10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended March 31, 2004

Commission file number 0-15981

HILB ROGAL & HOBBS COMPANY

(Exact name of registrant as specified in its charter)

Virginia	54-1194795
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4951 Lake Brook Drive, Suite 500 Glen Allen, Virginia	23060
(Address of principal executive offices)	(Zip Code)

(804) 747-6500

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x    No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes  x     No  ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at May 1, 2004
Common Stock, no par value	36,051,217

HILB ROGAL & HOBBS COMPANY

INDEX

			Page
Part I.	FINANCIAL INFORMATION
	Item 1.	Financial Statements
	Statement of Consolidated Income for the three months ended March 31, 2004 and 2003		2
	Consolidated Balance Sheet March 31, 2004 and December 31, 2003		3
	Statement of Consolidated Shareholders’ Equity for the three months ended      March 31, 2004 and 2003		4
	Statement of Consolidated Cash Flows for the three months ended      March 31, 2004 and 2003		5
	Notes to Consolidated Financial Statements		6-8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9-11
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	11
	Item 4.	Controls and Procedures	11
Part II.	OTHER INFORMATION
	Item 6.	Exhibits and Reports on Form 8-K	12
Signatures			13

1

PART I—FINANCIAL INFORMATION

Item 1.    FINANCIAL STATEMENTS

STATEMENT OF CONSOLIDATED INCOME

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

(UNAUDITED)

	Three Months Ended March 31,
(in thousands, except per share amounts)	2004		2003
Revenues
Commissions and fees	$	156,396	$	140,499
Investment income		555		659
Other		1,276		833
		158,227		141,991
Operating expenses
Compensation and employee benefits		83,725		75,813
Other operating expenses		25,566		23,157
Depreciation		2,255		2,288
Amortization of intangibles		2,829		2,152
Interest expense		2,529		2,793
Integration costs		991		—
Retirement benefit		—		5,195
		117,895		111,398
INCOME BEFORE INCOME TAXES		40,332		30,593
Income taxes		16,098		12,495
NET INCOME	$	24,234	$	18,098
Net Income Per Share:
Basic	$	0.68	$	0.54
Assuming Dilution	$	0.67	$	0.51

See notes to consolidated financial statements.

2

CONSOLIDATED BALANCE SHEET

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

	March 31, 2004			December 31, 2003
(in thousands)	(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	158,149		$	126,464
Receivables:
Premiums and commissions, less allowance for doubtful accounts of $4,309 and $4,243, respectively		182,627			223,431
Other		33,565			31,820
		216,192			255,251
Prepaid expenses and other current assets		12,551			14,603
TOTAL CURRENT ASSETS		386,892			396,318
PROPERTY AND EQUIPMENT, NET		24,564			25,487
GOODWILL		568,327			565,023
OTHER INTANGIBLE ASSETS		113,273			112,414
Less accumulated amortization		66,002			63,191
		615,598			614,246
OTHER ASSETS		17,847			13,176
	$	1,044,901		$	1,049,227
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Premiums payable to insurance companies	$	273,867		$	308,533
Accounts payable		9,584			9,089
Accrued expenses		30,588			37,434
Premium deposits and credits due customers		41,710			34,290
Current portion of long-term debt		9,035			9,321
TOTAL CURRENT LIABILITIES		364,784			398,667
LONG-TERM DEBT		172,251			174,012
DEFERRED INCOME TAXES		18,990			19,208
OTHER LONG-TERM LIABILITIES		27,242			23,073
SHAREHOLDERS’ EQUITY
Common Stock, no par value; authorized 100,000 shares; outstanding 35,865 and 35,446 shares, respectively		234,050			228,357
Retained earnings		226,108			205,184
Accumulated other comprehensive income (loss):
Unrealized loss on interest rate swaps, net of deferred tax benefit of $168 and $334, respectively		(252	)		(502	)
Other		1,728			1,228
		461,634			434,267
	$	1,044,901		$	1,049,227

See notes to consolidated financial statements.

3

STATEMENT OF CONSOLIDATED SHAREHOLDERS’ EQUITY

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

(UNAUDITED)

(in thousands, except per share amounts)	Common Stock		Retained Earnings			Accumulated Other Comprehensive Income (Loss)
Balance at January 1, 2004	$	228,357	$	205,184		$	726
Issuance of 419 shares of Common Stock		932
Income tax benefit from exercise of stock options		4,761
Payment of dividends ($.0925 per share)				(3,310	)
Net income				24,234
Derivative gain, net of tax							250
Other							500
Balance at March 31, 2004	$	234,050	$	226,108		$	1,476
Balance at January 1, 2003	$	168,558	$	143,005		$	(915	)
Issuance of 374 shares of Common Stock		11,514
Income tax benefit from exercise of stock options		461
Payment of dividends ($.0900 per share)				(3,043	)
Net income				18,098
Derivative gain, net of tax							192
Retirement benefit		906
Other							29
Balance at March 31, 2003	$	181,439	$	158,060		$	(694	)

See notes to consolidated financial statements.

