared to "flatten out," casualty was continuing tosee "single-digit increases," and some specialty lines "atdouble-digit" increases. However, he noted, "we have seen somemarkets that have offerings that defy logic."

For the third quarter, net income rose $1.4 million, or 3 centsa share, going to $6.8 million, or 22 cents a share, from $5.4million, or 19 cents a share, for the three months in 2002.Revenues rose $15.12 million, or 31 percent, going to $64.7 millionfrom $49.6 million.

For the nine months, net income rose $4.8 million, or 23percent, from 21.1 million, or 79 cents a share, to $25.8 million,or 81 cents a share. Revenues were up $51.4 million, or 33 percent,from $156.3 million to $207.7 million.

Hub said its earning guidance for 2003 would fall at the lowerend of its previously released guidance of $1.13 to $1.18 ashare.

The firm said this was largely due to the performance of thecreditor-placed insurance, which Mr. Hughes said was the result ofaccelerated cancellations. He said this product sees a normal cycleof cancellations, but because bankers were tightening terms,customers were canceling insurance sooner than normal. He saidthese policies are primarily written in the Midwest in Michigan andOhio.

The firm said that without the losses from these policies, theU.S. organic growth rate would have been 11 percent instead of 1percent.

Hub also said it would pay a dividend of 5 cents per share as ofDec. 30 to shareholders of record as of Dec. 15.