-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UW8fiK8G3bsjtHjFXs/iJeLE2WRXu3OcQPN53EkE4BSZUp3wV5mMVVGXjychiJsy Ckwbzl+vMvbLeDasRR+wCA== 0001157523-07-004317.txt : 20070501 0001157523-07-004317.hdr.sgml : 20070501 20070501112547 ACCESSION NUMBER: 0001157523-07-004317 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20070501 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070501 DATE AS OF CHANGE: 20070501 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUB INTERNATIONAL LTD CENTRAL INDEX KEY: 0001133016 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 364412416 STATE OF INCORPORATION: A6 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-31310 FILM NUMBER: 07804282 BUSINESS ADDRESS: STREET 1: 8 NELSON STREET WEST STREET 2: 6TH FLOOR CITY: BRAMPTON STATE: A6 ZIP: L6X 4J2 BUSINESS PHONE: 905.866.5200 MAIL ADDRESS: STREET 1: 55 EAST JACKSON BOULEVARD STREET 2: FLOOR 14A CITY: CHICAGO STATE: IL ZIP: 60604 8-K 1 a5390283.txt HUB INTERNATIONAL 8K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 ----------------------------- Date of Report (Date of earliest event reported): May 1, 2007 HUB INTERNATIONAL LIMITED (Exact name of Registrant as specified in its charter) Canada (State or Other Jurisdiction of Incorporation) 1-31310 36-4412416 (Commission File Number) (I.R.S. Employer Identification Number) ----------------------------- 55 East Jackson Boulevard, Chicago, Illinois 60604 (877) 402-6601 (Address of principal executive offices and telephone number, including area code) n/a (Former name or former Address, if changed since last Report) ----------------------------- Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13c-4(c)) Item 2.02. Results of Operations and Financial Condition. On May 1, 2007, Hub International Limited issued a press release announcing its financial results for the first quarter ended March 31, 2007. A copy of the press release is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference. The foregoing information, including the information contained in the press release, is being furnished pursuant to this Item 2.02 and shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. Item 9.01. Financial Statements and Exhibits. (d) Exhibits: 99.1 Press release of Hub International Limited dated May 1, 2007. EXHIBIT INDEX Exhibit Description ------- ----------- 99.1 Press release of Hub International Limited dated May 1, 2007. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: May 1, 2007 HUB INTERNATIONAL LIMITED By: /s/ "W. Kirk James" --------------------------------------- Name: W. Kirk James Title: Chief Corporate Development Officer EX-99.1 2 a5390283ex991.txt EXHIBIT 99.1 Exhibit 99.1 Hub International Announces First Quarter 2007 Results First Quarter Revenue Increases 28% on 7.2% Organic Revenue Growth CHICAGO--(BUSINESS WIRE)--May 1, 2007--Hub International Limited (NYSE: HBG) (TSX: HBG) announced strong growth in revenue and net earnings for the first quarter ended March 31, 2007. First quarter 2007 revenue of $171.8 million represented a $37.7 million, or 28%, increase over first quarter 2006 revenue of $134.1 million. First quarter 2007 net earnings of $24.7 million represented an $8.3 million, or 50%, increase over first quarter 2006 net earnings of $16.5 million. First quarter 2007 diluted earnings per share of $0.60 represented a $0.14, or 30%, increase over first quarter 2006 diluted earnings per share of $0.46. Quarterly total revenue organic revenue growth was 7.2%. Organic revenue growth calculations for the first quarter of 2007 exclude guaranteed supplemental commission revenue recorded during the first quarter of 2007 that historically would not have been recorded until 2008. Quarterly total organic revenue growth was 8.3% including guaranteed supplemental commission revenue, or 8.7% excluding the impact of foreign exchange. Organic revenue growth is a non-GAAP measurement that describes internal revenue growth from current operations owned at least one year. Net earnings include a number of items that can distort comparisons between periods. A reconciliation of these items to a normalized net earnings amount is included in exhibits attached to this press release. Considering these items, normalized first quarter 2007 net earnings of $26.0 million represented a $5.3 million, or 25%, increase over normalized first quarter 2006 net earnings of $20.7 million. Normalized diluted earnings per share were $0.63 and $0.58, respectively, for the first quarter 2007 and 2006. First Quarter 2007 Performance Review Quarterly total revenue growth of 28% included organic revenue growth of 7.2%, despite most hubs operating in declining rate environments. Commission income growth of 26% included organic commission income growth of 5.3%. Contingent commission and volume override revenue increased 32% including organic contingent commission and volume override revenue growth of 11.5%. Excluding the impact of foreign exchange, organic commission income growth was 5.7%. For U.S.