4

STATEMENT OF CONSOLIDATED CASH FLOWS

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

(UNAUDITED)

	Three Months Ended March 31,
(in thousands)	2004			2003
OPERATING ACTIVITIES
Net income	$	24,234		$	18,098
Adjustments to reconcile net income to net cash provided by operating activities:
Integration costs		991			—
Retirement benefit		—			5,195
Depreciation		2,255			2,288
Amortization of intangibles		2,829			2,152
Provision for losses on receivables		291			270
Provision for deferred income taxes		(302	)		1,233
(Gain) loss on sale of assets		(397	)		76
Income tax benefit from exercise of stock options		4,761			461
Changes in operating assets and liabilities net of effects from integration costs, retirement benefit and insurance agency acquisitions and dispositions:
Decrease in receivables		38,769			36,284
Decrease in prepaid expenses		2,043			11,438
Decrease in premiums payable to insurance companies		(34,666	)		(33,421	)
Increase (decrease) in premium deposits and credits due customers		7,421			(889	)
Increase (decrease) in accounts payable		278			(2,028	)
Decrease in accrued expenses		(7,409	)		(18,630	)
Other operating activities		(639	)		2,752
Net Cash Provided by Operating Activities		40,459			25,279
INVESTING ACTIVITIES
Purchase of property and equipment		(1,692	)		(2,833	)
Purchase of insurance agencies, net of cash acquired		(2,493	)		(3,166	)
Proceeds from sale of assets		2,772			98
Other investing activities		288			570
Net Cash Used in Investing Activities		(1,125	)		(5,331	)
FINANCING ACTIVITIES
Proceeds from long-term debt		—			5,000
Principal payments on long-term debt		(2,787	)		(11,982	)
Debt issuance costs		(300	)		—
Proceeds from issuance of Common Stock, net of tax payments for options exercised		(1,252	)		447
Dividends		(3,310	)		(3,043	)
Net Cash Used in Financing Activities		(7,649	)		(9,578	)
Increase in Cash and Cash Equivalents		31,685			10,370
Cash and cash equivalents at beginning of period		126,464			134,692
Cash and Cash Equivalents at End of Period	$	158,149		$	145,062

See notes to consolidated financial statements.

5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

March 31, 2004

(UNAUDITED)

NOTE A—BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Hilb Rogal & Hobbs Company (the Company) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2004, are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Form 10-K for the year ended December 31, 2003.

NOTE B—ACCOUNTING FOR STOCK-BASED COMPENSATION

The Company has three stock-based compensation plans. The Company continues to account for its stock options using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. No stock-based compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant.

Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (Statement 123), as amended by Statement of Financial Accounting Standards No. 148, establishes accounting and disclosure requirements using a fair value based method of accounting for stock options.

The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of Statement 123 to stock-based compensation.

	Three Months Ended March 31,
(in thousands, except per share amounts)	2004			2003
Net income—as reported	$	24,234		$	18,098
Deduct: Total stock-based compensation expense determined under fair value based method for all awards, net of related tax effects		(1,203	)		(1,454	)
Pro forma net income	$	23,031		$	16,644
Net income per share:
Basic—as reported	$	0.68		$	0.54
Basic—pro forma	$	0.65		$	0.49
Assuming dilution—as reported	$	0.67		$	0.51
Assuming dilution—pro forma	$	0.63		$	0.47

NOTE C—INCOME TAXES

Deferred taxes result from temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company’s effective rate varies from the statutory rate primarily due to state income taxes.

6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

March 31, 2004

(UNAUDITED)

NOTE D—ACQUISITIONS

During the first three months of 2004, the Company acquired certain assets and liabilities of one insurance agency. This acquisition is not material to the consolidated financial statements.

NOTE E—SALE OF ASSETS AND OTHER GAINS

During the three months ended March 31, 2004 and 2003, the Company sold certain insurance accounts and other assets resulting in gains of $397 thousand and losses of $76 thousand, respectively. Revenues, expenses and assets related to these dispositions were not material to the consolidated financial statements.

NOTE F—NET INCOME PER SHARE

The following table sets forth the computation of basic and diluted net income per share.

