10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For Fiscal Year Ended December 31, 2005

COMMISSION FILE NO. 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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, no par value	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer  x Accelerated Filer  ¨ Non-Accelerated Filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

    Yes  ¨    No  x

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

$1,170,558,000 as of June 30, 2005

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

Class	Outstanding at February 28, 2006
Common Stock, no par value	36,163,907

Documents Incorporated by Reference

Portions of the registrant’s 2006 Annual Report to Shareholders are incorporated by reference into Parts I and II of this report.

Portions of the registrant’s Proxy Statement for the 2006 Annual Meeting of Shareholders, to be filed within 120 days after the end of the fiscal year, are incorporated by reference into Part III of this report.

PART I

ITEM 1. BUSINESS.

The Company

Hilb Rogal & Hobbs Company serves as an insurance and risk management intermediary between its clients and insurance companies that underwrite client risks. With offices located throughout the United States and in London, England, the Company assists clients in managing their risks in areas such as property and casualty, employee benefits and other areas of specialized exposure.

“HRH”, the “Company” and the “Registrant” refer to Hilb Rogal & Hobbs Company and its consolidated subsidiaries on a combined basis unless the context requires otherwise.

The Company was incorporated under the laws of the Commonwealth of Virginia in 1982. The Company is a holding company and operates through its subsidiaries. The Company has its principal executive office at 4951 Lake Brook Drive, Suite 500, Glen Allen, Virginia 23060. The Company maintains an internet website at www.hrh.com.

Shareholders of the Company and the public may access the Company’s periodic and current reports (including annual, quarterly and current reports on Form 10-K, Form 10-Q and Form 8-K, respectively, and any amendments to those reports), filed with or furnished to the Securities and Exchange Commission (SEC) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended. The reports are made available on the Company’s website as soon as practicable following the filing of such documents with the SEC. In addition, the Company’s Corporate Governance Guidelines, Code of Business Conduct and Ethics, Code of Ethics for Senior Financial Officers, and the Charters of the Audit Committee, Corporate Governance Committee, Human Resources and Compensation Committee, Corporate Affairs Committee, Finance Committee, and Business Practices Committee are available to shareholders of the Company and the public. These documents are available through the “Investor Relations” section of the Company’s website, or printed copies are available upon written request to the Company’s Secretary at the address set forth above. The information is free of charge and may be reviewed, downloaded and printed from the website at any time.

Overview

The Company’s client base ranges from personal to large national accounts and is primarily comprised of middle-market and major commercial and industrial accounts. Middle-market businesses are generally businesses that do not have internal risk management departments and outsource that function to an intermediary. Major accounts, which may have risk management departments, typically generate annual commissions and fees in excess of $100,000.

Insurance commissions (and fees in lieu of commission) accounted for approximately 94% of the Company’s total revenues in 2005. The Company also advises clients on risk management and employee benefits and provides claims management and loss control consulting services to clients, which contributed approximately 4% of revenues in 2005.

The Company’s offices typically act as independent agents representing a large number of insurance companies, which gives the Company access to specialized products and capacity needed by its clients. Offices and regions are staffed to handle the broad variety of insurance needs of their clients. The Company also markets excess and surplus lines insurance, reinsurance, and specialty programs through its Managing General Agencies/Underwriters (MGA/MGU) to its own offices and other intermediaries.

The Company is organized under regional operating units to coordinate the efforts of several local offices in a geographic area to focus on markets, account retention, client service and new business production. The six

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U.S. regions are the Mid-Atlantic (Delaware, Maryland, Ohio, Pennsylvania, Tennessee and Virginia); Northeast (Connecticut, Maine, Massachusetts, New Hampshire, New Jersey and New York); Southeast (Alabama, Florida and Georgia); Central (Kansas, Oklahoma and Texas); West (Arizona, California, Colorado, Nevada, Oregon and Wyoming) and the Midwest (Illinois, Michigan, Nebraska and Wisconsin). By regionally managing and coordinating complementary resources, the Company has enabled each office to address a broader spectrum of client needs and respond more quickly and expertly than each could do on a stand-alone basis. Operations were streamlined by merging multiple locations in the same city into a single profit center and converting smaller locations into sales offices of a larger profit center in the same region. The Company also has operating units specializing in excess and surplus lines brokerage (California, Florida, Illinois and Texas), MGA/MGU business (Colorado, Connecticut and Vermont); and reinsurance brokerage (London, England). Additionally, the Company has coordinated national resources such as specialized industry or product expertise, claims management and loss control in order to deploy these resources as needed to offices, without regard to geographic boundaries, which will further enhance service capacity to larger and more complex clients.

The Company has established direct access to certain foreign insurance markets without the need to share commissions with excess and surplus lines brokers. This direct access allows the Company to enhance its revenues from insurance products written by foreign insurers and allows it to provide a broader array of insurance products to its clients.

The Company believes that a key to its success has been a strong emphasis on local client service by experienced personnel with established community relations. The Company’s offices have historically been largely decentralized with respect to client solicitation, account maintenance underwriting decisions, selection of insurance companies and areas of insurance specialization. The Company maintains centralized administrative functions, including cash management and investment, human resources and legal functions, through its corporate headquarters to allow the local office staff to focus on business production and retention. Accounting records and systems are maintained at each office, but the Company requires each office to comply with standardized financial reporting and control requirements. Through its internal auditing department, Company personnel periodically visit offices and monitor compliance with internal accounting controls and procedures.

The Company derives income primarily from commissions on the sale of insurance products to clients paid by the insurance underwriters with whom the offices place their clients’ insurance. In some cases, the Company is compensated by a fee paid directly by the client. The Company typically acts as an agent in soliciting, negotiating and effecting contracts of insurance through insurance companies and occasionally as a broker in procuring contracts of insurance on behalf of insureds. In the past three years, the Company has derived in excess of 90% of its commission and fee revenue from the sale of insurance products, principally property and casualty and employee benefits insurance. Accordingly, no breakdown by industry segments has been made. The balance is primarily derived from service fee income related to claims management and loss control services, program administration and workers compensation consultative service. Within its range of services, the Company also places surplus lines coverages (coverages not available from insurance companies licensed by the states in which the risks are located) with surplus lines insurers for various specialized risks.

Insurance agents’ commissions are generally a percentage of the premium paid by the client. Commission rates vary substantially within the insurance industry. Commissions depend upon a number of factors, including the type of insurance, the amount of the premium, the particular insurer, the capacity in which the Company acts and the scope of the services it renders to the client. The Company has historically entered into contingent and override commission arrangements with various underwriters. Contingent commissions are commissions paid by underwriters based on profitability of the business, premium growth, total premium volume or some combination of these factors. Contingent commissions are generally received in the first and second quarters of each year which accordingly, may cause earnings for those quarters to vary from other quarterly results. Commissions from national override agreements were typically volume based and paid quarterly by insurance underwriters in excess of the standard commission rates on specific classes of business. National Override Agreements mean

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corporate-wide compensation agreements negotiated by the Company with those certain insurance companies on behalf of all of the Company’s offices to receive commissions in lieu of standard contingent compensation arrangements with each office of the Company. These amounts were recorded as earned. Effective for business written on or after January 1, 2005, these National Override Agreements reverted into industry standard local contingency agreements with those insurance underwriters.

The Company provides a variety of professional services to assist clients in analyzing risks and in determining whether protection against risks is best obtained through the purchase of insurance or through retention of all, or a portion of those risks, and the adoption of risk management policies and cost-effective loss control and prevention programs.

No material part of the Company’s business is dependent on a single client or on a few clients, and the Company does not depend on a single industry or type of client for a substantial amount of its business. In 2005, the largest single client accounted for approximately 0.8% of the Company’s total revenues.

Industry Regulatory Matters

On August 31, 2005, the Company entered into an agreement with the Attorney General of the State of Connecticut (the Attorney General) and the Insurance Commissioner of the State of Connecticut (the Commissioner) to resolve all issues related to investigations conducted by the Attorney General and the Commissioner into certain insurance brokerage and insurance agency practices (the Investigations) and to settle an action commenced on August 31, 2005 by the Attorney General in the Connecticut Superior Court alleging violations of the Connecticut Unfair Trade Practices Act and the Connecticut Unfair Insurance Practices Act. In the agreement, the Company agreed to take certain actions including establishing a $30.0 million national fund for distribution to certain clients, enhancing disclosure practices for agency and broker clients, and to not accept or request contingent compensation on brokerage business. For further information on this agreement, see “Note M-Regulatory Charge and Related Matters” of Notes to Consolidated Financial Statements in the portions of the Company’s 2005 Annual Report to Shareholders set forth as Exhibit 13 in this report. Following is additional information regarding governmental investigations into the insurance intermediary industry’s business practices and broker compensation arrangements.

On October 14, 2004, the Office of the Attorney General of the State of New York (NYAG) filed a lawsuit against Marsh & McLennan Companies, Inc. and its subsidiary Marsh Inc. (collectively Marsh), the world’s largest insurance broker, alleging statutory and common law fraud, securities fraud, bid-rigging and other antitrust violations in the placement of insurance business. On March 4, 2005, the NYAG filed a lawsuit against Aon Corporation (Aon), the world’s second largest insurance broker, alleging fraudulent business practices, common law fraud and securities fraud in connection with the conduct of its placement of insurance business. Marsh and Aon each entered into settlement agreements with the NYAG and certain state regulators in January 2005 and March 2005, respectively. On April 8, 2005, Willis Group Holdings Limited, Willis North America Inc. and Willis of New York, Inc. (collectively Willis) entered into an agreement with the NYAG and the New York state insurance regulator to resolve issues related to investigations of business practices conducted by the NYAG and the state regulator. On May 18, 2005, Arthur J. Gallagher & Co. and its subsidiaries and affiliates, except for Gallagher Bassett Services, Inc., (collectively Gallagher), entered into an Assurance of Voluntary Compliance with the Attorney General of the State of Illinois and the Illinois state insurance regulator to resolve issues related to investigations of business practices conducted by the Illinois regulators.

Under the terms of the agreements, Marsh, Aon, Willis and Gallagher are required to establish settlement funds in the amounts of $850 million, $190 million, $50 million and $27 million, respectively, to compensate certain policyholder clients who retained Marsh, Aon, Willis or Gallagher to place insurance between specified inception or renewal dates, where such policies resulted in Marsh, Aon, Willis and Gallagher recording contingent or override commissions. The Marsh, Aon, Willis and Gallagher agreements also place restrictions on the future business practices of these companies. Marsh, Aon, Willis and Gallagher may no longer accept (i) any contingent compensation for certain services in placing, renewing, consulting on or servicing any insurance

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policy and (ii) any compensation other than a specific fee to be paid by the client, a specific percentage commission on premiums to be paid by the insurer set at the time of the purchase, renewal, placement or servicing of the policy, or both types of compensation. If Marsh, Aon or Willis receives any commission, it must disclose to the client that it intends to collect the commission and obtain the client’s written consent prior to the binding of the policy.

Contingent and National Override Agreements Commissions

As a result of the industry and regulatory developments described above, controversy continues to surround the longstanding insurance industry practice of contingent and override commissions paid to agents and brokers by underwriters. The Company has historically entered into contingent and override commission agreements with various underwriters. Contingent commissions are commissions paid by underwriters based on profitability of the business, premium growth, total premium volume or some combination of these factors. Revenue from contingent commissions is heavily weighted in the first and second quarters. Income from the National Override Agreements was typically volume-based and paid quarterly by underwriters in excess of the standard commission rates on specific classes of business. National Override Agreements are defined under “Overview” above.

For 2005, 2004 and 2003, the company recognized contingent and National Override Agreements commissions of $48.5 million, $42.4 million and $40.8 million, respectively. Of the 2005 amount, 94% was from standard contingency agreements and 6% was from National Override Agreements. Of the 2004 annual amount, 81% was from standard contingency agreements and 19% was from National Override Agreements. The standard contingency agreements are entered into and maintained at the local office level. Effective for business written on or after January 1, 2005, these National Override Agreements reverted into standard local contingency arrangements with those underwriters on an office by office basis, which will be paid and recorded, if at all, annually beginning in early 2006. There can be no assurance that the loss of National Override Agreements commissions resulting from the reversion to standard local contingency arrangements will be offset by additional contingent commissions in future periods.

State attorneys general and insurance departments have issued subpoenas and/or made inquiries into, among other things, the industry’s commission payment practices. The Company has received subpoenas and/or requests for information from attorneys general and/or insurance departments in fourteen states. The Company may receive additional subpoenas and/or requests for information in the future.