-based hubs, quarterly revenue of $130.8 million represented a $35.0 million, or 37%, increase from first quarter 2006 revenue of $95.8 million. Organic commission income growth was 5.8% and organic revenue growth was 8.5%. Including the effect of guaranteed supplemental commission revenue earned during the first quarter of 2007, organic revenue growth was 10.0%. For Canadian-based hubs, quarterly revenue of $40.5 million represented a $2.6 million, or 7%, increase from first quarter 2006 revenue of $37.8 million. Organic commission income growth was 3.9% and organic revenue growth was 4.1%. Excluding the impact of foreign exchange, organic commission income and organic revenue growth was 5.3% and 5.5%, respectively. Canadian-based hubs are not presently affected by guaranteed supplemental commission arrangements. Quarterly employee cash compensation of $85.4 million represented a $17.0 million, or 25%, increase from first quarter 2006 employee cash compensation of $68.4 million. As a percentage of quarterly revenue, 2007 quarterly employee cash compensation improved 130 basis points to 49.7% from 51.0% for the same period in 2006. Quarterly selling, occupancy and administration expense of $27.6 million represented a $5.2 million, or 23%, increase from first quarter 2006 selling, occupancy and administration expense of $22.4 million. First quarter 2007 selling, occupancy and administration expense included approximately $2.6 million of transaction costs related to the Arrangement Agreement pursuant to which the Company would be acquired by funds advised by Apax Partners and Morgan Stanley Principal Investments. As a percentage of quarterly revenue, 2007 quarterly selling, occupancy and administration expense improved 60 basis points to 16.1% from 16.7% for the same period in 2006. On a combined basis, quarterly employee cash compensation and selling, occupancy and administration expense improved 200 basis points to 65.8% of revenue from 67.8% of revenue for the same period in 2006. Quarterly intangible asset amortization expense of $8.5 million represented a $5.2 million, or 160%, increase over first quarter 2006 intangible asset amortization expense of $3.3 million. This increase is primarily attributable to the impact of acquisitions and a refinement in our amortization methodology for customer relationship and non-competition covenants intangible assets accounted for as a change in accounting estimate. First Quarter Highlights -- The Company continued its penetration into the southeastern U.S. market by acquiring Hibernia Insurance Agency, an $18 million revenue brokerage located just outside of New Orleans. The Company's acquisition of Hibernia provides it with a strategic platform to expand its operations in the gulf coast region. -- The Company expanded its presence in the transportation insurance market by acquiring Vermont-based Coburn Insurance Agency, a $9 million revenue brokerage, as well as a smaller insurance brokerage that specializes in the transportation insurance market in the eastern U.S. The combined strength of these operations, together with the Salt Lake City-based Kaufman transportation insurance brokerage that was acquired during 2006 (collectively operating as Hub International Transportation Insurance Services) will provide increased accessibility to insurance markets and will position Hub as the provider of choice for transportation risks across the U.S. -- Quarterly earnings before interest, taxes, depreciation and amortization (EBITDA, a non-GAAP measurement) margin of 34.2% improved 200 basis points from 32.2% for the same period in 2006. EBITDA margin calculations exclude all Talbot earnout compensation and all other non-cash share-based compensation. -- Subsequent to March 31, 2007, on April 2, 2007 the Company made the final Talbot earnout payment of $21.8 million in cash. As of April 2, 2007, the Talbot earnout is complete. Compensation expense of $2.0 million, which is not deductible for tax purposes, was charged to earnings through the first quarter of 2007 for the Talbot earnout and will affect year-over-year earnings comparisons through 2008. -- Cash and cash equivalents as of March 31, 2007 were $102.5 million, an increase of $3.3 million from December 31, 2006. -- Quarterly capital expenditures of $1.9 million represented 1.1% of total revenue, a decrease from the 2.2% experienced during the first quarter of 2006. Management expects full-year 