	Three Months Ended March 31,
(in thousands, except per share amounts)	2004		2003
Numerator for basic and dilutive net income per share
Net income	$	24,234	$	18,098
Denominator
Weighted average shares		35,337		33,503
Effect of guaranteed future shares to be issued in connection with agency acquisitions		251		178
Denominator for basic net income per share		35,588		33,681
Effect of dilutive securities:
Employee stock options		535		823
Employee non-vested stock		122		124
Contingent stock—acquisitions		91		865
Dilutive potential common shares		748		1,812
Denominator for diluted net income per share—
Adjusted weighted average shares		36,336		35,493
Net Income Per Share:
Basic	$	0.68	$	0.54
Assuming Dilution	$	0.67	$	0.51

NOTE G—INTEGRATION COSTS

The Company began the integration of Hobbs with the rest of the Company subsequent to June 30, 2003 with the completion of the Hobbs earn-out. In the first quarter of 2004, the Company recognized integration costs of $1.0 million and related income taxes of $0.4 million. These amounts represent costs such as severance and other employee-related costs, facility and lease termination costs, and branding expenses.

7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

March 31, 2004

(UNAUDITED)

NOTE H—LONG-TERM DEBT

The Company has a credit agreement which provides a term loan facility and revolving credit facility. Borrowings under this credit agreement bear interest at variable rates based on LIBOR plus a negotiated spread. Effective March 31, 2004, the Company amended the credit agreement to reduce the negotiated spread applicable to the term loan. In addition, the Company modified certain covenants including increasing the annual limit for repurchases of its common stock from $20.0 million to $50.0 million.

NOTE I—CHANGE IN METHOD OF ACCOUNTING

In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (FIN 46) and subsequently revised FIN 46 in December 2003. Effective January 1, 2004, the Company adopted the provisions of FIN 46. The Company did not identify any VIEs of which the Company is the primary beneficiary, thus, the Company was not required to consolidate any VIE.

NOTE J—RETIREMENT BENEFIT

In March 2003, Andrew L. Rogal, the Company’s former Chairman and Chief Executive Officer, announced his decision to retire for personal reasons following the Company’s annual meeting of shareholders on May 6, 2003. In the first quarter of 2003, the Company recorded a one-time retirement benefit charge, net of tax, of $3.2 million, or $0.09 per share, representing a contractual retirement benefit for Mr. Rogal. The charge consists primarily of compensation and the accelerated vesting of stock options and non-vested stock. The Company’s board of directors elected Martin L. Vaughan, III, to succeed Mr. Rogal as Chairman and Chief Executive Officer.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In September 2003, the Company announced that it was changing its name to Hilb Rogal & Hobbs Company and immediately began doing business under the new name. The Company’s board of directors approved an amendment to the Company’s articles of incorporation to change the name subject to approval by the Company’s shareholders. The Company’s shareholders approved this amendment at the May 2004 annual meeting. The Company’s New York Stock Exchange ticker symbol will continue as “HRH.”

Results of Operations

Three Months Ended March 31, 2004

Net income for the three months ended March 31, 2004 was $24.2 million, or $0.67 per share, compared with $18.1 million, or $0.51 per share, for the comparable period last year. Net income for the 2004 quarter included integration costs, net of tax, of $0.6 million, or $0.02 per share. Integration costs represent costs such as severance and other employee-related costs, facility and lease termination costs, and branding expenses. Net income for the first quarter of 2003 included a one-time retirement benefit charge, net of tax, of $3.2 million, or $0.09 per share. In addition, non-operating gains, net of tax, were $238 thousand and non-operating losses, net of tax, were $45 thousand for the three months ended March 31, 2004 and 2003, respectively.

Commissions and fees were $156.4 million, an increase of 11.3%, from commissions and fees of $140.5 million during the comparable period of the prior year. Approximately $9.9 million of commissions were derived from acquisitions of new insurance agencies in 2004 and 2003. This increase was offset by decreases of approximately $1.2 million from the sale of certain offices and accounts in 2004 and 2003. Excluding the effect of acquisitions and dispositions, commissions and fees increased 5.1%. This increase principally reflects higher contingent and override commissions, new business production and a moderating rate environment.

Expenses for the quarter increased $6.5 million or 5.8%. The 2004 quarter includes Hobbs integration costs of $1.0 million. First quarter 2003 expenses include a one-time retirement benefit charge of $5.2 million. Compensation and benefits, and other operating expenses increased $7.9 million and $2.4 million, respectively. Compensation and benefits increased primarily due to acquisitions of insurance agencies and increased revenue production. Other operating expenses increased mainly due to acquisitions, increased revenue production and implementation of the new sales process. Depreciation expense was unchanged between the quarters. Amortization of intangibles increased approximately $0.7 million due primarily to intangible assets acquired in 2004 and 2003 acquisitions. Interest expense decreased $0.3 million as average borrowings declined slightly between the quarters.

The Company’s overall tax rate for the three months ended March 31, 2004 was 39.9% and decreased from 40.8% for the same period of the prior year primarily due to state tax planning.

Other

For the three months ended March 31, 2004, net income as a percentage of revenues did not vary significantly from the three months ended December 31, 2003. Commission income was higher during the first quarter due to higher contingent commissions, the majority of which are historically received during the first quarter.