In addition to state regulatory inquiries, the Company has been named as a defendant in four purported class actions brought against a number of brokers in the insurance industry and one purported securities class action. For information on industry litigation, see Part I, Item 3—Legal Proceedings.

Operating History and Acquisition Program

The Company was formed in 1982 to acquire and operate an existing insurance agency network. At that time, the Company undertook a program of consolidating agencies, closing or selling unprofitable locations and acquiring new agencies. Since 1984, over 220 independent agencies have been acquired. The purchase price of an agency is typically paid in cash, common stock and/or deferred payments of cash or common stock.

Since 1997, the Company’s acquisition program has been focused on independent intermediaries that fit into the Company’s current operating models and strategic plans, targeting entities that strengthen its regions and middle-market and major account positions or add to its specialty lines of business and increase its range of services.

The Company has substantial experience in acquiring insurance agencies. Generally, each acquisition candidate is subjected to a due diligence process in which the Company evaluates the quality and reputation of the business and its management, revenues and earnings, specialized products and expertise, administrative and

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accounting records, growth potential and location. For candidates that pass this screening process, the Company uses a pricing method that emphasizes pro forma revenues, profits and tangible net worth. As a condition to completing an acquisition, the Company requires that the principals and key employees be subject to restrictive covenants. Once the acquisition is consummated, the Company takes steps to introduce its procedures and to integrate the agency’s systems and employees into the Company.

Competition

The Company participates in a very competitive industry. Competition is primarily based on price, service, relationships and expertise. The Company is the eighth largest insurance and risk management intermediary firm in the United States serving a wide variety of clients through its offices located in 29 states. Many of the Company’s competitors are larger and have greater resources than the Company and operate on an international scale. Four of these competitors are significantly larger, having more than double the commissions and/or fee revenues of the Company.

In some of the offices’ cities, because no major national insurance broker has established a presence, the Company competes with local agents and private, regional firms, some of which may be larger than the Company’s local office.

The Company is also in competition with certain insurance companies that write insurance directly for their clients, the banking industry, as well as self-insurance and other employer-sponsored programs.

Employees

As of December 31, 2005, the Company had approximately 3,600 employees. No employees are currently represented by a union. The Company believes its relations with its employees are good.

Regulation

In every state in which the Company does business, the applicable office or employee is required to be licensed or to have received regulatory approval by the state insurance department in order for the Company to conduct business. In addition to licensing requirements applicable to the Company, most jurisdictions require individuals who engage in brokerage and certain insurance service activities to be licensed personally.

The Company’s operations depend on the validity of and its continued good standing under the licenses and approvals pursuant to which it operates. Licensing laws and regulations vary from jurisdiction to jurisdiction. In all jurisdictions, the applicable licensing laws and regulations are subject to amendment or interpretation by regulatory authorities, and generally such authorities are vested with general discretion as to the grant, renewal and revocation of licenses and approvals.

Ownership of Insurers and Reinsurers

Except for Anthony F. Markel and Norwood H. Davis, Jr., no executive officer or director of the Company has greater than $1,000,000 of ownership interest in an insurance or reinsurance company. Mr. Markel’s interest is in Markel Corporation, and Mr. Davis’ interest is in WellPoint, Inc.

ITEM 1A. RISK FACTORS.

Risk factors that might impact the Company include, but are not limited to, the following:

The Company’s commission revenues are based on premiums set by insurers and any decreases in these premium rates could result in revenue decreases for the Company.

The Company is engaged in insurance agency and brokerage activities and derives revenues primarily from commissions on the sale of insurance products to clients that are paid by the insurance underwriters with whom the Company’s offices place clients’ insurance. These commissions are highly dependent on the premiums

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charged by insurance underwriters, which are subject to fluctuation based on the prevailing economic conditions and competitive factors that affect insurance underwriters. Premiums historically have been cyclical in nature, varied by region and displayed a high degree of volatility based on the prevailing economic and competitive factors that affect insurance underwriters. These factors, which are not within the Company’s control, include the capacity of insurance underwriters to place new business, non-underwriting profits of insurance underwriters, consumer demand for insurance products, the availability of comparable products from other insurance underwriters at a lower cost, and the availability of alternative insurance products, such as government benefits and self-insurance plans, to consumers.

The Company cannot predict the timing or extent of future changes in premiums and thus commissions. As a result, the Company cannot predict the effect that future premium rates will have on the Company’s operations. While increases in premium rates may result in revenue increases for the Company, decreases in premium rates may result in revenue decreases for the Company. These decreases may adversely affect the Company’s operations for the periods in which they occur.

The level of contingent commissions is difficult to predict and any material decrease in the Company’s collection of them is likely to have an adverse impact on operating results.

Contingent commissions are commissions paid by insurance underwriters based on profitability of the business, premium growth, total premium volume or some combination of these factors. The Company generally receives these contingent commissions in the first and second quarters of each year. Due to the nature of these commissions, it is difficult for the Company to predict their payment. Increases in loss ratios experienced by insurance underwriters will result in a decreased profit to them and may result in decreases in the payment of contingent commissions to the Company. Furthermore, the Company has no control over insurance underwriters’ abilities to estimate loss reserves, which affects the Company’s payment calculation. In addition, tightening of underwriting criteria by certain insurance underwriters, due in part to the high loss ratios, may result in a lower volume of business that the Company is able to place with them. Contingent commissions affect the Company’s revenues, and decreases in their payment to the Company may have an adverse effect on the Company’s results of operations.

The Company has eliminated National Override Agreements commissions effective for business written on or after January 1, 2005, and it is uncertain whether additional contingent commissions payable to the Company will offset the loss of such revenues.

Effective for business written on or after January 1, 2005, National Override Agreements reverted into standard local contingency arrangements with those respective underwriters on an office by office basis, which will be paid and recorded, if at all, annually beginning in early 2006. Due to the difficulty in predicting contingent commissions (as noted above), it is uncertain whether additional contingent commissions payable to the Company will offset the loss of such revenues. National Override Agreements are defined in Part I, Item 1—Business. In 2005, commissions from National Override Agreements accounted for 0.5% of total revenues.

The Company’s growth has been enhanced through acquisitions, but the Company may not be able to successfully identify and attract suitable acquisition candidates and complete acquisitions.

There can be no assurance that the Company will be able to successfully identify suitable acquisition candidates that will permit the Company to expand into new or existing markets. The Company is unable to predict whether or when any prospective acquisition candidates will become available or the likelihood that any acquisition will be completed once negotiations have commenced. The Company competes for acquisition and expansion opportunities with entities that have substantially greater resources. The failure to acquire additional agencies at the same rate that the Company has in the past may adversely affect the expected growth in revenues.

The Company’s failure to integrate an acquired insurance agency efficiently may have an adverse effect on the Company.

The integration of an acquisition may involve a number of factors that may affect the Company’s operations. These factors include diversion of management’s attention, difficulties in the integration of acquired

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operations and retention of personnel, entry into unfamiliar markets, unanticipated problems or legal liabilities, and tax and accounting issues. Furthermore, once the Company has integrated an acquired insurance agency, the agency may not achieve levels of revenue, profitability, or productivity comparable to our existing locations, or otherwise perform as expected. The failure to integrate one or more acquired agencies so that they achieve expected performance goals may have an adverse effect on the Company’s results of operations and financial condition.

The general level of economic activity can have a substantial impact on revenues that is difficult to predict. A strong economic period may not necessarily result in higher revenues.

The volume of insurance business available to the Company’s agencies has historically been influenced by factors such as the health of the overall economy. The specific impact of the health of the economy on the Company’s revenues, however, can be difficult to predict. When the economy is strong, insurance coverages typically increase as payrolls, inventories and other insured risks increase. Insurance commissions to the Company’s agencies generally would be expected to increase. As discussed above, however, the Company’s commission revenues are dependent on premium rates charged by insurance underwriters, and these rates are subject to fluctuation based on prevailing economic and competitive conditions. As a result, the higher commission revenues the Company generally would expect to see in a strong economic period may not necessarily occur, as any increase in the volume of insurance business brought about by favorable economic conditions may be offset by premium rates that have declined in response to increased competitive conditions, among other factors.

The Company’s success in the future depends, in part, on the Company’s ability to attract and retain quality producers.

The Company believes that its success in the future depends, in part, on its ability to attract and retain quality producers. The competition for such personnel in the insurance intermediary industry is intense. The Company’s failure to recruit, retain, train and integrate quality producers may have an adverse effect on the Company’s results of operations.

The Company may be subject to increasing costs arising from errors and omissions claims against the Company.

Errors and omissions claims could include, for example, the failure of Company employees, whether negligently or intentionally, to place coverage correctly or notify claims on behalf of clients or to provide insurance carriers with complete and accurate information relating to the risks being insured. Errors and omissions claims against the Company may allege its potential liability for all or part of the amounts in question. It is not always possible to prevent and detect errors and omissions, and the precaution taken by the Company may not be effective in all cases.

The Company is subject to governmental regulation which may impact operating results and/or growth.

The Company is subject to governmental regulation which may adversely impact operating results and/or growth. The Company’s failure to comply with regulations may lead to disciplinary action. These actions may include the assessment of penalties and requiring clients to be compensated for loss. Also, changes in regulations and actions by regulators may require operational changes which could adversely affect the Company’s results of operations.

The business practices and broker compensation arrangements of the Company are subject to uncertainty due to investigations by governmental authorities and related private litigation.

The business practices and broker compensation arrangements of the Company and the insurance intermediary industry are subject to uncertainty due to investigations by various governmental authorities and

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related private litigation. The departments of insurance of various states may adopt new regulations addressing contingent commission arrangements and disclosure of such arrangements with insureds. In addition, the National Association of Insurance Commissioners has proposed model legislation to implement new disclosure requirements relating to agent and broker compensation arrangements. The Company intends to monitor agent and broker compensation practices and, as warranted by market and regulatory developments, will review its compensation arrangements with underwriters. While it is not possible to predict the outcome of the governmental inquiries and investigations into the insurance industry’s commission payment practices or the responses by the market and regulators, any material decrease in the Company’s contingent commissions is likely to have an adverse effect on its results of operations.

The Company is subject to a number of investigations and legal proceedings, which if determined unfavorably for the Company, may adversely affect the Company’s results of operations.

Costs incurred related to investigations, private litigation and class actions are uncertain and difficult to predict. In addition to routine litigation and disclosed investigations, the Company has been named as a defendant in four purported class actions brought against a number of brokers in the insurance industry and one purported securities class action. The final outcome of these matters and similar matters, and related costs, cannot be determined. An unfavorable resolution to these matters could adversely impact the Company’s results of operations.

A decline in the Company’s ability to obtain new financing and/or refinance current borrowings may adversely affect the Company.

At December 31, 2005, the Company had $264.0 million of consolidated debt outstanding. A decline in the Company’s ability to obtain new financing and/or refinance current borrowings may adversely effect the Company’s borrowing costs and financial flexibility.

If the Company is unable to respond in a timely and cost-effective manner to rapid technological change in the insurance intermediary industry, there may be a resulting adverse effect on business and operating results.

The insurance industry is increasingly influenced by rapid technological change, frequent new product and service introductions and evolving industry standards. For example, the insurance intermediary industry has increased use of the internet to communicate benefits and related information to consumers and to facilitate information exchange and transactions. The Company believes that its future success will depend on its ability to continue to anticipate technological changes and to offer additional product and service opportunities that meet evolving standards on a timely and cost-effective basis. There is a risk that the Company may not successfully identify new product and service opportunities or develop and introduce these opportunities in a timely and cost-effective manner. In addition, opportunities that the Company’s competitors develop or introduce may render the Company’s products and services noncompetitive. As a result, the Company can give no assurances that technological changes that may affect its industry in the future will not have a material adverse effect on the Company’s business and results of operations.

Quarterly and annual variations in the Company’s commissions and fees that result from the timing of policy renewals and the net effect of new and lost business production may have unexpected impacts on the Company’s results of operations.

The Company’s commission and fee income, which typically accounts for more than 90% of total annual revenues, is subject to both quarterly and annual fluctuations as a result of timing of policy renewals and the net effect of new and lost business production. The factors that cause these variations are not within the Company’s control. Specifically, consumer demand for insurance products can influence the timing of renewals, new business and lost business, which generally includes policies that are not renewed, and cancellations.