2007 capital expenditures to be approximately 2% of total revenue. -- Effective tax rate, excluding the effects of the Talbot earnout expense, was approximately 38% for the first quarter of 2007. -- Debt-to-capitalization ratio increased slightly to 19% as of March 31, 2007 from 18% as of December 31, 2006. The Company has $22.0 million outstanding and $63.4 million remaining available under its revolving credit facilities as of March 31, 2007. Conference Call and Webcast Hub will discuss its financial results and outlook on a conference call scheduled for Tuesday, May 1, 2007 at 10:30 a.m. (EDT), 9:30 a.m. (CDT). The call is being webcast by Thompson/CCBN and can be accessed at Hub's web site at www.hubinternational.com. The webcast is also being distributed through the Thomson StreetEvents Network to both institutional and individual investors. Individual investors can listen to the call at www.fulldisclosure.com, Thomson/CCBN's individual investor portal, powered by StreetEvents. Institutional investors can also access the call via Thomson's password-protected event management site, StreetEvents (www.streetevents.com). Headquartered in Chicago, IL, Hub International Limited is a leading North American insurance brokerage that provides a broad array of property and casualty, reinsurance, life and health, employee benefits, investment and risk management products and services through offices located in the United States and Canada. Important Additional Information will be Filed with Securities Regulators: In connection with the proposed acquisition of Hub by Maple Tree Acquisition Corp., Hub has filed a preliminary proxy statement and will file a definitive proxy statement with the Securities and Exchange Commission and Canadian securities regulators. Hub has also filed a copy of the Arrangement Agreement regarding the proposed acquisition with the Securities and Exchange Commission and Canadian securities regulators. INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE DEFINITIVE PROXY STATEMENT WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT THE ARRANGEMENT AND THE PARTIES THERETO. Investors and security holders may obtain a free copy of the definitive proxy statement, when available, the Arrangement Agreement and other documents filed by Hub at the Securities and Exchange Commission's Web site at http://www.sec.gov and at the Canadian securities regulators Web site at http://www.sedar.com. The definitive proxy statement, when available, and such other documents may also be obtained for free from Hub by directing such request to Investor Relations, Hub International Limited, 55 East Jackson Boulevard, Chicago, IL 60604, telephone: (877) 402-6601. Hub and its directors, executive officers and other members of its management and employees may be deemed to be participants in the solicitation of proxies from Hub's shareholders in connection with the proposed transaction. Information concerning the interests of Hub's management who are participating in the solicitation, which may be different than those of Hub shareholders generally, is set forth in Hub's proxy statements and Annual Reports on Form 10-K, filed with the Securities and Exchange Commission and Canadian securities regulators, and in the definitive proxy statement relating to the acquisition when it becomes available. Forward Looking Statements: This press release may contain "forward-looking statements" as defined in Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that reflect our current expectations regarding our future growth, results of operations, cash flows, performance and business prospects, and opportunities, as well as assumptions made by, and information currently available to, our management. We have used words such as "anticipate," "believe," "expect," "intend," "plan," "project," "will continue," "will likely result," and similar expressions to indicate forward-looking statements. However, these words are not the exclusive means of identifying these forward-looking statements. These statements are based on information currently available to us and are subject to various risks, uncertainties, and other factors that could cause our actual growth, results of operations, financial condition, cash flows, performance and business prospects, and opportunities to differ materially from those expressed in, or implied by, these statements, including, but not limited to: risks associated with implementing our business strategies, identifying and consummating acquisitions, successfully integrating acquired businesses, attaining greater market share, resolution of regulatory issues and litigation, including those related to compensation arrangements with insurance carriers, the