The timing of contingent commissions, policy renewals and acquisitions may cause revenues, expenses and net income to vary significantly from quarter to quarter. As a result of the factors described above, operating results for the three months ended March 31, 2004 should not be considered indicative of the results that may be expected for the entire year ending December 31, 2004.

9

Liquidity and Capital Resources

Net cash provided by operations totaled $40.5 million and $25.3 million for the three months ended March 31, 2004 and 2003, respectively, and is primarily dependent upon the timing of the collection of insurance premiums from clients and payment of those premiums to the appropriate insurance underwriters.

The Company has historically generated sufficient funds internally to finance capital expenditures for property and equipment. Cash expenditures for the acquisition of property and equipment were $1.7 million and $2.8 million for the three months ended March 31, 2004 and 2003, respectively. The purchase of insurance agencies utilized cash of $2.5 million and $3.2 million in the three months ended March 31, 2004 and 2003, respectively. Cash expenditures for such insurance agency acquisitions have been primarily funded through operations and long-term borrowings. In addition, a portion of the purchase price in such acquisitions may be paid through the Company’s common stock and/or deferred cash and common stock payments. The Company did not have any material capital expenditure commitments as of March 31, 2004.

Financing activities utilized cash of $7.6 million and $9.6 million in the three months ended March 31, 2004 and 2003, respectively, as the Company made dividend and debt payments. The Company has annually increased its dividend rate and anticipates the continuance of its dividend policy. The Company did not repurchase any shares during the three months ended March 31, 2004 or 2003. The Company is currently authorized to purchase up to $50.0 million annually of its common stock subject to market conditions and other factors.

As of March 31, 2004, the Company has a credit agreement with outstanding term loans of $153.9 million which are due in various amounts through 2007, including $149.6 million due in 2007, and outstanding revolving credit facility borrowings of $10.0 million, with $120.0 million available under the revolving credit facility for future borrowings. Borrowings bear interest at variable rates based on LIBOR plus a negotiated spread. Effective March 31, 2004, the Company amended the credit agreement to reduce the negotiated spread applicable to the term loan. In addition, the Company modified certain covenants including increasing the annual limit for repurchases of its common stock.

The Company had a current ratio (current assets to current liabilities) of 1.06 to 1.00 as of March 31, 2004. Shareholders’ equity of $461.6 million at March 31, 2004, is improved from $434.3 million at December 31, 2003. The debt to equity ratio at March 31, 2004 of 0.37 to 1.00 is decreased from the ratio at December 31, 2003 of 0.40 to 1.00 due to net income and the issuance of Common Stock.

The Company believes that cash generated from operations, together with proceeds from borrowings, will provide sufficient funds to meet the Company’s short and long-term funding needs.

Market Risk

The Company has certain investments and utilizes derivative financial instruments (on a limited basis) which are subject to market risk; however, the Company believes that exposure to market risk associated with these instruments is not material.

Change in Accounting Method

In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (FIN 46) and subsequently revised FIN 46 in December 2003. Effective January 1, 2004, the Company adopted the provisions of FIN 46. The Company did not identify any VIEs for which the Company is the primary beneficiary, thus, the Company was not required to consolidate any VIE.

Recent Industry Developments

Based on press releases issued by certain insurance brokerage companies, the Company understands that the Office of the Attorney General of New York has served subpoenas on certain insurance brokerage companies seeking information relating to certain compensation agreements between those insurance brokers and insurance

10

underwriters. As of the date of this report, the Company has not received a subpoena from the Office of the Attorney General of New York. However, in March 2004, one of the Company’s New York subsidiaries received a letter from the State of New York Insurance Department requesting information relating to placement service agreements, generally known as override commission agreements, maintained by the Company’s New York subsidiary. The Company’s New York subsidiary has responded to such request.

As previously disclosed in our public filings, the Company has override commission agreements and contingent commission agreements with certain insurance underwriters. Override commissions are commissions paid by insurance underwriters in excess of the standard commission rates on specific classes of business. Contingent commissions are commissions paid by insurance underwriters based on the estimated profit that the underwriter makes and/or the overall volume of business that the Company places with the underwriter. While it is not possible to predict the outcome of these inquiries, any decrease in these override and contingent commissions may have a negative effect on our results of operations.

Forward-Looking Statements

The Company cautions readers that the foregoing discussion and analysis includes “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created by that Act. These forward-looking statements are believed by the Company to be reasonable based upon management’s current knowledge and assumptions about future events, but are subject to the uncertainties generally inherent in any such forward-looking statement, including factors discussed above as well as other factors that may generally affect the Company’s business, financial condition or operating results. Reference is made to the discussion of “Forward-Looking Statements” contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003 regarding important risk factors and uncertainties that could cause actual results, performance or achievements to differ materially from future results, performance or achievements expressed or implied in any forward-looking statement made by or on behalf of the Company.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company believes that its exposure to market risk associated with transactions using certain investments and derivative financial instruments is not material.