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Information Concerning Forward-Looking Statements

This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Among other things, these statements relate to the financial condition, results of operations and future business plans, operations, opportunities and prospects of the Company. These forward-looking statements involve risks and uncertainties that could cause the Company’s actual results, performance or achievements to be materially different from any anticipated results, performance or achievements expressed or implied by such forward-looking statements.

Forward-looking statements in Form 10-K or other filings by the Company with the SEC, in the Company’s press releases or other public or shareholder communications, or in oral statements made with the approval of an authorized Company executive officer include the words or phrases “would be,” “will allow,” “expects to,” “will continue,” “is anticipated,” “estimate,” “project” or similar expressions that are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

While forward-looking statements are provided to assist in the understanding of the Company’s anticipated future financial performance, the Company cautions readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. Forward-looking statements are subject to significant risks and uncertainties, many of which are beyond the Company’s control. Although the Company believes that the assumptions underlying its forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Actual results may differ materially from those contained in or implied by such forward-looking statements for a variety of reasons including the risk factors and uncertainties disclosed above.

The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 2. PROPERTIES.

The Company leases its Headquarters’ office in Glen Allen, Virginia. The Company’s subsidiaries also conduct their business operations from leased office space in various states where located. Information on the Company’s lease commitments is incorporated by reference to the material contained in “Note G-Leases” of Notes to Consolidated Financial Statements included in the portions of the Company’s Annual Report to Shareholders set forth as Exhibit 13 in this report. The Company believes that its properties are in good condition and are suitable and adequate for its purposes.

ITEM 3. LEGAL PROCEEDINGS.

Except as described below, the Company has no material pending legal proceedings other than ordinary, routine litigation incidental to the business, to which it or a subsidiary is a party. With respect to the routine litigation, upon the advice of counsel, management believes that none of these proceedings, either individually or in the aggregate, if determined adversely to the Company, would have a material effect on the financial position or results of operations of the Company or its ability to carry on its business as currently conducted.

Information on the Company’s material legal proceedings is incorporated by reference to the material contained in “Note P—Commitments and Contingencies” of Notes to Consolidated Financial Statements included in the portions of the Company’s Annual Report to Shareholders set forth as Exhibit 13 in this report.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.

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EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of the Registrant are as follows:

Martin L. Vaughan, III, 58, has been Chairman and Chief Executive Officer since May 2003. He has been a Director of the Company since 1999. Prior thereto, he was President of the Company from 2000 to 2003 and Chief Operating Officer from 1999 to 2003. He was President and Chief Executive Officer of American Phoenix Corporation from 1990 to 1999.

F. Michael Crowley, 54, has been President since September 2005. He was Executive Vice President, National Director for Property and Casualty from 2004 to 2005. Prior thereto, he was Vice Chairman of Palmer & Cay, Inc. from 2002 to 2004 and President and Chief Operating Officer of Palmer & Cay, Inc. from 1998 to 2002.

Michael Dinkins, 51, has been Executive Vice President and Chief Financial Officer since October 2005. Prior thereto, he was Vice President-Global Control and Reengineering of Guidant Corporation from 2004 to 2005; Vice President and Chief Financial Officer of Worldwide Customer Services Operations for NCR Corporation from 2002 to 2004; and Chairman, President and Chief Executive Officer of Access Worldwide Communications from 1999 to 2002.

Timothy J. Korman, 53, has been Executive Vice President, Finance and Administration since 1997 and was a Director of the Company from 1999 to 2005. He is a first cousin of Robert S. Ukrop, a Director of the Company.

Joseph W. G. Birriel, 55, has been Senior Vice President, Human Resources and Corporate Branding since October 2005. Prior thereto, he was President of BrandInside, the internal branding division of The Martin Agency, from 2002 to 2005 and Senior Vice President, Human Resources of The Martin Agency from 2000 to 2002.

Walter L. Smith, 48, has been Senior Vice President, Business Practices and Quality Assurance since October 2005. He has been Senior Vice President of the Company since 2001. He has been Secretary of the Company since 1998. He was General Counsel of the Company from 1988 to 2005. He was Vice President from 1991 to 2001 and he was Assistant Secretary of the Company from 1989 to 1998.

Frank H. Beard, 58, has been Vice President, National Director of Property and Casualty since November 2005. Prior thereto, he was Managing Director of Risk Practices and Carrier Relations for Wachovia from May to November 2005 and Executive Vice President for Palmer & Cay, Inc. from 1999 to May 2005.

William L. Chaufty, 53, has been Vice President of the Company since 1998. He has been Director of the Central Region since 1997 and was President of Hilb Rogal & Hobbs of Oklahoma, a subsidiary of the Company, from 1989 to 2000.

William F. Creedon, 45, has been Vice President and Director of the West Region since February 2006. Prior thereto, he was President of Hilb Rogal & Hobbs of Colorado, Inc. from 2002 to 2006. He was an Executive Vice President with Hobbs Group, LLC from 1996 to 2002.

Steven C. Deal, 52, has been Vice President of the Company since 1998. He has been Director of the Mid-Atlantic Region since 2000. He was National Director of Select Commercial Operations from 1997 until 2000 and National Director of Personal Lines from 1998 until 2000. He has also been Chairman of Hilb Rogal & Hobbs of Virginia, Inc., a subsidiary of the Company, since 1997. He was President of this subsidiary from 1990 to 1997.

Karl E. Manke, 59, has been Vice President, National Director, Select and Personal Lines of the Company since 2003. Prior thereto, he was Vice President, Marketing and Sales Development of the Company from 1999 to 2003.

10

Peter E. Marcia, 41, has been Vice President, National Director of Employee Benefits since November 2003. Prior thereto, he was Managing Director of Hobbs Group, LLC Employee Benefits from 1999 to 2003.

John P. McGrath, 48, has been Vice President and Director of the Midwest Region since November 2003. He was Senior Vice President—Business and Product Development from 1999 to 2003 and was Vice President of the Company from 1998 to 1999. He was Director of the Mid-Atlantic Region from 1995 to 2000 and President and Chief Executive Officer of Hilb Rogal & Hobbs of Pittsburgh, LLC from 1993 to 1998.

Robert S. O’Brien, 49, has been Vice President, National Director of Production and Sales Development since August 2003. Prior thereto, he was Senior Vice President of Marketing for Hobbs Group, LLC from 2002 to 2003, Vice President of Marketing from 2001 to 2002 and Vice President of Market Integration from 2000 to 2001.

J. Thomas Stiles, 55, has been Vice President and Director of the Southeast Region of the Company since June 2004. Prior thereto, he was a Senior Vice President of Hobbs Group, LLC from 1997 to 2004.

Henry N. Watkins, 47, has been Vice President and Director of the Northeast Region since November 2005. He was President of Hilb Rogal & Hobbs of Connecticut, LLC, a subsidiary of the Company, from 2003 until 2005. He was a Senior Vice President of this subsidiary from 2002 to 2003. Prior thereto, he was a Senior Vice President with Marsh & McLennan from 2000 to 2002.

John Hamerski, 54, has been Vice President, Controller since January 2006. Prior thereto, he was Vice President and Chief Financial Officer of Inyx, Inc. from April 2005 to December 2005. During 2004 and 2005, he performed several consulting assignments including a project for Inyx, Inc. From 1999 to 2004, he was Executive Vice President and Chief Financial Officer of Access Worldwide Communications, Inc.

A. Brent King, 37, has been General Counsel of the Company since October 2005. He has been Vice President and Assistant Secretary of the Company since 2001. He was Associate General Counsel of the Company from 2001 to 2005. Prior thereto, he was an attorney at Williams Mullen from 1994 to 2001.

All officers serve at the discretion of the Board of Directors and, to the extent provided for in the Company’s bylaws, the Chairman of the Board. Each holds office until the next annual election of officers by the Board of Directors, which will occur after the Annual Meeting of Shareholders, scheduled to be held on May 2, 2006, or until their successors are elected. There are no family relationships nor any arrangements or understandings between any officer and any other person pursuant to which any such officer was selected, except as noted above.

11

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

(a) The Company’s Common Stock has been publicly traded since July 15, 1987. It is traded on the New York Stock Exchange (NYSE) under the symbol “HRH.” As of December 31, 2005, there were 519 holders of record of the Company’s Common Stock.

The following table sets forth the reported high and low sales prices per share of the Common Stock on the NYSE Composite Tape, based on published financial sources, and the dividends per share declared on Common Stock for the quarter indicated.

Quarter Ended	Sales Price				Cash Dividends Declared
	High		Low
2005
March 31	$	36.48	$	32.65	$	0.1050
June 30		38.20		33.35		0.1150
September 30		38.08		31.91		0.1150
December 31		39.89		36.00		0.1150
2004
March 31	$	38.33	$	31.19	$	0.0925
June 30		38.92		34.61		0.1050
September 30		37.01		32.26		0.1050
December 31		37.64		30.77		0.1050

The Company’s current dividend policy anticipates the payment of quarterly dividends in the future. The declaration and payment of dividends to holders of Common Stock will be at the discretion of the Board of Directors and will be dependent upon the future earnings and financial condition of the Company.

The Company’s current credit facility limits the payment of cash dividends and other distributions on the Common Stock of the Company. The Company may not make dividend payments or other distributions during any fiscal year exceeding the consolidated net income for the immediately preceding fiscal year.

(c) No purchases of Common Stock occurred in the fourth quarter of 2005 under the publicly announced share-repurchase program (the 2004 Program).

The 2004 Program was announced by the Company on March 31, 2004 and provides for the Company to purchase up to $50.0 million of its Common Stock annually. The repurchases may be made on the open market or in negotiated transactions, with the timing and amount of the transactions to be determined by the Company’s management subject to market conditions and other factors.

Not included in the 2004 Program are purchases that were made on behalf of a trust maintained by the Company for the Executive Voluntary Deferral Plan and the Outside Directors Deferral Plan. Total number of shares purchased during the fourth quarter of 2005 relating to the plans was 4,832, at an average price per share of $38.58.

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ITEM 6. SELECTED FINANCIAL DATA.

Information as to selected financial data is incorporated by reference to the material under the heading “Selected Financial Data” in the portions of the Company’s 2005 Annual Report to Shareholders set forth as Exhibit 13 in this report.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Information as to management’s discussion and analysis of financial condition and results of operations is incorporated by reference to the material under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the portions of the Company’s 2005 Annual Report to Shareholders set forth as Exhibit 13 in this report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The Company’s consolidated financial statements and notes thereto, selected quarterly financial data and the Report of Independent Registered Public Accounting Firm on Financial Statements are incorporated by reference to the material under those headings in the portions of the Company’s 2005 Annual Report to Shareholders set forth as Exhibit 13 in this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods required by the Securities and Exchange Commission. As of the end of the period covered by this report on Form 10-K, 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 the end of such period.

Internal Control over Financial Reporting

Management is also responsible for establishing and maintaining adequate internal control over the Company’s financial reporting (as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934, as amended). Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, management has conducted an assessment of the design and effectiveness of its internal controls over financial reporting. Management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2005 has been

13

audited by Ernst & Young LLP, the independent registered public accounting firm that also audited the Company’s consolidated financial statements. Management’s Report on Internal Control Over Financial Reporting and the Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting are incorporated by reference to the portions of the Company’s 2005 Annual Report to Shareholders set forth as Exhibit 13 in this report. There have been no changes in the Company’s internal control over financial reporting during the three months ended December 31, 2005 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

None.

14

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Except for certain information regarding executive officers included in Part I and the matters set forth below, the information required by this Item is incorporated by reference to the Company’s definitive Proxy Statement for the 2006 Annual Meeting of Shareholders to be filed within 120 days after the end of the fiscal year.

Code of Ethics

The Company has adopted codes of ethics that apply to all its directors, officers (including its Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and any person performing similar functions) and employees. The codes of ethics contain provisions relating to honest and ethical conduct (including the handling of conflicts of interest between personal and professional relationships), the preparation of full, fair, accurate and timely disclosure in reports and documents filed with the Securities and Exchange Commission and in other public communications made by the Company, compliance with governmental laws, rules and regulations and other matters. Shareholders of the Company and the public may obtain a copy from the “Investor Relations” section of the Company’s website at www.hrh.com or request a free copy from Hilb Rogal & Hobbs Company, Attention: Investor Relations, 4951 Lake Brook Drive, Suite 500, Glen Allen, Virginia 23060. Any amendment to or waiver from a provision of the code of ethics relating to directors and executive officers will be promptly disclosed on the Company’s website.

ITEM 11. EXECUTIVE COMPENSATION.

