Hub International Limited reported the insurance brokerage firm's net income increased 47 percent in the fourth quarter of 2005, and announced a major New England acquisition it said should help build brand recognition.
The Chicago-based Hub reported net income increased in the quarter by $1.8 million to $5.7 million, or 17 cents a share, compared with $3.9 million, or 12 cents a share, in the 2004 period. Revenues increased 12 percent, or $12.6 million, to $114.1 million from $101.5 million in 2004.
For the year, net income dropped 2 percent, or $526,000, from $26.2 million, or 80 cents a share in 2004, to $25.7 million, or 76 cents a share. Revenues grew 25 percent for the year, or $87.5 million, from $355.1 million to $443 million.
"We made great progress on a lot of fronts in spite of what has been a really difficult market," said Martin Hughes, chairman and chief executive officer for Hub.
Mr. Hughes said the firm completed 13 acquisitions last year, adding about $45 million to its revenue base.
Organic growth for the year was 6 percent, Hub said, which Mr. Hughes noted was a challenge in 2005 due to the soft market.
Reflecting on the coming year, Mr. Hughes said there is evidence that rates are beginning to show signs of leveling off.
"This will be a very interesting year [2006] for industry observers," he commented. "Many of the industry reinsurance treaties renew April 1 and July 1. These renewals will impact rates to some degree, but either way, we are going to do well."
On the news of the acquisition, Hub said it has formed a strategic alliance with Citizens Financial Group Inc., a Providence, R.I.-based bank holding company and subsidiary of The Royal Bank of Scotland Group.
Hub will acquire three of CFG's insurance brokerage firms: Citizens Clair Insurance Group, based in Norristown, Pa.; Brewer & Lord, based in Norwell, Mass.; and Feitelberg Insurance, based in Fall River, Mass.
The three had combined revenue of approximately $45 million in 2005 and operate from 19 offices in Pennsylvania, Massachusetts and Rhode Island.
Hub said it will pay $80 million in cash at the closing of the deal, and additional fees (earn-out) based on future performance. Hub said these fees are expected to amount to at least $3 million over three years in cash or a combination of cash and Hub common shares.
The closing of the deal is expected in April 2006, subject to regulatory approvals.
Mr. Hughes said CFG will invest in the marketing of the CFG
-Hub relationship. He commented that the deal "has the potential to be very powerful" for the firm. He added that CFG chose Hub for this deal based on prior relationships with the acquired brokers, and discussed it with no one else.
He said CFG probably felt it would be in its best interest to build insurance relationships this way rather than try to build an insurance business on its own.
Hub also announced it was paying a quarterly dividend of 7 cents a share, a 1 cent increase, on March 31 to shareholders of record as of March 15.
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