Item 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report on Form 10-Q, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, performed an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended). Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of that evaluation date. Management is also responsible for establishing and maintaining adequate internal control over the Company’s financial reporting. There have been no changes in the Company’s internal control over financial reporting during the three months ended March 31, 2004, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

11

PART II—OTHER INFORMATION

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

a) Exhibits

Exhibit No.	Document
10.1	Second Amendment to Credit Agreement, dated as of March 31, 2004, among the Company, as Borrower, and Wachovia Bank, National Association, as administrative agent
31.1	Certification Statement of Chief Executive Officer Pursuant to Rule 13a – 14(a)/15d – 14(a)
31.2	Certification Statement of Chief Financial Officer Pursuant to Rule 13a – 14(a)/15d – 14(a)
32.1	Certification Statement of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350
32.2	Certification Statement of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350

b) Reports on Form 8-K

(i) The Company furnished a Current Report on Form 8-K with the Securities and Exchange Commission on February 12, 2004. The Form 8-K reported under Item 12 the Company’s financial results for the quarter and year ended December 31, 2003.

(ii) The Company furnished a Current Report on Form 8-K with the Securities and Exchange Commission on April 21, 2004. The Form 8-K reported under Item 12 the Company’s financial results for the quarter ended March 31, 2004.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant, Hilb Rogal & Hobbs Company, has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Hilb Rogal & Hobbs Company

(Registrant)

Date	May 7, 2004	By:	/s/    Martin L. Vaughan, III
			Martin L. Vaughan, III Chairman and Chief Executive Officer (Principal Executive Officer)

Date	May 7, 2004	By:	/s/    Carolyn Jones
			Carolyn Jones Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)

Date	May 7, 2004	By:	/s/    Robert W. Blanton, Jr.
			Robert W. Blanton, Jr. Vice President and Controller (Chief Accounting Officer)

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HILB ROGAL & HOBBS COMPANY

EXHIBIT INDEX

Exhibit No.	Document
10.1	Second Amendment to Credit Agreement, dated as of March 31, 2004, among the Company, as Borrower; and Wachovia Bank, National Association, as administrative agent
31.1	Certification Statement of Chief Executive Officer Pursuant to Rule 13a – 14(a)/15d – 14(a)
31.2	Certification Statement of Chief Financial Officer Pursuant to Rule 13a – 14(a)/15d – 14(a)
32.1	Certification Statement of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350
32.2	Certification Statement of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350

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EX-10.1

Exhibit 10.1

SECOND AMENDMENT TO CREDIT AGREEMENT

THIS SECOND AMENDMENT TO CREDIT AGREEMENT, dated as of the 31st day of March, 2004 (this “Amendment”), is made among HILB, ROGAL AND HAMILTON COMPANY, a Virginia corporation doing business as Hilb Rogal & Hobbs Company (the “Borrower”), and WACHOVIA BANK, NATIONAL ASSOCIATION (the “Administrative Agent”) on behalf of the Required Lenders and the Tranche B Lenders (each as defined in the Credit Agreement described below).

RECITALS

A. The Borrower, the Administrative Agent and the banks and financial institutions listed on the signature pages thereof or that became parties thereto after the date thereof (collectively the “Lenders”) are parties to a Second Amended and Restated Credit Agreement, dated as of July 1, 2002, as amended by a First Amendment to Credit Agreement, dated as of July 16, 2003 (as further amended, the “Credit Agreement”), providing for the availability of a credit facility to the Borrower upon the terms and conditions set forth therein. Capitalized terms used herein without definition shall have the meanings given to them in the Credit Agreement.

B. The Borrower has requested that the Lenders agree to amend (i) the pricing matrix set forth in the “Applicable Margin Percentage” definition of the Credit Agreement, (ii) the limits on the principal amounts of Borrower’s secured letters of credit issued to insurance companies and (iii) the limits on the Borrower’s ability to repurchase shares of its Capital Stock. The Borrower has also requested that the Lenders approve the change of the corporate name of the Borrower to “Hilb Rogal & Hobbs Company.”

C. The Administrative Agent and the Lenders have agreed to effect such amendments and consents on the terms and subject to the conditions set forth herein.

STATEMENT OF AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

AMENDMENTS

1.1 New Definition. Section 1.1 of the Credit Agreement is hereby amended by adding the following definition of “Second Amendment” in appropriate alphabetical order:

“Second Amendment” shall mean the Second Amendment to Credit Agreement, dated as of March 31, 2004, between the Borrower, the Administrative Agent and the Lenders.”