Except for certain information set forth under the captions “Human Resources & Compensation Committee Report on Executive Compensation” and “Performance Graph,” the information required by this Item is incorporated by reference to the Company’s definitive Proxy Statement for the 2006 Annual Meeting of Shareholders to be filed within 120 days after the end of the fiscal year.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Information required by this Item is incorporated by reference to the Company’s definitive Proxy Statement for the 2006 Annual Meeting of Shareholders to be filed within 120 days after the end of the fiscal year.

Securities Authorized for Issuance under Equity Compensation Plans

Information regarding the Company’s equity compensation plans is incorporated by reference to the material under the heading “Equity Compensation Plan Information” in the Company’s definitive Proxy Statement for the 2006 Annual Meeting of Shareholders to be filed within 120 days after the end of the fiscal year.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Information required by this Item is incorporated by reference to the Company’s definitive Proxy Statement for the 2006 Annual Meeting of Shareholders to be filed within 120 days after the end of the fiscal year.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

Information required by this Item is incorporated by reference to the Company’s definitive Proxy Statement for the 2006 Annual Meeting of Shareholders to be filed 120 days after the end of the fiscal year.

15

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) (1) and (2). The response to this portion of Item 15 is submitted as a separate section of this report.

(3) 2005 Exhibits

Exhibit No.	Document
3.1	Amended and Restated Articles of Incorporation of the Company, (incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K, dated May 6, 2003, File No. 0-15981)
3.2	Amended and Restated Bylaws of the Company, (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated February 14, 2006, File No. 0-15981)
10.1	Hilb, Rogal and Hamilton Company 2000 Stock Incentive Plan, as amended and restated February 11, 2003 (incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-8 dated November 21, 2003, File No. 333-110666)**
10.2	Hilb, Rogal and Hamilton Company 1989 Stock Plan, as amended and restated (incorporated by reference to Exhibit 10.7 to the Company’s Form 10-K for the year ended December 31, 1998, File No. 0-15981)**
10.3	Hilb, Rogal and Hamilton Company Non-employee Directors Stock Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.10 to the Company’s Form 10-K for the year ended December 31, 1998, File No. 0-15981)**
10.4	Amended and Restated Voting and Standstill Agreement dated as of November 7, 2002 made by and among the Company, The Phoenix Companies, Inc., Phoenix Life Insurance Company and PM Holdings, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended September 30, 2002, File No. 0-15981)
10.5	Hilb, Rogal and Hamilton Company Executive Voluntary Deferral Plan, as amended and restated effective November 25, 2002 (incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-8 dated March 28, 2003, File No. 333-103262)**
10.6	Form of Change of Control Employment Agreement for the following executive officers: Timothy J. Korman, Martin L. Vaughan, III, Carolyn Jones, Michael Dinkins, Frank H. Beard, Joseph W. G. Birriel, Walter L. Smith, A. Brent King, William C. Widhelm and F. Michael Crowley (incorporated by reference to Exhibit 10.12 to the Company’s Form 10-K for the year ended December 31, 1998, File No. 0-15981)**
10.7	Form of Change of Control Employment Agreement for the following executive officers: John P. McGrath, William C. Chaufty, William F. Creedon, Steven C. Deal, J. Thomas Stiles, Henry N. Watkins, Karl E. Manke, Richard F. Galardini, Peter E. Marcia and Robert S. O’Brien (incorporated by reference to Exhibit 10.13 to the Company’s Form 10-K for the year ended December 31, 1998, File No. 0-15981)**
10.8	Form of First Amendment to Change of Control Employment Agreement for the following executive officers: Timothy J. Korman, Martin L. Vaughan, III, Carolyn Jones, Michael Dinkins, Frank H. Beard, Joseph W. G. Birriel, Walter L. Smith, A. Brent King, William C. Widhelm, F. Michael Crowley, John P. McGrath, William C. Chaufty, William F. Creedon, Steven C. Deal, J. Thomas Stiles, Henry N. Watkins, Karl E. Manke, Richard F. Galardini, Peter E. Marcia and Robert S. O’Brien (incorporated by reference to Exhibit 10.12 to the Company’s Form 10-K for the year ended December 31, 2004, File No. 0-15981)**
10.9	Senior Executive Employment Agreement of Martin L. Vaughan, III, dated May 6, 2003, by and between the Company and Martin L. Vaughan, III (incorporated by reference to Exhibit 10.15 to the Company’s Form 10-K for the year ended December 31, 2003, File No. 0-15981)**

16

Exhibit No.	Document
10.10	Form of Regional Director Employment Agreement for the following executive officers: William F. Creedon, John P. McGrath, J. Thomas Stiles and Henry N. Watkins (incorporated by reference to Exhibit 10.11 to the Company’s Form 10-K for the year ended December 31, 2004, File No. 0-15981)**
10.11	Senior Executive Employment Agreement of F. Michael Crowley, dated January 17, 2006, by and between Hilb Rogal & Hobbs Company and F. Michael Crowley (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated January 17, 2006, File No. 0-15981)**
10.12	Change of Control Employment Agreement of F. Michael Crowley, dated January 17, 2006, by and between Hilb Rogal & Hobbs Company and F. Michael Crowley (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, dated January 17, 2006, File No. 0-15981)**
10.13	Hilb Rogal & Hobbs Company Restricted Stock Agreement between the Company and Michael Dinkins, dated October 1, 2005 (incorporated by reference to Exhibit 10.4 to the Company’s Form 10-Q/A for the quarter ended September 30, 2005, File No. 0-15981)**
10.14	Hilb Rogal & Hobbs Company Employee Non-Qualified Stock Option Agreement between the Company and Michael Dinkins, dated October 1, 2005 (incorporated by reference to Exhibit 10.5 to the Company’s Form 10-Q/A for the quarter ended September 30, 2005, File No. 0-15981)**
10.15	Offer Letter of Michael Dinkins, dated July 25, 2005, by and between Hilb Rogal & Hobbs Company and Michael Dinkins (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated September 13, 2005, File No. 0-15981)**
10.16	Executive Employment Agreement of Michael Dinkins, dated September 13, 2005, by and between Hilb Rogal & Hobbs Company and Michael Dinkins (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated September 13, 2005, File No. 0-15981)**
10.17	Senior Executive Employment Agreement of Timothy J. Korman dated December 1, 2001 by and between Hilb, Rogal and Hamilton Company and Timothy J. Korman (incorporated by reference to Exhibit 10.22 to the Company’s Form 10-K for the year ended December 31, 2001, File No. 0-15981)**
10.18	Executive Employment Agreement of Frank H. Beard dated November 15, 2005 by and between Hilb Rogal & Hobbs Company and Frank H. Beard*,**
10.19	Hilb, Rogal and Hamilton Company Outside Directors Deferral Plan, as amended and restated effective January 1, 2002 (incorporated by reference to Exhibit 4.3 to the Company’s Amendment No. 1 to Form S-8 dated February 12, 2002, File No. 333-74344)**
10.20	2002 form of Hilb, Rogal and Hamilton Company Employee Non-Qualified Stock Option Agreement with schedule of optionees and amounts of options granted (incorporated by reference to Exhibit 10.25 to the Company’s Form 10-K for the year ended December 31, 2001, File No. 0-15981)**
10.21	2002 form of Hilb, Rogal and Hamilton Company Restricted Stock Agreement with schedule of grantees and amounts of restricted stock granted (incorporated by reference to Exhibit 10.26 to the Company’s Form 10-K for the year ended December 31, 2001, File No. 0-15981)**
10.22	2003 form of Hilb, Rogal and Hamilton Company Employee Non-Qualified Stock Option Agreement with schedule of optionees and amounts of options granted (incorporated by reference to Exhibit 10.24 to the Company’s Form 10-K for the year ended December 31, 2002, File No. 0-15981)**

17

Exhibit No.	Document
10.23	2003 form of Hilb, Rogal and Hamilton Company Restricted Stock Agreement with schedule of grantees and amounts of restricted stock granted (incorporated by reference to Exhibit 10.25 to the Company’s Form 10-K for the year ended December 31, 2002, File No. 0-15981)**
10.24	2004 form of Hilb, Rogal and Hamilton Company Employee Non-Qualified Stock Option Agreement with schedule of optionees and amounts of options granted (incorporated by reference to Exhibit 10.25 to the Company’s Form 10-K for the year ended December 31, 2003, File No. 0-15981)**
10.25	2004 form of Hilb, Rogal and Hamilton Company Restricted Stock Agreement with schedule of grantees and amounts of restricted stock granted (incorporated by reference to Exhibit 10.26 to the Company’s Form 10-K for the year ended December 31, 2003, File No. 0-15981)**
10.26	2005 form of Hilb Rogal Hobbs Company Employee Non-Qualified Stock Option Agreement with schedule of optionees and amounts of options granted (incorporated by reference to Exhibit 10.24 to the Company’s Form 10-K for the year ended December 31, 2004, File No. 0-15981)**
10.27	2005 form of Hilb Rogal & Hobbs Company Restricted Stock Agreement with schedule of grantees and amounts of restricted stock granted (incorporated by reference to Exhibit 10.25 to the Company’s Form 10-K for the year ended December 31, 2004, File No. 0-15981)**
10.28	2006 form of Hilb Rogal & Hobbs Company Employee Non-qualified Stock Option Agreement with schedule of optionees and amounts of options granted*,**
10.29	Hilb, Rogal and Hamilton Company Supplemental Executive Retirement Plan, as amended and restated, effective January 1, 2002 (incorporated by reference to Exhibit 10.27 to the Company’s Form 10-K for the year ended December 31, 2001, File No. 0-15981)**
10.30	Hilb, Rogal and Hamilton Company Employee Stock Purchase Plan, as amended and restated, effective November 25, 2002 (incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-8 dated February 13, 2003, File No. 333-103191)**
10.31	Retirement Agreement by and between the Company and Andrew L. Rogal dated March 25, 2003 (incorporated by reference to Exhibit 10.29 to the Company’s Form 10-K for the year ended December 31, 2002, File No. 0-15981)**
10.32	Severance Agreement by and between the Company and Thomas A. Golub dated August 5, 2003 (incorporated by reference to Exhibit 10.6 to the Company’s Form 10-Q for the quarter ended June 30, 2003, File No. 0-15981)**
10.33	Senior Executive Employment Agreement of Robert B. Lockhart dated December 1, 2003 by and between the Company and Robert B. Lockhart (incorporated by reference to Exhibit 10.20 to the Company’s Form 10-K for the year ended December 31, 2003, File No. 0-15981)**
10.34	Hilb, Rogal and Hamilton Company Employee Non-Qualified Stock Option Agreement between the Company and Martin L. Vaughan, III, dated May 6, 2003 (incorporated by reference to Exhibit 10.4 to the Company’s Form 10-Q for the quarter ended June 30, 2003, File No. 0-15981)**
10.35	Hilb, Rogal and Hamilton Company 2003 Restricted Stock Agreement between the Company and Martin L. Vaughan, III, dated May 6, 2003 (incorporated by reference to Exhibit 10.5 to the Company’s Form 10-Q for the quarter ended June 30, 2003, File No. 0-15981)**
10.36	Amended and Restated Credit Agreement, dated December 15, 2004, among the Company, as Borrower; the banks named therein as Lenders; Wachovia Bank, National Association, as administrative agent; PNC Bank, National Association and SunTrust Bank, as documentation agents; and Bank of America, N.A., as syndication agent (incorporated by reference to Exhibit 99.1 to the Company’s Form 8-K dated December 15, 2004, File No. 0-15981)

18

Exhibit No.	Document
10.37	First Amendment to Credit Agreement, dated September 29, 2005, among the Company, as Borrower; and Wachovia Bank, National Association, as administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q/A for the quarter ended September 30, 2005, File No. 0-15981)
10.38	Agreement between the Attorney General of the State of Connecticut and the Insurance Commissioner of the State of Connecticut and Hilb Rogal & Hobbs Company and its subsidiaries and affiliates dated August 31, 2005 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated August 31, 2005, File No. 0-15981)
10.39	Stipulation and Consent Order between the Insurance Commissioner of the State of Connecticut and Hilb Rogal & Hobbs Company and Hilb Rogal & Hobbs of Connecticut, LLC dated August 31, 2005 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated August 31, 2005, File No. 0-15981)
10.40	Amended and Restated Consulting Agreement between the Company and Robert H. Hilb (incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q for the quarter ended June 30, 2002, File No. 0-15981)**
10.41	First Amendment to Amended and Restated Consulting Agreement between the Company and Robert H. Hilb (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q dated August 13, 2003, File No. 0-15981)**
13	Portions of 2005 Annual Report to Shareholders*
21	Subsidiaries of Hilb Rogal & Hobbs Company*
23	Consent of Ernst & Young LLP*
31.1	Certification Statement of Chief Executive Officer Pursuant to Rule 13a-14(a)/15(d)-14(a)*
31.2	Certification Statement of Chief Financial Officer Pursuant to Rule 13a-14(a)/15(d)-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*

