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 reported second-quarter profits rose 53 percent over the same period last year, with a revenue increase of 46 percent compared to the same period last year.

For the three months ending June 30, the Richmond, Va.-based insurance 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 $139.5 million for this quarter. Earnings per share for the quarter rose 12 cents, from 40 cents to 52 cents a share.

The firm attributed its results to a combination of growth from acquisitions, new business and continued premium rate growth in the insurance 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. Net income rose 18 percent or $5.5 million, from $31.6 million to $37.2 million.

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

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

Mr. Vaughan said growth would occur despite the moderation in price increases the insurance industry is seeing. He added that no one "expected increases to continue this year at last year's levels."

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

In line with this, HRH recently announced it acquired the remaining 49 percent interest in Stamford, Conn.-based New World E&S, LLC.

New World is a casualty E&S lines firm specializing in excess general liability and umbrella coverages. The E&S firm also specializes in risks associated with the railroad service industry.

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

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

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

One area Mr. Vaughn said the firm is experiencing problems in is its commercial transportation line that is suffering from a capacity problem. He said the firm's capacity shortage is not unique, and as a managing general agent in this line, the firm is hoping to get back to pre-hard market levels within the next 4 to 6 months.

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

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HRH Sees 53 Percent Profit Increase

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