possibility that the receipt of contingent compensation from insurance carriers could be prohibited, developing and implementing effective information technology systems, recruiting and retaining qualified employees, fluctuations in the demand for insurance products, fluctuations in the premiums charged by insurance carriers, with corresponding fluctuations in our premium-based revenue, fluctuations in foreign currency exchange rates, any loss of services of key executive officers, industry consolidation, increased competition in the industry, the actual costs of resolution of contingent liabilities, the passage of new federal, state or provincial legislation subjecting our business to regulation in the jurisdictions in which we operate, and those risks discussed in our Annual Report on Form 10-K, particularly under the caption "Risk Factors," filed with the Securities and Exchange Commission and the Canadian securities commissions. These uncertainties and other factors also include, but are not limited to, risks associated with the transaction, including the occurrence of any event, change or other circumstances that could give rise to the termination of the Arrangement Agreement, the inability to complete the transaction due to the failure to obtain shareholder approval or the failure to satisfy other conditions to completion of the transaction, including the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, the failure to obtain the necessary debt financing arrangements set forth in commitment letters received in connection with the transaction, risks that the proposed transaction disrupts current plans and operations and the potential difficulties in employee retention as a result of the transaction. Many of the factors that will determine the outcome of the subject matter of this press release are beyond Hub's ability to control or predict. We caution readers not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Except as otherwise expressly required by federal securities laws, we undertake no obligation to update or publicly announce the revision of any of the forward-looking statements contained herein to reflect new information, future events, developments or changed circumstances or for any other reason. HUB INTERNATIONAL LIMITED Consolidated Organic Revenue Growth (unaudited) For the three months ended March 31, 2007 (in thousands of U.S. dollars, except percentages) Revenue for the Increase Three Months Ended 2007 vs. Net Organic March 31, 2006 Adjust- Growth ------------------- ---------- ments Exclud- For ing (Acqui- Foreign sitions) Cur- And Organic rency Dispo- Growth Changes 2007 2006 (%) sitions (%) (%) --------- --------- ---------- ----------------- ------- Hub Consolidated - ------------- Commission Income $125,487 $99,932 26% $(20,223) 5.3% 5.7% Contingent Commission and Volume Override income 41,158 31,168 32% (6,395) 11.5% 11.9% Other Income 5,129 3,011 70% (1,308) 27.1% 27.5% --------- --------- --------- Total revenue $171,774 $134,111 28% $(27,926) 7.2% 7.6% ========= ========= ========= U.S. - ------------- Commission Income $95,049 $71,241 33% $(19,577) 5.8% N/A Contingent Commissions and Volume Overrides income 31,720 22,366 42% (5,926) 15.3% N/A Other Income 4,028 2,189 84% (1,308) 24.5% N/A --------- --------- --------- Total revenue $130,797 $95,796 37% $(26,811) 8.5% N/A ========= ========= ========= Canada - ------------- Commission Income $30,438 $28,691 6% $(646) 3.9% 5.3% Contingent Commissions and Volume Overrides income 9,438 8,628 9% (469) 4.0% 5.2% Other Income 579 489 18% - 18.3% 20.0% --------- --------- --------- Total revenue $40,455 $37,808 7% $(1,115) 4.1% 5.5% ========= ========= ========= Head Office - ------------- Total revenue $522 $507 ========= ========= Notes: - We define organic revenue growth as the net increase in revenue as the result of (1) new client accounts, (2) retention and expansion of existing client accounts, and (3) the impact of changes in insurance premium rates. Organic revenue growth excludes the net increase in revenue attributable to net business acquisitions and dispositions during the preceding 12-month period. Organic revenue growth is a non-GAAP measure and should not be considered an alternative to any measure of performance or liquidity promulgated under U.S. GAAP. We believe that organic revenue growth is a particularly meaningful indicator of our financial and operational performance, the effectiveness of our sales initiatives, the long- term sustainability of our profits, and the demand for our products and services. - Organic revenue growth calculations for the first quarter of 2007 exclude revenue recorded in connection with guaranteed supplemental commission