U.S.I. To Be Subpoenaed?Again
By Mark E. Ruquet
NU Online News Service, Oct. 29, 3:30 p.m. EDT?U.S.I. Holdings Corporation said it expects to receive a subpoena from the office of N.Y. Attorney General Eliot Spitzer in the continuing probe of contingency fee placements, after stating it received one from Connecticut yesterday.[@@]
The announcement came as the Briarcliff Manor, N.Y.-based insurance brokerage firm reported its third-quarter financial results that showed a 2 percent drop in its net income compared to the same quarter last year.
David L. Eslick, chairman, president and chief executive officer of the brokerage firm, said the firm feels there is no basis to believe that the reasons for allegations against Marsh would be found at U.S.I.
The firm has hired an outside counsel and is conducting an internal review because, he said, despite the professionalism and conduct the firm's 2,000 associates display each day, one cannot "know what each individual is doing each minute, with each client, each and everyday, and that is the reason for the internal review."
He said the firm is also setting up a position of senior compliance officer to ensure that all policies are being carried out correctly.
While not going as far as other brokers to say it is abandoning contingency fees, Mr. Eslick said that U.S.I. feels insurers will not continue paying contingency fees in the future. In response to the expected change in compensation, the firm plans to renegotiate commission payments with carriers to make up for the one percent in contingent commissions that would be lost.
"The carriers rely upon agents and brokers as their complete distribution network, and have a vested interest in our success, financial strength and growth, which gives us confidence [in these re-negotiations]," Mr. Eslick said.
For the third quarter, U.S.I. reported its net income dropped $81,000 compared to the same period last year, going from $4.98 million, or 11 cents a share, to $4.9 million, or 10 cents a share. This was on an increase in revenue of 21 percent, or less than $18 million, from $87 million to $105 million.
The drop was blamed on an increase in amortization and interest expenses, expenses from a contract termination, net increase in expense for the corporate move from California, and Sarbanes-Oxley compliance preparation. The firm also paid $2.6 million more in taxes in the quarter compared to last year.
For the first nine months, net income is off 10 percent compared to last year, or slightly more than $1.7 million, going from $17.5 million, or 38 cents a share, to $15.8 million, or 32 cents a share. Revenues are up 17 percent, or more than $42 million, going from $256 million to more than $298 million, according to U.S.I.
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