* Filed Herewith

** Indicates management contract or compensatory plan or arrangement

19

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant, has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

HILB ROGAL & HOBBS COMPANY
By:	/s/    MARTIN L. VAUGHAN, III
	Martin L. Vaughan, III
	Chairman and Chief Executive Officer
Date: March 9, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

Signature	Title	Date
/s/    MARTIN L. VAUGHAN, III         Martin L. Vaughan, III	Chairman, Chief Executive Officer and Director (Principal Executive Officer)	March 9, 2006
/s/    MICHAEL DINKINS         Michael Dinkins	Executive Vice President and Chief Financial Officer (Principal Financial Officer)	March 9, 2006
/s/    JOHN HAMERSKI         John Hamerski	Vice President and Controller (Principal Accounting Officer)	March 9, 2006
/s/    ROBERT H. HILB         Robert H. Hilb	Chairman Emeritus and Director	March 9, 2006
/s/    ROBERT S. UKROP         Robert S. Ukrop	Director	March 9, 2006
/s/    THOMAS H. O’BRIEN         Thomas H. O’Brien	Director	March 9, 2006
/s/    NORWOOD H. DAVIS, JR.         Norwood H. Davis, Jr.	Director	March 9, 2006
/s/    THEODORE L. CHANDLER, JR.         Theodore L. Chandler, Jr.	Director	March 9, 2006
/s/    ANTHONY F. MARKEL         Anthony F. Markel	Director	March 9, 2006
/s/    ROBERT W. FIONDELLA         Robert W. Fiondella	Director	March 9, 2006
/s/    JULIOUS P. SMITH, JR.         Julious P. Smith, Jr.	Director	March 9, 2006
/s/    WARREN M. THOMPSON         Warren M. Thompson	Director	March 9, 2006

20

ANNUAL REPORT ON FORM 10-K

ITEM 8, ITEM 9A, ITEMS 15 (a)(1) AND (2) AND (c)

INDEX OF FINANCIAL STATEMENTS AND

FINANCIAL STATEMENT SCHEDULES

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

FINANCIAL STATEMENT SCHEDULES

CERTAIN EXHIBITS

YEAR ENDED DECEMBER 31, 2005

HILB ROGAL & HOBBS COMPANY

GLEN ALLEN, VIRGINIA

21

HILB ROGAL & HOBBS COMPANY

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

The Report of Independent Registered Public Accounting Firm on Financial Statements is included on page 23 of this Form 10-K and the following consolidated financial statements of Hilb Rogal & Hobbs Company and subsidiaries, included in the portions of the Company’s 2005 Annual Report to Shareholders that are incorporated by reference in Item 8 of this report:

Consolidated Balance Sheet, December 31, 2005 and 2004

Statement of Consolidated Income,

Years Ended December 31, 2005, 2004 and 2003

Statement of Consolidated Shareholders’ Equity,

Years Ended December 31, 2005, 2004 and 2003

Statement of Consolidated Cash Flows,

Years Ended December 31, 2005, 2004 and 2003

Notes to Consolidated Financial Statements

Management’s Report on Internal Control Over Financial Reporting and the Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting are included in the portions of the Company’s 2005 Annual Report to Shareholders that are incorporated by reference in Item 9a of this report.

The following consolidated financial statement schedule of Hilb Rogal & Hobbs Company and subsidiaries is included in Item 15(c):

		Page Number
Schedule II	Valuation and Qualifying Accounts	24

All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.

22

Report of Independent Registered Public Accounting Firm on Financial Statements

Shareholders and Board of Directors

Hilb Rogal & Hobbs Company

We have audited the accompanying consolidated balance sheets of Hilb Rogal & Hobbs Company as of December 31, 2005 and 2004, and the related consolidated statements of earnings, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2005. Our audits also included the financial statement schedule listed in the Index at Item 15(c). These financial statements and schedule are the responsibility of Hilb Rogal & Hobbs Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Hilb Rogal & Hobbs Company at December 31, 2005 and 2004, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Hilb Rogal & Hobbs Company’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 3, 2006, expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Richmond, Virginia

March 3, 2006

23

HILB ROGAL & HOBBS COMPANY

AND SUBSIDIARIES

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

(in thousands)

Col. A	Col. B		Col. C					Col. D			Col. E
	Balance at Beginning of Period		Additions					Deductions (Describe)			Balance at End of Period
Description			Charged to Costs and Expenses		Charged to Other Accounts (Describe)
Year ended December 31, 2005:
Allowance for doubtful accounts	$	4,630	$	753	$	164	(c)	$	1,367	(b)	$	4,180
Year ended December 31, 2004:
Allowance for doubtful accounts		4,243		1,588		467	(d)		1,668	(b)		4,630
Year ended December 31, 2003:
Allowance for doubtful accounts		5,567		1,362		184	(a)		2,870	(e)		4,243

(a) Recoveries

(b) Bad debts written off

(c) Recoveries ($155) and from acquisitions ($9)

(d) Recoveries ($136) and from acquisitions ($331)

(e) Bad debts written off ($1,358) and from acquisitions ($1,512)

24

EX-10.18

Exhibit 10.18

HILB ROGAL & HOBBS COMPANY

Executive Employment Agreement with

FRANK H. BEARD

EMPLOYMENT AGREEMENT

THIS AGREEMENT, dated November 15, 2005, is made between HILB ROGAL & HOBBS COMPANY, a Virginia corporation (“Employer”) publicly held and traded on the New York Stock Exchange, and FRANK H. BEARD (“Employee”), a resident of Atlanta, Georgia.

WITNESSETH

WHEREAS, Employer owns a number of subsidiaries which operate full-line insurance agencies all over the United States and which are organized, and report to Employer, regionally;

WHEREAS, Employee has been selected to be a national leader of Employer’s property and casualty operations;

WHEREAS, Employer desires that Employee develop and promote the property and casualty capabilities and distribution of Employer in a profitable manner, with an emphasis on developing regional and national platforms for the sale of property and casualty business, developing an exceptional sales force and culture, and supporting other corporate goals, initiatives and lines of business, all as may be set from time-to-time by Employer;

WHEREAS, Employer will provide Employee with tools necessary to perform the services contemplated herein, including, without limitation, office, administrative and clerical support, access to domestic and international markets, access to Confidential Information (as hereinafter defined) and access to HRH’s business plans, strategies and capabilities;

WHEREAS, Employee will be considered an “insider” of Employer for securities law purposes and will be compensated pursuant to plans and policies overseen presently by the Human Resources & Compensation Committee (“Committee”) of the Board of Directors of Employer, which compensation package presently includes a combination of salary, bonus incentives, restricted stock, nonqualified stock options and such other perks and benefits as established by the Committee, all of which elements of compensation are subject to change from time-to-time by the Committee or the Board of Employer, expressly in exchange for Employee agreeing to perform the duties and to abide by the restrictive covenants set forth herein;

WHEREAS, Employer would neither compensate Employee at the levels contemplated herein, nor cause Employee to be promoted to this position herein, without Employee agreeing to abide by paragraphs 4, 5, 6 and 7 herein;

WHEREAS, Employee, as a business leader and “insider” of Employer, will be expected to comply with Employer’s policies and initiatives, including, without limitation, ownership of Employer stock, as may be established from time-to-time; and

WHEREAS, Employee desires to accept this new position and these new terms of employment subject to the terms, covenants and conditions specified herein;

NOW, THEREFORE, in consideration of the premises stated above, Employer’s promotion of Employee to a new position, and the mutual promises contained in this Agreement, the parties agree as follows:

1. EMPLOYMENT. Employer agrees to employ Employee as Vice President—National Director of Property and Casualty, effective as of                     , 2005 (“Effective Date”). Employee’s employment hereunder is at will and may be terminated at any time by Employer or Employee. Employee shall report directly to the President and Chief Operating Officer of Employer.

2. FULL EFFORTS OF EMPLOYEE. Employee represents to Employer that Employee has no employment or other relationship with any competitor of Employer which would restrict Employee in performing the duties

contemplated herein, as such exists now and may exist from time-to-time in the future. Employee agrees to indemnify and hold Employer harmless from all claims and damages (including reasonable attorneys’ fees and costs) suffered by Employer and arising out of a breach of the foregoing representation. Employee agrees (i) to devote Employee’s full business time and energies to the business and affairs of Employer, (ii) to use Employee’s best efforts, skills and abilities to promote the interests of the Employer and (iii) to perform faithfully and to the best of Employee’s ability all assignments of work given to Employee by Employer. During the course of Employee’s employment hereunder, Employee shall not, directly or indirectly, enter into or engage in any other business activity or other gainful employment without the prior written consent of Employer.

3. FULL COMPENSATION FOR SERVICES. All business, including insurance, bond, risk management, self-insurance and any other services (collectively, the “HRH Business”), transacted through the efforts of Employee or any other employee of Employer or any of its subsidiaries (Employer and its subsidiaries are herein referred to as the “HRH Companies”) shall be the sole property of the HRH Companies, and Employee acknowledges that Employee shall have no right to any commission or fee resulting from the conduct of such business other than in the form of compensation as established by the Committee or Board. Premiums, commissions or fees on the HRH Business transacted through the efforts of Employee, whether received from an insured or purchaser or from one of the companies represented by the HRH Companies or Employee, are at all times the sole property of the HRH Companies. All checks or bank drafts received by Employee from any company, insured or purchaser shall be made payable to Employer (or applicable company of the HRH Companies) and all amounts collected by Employee shall be promptly turned over to Employer (or applicable company of the HRH Companies). Employee covenants to cooperate with Employer, and to take all actions reasonably requested by Employer, whenever Employer attempts to verify that all income has been paid to the HRH Companies and whenever Employer, before or after termination of Employee’s employment, desires to have commissions from HRH Business assigned to another employee or HRH Company.

4. CONFIDENTIAL INFORMATION. For purposes of this Agreement, “Confidential Information” shall mean any and all information of a proprietary or confidential nature and trade secrets of Employer and the HRH Companies. Confidential information shall include, but not be limited to, such confidential information related to Employer’s plans, strategies and capabilities, personnel of the HRH Companies, information about the Customers (as defined below) such as customer identities and lists, revenues from customers’ accounts, customer risk characteristics and requirements, key contact personnel, financial data and performance, payroll, policy expiration dates, policy terms, conditions and rates, information about prospective customers, and information about the HRH Companies such as strategic plans, methods of soliciting business, documents, financial data, business plans and strategies, marketing programs and specialized insurance markets. Confidential information may be acquired from any source during Employee’s term of employment, whether or not such information was expressly disclosed to Employee during the term of Employee’s employment;

Employee acknowledges that, in the course of Employee’s employment hereunder, Employee will become acquainted and entrusted with Confidential Information which is the exclusive property of Employer. Employee further acknowledges that (i) Employer and the HRH Companies derive actual and potential economic value from the Confidential Information not being generally known to the public or to other persons who can obtain economic value from its disclosure or use, and (ii) Employer and the HRH Companies have expended and currently expend substantial effort to acquire Confidential Information, and expend substantial effort, and expect their employees to expend substantial effort, to maintain the secrecy of the Confidential Information. Employee agrees and covenants that Employee will safeguard the Confidential Information from exposure to, or appropriation by, unauthorized persons, either within or outside the employment of Employer or the HRH Companies, and that Employee will not, directly or indirectly, without the prior written consent of Employer during the term of this Agreement and any time in the three year period following termination of this Agreement, divulge or make any use of the Confidential Information except as may be required in the course of Employee’s employment hereunder. Employee also agrees that nothing in this agreement shall be construed to limit or otherwise restrict Employer’s right to protect its trade secrets so long as they remain a trade secret under applicable law. Upon termination of Employee’s employment, Employee covenants to deliver to Employer all information and materials, including personal notes and reproductions, relating to the Confidential Information, the HRH Companies, and the Customers, which are in Employee’s possession or control.