revenue recorded during the first quarter of 2007 that would historically not have been recorded until 2008. Total guaranteed supplemental commission revenue recorded during the first quarter of 2007 was approximately $1.4 million and was included as a component of "contingent commission and volume override" in our consolidated statements of earnings. Had we included guaranteed supplemental commission revenue in our organic revenue growth calculation, our total consolidated organic revenue growth for the first quarter of 2007 would have been 8.3%, or 8.7% excluding the effects of the weakening of the Canadian dollar as compared to the U.S. dollar, and our total U.S. segment organic revenue growth for the first quarter of 2007 would have been 10.0%. HUB INTERNATIONAL LIMITED Consolidated Statements of Earnings Data (unaudited) For the three months ended March 31, 2007 and 2006 (in thousands of U.S. dollars, except per share amounts) For the Three Months ended March 31, ------------------------------------ % of % of Total Total 2007 Revenue 2006 Revenue ----------------- ------------------ REVENUE: Commission income $125,487 73% $99,932 75% Contingent commission and volume override 41,158 24% 31,168 23% Other 5,129 3% 3,011 2% --------- --------- Total revenue 171,774 100% 134,111 100% --------- --------- EXPENSES: Compensation (a) 88,981 52% 74,715 56% Selling, occupancy, and administration 27,610 16% 22,448 17% Intangible asset amortization 8,504 5% 3,275 2% Interest expense 2,779 2% 3,066 2% Depreciation 2,644 2% 2,142 2% Loss on disposal of subsidiaries, property and equipment, and other assets 91 0% 167 0% --------- --------- Total operating expenses 130,609 76% 105,813 79% --------- --------- NET EARNINGS BEFORE PROVISION FOR INCOME TAXES 41,165 24% 28,298 21% PROVISION FOR INCOME TAXES: 16,433 10% 11,832 9% --------- --------- NET EARNINGS 24,732 14% 16,466 12% Dividends in lieu on restricted share units 30 0% 29 0% Interest on subordinated convertible debentures - 0% 475 0% --------- --------- DILUTED NET EARNINGS $24,762 14% $16,970 13% ========= ========= EARNINGS PER SHARE - BASIC: $0.62 $0.52 ========= ========= EARNINGS PER SHARE - DILUTED: $0.60 $0.46 ========= ========= WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 39,642 31,756 ========= ========= Diluted 41,166 36,981 ========= ========= (a) COMPENSATION INCLUDES: Employee cash compensation $85,432 50% $68,416 51% Talbot earnout compensation 1,982 1% 4,664 3% Other non-cash share-based compensation 1,567 1% 1,635 1% --------- --------- $88,981 52% $74,715 56% ========= ========= HUB INTERNATIONAL LIMITED Consolidated Balance Sheet Information (unaudited) As of March 31, 2007 and December 31, 2006 (in thousands of U.S. dollars) March 31, December 31, 2007 2006 -------------- ------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $102,486 $99,213 Trust cash 91,855 112,188 Accounts and other receivables, net 258,352 283,415 Deferred income tax assets 6,402 6,548 Prepaid expenses 7,332 8,212 -------------- ------------- Total current assets 466,427 509,576 GOODWILL 563,179 528,239 OTHER INTANGIBLE ASSETS, net 169,785 152,455 PROPERTY AND EQUIPMENT, net 30,762 30,682 OTHER ASSETS 6,268 9,437 -------------- ------------- TOTAL ASSETS $1,236,421 $1,230,389 ============== ============= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued liabilities $357,481 $413,102 Income taxes payable 11,724 5,869 Current maturities of long-term debt and capital leases 2,792 3,296 -------------- ------------- Total current liabilities 371,997 422,267 LONG-TERM DEBT AND CAPITAL LEASES 159,440 137,341 DEFERRED INCOME TAX LIABILITIES 17,144 13,285 -------------- ------------- TOTAL LIABILITIES 548,581 572,893 -------------- ------------- COMMITMENTS AND CONTINGENCIES - - SHAREHOLDERS' EQUITY: Common shares 479,487 473,512 Additional paid-in capital 25,075 23,789 Accumulated other comprehensive income 20,959 19,754 Retained earnings 162,319 140,441 -------------- ------------- Total shareholders' equity 687,840 657,496 -------------- ------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,236,421 $1,230,389 ============== ============= HUB INTERNATIONAL LIMITED Consolidated Cash Flow Information (unaudited) For the three months ended March 31, 2007 and 2006 (in thousands of U.S. dollars) For the Three Months ended March 31, -------------------- 2007 2006 ---------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $24,732 $16,466 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization expense 11,148 5,417 Loss on disposal of subsidiaries, property and equipment, and other assets 91 167 Total compensation for Talbot earnout 1,982 4,664 Other non-cash share-based compensation 1,567 1,635 Deferred