Hub International Limited insurance brokerage reported its net income in the third quarter dropped 165 percent compared to last year on a $7.6 million payout to employees from a brokerage service acquired last year.

For the third quarter of this year, net income declined about $1.9 million, going from $1.15 million, or 4 cents a share in 2004, to a loss of $741,000, or 2 cents a share. Revenues increased 7 percent, or $6.3 million, to $98 million from $92 million last year.

For the nine months ending Sept. 30, net income dropped 11 percent, or $2.4 million, going from $22.4 million, or 68 cents a share, to more than $20 million, or 59 cents a share. Revenues increased 30 percent, or $75 million, from $254 million to $328.5 million.

The Chicago-based company said the $7.6 million payout, part of the deal to acquire Talbot, a unit of Safeco until the acquisition, was an increase from $6.9 million last year. Under the three-year agreement, the amount of compensation would begin to decline starting in the fourth quarter of this year.

Excluding the Talbot arrangement and other costs, including severance pay, for the third quarter of both 2004 and 2005, Hub said net income would have increased 18 percent to $8.4 million, or 27 cents a share, from $7.1 million, or 22 cents a share.

"From a revenue stand-point, things are looking up," said Martin Hughes, chairman and chief executive officer of Hub, adding that the firm had to deal with a softer rate environment that affected earnings.

He said the company eliminated 75 positions for an annualized payroll savings of about $3 million to control costs. The company saw organic growth of 5 percent in the quarter and continues to see "attractive acquisitions," he said.

Mr. Hughes observed that the industry in general is in much better shape today facing catastrophes than it was facing the Sept. 11 terror attack losses in 2001. That improved financial condition, he said, will moderate the impact of losses this time around.

"I'm not one who believes rates will rise significantly, or anywhere near post 9/11," said Mr. Hughes. "If all they do is flatten out, it will be a huge win for us."

He noted, "When the reinsurance treaties renew come Jan. 1, we'll likely see great increases across the board begin to take place," adding the increases will be "pervasive" and not limited to coastal exposures.

Hub also declared a quarterly dividend of 6 cents a share on common stock payable on Dec. 31 to shareholders of record as of Dec. 15.

Special Reports /

Hub Net Income Down 165% On 3Q Talbot Payout

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