5. NONPIRACY COVENANTS. For the purpose of this Agreement, the following terms shall have the following meanings:

“Customers” shall be limited to those customers of any of the HRH Companies for whom there is an insurance policy or bond in force or to or for whom any of the HRH Companies is rendering services as of the date of termination of Employee’s employment;

“Known Customers” shall be limited to those “Customers” of any of the subsidiary offices of Employer with whom Employee had personal contact, or for whom Employee handled insurance or bonds, or whose individualized risk management or employee benefit characteristics became or were known to Employee within the last year of Employee’s employment with Employer;

“Prohibited Services” shall mean those services in the fields of risk management, insurance or bonds performed by any of the HRH Companies within Employee’s region as of the date of termination of Employee’s employment. “Field of insurance” does not include title insurance, but does include all other lines of insurance sold by any of the HRH Companies within Employee’s region, including, without limitation, property and casualty, life, group, accident, health, disability, and annuities;

“Prospective Customers” shall be limited to those parties who are not currently Customers, but who are known by Employee to have been solicited to provide any Prohibited Service within the twelve (12) month period preceding the date of termination of Employee’s employment, by Employee or an employee within Employee’s region, and, with respect to any such potential Prospective Customer, Employee or an employee within Employee’s region had, within the twelve (12) month period preceding the date of termination of Employee’s employment, met for the purpose of offering any Prohibited Service or had received a written response to an earlier solicitation to provide a Prohibited Service;

“Restricted Period” shall mean the period of two (2) years immediately following the date of termination of Employee’s employment.

Employee recognizes that over a period of many years the Employer and the HRH Companies have developed, at considerable expense, relationships with, and knowledge about, Customers and Prospective Customers which constitute a major part of the value of Employer. During the course of Employee’s employment by Employer, Employee will have substantial contact with these Customers and Prospective Customers. In order to protect the value of the Employer’s business, Employee covenants and agrees that, in the event of the termination of Employee’s employment, whether voluntary or involuntary, whether with or without cause, Employee shall not, directly or indirectly, for Employee’s own account or for the account of any other person or entity, as an owner, stockholder, director, employee, partner, agent, broker, consultant or other participant during the Restricted Period:

(a) solicit a Known Customer or accept an invitation from a Known Customer for the purpose of providing Prohibited Services to such Known Customer; or

(b) solicit a Prospective Customer or accept an invitation from a Prospective Customer for the purpose of providing Prohibited Services to such Prospective Customer.

Subparagraphs (a) and (b) are separate and divisible covenants; if for any reason any one covenant is held to be illegal, invalid or unenforceable, in whole or in part, the remaining covenants shall remain valid and enforceable and shall not be affected thereby. Further, the periods and scope of the restrictions set forth in any such subparagraph shall be reduced by the minimum amount necessary to reform such subparagraph to the maximum level of enforcement permitted to Employer by the law governing this Agreement.

6. NONRAIDING OF EMPLOYEES. Employee covenants that during Employee’s employment hereunder and for twenty-four (24) months after termination of Employee’s employment, whether voluntary or involuntary, with or without cause, Employee will not hire any individuals who, as of the date of termination of Employee’s employment, were, or had been within the twelve (12) month period preceding Employee’s date of termination of employment, employees within Employee’s region or employees of any of the HRH Companies with whom he had contact within the twelve (12) month period preceding Employee’s termination (collectively, “Known

Group”), nor will Employee directly or indirectly solicit, induce or encourage any member of the Known Group to seek employment with any other business, whether or not Employee is then affiliated with such business.

7. NOTIFICATION OF FORMER AND NEW EMPLOYMENT. During the term of this Agreement and the Restricted Period specified in paragraph 5 hereof, Employee covenants to notify any prospective employer or joint venturer, which is a competitor of Employer or any of the HRH Companies, of this Agreement with Employer; and if Employee accepts employment or establishes a relationship with such competitor during the above described period, Employee covenants to notify Employer and HRH immediately of such relationship. If Employer or HRH reasonably believes that Employee is affiliated or employed by or with a competitor of Employer or any of the HRH Companies during the Restricted Period, then Employee grants each of Employer and HRH the right to forward a copy of this Agreement to such competitor.

8. ESSENCE OF AGREEMENT. The restrictive covenants from Employee for the benefit of the Employer and the HRH Companies set forth herein are the essence of this Agreement with respect to Employer agreeing to employ Employee and each such covenant shall be construed as independent of any other provision in this Agreement. The existence of any claim or cause of action of the Employee against the Employer, whether predicated on this Agreement or not, shall not constitute a defense to the enforcement by the Employer of any of the restrictive covenants contained herein. Employer shall at all times maintain the right to seek enforcement of these provisions whether or not Employer has previously refrained from seeking enforcement of any such provision as to Employee or any other individual who has signed an agreement with similar provisions. Further, Employee grants to Employer the continuous and unilateral right, upon written notice to Employee, to lessen the restrictions of any of the covenants set forth in paragraphs 4, 5, 6 and 7 hereof by so much as Employer deems necessary either to make this Agreement in accordance with public policy of the Commonwealth of Virginia or to fit the circumstances peculiar to Employee. Additionally, Employee covenants that if Employee has any questions about the scope or meaning of any restrictive covenants of this Agreement, then Employee shall put such questions in writing to General Counsel of HRH, who shall then endeavor to answer such requests as soon as practicable.

9. SEVERABILITY AND INDEPENDENCE. If any provision of this Agreement or any part of any provision of this Agreement is determined to be unenforceable for any reason whatsoever, it shall be severable from the rest of this Agreement and shall not invalidate or affect the other portions or parts of the Agreement, which shall remain in full force and effect and be enforceable according to their terms. Furthermore, no covenant herein shall be dependent upon any other covenant or provision herein, each of which covenants shall stand independently and be enforceable without regard to the other or to any other provision of this Agreement.

10. INTERPRETATION. There shall be no presumption that this Agreement is to be construed against the Employer or the HRH Companies, since Employee acknowledges that Employee understands all provisions of this Agreement, that the restrictive covenants contained herein are ancillary to an enforceable agreement and are fair, necessary for the protection of Employer and the HRH Companies and relatively standard to the insurance agency industry and that Employee was offered the opportunity to negotiate, alter, and amend any and all provisions of this Agreement before executing this Agreement and legally binding himself hereto.

11. MANDATORY ARBITRATION; GOVERNING LAW; PRAYER FOR REFORMATION. Any dispute or controversy as to the interpretation, construction, application or enforcement of, or otherwise arising under or in connection with this Agreement, shall be submitted to mandatory, final and binding arbitration in the City of Richmond, Virginia, in accordance with the commercial arbitration rules then prevailing of the American Arbitration Association. Employer and Employee waive the right to submit any controversy or dispute to a Court and/or a jury. Any award rendered therein shall provide the full remedies available to the parties under the applicable law and shall be final and binding on each of the parties hereto and their heirs, executors, administrators, successors and assigns and judgment may be entered thereon in any court having jurisdiction. The prevailing party in any such arbitration shall be entitled to an award by the arbitrator of all reasonable attorneys’ fees and expenses incurred in connection with the arbitration. The parties agree that the transactions reflected in this document involve interstate commerce, and accordingly agree that any issues as to arbitrability shall be resolved pursuant to the Federal Arbitration Act.

The parties agree that any substantive issues under this Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia.

/s/    F. Michael Crowley	/s/    Frank H. Beard
HILB ROGAL & HOBBS COMPANY	FRANK H. BEARD

EACH OF EMPLOYER AND EMPLOYEE KNOWINGLY AND VOLUNTARILY REQUESTS THAT ANY TRIBUNAL BEFORE WHOM THIS EMPLOYMENT AGREEMENT IS IN CONTROVERSY REFORM THE RESTRICTIVE COVENANTS HEREIN, IF SUCH REFORMATION IS NECESSARY TO MAKE ANY OF THEM ENFORCEABLE, TO THE MAXIMUM LEVEL OF ENFORCEMENT PERMISSIBLE TO EMPLOYER AND EQUITABLE UNDER THE CIRCUMSTANCES. THIS PROVISION IS A MATERIAL INDUCEMENT FOR EMPLOYER TO ENTER INTO THIS AGREEMENT.

12. Mandatory Forum for Confirmation of Arbitration Award: Employee agrees that any award rendered as a result of the arbitration proceedings shall be confirmed in the Federal or State Courts of the Commonwealth of Virginia, and may be enforced by such courts as if the order were their own. By execution hereof, Employee irrevocably submits to the jurisdiction of such courts for this purpose, and waives any defense that he is not subject to such proceedings, that the forum is not convenient, that the matter should be transferred to another forum, or that the arbitration award may not be confirmed and enforced by such courts. Employee consents to service of process in any such proceedings in any manner permitted by the laws of the Commonwealth of Virginia.

13. MISCELLANEOUS.

A. Case and Gender. Wherever required by the context of this Agreement, the singular and plural cases and the masculine, feminine and neuter genders shall be interchangeable.

B. Nonwaiver. The waiver by Employer of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach or as a waiver of any other provisions of this Agreement.

C. Captions. The captions provided in this Agreement are intended for descriptive and reference purposes only and are not intended to limit the applicability of the terms of any paragraph to that caption.

D. Succession and Assignment. This Agreement shall be binding upon the parties hereto and is not assignable by Employee. This Agreement shall inure, however, to the benefit of Employer’s successors and assigns, including, without limitation, successor corporations by way of merger or consolidation or any entity which purchases substantially all of the assets of Employer or of the region headed by Employee.

E. Entire Agreement. This Agreement supersedes any prior written or unwritten agreement, representation or understanding between the Employer and Employee and represents the entire agreement, representations and understanding between Employer and Employee concerning the subject matter hereof.

F. Executive Compensation and Benefits. Employee acknowledges that the executive compensation and benefits that may be offered are subject to change in the discretion of Employer and the Committee and the Board of Employer and are not guaranteed to continue or to be without change and may be terminated or altered as deemed prudent by any of the foregoing.

WITNESS the following signatures as of the date first set forth above.

EMPLOYER:		EMPLOYEE:
HILB ROGAL & HOBBS COMPANY
By	/S/    F. MICHAEL CROWLEY		/S/    FRANK H. BEARD
Its	President		FRANK H. BEARD

EX-10.28

Exhibit 10.28

February 23, 2006

John H. Doe

111 Somewhere Street

Richmond, VA 23220

Dear Mr. Doe:

You have been granted a nonqualified stock option to purchase 1,000 shares of Common Stock of the Company, subject to the terms and conditions (i) in the Company’s 2000 Stock Incentive Plan, as amended from time to time (the “Plan”), and (ii) as set forth in Exhibit A, attached hereto and made a part hereof (together, with this letter, the “Agreement”), as follows:

Date  of Agreement/Grant:	February 16, 2006
Exercise Price Per Share:	$39.25
Total Exercise Price:	$39,250.00
Expiration Date:	February 16, 2013
Vesting Schedule:	25% per year for 4 years 250 on February 16, 2007 250 on February 16, 2008 250 on February 16, 2009 250 on February 16, 2010

Please indicate your acceptance by executing two (2) original copies of this Agreement and returning one (1) copy by U.S. Mail to Gwynn Noble.

Very truly yours,

Martin L. Vaughan, III,

Chairman and Chief Executive Officer

By my signature below, I hereby acknowledge my Consent to Electronic Delivery, receipt of this Option, pursuant to all terms and conditions of the Plan, and electronic receipt of the Plan and Prospectus. I agree to conform to all of the terms and conditions of the Option and the Plan.

Signature:		Date:
	John H. Doe

Note: If there are any discrepancies in the name or address shown above, please make the appropriate corrections on this form.

EXHIBIT A

TERMS AND CONDITIONS

STOCK OPTION AGREEMENT

1. Exercise of Option. Except as provided in paragraphs 4, 5, 6, 11 and 12 of these Terms and Conditions, this Option shall be exercisable as set forth in the Vesting Schedule for each full year, up to a total of four (4) full years, that Optionee continues to be employed by the Company after the date of this Agreement. Once this Option has become exercisable with respect to any portion of the total number of shares in accordance with the preceding sentence, it shall continue to be exercisable with respect to such shares until the termination of Optionee’s rights hereunder pursuant to paragraphs 4, 5 or 6, or until the Expiration Date. A partial exercise of this Option shall not affect Optionee’s right to exercise subsequently this Option with respect to the remaining shares that are exercisable, subject to the conditions of the Plan and this Agreement.