income taxes (364) 155 Changes in operating assets and liabilities: Trust cash 22,196 48,655 Accounts and other receivables, net 35,814 53,495 Prepaid expenses 945 742 Other assets 129 135 Accounts payable and accrued liabilities (75,576) (105,420) Income taxes payable 6,124 7,994 ---------- --------- Net cash provided by operating activities: 28,788 34,105 ---------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Business acquisitions, net of cash received (45,248) (8,448) Business dispositions 341 1,174 Purchase of property and equipment (1,902) (2,904) Premium financing receipts 14,540 - Premium financing disbursements (13,286) - Other 176 276 ---------- --------- Net cash used in investing activities: (45,379) (9,902) ---------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from (payments of) bank debt (876) 75,000 Proceeds from the issuance of long-term debt 22,000 - Payments of long-term debt and capital lease obligations (607) (1,374) Proceeds from exercise of stock options 1,504 704 Tax benefit associated with share-based awards 198 80 Dividends paid (2,789) (2,199) ---------- --------- Net cash provided by financing activities: 19,430 72,211 ---------- --------- EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS: 434 (32) ---------- --------- NET INCREASE IN CASH AND CASH EQUIVALENTS 3,273 96,382 CASH AND CASH EQUIVALENTS - beginning of period 99,213 70,118 ---------- --------- CASH AND CASH EQUIVALENTS - end of period $102,486 $166,500 ========== ========= HUB INTERNATIONAL LIMITED Compensation for Talbot Earnout and Other Non-Cash Share-Based Compensation (unaudited) For the three months ended March 31, 2007 and 2006 (in thousands of U.S. dollars) Compensation expense recorded in connection with the Talbot earnout includes both cash and non-cash share-based compensation. The Talbot earnout agreement is, in substance, a performance-based contingent compensation agreement, and, thus, the Company has recorded the Talbot earnout payments as a charge to compensation expense over the period in which the payments are earned. Compensation expense incurred in connection with the Talbot earnout is not deductible for income tax purposes. The final Talbot earnout payment of $21.8 million was made on April 2, 2007, in cash. Compensation expense recorded in connection with the Talbot earnout for the three months ended March 31, 2007 and 2006, was as follows: For the Three Months ended March 31, --------------------- 2007 2006 ---------- ---------- Cash-based compensation expense $1,982 $1,938 Non-cash share-based compensation expense - 2,726 ---------- ---------- Total Talbot earnout compensation $1,982 $4,664 ========== ========== Other non-cash share-based compensation expense, excluding the non- cash share-based portion of the Talbot earnout, recognized during the three months ended March 31, 2007 and 2006, was as follows: For the Three Months ended March 31, --------------------- 2007 2006 ---------- ---------- RSUs $1,563 $1,635 Common shares issued in connection with acquisitions 4 - ---------- ---------- Total other non-cash share-based compensation 1,567 1,635 Tax benefit 311 671 ---------- ---------- Total other non-cash share-based compensation, net of tax $1,256 $964 ========== ========== Based on share-based awards issued and outstanding as of March 31, 2007, the Company estimates future non-cash share-based compensation expense to be approximately $19.1 million. HUB INTERNATIONAL LIMITED Reconciliation of GAAP Net Earnings and Diluted Net Earnings Per Share to Normalized Net Earnings and Diluted Earnings Per Share (unaudited) (in thousands of U.S. dollars, except per share amounts) For the Three For the Three Months ended Months ended March 31, 2007 March 31, 2006 ------------------- ------------------- Effect on Effect on Diluted Diluted Net Net Effect on Earnings Effect on Earnings Net Per Net Per Earnings Share Earnings Share --------- --------- --------- --------- Net earnings reported under GAAP $24,732 $0.60 $16,466 $0.46 Compensation expense for Talbot earnout 1,982 0.05 4,664 0.13 Foreign exchange losses (gains), net of tax 143 - (389) (0.01) Guaranteed supplemental commission income, net of tax (829) (0.02) - - --------- --------- --------- --------- Normalized net earnings and diluted earnings per share $26,028 $0.63 $20,741 $0.58 ========= ========= ========= ========= CONTACT: Hub International Limited MEDIA CONTACT: W. Kirk James Vice President, Secretary and Chief Corporate Development Officer Phone: 312.279.4881 Kirk.James@HubInternational.com or INVESTOR CONTACT: John P. Graham Vice President, Chief Financial Officer Phone: 312.279.4840 E-mail: John.Graham@HubInternational.com -----END PRIVACY-ENHANCED MESSAGE-----