1.2 Existing Definitions. Section 1.1 of the Credit Agreement is hereby amended by deleting the matrix set forth in the definition of “Applicable Margin Percentage” and replacing it in its entirety with the following:

Leverage Ratio	Applicable Margin Percentage for Base Rate Revolving Loans		Applicable Margin Percentage for LIBOR Revolving Loans		Applicable Margin Percentage for Base Rate Tranche B Term Loans		Applicable Margin Percentage for LIBOR Tranche B Term Loans		Applicable Margin Percentage for Commitment Fee
Greater than or equal to 2.0 to 1.0	1.000	%	2.000	%	1.500	%	2.250	%	0.400	%
Greater than or equal to 1.0 to 1.0 but less than 2.0 to 1.0	0.750	%	1.750	%	1.500	%	2.250	%	0.375	%
Less than 1.0 to 1.0	0.500	%	1.500	%	1.500	%	2.250	%	0.350	%

1.3 Indebtedness. Section 7.2(xi) of the Credit Agreement is hereby amended by deleting the reference to “$5,000,000” and replacing it with “$10,000,000.”

1.4 Restricted Payments. Section 7.6(a) of the Credit Agreement is hereby amended by deleting the reference to “$20,000,000” in clause (iii) and replacing it with “$50,000,000.”

ARTICLE II

CONSENT

The Required Lenders hereby consent to the following for the purposes of the Credit Agreement and the other Credit Documents: (i) the Borrower’s doing business under the trade name “Hilb, Rogal & Hobbs Company” and (ii) the change of the Borrower’s name to “Hilb, Rogal & Hobbs Company”, provided that the Borrower gives the Administrative Agent notice of such name change within ten (10) Business Days after such change shall take effect.

ARTICLE III

EFFECTIVENESS

This Amendment shall become effective on the date when the last of the following conditions shall have been satisfied:

a) The Administrative Agent shall have received counterparts of this Amendment, duly executed by the Borrower and the Subsidiary Guarantors;

b) The Administrative Agent shall have received the approval of this Amendment from the Required Lenders and all of the Tranche B Lenders; and

c) The Borrower shall have paid to Wachovia Capital Markets, LLC (the “Arranger”) all fees and expenses described in the Engagement Letter dated March 11, 2004 between the Borrower and the Arranger.

ARTICLE IV

ACKNOWLEDGEMENT

The Subsidiary Guarantors hereby acknowledge that the Borrower, the Administrative Agent and the Lenders have agreed to amend the Credit Agreement as provided herein. Each Subsidiary Guarantor hereby

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approves and consents to the transactions contemplated by this Amendment and agrees that its obligations under the Subsidiary Guaranty and the other Credit Documents to which it is a party shall not be diminished as a result of the execution of this Amendment. This acknowledgement by the Subsidiary Guarantors is made and delivered to induce the Administrative Agent and the Lenders to enter into this Amendment, and the Subsidiary Guarantors acknowledge that the Administrative Agent and the Lenders would not enter into this Amendment in the absence of the acknowledgements contained herein.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

The Borrower hereby represents and warrants to the Administrative Agent and the Lenders as follows:

5.1 Representations and Warranties. After giving effect to this Amendment, each of the representations and warranties of the Borrower contained in the Credit Agreement and in the other Credit Documents is true and correct in all material respects on and as of the date hereof, with the same effect as if made on and as of the date hereof (except to the extent any such representation or warranty is expressly stated to have been made as of a specific date, in which case such representation or warranty is true and correct in all material respects as of such date).

5.2 No Default. After giving effect to this Amendment, no Default or Event of Default has occurred and is continuing.

ARTICLE VI

MISCELLANEOUS

6.1 Effect of Amendment. From and after the effective date of the amendments to the Credit Agreement set forth herein, all references to the Credit Agreement set forth in any other Credit Document or other agreement or instrument shall, unless otherwise specifically provided, be references to the Credit Agreement as amended by this Amendment and as may be further amended, modified, restated or supplemented from time to time. This Amendment is limited as specified and shall not constitute or be deemed to constitute an amendment, modification or waiver of any provision of the Credit Agreement except as expressly set forth herein. Except as expressly amended hereby, the Credit Agreement shall remain in full force and effect in accordance with its terms.

6.2 Governing Law. This Amendment shall be governed by and construed and enforced in accordance with the laws of the State of New York (without regard to the conflicts of law provisions thereof, but including Section 5-1401 of the General Obligations Law of the State of New York).

6.3 Expenses. The Borrower agrees to pay upon demand all reasonable out-of-pocket costs and expenses of the Administrative Agent (including, without limitation, the reasonable fees and expenses of counsel to the Administrative Agent) in connection with the preparation, negotiation, execution and delivery of this Amendment and the other Credit Documents delivered in connection herewith.