2. Method of Exercising and Payment for Shares. This Option may be exercised only by written notice delivered to the attention of the Company’s Secretary at the Company’s principal office. The written notice shall specify the number of shares being acquired pursuant to the exercise of the Option when such Option is being exercised in part in accordance with the Vesting Schedule. The exercise date shall be the date such notice is received by the Company. Such notice shall be accompanied by payment of the Option price in full for each share (a) in cash (United States dollars) or by cash equivalent acceptable to the Company, or (b) by a cashless exercise pursuant to Section IX(2) of the Plan.

3. Nontransferability. This Option is nontransferable except, in the event of the Optionee’s death, by will or by the laws of descent and distribution subject to the terms hereof. During Optionee’s lifetime, this Option may be exercised only by Optionee.

4. Exercise in the Event of Death. This Option shall be exercisable in full in the event that Optionee dies while employed by the Company or an Affiliate and prior to the Expiration Date of this Option. In that event, this Option may be exercised by Optionee’s estate, or the person or persons to whom his rights under this Option shall pass by will or the laws of descent and distribution. Optionee’s estate or such persons must exercise this Option, if at all, within one year of the date of Optionee’s death or during the remainder of the period preceding the Expiration Date, whichever is shorter, but in no event may the Option be exercised prior to the expiration of six (6) months from the date of the grant of the Option.

5. Exercise in the Event of Permanent and Total Disability. This Option shall be exercisable in full if Optionee becomes Disabled while employed by the Company or an Affiliate and prior to the Expiration Date of this Option. In that event, Optionee must exercise this Option, if at all, within one year of the date he becomes Disabled or during the remainder of the period preceding the Expiration Date, whichever is shorter, but in no event may the Option be exercised prior to the expiration of six (6) months from the date of the grant of the Option.

6. Exercise After Termination of Employment. In the event that the Optionee retires from employment with the Company after attaining age 62 and serving at least 10 consecutive years with the Company or an Affiliate or predecessor thereof, then this Option shall be exercisable in full but must be exercised by the Optionee, if at all, within one year following his retirement date or during the remainder of the period preceding the Expiration Date, whichever is shorter, but in no event may the Option be exercised prior to the expiration of six (6) months from the date of the grant of the Option. In all events other than those events addressed in paragraphs 4 or 5 or the foregoing sentence of this paragraph 6, in which Optionee ceases to be employed by the Company: (a) Optionee, subject to the provisions of paragraph 12, may exercise the Option in whole or in part with respect to that number of shares which are exercisable by him under the Vesting Schedule on the date his employment terminated, and (b) this

Option must be exercised by Optionee, if at all, within ninety (90) days following the date upon which he ceases to be employed by the Company or during the remainder of the period preceding the Expiration Date, whichever is shorter, but in no event may the Option be exercised prior to the expiration of six (6) months from the date of the grant of the Option.

7. Fractional Shares. Fractional shares shall not be issuable hereunder, and when any provision hereof may entitle Optionee to a fractional share such fraction shall be disregarded.

8. No Right to Continued Employment. This Option does not confer upon Optionee any right with respect to continuance of employment by the Company or an Affiliate, nor shall it interfere in any way with the right of the Company or an Affiliate to terminate his employment at any time.

9. Investment Representation. Optionee agrees that, unless such shares previously have been registered under the Securities Act of 1933, as amended (the “Securities Act”): (i) any shares purchased by him hereunder will be purchased for investment and not with a view to distribution or resale and (ii) until such registration, certificates representing such shares may bear an appropriate legend to assure compliance with the Securities Act. This investment representation shall terminate when such shares have been registered under the Securities Act.

10. Change in Capital Structure. Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by this Option, and the price per share thereof, shall be proportionately adjusted by the Company for any increase or decrease in the number of issued and outstanding shares of Common Stock of the Company resulting from any stock dividend (but only on the Common Stock), stock split, combination, reclassification, recapitalization or general issuance to holders of Common Stock of rights to purchase Common Stock at substantially below its then fair market value, or any change in the number of such shares outstanding effected without receipt of cash or property or labor or services by the Company, or any spin-off or other distribution of assets to shareholders.

In the event of a change in the Common Stock of the Company as presently constituted, which is limited to a change of all or a part of its authorized shares without par value into the same number of shares with a par value, or any subsequent change into the same number of shares with a different par value, the shares resulting from any such change shall be deemed to be the Common Stock within the meaning of the Plan.

The grant of this Option pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets.

11. Change of Control. Notwithstanding any other provision of this Agreement to the contrary, in the event of a Change of Control, the provisions of Section XIII(3) of the Plan shall apply to this Option.

12. Forfeiture of Certain Gains.

(a) Termination for Cause. If Optionee’s employment is terminated for “Cause” within one year of any exercise of this Option, in whole or in part, the Optionee shall pay to the Company an amount equal to the gain realized by Optionee from such exercise represented by the excess of the Fair Market Value on the date of exercise over the Option price multiplied by the number of shares purchased, without regard to any subsequent market price increase or decrease (“Option Gain”). For purposes of this paragraph, “Cause” shall have the meaning ascribed to it in any employment agreement between the Optionee and the Company that is in effect at the time of termination and, if no such agreement exists, it shall mean:

(i) the willful and continued failure of the Optionee to perform substantially the Optionee’s duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is

delivered to the Optionee by the Company which specifically identifies the manner in which the Company believes that the Optionee has not substantially performed the Optionee’s duties, or

(ii) the willful engaging by the Optionee in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company.

(b) Forfeiture if Optionee Engages in Certain Activities. If Optionee, between the date hereof and one year after the date of termination of Optionee’s employment, engages in any activity in competition with any activity of the Company, or inimical, contrary or harmful to the interests of the Company, including but not limited to (i) accepting employment with or serving as a consultant advisor or in any other capacity to an employer that is in competition with or acting against the interests of the Company, (ii) disclosing or misusing any confidential information or material concerning the Company or (iii) participating in any hostile takeover attempt, then (1) this Option, including any vested but unexercised shares, shall terminate effective the date on which Optionee enters into such activity, unless terminated sooner by operation of another term or condition of this Agreement or the Plan, and (2) the Optionee shall pay to the Company an amount equal to the Option Gain realized by Optionee from any exercise of this Option, in whole or in part, within one year of the date such activity began.

(c) Right of Set-off. Optionee hereby consents to a deduction from any amounts owed by the Company to Optionee from time to time (including amounts owed as wages or other compensation, fringe benefits or vacation pay, to the extent of any amounts Optionee owes the Company under paragraphs 12(a) and (b). Whether or not the Company elects to make any set-off in whole or in part, if Company does not recover by means of set-off the full amount owed by Optionee under paragraphs 12(a) and (b), Optionee agrees to immediately pay the unpaid balance to the Company.

13. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Virginia, except to the extent that federal law shall be deemed to apply.

14. Conflicts. In the event of any conflict between the provisions of the Plan as in effect on the date hereof and the provisions of this Agreement, the provisions of the Plan shall govern. All references herein to the Plan shall mean the Plan as in effect on the date hereof.

15. Optionee Bound by Plan. Optionee hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all the terms and provisions thereof.

16. Binding Effect. Subject to the limitations stated above and in the Plan, this Agreement shall be binding upon and inure to the benefit of the legatees, distributes, and personal representatives of Optionee and the successors of the Company.

17. Gender. All pronouns used herein shall be deemed to refer to either the male or female as appropriate.

18. Notice and Consent to Electronic Delivery. The Company expects to deliver notices and certain documents relating to its employee benefit plans by posting the information on the Company’s web site, intranet or electronic bulletin board or transmitting the material to employees by e-mail. These documents include employee benefits plans and any amendments thereto, election forms, prospectuses, supplements to prospectuses, annual reports to shareholders, informational brochures and similar information. The Company will provide you with e-mail notification of the posting of any of the foregoing documents. This method of notification and access to documents relating to employee benefit plans will be in lieu of paper delivery of the same documents. To satisfy legal requirements, your signature is an affirmative election to accept electronic notification and delivery of these documents in lieu of paper delivery, as well as all other terms of the award.

19. Defined Terms. All terms used herein that are defined in the Plan shall have the meanings given to them in the Plan.

NONQUALIFIED STOCK OPTIONS

FOR NAMED EXECUTIVE OFFICERS

	GRANT DATE	OPTIONS GRANTED
Martin L. Vaughan, III	2/16/06	50,000
F. Michael Crowley	2/16/06	24,000
Timothy J. Korman	2/16/06	18,000
John P. McGrath	2/16/06	14,500
J. Thomas Stiles	2/16/06	14,500

EX-13

Exhibit 13

Selected Financial Data

The following table sets forth selected consolidated financial information of the company for each of the years in the five-year period ended December 31, 2005. These tables should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and related notes appearing elsewhere in this report.

	Year Ended December 31,
(In thousands, except per share amounts)	2005		2004		2003		2002		2001
Statement of Consolidated Income Data(1)(5):
Commissions and fees(2)	$	658,012	$	609,660	$	555,732	$	446,673	$	323,078
Investment income		6,581		3,176		3,151		2,439		2,585
Other		9,292		6,767		4,764		3,614		4,604
Total revenues		673,885		619,603		563,647		452,726		330,267
Compensation and employee benefits		365,481		333,057		302,760		245,405		182,397
Other operating expenses		127,702		112,274		97,358		80,308		62,095
Depreciation		8,410		8,693		9,082		7,771		6,116
Amortization of intangibles(3)		18,755		13,848		9,828		5,320		13,868
Interest expense		16,243		10,288		10,429		10,665		9,061
Regulatory charge and related costs(4)		42,320		—		—		—		—
Severance charge		1,303		—		—		—		—
Integration costs		764		1,909		4,094		—		—
Loss on extinguishment of debt		—		1,557		—		—		—
Retirement benefit		—		—		5,195		—		—
Total expenses		580,978		481,626		438,746		349,469		273,537
Income before income taxes and cumulative effect of accounting change		92,907		137,977		124,901		103,257		56,730
Income taxes		36,707		56,563		49,947		42,082		24,381
Income before cumulative effect of accounting change		56,200		81,414		74,954		61,175		32,349
Cumulative effect of accounting change, net of tax(2)		—		—		—		3,944		—
Net Income(3)	$	56,200	$	81,414	$	74,954	$	65,119	$	32,349
Net Income per Share —Basic:
Income before cumulative effect of accounting change	$	1.57	$	2.27	$	2.17	$	2.09	$	1.18
Cumulative effect of accounting change, net of tax(2)		—		—		—		0.14		—
Net Income	$	1.57	$	2.27	$	2.17	$	2.23	$	1.18
Net Income per Share – Assuming Dilution:
Income before cumulative effect of accounting change	$	1.55	$	2.23	$	2.06	$	1.89	$	1.07
Cumulative effect of accounting change, net of tax(2)		—		—		—		0.12		—
Net Income	$	1.55	$	2.23	$	2.06	$	2.01	$	1.07
Weighted average shares outstanding:
Basic		35,756		35,833		34,595		29,240		27,411
Assuming Dilution		36,314		36,493		36,304		32,876		31,160
Dividends paid per share	$	0.4500	$	0.4075	$	0.3675	$	0.3575	$	0.3475
Consolidated Balance Sheet Data(5):
Intangible assets, net	$	763,536	$	757,942	$	614,246	$	441,973	$	266,083
Total assets		1,329,767		1,277,999		1,049,227		833,024		494,076
Long-term debt, less current portion		251,507		265,384		174,012		177,151		114,443
Other long-term liabilities including deferred income taxes		74,182		64,185		40,415		20,324		11,786
Total shareholders’ equity		546,257		507,156		434,267		310,648		142,802

(1) See Note K of Notes to Consolidated Financial Statements for information regarding business purchase transactions which impact the comparability of this information. In addition, during 2002 and 2001, the company consummated six and ten purchase acquisitions, respectively.

(2) Effective January 1, 2002, the company changed its method of accounting for commissions on premiums billed and collected directly by insurance carriers on its middle-market property and casualty business.

(3) Adoption of FASB Statement No. 142, “Goodwill and Other Intangible Assets,” required the company to cease goodwill amortization as of January 1, 2002. For 2001, goodwill amortization, net of income taxes, was $8.4 million.

(4) The company recorded a regulatory charge representing the Connecticut settlement, related legal and administrative costs, and estimated costs for related pending regulatory matters. See Note M of Notes to Consolidated Financial Statements for information.