6.4 Severability. To the extent any provision of this Amendment is prohibited by or invalid under the applicable law of any jurisdiction, such provision shall be ineffective only to the extent of such prohibition or invalidity and only in any such jurisdiction, without prohibiting or invalidating such provision in any other jurisdiction or the remaining provisions of this Amendment in any jurisdiction.

6.5 Successors and Assigns. This Amendment shall be binding upon, inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto.

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6.6 Construction. The headings of the various sections and subsections of this Amendment have been inserted for convenience only and shall not in any way affect the meaning or construction of any of the provisions hereof.

6.7 Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their duly authorized officers as of the date first above written.

HILB, ROGAL AND HAMILTON COMPANY d/b/a HILB, ROGAL & HOBBS COMPANY
By:	/s/    Carolyn Jones

Title: SVP, CFO & Treasurer

WACHOVIA BANK, NATIONAL ASSOCIATION, as Administrative Agent on behalf of the Required Lenders and the Tranche B Lenders
By:	/s/    Jason S. Miller

Title: Vice President

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For purposes of Article IV only:

HILB, ROGAL AND HAMILTON INVESTMENT COMPANY

HILB, ROGAL AND HAMILTON REALTY COMPANY

HILB, ROGAL AND HAMILTON SERVICES COMPANY

HILB, ROGAL AND HAMILTON COMPANY OF ALABAMA, INC.

BEIERSDOERFER, MEADOWS & GOULD, INC.

HILB, ROGAL AND HAMILTON COMPANY OF ARIZONA

HRH INSURANCE SERVICES OF THE COACHELLAVALLEY, INC.

HILB, ROGAL AND HAMILTON INSURANCE SERVICES OF CENTRAL CALIFORNIA, INC.

MORGAN & FRANZ INSURANCE AGENCY OF ORANGE COUNTY

HRH OF NORTHERN CALIFORNIA INSURANCE SERVICES, INC.

PROFESSIONAL PRACTICE INSURANCE BROKERS, INC.

HILB, ROGAL AND HAMILTON INSURANCE SERVICES OF SAN DIEGO, INC.

ARIS/B&W INSURANCE SERVICES, INC.

SUMMIT RISK MANAGEMENT & INSURANCE SERVICES, INC.

HILB, ROGAL AND HAMILTON COMPANY OF DENVER

HILB, ROGAL AND HAMILTON COMPANY OF CONNECTICUT, LLC

THE MANAGING AGENCY GROUP, INC.

PREMIUM FUNDING ASSOCIATES, INC.

THOMAS M. MURPHY & ASSOCIATES, INC.

HILB, ROGAL AND HAMILTON COMPANY OF GAINESVILLE, FLORIDA, INC.

HUNT INSURANCE GROUP, INC.

INSURANCE CONSULTANTS & ANALYSTS, INC.

HILB, ROGAL AND HAMILTON COMPANY OF ORLANDO

HILB, ROGAL AND HAMILTON COMPANY OF SARASOTA

HILB, ROGAL AND HAMILTON COMPANY OF SOUTH FLORIDA

HILB, ROGAL AND HAMILTON COMPANY OF TAMPA BAY, INC.

HILB, ROGAL AND HAMILTON COMPANY OF ATLANTA

HILB, ROGAL AND HAMILTON COMPANY OF GAINESVILLE, GEORGIA

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HILB, ROGAL AND HAMILTON COMPANY OF SAVANNAH, INC.

HILB, ROGAL AND HAMILTON COMPANY OF ILLINOIS

DULANEY, JOHNSTON & PRIEST, INC.

THE DUNLAP CORPORATION

THE DUNLAP AGENCY

THE DUNLAP CORPORATION OF NEW HAMPSHIRE

HILB, ROGAL AND HAMILTON COMPANY OF BALTIMORE

HILB, ROGAL AND HAMILTON COMPANY OF METROPOLITAN WASHINGTON

HILB, ROGAL AND HAMILTON INSURANCE AGENCY OF MASSACHUSETTS, LLC

HILB, ROGAL AND HAMILTON COMPANY OF GRAND RAPIDS

HILB, ROGAL AND HAMILTON COMPANY OF PORT HURON

HRH INSURANCE SERVICES OF NEVADA, INC.

ASHURST PROCESSING AGENCY, INC.

GIACONIA LIFE ASSOCIATES, LLC

HILB, ROGAL AND HAMILTON COMPANY OF NORTHERN NEW JERSEY, LLC

HRH CONSULTING GROUP, LLC

HILB, ROGAL AND HAMILTON COMPANY OF NEW YORK, LLC

KAMMSAC INTERNATIONAL, LLC

KALVIN-MILLER HOLDINGS, LLC

PROPERTY OWNERS & MANAGERS PURCHASING GROUP, INC.

HILB, ROGAL AND HAMILTON COMPANY OF UPSTATE NEW YORK, LLC

PROFESSIONAL PRACTICES INSURANCE BROKERS, INC. (SOUTHEAST)

BOAHC, INC. D/B/A BERWANGER OVERMYER ASSOCIATES

BOAEB AGENCY, INC.

BOAFS AGENCY, INC.

MIDWEST PENSION SERVICES, INC.

BOAPC AGENCY, INC.

HILB, ROGAL AND HAMILTON COMPANY OF OKLAHOMA

HILB, ROGAL AND HAMILTON COMPANY OF OREGON

HILB, ROGAL AND HAMILTON COMPANY OF PHILADELPHIA, LLC

HILB, ROGAL AND HAMILTON COMPANY OF PITTSBURGH, LLC

HRH MERGER COMPANY

HILB, ROGAL AND HAMILTON COMPANY OF SAN ANTONIO

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HILB, ROGAL AND HAMILTON COMPANY OF TEXAS

HILB, ROGAL AND HAMILTON COMPANY OF VIRGINIA

TIMOTHY S. MILLS INSURANCE SERVICES, INC.

INTEGRATED RISK SOLUTIONS INSURANCE SERVICES, LLC

TLC HOBBS, LLC

WESTPORT FINANCIAL SERVICES, LLC

WESTPORT INSURANCE AGENCY, LLC

WESTPORT WORLDWIDE, LLC

WESTPORT INSURANCE BROKERAGE, LLC

STAFFING RISK SOLUTIONS, LLC

BAY TECHNOLOGY GROUP, LLC

HOBBS GROUP, INC. (OH)

HOBBS GROUP, INC. (MD)

HOBBS GROUP, INC. (MA)

HOBBS GROUP INVESTMENT ADVISORS, LLC

HOBBS GROUP LIMITED LIABILITY COMPANY

HOBBS GROUP, LLC

HOBBS IRA CORP.

INTEGRATED RISK SOLUTIONS INSURANCE SERVICES, LLC

HOBBS GROUP INSURANCE BROKERS, LLC

HOBBS/OFJ ACQUISITION CORP.

O’NEILL, FINNEGAN & JORDAN INSURANCE AGENCY, INC.

HOBBS GROUP (NY), LLC

KIRKLIN & COMPANY, LLC

HOBBS GROUP, INC. (TX)

HRH OF COLORADO MERGER COMPANY

FREBERG & COMPANY OF WYOMING, INC.

DOMINION SPECIALTY GROUP, INC.

By: /s/    Walter L. Smith

Title: Secretary

S-4

EX-31.1

Exhibit 31.1

STATEMENT OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13a – 14(a)/15d – 14(a)

I, Martin L. Vaughan, III, Chief Executive Officer of Hilb Rogal & Hobbs Company, certify that:

1. I have reviewed this report on Form 10-Q of Hilb Rogal & Hobbs Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date	May 6, 2004	/s/    Martin L. Vaughan, III
		Martin L. Vaughan, III Chief Executive Officer

EX-31.2

Exhibit 31.2

STATEMENT OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13a – 14(a)/15d – 14(a)

I, Carolyn Jones, Senior Vice President, Chief Financial Officer and Treasurer of Hilb Rogal & Hobbs Company, certify that:

1. I have reviewed this report on Form 10-Q of Hilb Rogal & Hobbs Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date	May 6, 2004	/s/    Carolyn Jones
		Carolyn Jones Senior Vice President, Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

STATEMENT OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Form 10-Q of Hilb Rogal & Hobbs Company for the quarter ended March 31, 2004, I, Martin L. Vaughan, III, Chief Executive Officer of Hilb Rogal & Hobbs Company, hereby certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(a) such Form 10-Q for the quarter ended March 31, 2004 fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934, as amended; and

(b) the information contained in such Form 10-Q for the quarter ended March 31, 2004 fairly presents, in all material respects, the consolidated financial condition and results of operations of Hilb Rogal and Hobbs Company and its subsidiaries as of and for the periods presented in such Form 10-Q.

By:	/s/    Martin L. Vaughan, III	Date:	May 6, 2004
	Martin L. Vaughan, III Chief Executive Officer

EX-32.2

Exhibit 32.2

STATEMENT OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Form 10-Q of Hilb Rogal & Hobbs Company for the quarter ended March 31, 2004, I, Carolyn Jones, Senior Vice President, Chief Financial Officer and Treasurer of Hilb Rogal & Hobbs Company, hereby certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(a) such Form 10-Q for the quarter ended March 31, 2004 fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934, as amended; and

(b) the information contained in such Form 10-Q for the quarter ended March 31, 2004 fairly presents, in all material respects, the consolidated financial condition and results of operations of Hilb Rogal & Hobbs Company and its subsidiaries as of and for the periods presented in such Form 10-Q.

By:	/s/    Carolyn Jones	Date:	May 6, 2004
	Carolyn Jones Senior Vice President, Chief Financial Officer and Treasurer