(5) Certain amounts for the prior years have been reclassified to conform to current year presentation.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

The income of an insurance and risk management intermediary such as the company is principally derived from commissions earned, which are generally percentages of premiums placed with insurance underwriters. Premium pricing within the insurance underwriting industry has been cyclical, varied by region and displayed a high degree of volatility based on prevailing economic and competitive conditions. Increases and decreases in underlying premium rates result directly in revenue changes to the company. From 1987 until 1999, the property and casualty insurance industry had been in a “soft market;” however, beginning in 2000, the industry experienced a firming of commercial premium rates which continued through 2002. In 2003, the industry observed more moderate increases in commercial premium rates. Beginning in the second quarter of 2004, the industry began to observe another “softening” in property and casualty premium rates which has continued through 2005. In addition, the level of contingent commissions received by the company, which is based upon the application of certain factors, including profitability of the business, premium growth, total premium volume or some combination of these factors, is subject to annual fluctuations and cannot be reasonably predicted. The company’s 2005 revenues have increased primarily due to acquisitions. Management cannot predict the timing or extent of contingent commissions or premium pricing changes due to market conditions or their effects on the company’s results of operations in the future.

On September 29, 2005, the company’s board of directors appointed F. Michael Crowley as president of the company effective September 29, 2005. Previously, Mr. Crowley was executive vice president and national director for property and casualty. Mr. Crowley succeeds Robert B. Lockhart, the company’s former president and chief operating officer, who resigned from the company in May 2005.

On September 13, 2005, the company’s board of directors appointed Michael Dinkins as executive vice president and chief financial officer of the company effective October 1, 2005. Previously, Mr. Dinkins was vice president-global control and reengineering for Guidant Corporation. Mr. Dinkins succeeds Carolyn Jones, the company’s former senior vice president, chief financial officer and treasurer, who announced in April 2005 her decision to retire from her position.

Results of Operations

For 2005, net income was $56.2 million, or $1.55 per share, compared to $81.4 million, or $2.23 per share for 2004. Net income for 2005 included a regulatory charge and related costs, net of tax, of $26.3 million, or $0.73 per share; a severance charge, net of tax, of $0.8 million, or $0.02 per share; and integration costs, net of tax, of $0.5 million, or $0.01 per share. The regulatory charge primarily related to the company’s settlement with the Attorney General and the Insurance Commissioner of the State of Connecticut. The Connecticut settlement provides for a $30 million national fund for distribution to HRH’s U.S. clients who elect to participate in the fund. The charge also includes amounts for the legal and administrative costs of complying with the settlement as well as estimated costs for related pending regulatory matters. In addition to the national fund, the company agreed to take certain other actions including enhanced disclosure practices for agency and broker clients and to not accept or request contingent compensation on brokerage business. For additional information regarding this matter, see “Note M-Regulatory Charge and Related Matters” of Notes to Consolidated Financial Statements. The severance charge represents estimated payments due to the company’s former president and chief operating officer under terms of his employment agreement. Integration costs represented costs associated with the company’s integration of Hobbs Group, LLC (Hobbs), which began after the completion of the Hobbs earn-out on June 30, 2003. Integration costs for 2005 represent facility and lease termination costs. In prior periods, integration costs included costs such as severance and other-employee related costs, facility and lease termination costs, and branding expenses. No additional integration costs for Hobbs are anticipated after 2005. Net income for 2004 included a loss on extinguishment of debt, net of tax, of $0.9 million, or $0.03 per share, and integration costs, net of tax, of $1.1 million, or $0.03 per share. The loss on extinguishment of debt was associated with the

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company’s entry into the Amended and Restated Credit Agreement (Amended Credit Agreement) in December 2004. This charge represented financing costs previously deferred in connection with the financing of the company’s former credit agreement in addition to certain lending fees paid in obtaining the Amended Credit Agreement. In addition, non-operating gains (losses), net of tax, were $2.9 million, or $0.08 per share, and ($0.3) million, or ($0.01) per share, for 2005 and 2004, respectively.

For 2004, net income was $81.4 million, or $2.23 per share, compared to $75.0 million, or $2.06 per share, for 2003. Net income for 2004 included a loss on extinguishment of debt, net of tax, of $0.9 million, or $0.03 per share, and integration costs, net of tax, of $1.1 million, or $0.03 per share. For 2003, net income included a one-time retirement benefit charge, net of tax, of $3.2 million, or $0.09 per share, and integration costs, net of tax, of $2.5 million, or $0.07 per share. In addition, non-operating gains (losses), net of tax, were ($0.3) million, or ($0.01) per share, and $0.2 million, or $0.01 per share, for 2004 and 2003, respectively.

The 2003 retirement benefit charge represented a contractual retirement benefit for Andrew L. Rogal, the company’s former chairman and chief executive officer, who retired in May 2003. This charge consisted primarily of compensation and the accelerated vesting of stock options and non-vested stock.

Commissions and fees for 2005 were $658.0 million, an increase of 7.9%, from commissions and fees of $609.7 million during the prior year. Approximately $65.0 million of commissions and fees were derived from acquisitions of new insurance agencies and accounts in 2005 and 2004. This increase was offset by decreases of approximately $10.2 million from the sale of certain agencies and accounts in 2005 and 2004. Excluding the effect of acquisitions and dispositions, the change in commissions and fees was (1.1)%. This decrease principally reflects a continued decline in property and casualty premium rates, the termination of National Override Agreements and lower than normal retention rates primarily related to producer culling. National Override Agreements are defined in “Note M-Regulatory Charge and Related Matters” of Notes to Consolidated Financial Statements. See “Contingent and National Override Agreements Commissions” for additional discussion of the company’s contingent and override commission arrangements.

Commissions and fees for 2004 were $609.7 million, an increase of 9.7% from commissions and fees of $555.7 million during the prior year. Approximately $50.3 million of commissions and fees were derived from new insurance agencies and accounts purchased in 2004 and 2003. This increase was offset by decreases of approximately $6.4 million from the sale of certain agencies and accounts in 2004 and 2003. Commissions and fees, excluding the effect of acquisitions and dispositions, increased 1.8%. This increase principally reflects net new business production, partially offset by the effects of a continued softening of property and casualty premium rates and the elimination of underperforming producers, resulting in the loss of some business.

Total operating expenses for 2005 were $581.0 million, an increase of $99.4 million, or 20.6%, from 2004. For 2004, total operating expenses were $481.6 million, an increase of $42.9 million, or 9.8%, from 2003.

Compensation and employee benefits costs for 2005 were $365.5 million, an increase of $32.4 million, or 9.7%, from 2004. Increases include approximately $33.7 million related to 2005 and 2004 purchase acquisitions, partially offset by decreases of $5.2 million related to agencies and accounts sold. Additional compensation costs in 2005 are attributable to continued investment in new sales and service talent.

Compensation and employee benefits costs for 2004 were $333.1 million, an increase of $30.3 million, or 10.0%, from 2003. Increases include approximately $28.9 million related to 2004 and 2003 purchase acquisitions, partially offset by decreases of $3.2 million related to agencies and accounts sold. Additional compensation costs in 2004 are attributable to investments in new talent as the company continued to implement its new team-based sales model and invest in its major accounts sales and service capabilities. These increased costs were partially offset by reductions for performance-based compensation and the elimination of underperforming sales personnel.

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Other operating expenses for 2005 were $127.7 million, or 13.7% higher than 2004. Other operating expenses increased mainly due to increased legal, compliance and claims expenses and acquisitions. Legal, compliance and claims expenditures increased $7.0 million due primarily to various regulatory inquiries and the protection of restrictive covenants in employment contracts as well as expenditures for compliance with Section 404 of the Sarbanes-Oxley Act. The $7.0 million increase is net of $4.4 million in insurance recoveries on contested claims. Regulatory inquiries relate to governmental investigations into the insurance intermediary industry’s business practices and broker compensation arrangements.

Other operating expenses for 2004 were $112.3 million, or 15.3% higher than 2003. Increases relate primarily to purchase acquisitions in 2004 and 2003 and increased legal, compliance and claims expenditures. The $6.5 million increase in legal, compliance and claims expenditures can be attributed to the protection of restrictive covenants in employment contracts, an unusual claims matter, compliance with Section 404 of the Sarbanes-Oxley Act, and various regulatory inquiries and related proceedings.

Depreciation expense for 2005 decreased $0.3 million, or 3.3%, from 2004 to $8.4 million. Depreciation expense decreased due to the impact of fully depreciated assets, partially offset by higher amounts for purchases.

Depreciation expense for 2004 decreased $0.4 million, or 4.3%, from 2003 to $8.7 million. Depreciation expense decreased due to the impact of fully depreciated assets and disposed assets, partially offset by higher amounts related to purchase acquisitions in 2004 and 2003.

Amortization expense reflects the amortization of intangible assets acquired in the purchase of insurance agencies. Amortization expense increased $4.9 million, or 35.4%, in 2005, which is attributable to acquisitions consummated during 2005 and 2004. Amortization expense increased $4.0 million, or 40.9%, in 2004, which is attributable to acquisitions consummated during 2004 and 2003.

Interest expense was $16.2 million, $10.3 million and $10.4 million in 2005, 2004 and 2003, respectively. Interest expense in 2005 was impacted by increased average borrowings and higher interest rates. Interest expense in 2004 was impacted by lower borrowing rates, offset by increased borrowings for acquisitions in the second half of the year.

The effective tax rate for the company was 39.5%, 41.0% and 40.0% in 2005, 2004 and 2003, respectively. The 2005 rate decreased primarily due to state tax planning, higher tax exempt investment income and less permanent tax differences on non-operating gains partially offset by certain non-deductible items in the regulatory charge. The 2004 rate increased primarily due to permanent tax differences related to the company’s current year non-operating gains.

Over the last three years, inflationary pressure has been relatively modest and did not have a significant effect on the company’s operations, while contingent commissions received by the company have historically been heavily weighted in the first and second quarters.

Liquidity and Capital Resources

Net cash provided by operations was $100.1 million, $114.8 million and $110.4 million for 2005, 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. Cash expenditures for the acquisition of property and equipment were $9.2 million, $8.8 million and $11.8 million for 2005, 2004 and 2003, respectively. Cash outlays related to the purchase of insurance agencies amounted to $23.8 million, $65.8 million and $46.0 million in 2005, 2004 and 2003, respectively. Cash outlays for such insurance agency acquisitions have been funded through operations and long-term borrowings. In addition, a portion of the

3

purchase price of such acquisitions may be paid through common stock and/or deferred cash and common stock payments; see “Note K-Acquisitions” of Notes to Consolidated Financial Statements for additional discussion. Cash proceeds from the sales of certain offices, insurance accounts and other assets totaled $7.7 million, $11.8 million and $1.3 million in 2005, 2004 and 2003, respectively. The company did not have any material capital expenditure commitments as of December 31, 2005.

Financing activities provided (utilized) cash of $(49.4) million, $32.4 million and ($62.8) million for 2005, 2004 and 2003, respectively, as the company repurchased common stock and made dividend and debt payments. For 2004, these uses of cash were offset by proceeds from the company’s entry into the Amended Credit Agreement which provided additional term loan borrowings. The company has annually increased its dividend rate and anticipates the continuance of its dividend policy. During 2005, the company repurchased, on the open market, 612,800 shares of its common stock for $21.8 million under its stock repurchase program. In 2004, the company repurchased, on the open market, 936,100 shares of its common stock for $31.5 million under its stock repurchase program. The company is currently authorized for 2006 and later years to purchase up to $50.0 million annually of its common stock subject to market conditions and other factors.

On December 15, 2004, the company signed the Amended Credit Agreement which provided for a revolving credit facility of $175.0 million, a Tranche A term loan of $50.0 million, and a Tranche B term loan of $200.0 million. The Amended Credit Agreement further permits the company to request additional term borrowings of up to $75.0 million prior to December 31, 2006, and provides that a portion of the revolving credit facility will be available for the issuance of letters of credit. At December 31, 2005, the company had borrowings of $243.0 million under the term loan facilities and had $174.6 million available for future borrowings under the revolving credit facility. The term loan facilities are payable quarterly and the revolving credit facility is due and payable upon the maturity date. Both the Tranche A term loan and revolving credit facility mature on December 15, 2009, and the Tranche B term loan matures on December 15, 2011. Borrowings under the Amended Credit Agreement bear interest at variable rates based on LIBOR plus a negotiated spread. Increased borrowings under the Amended Credit Agreement were made available for acquisitions, repurchase of equity shares and general corporate purposes.

The Amended Credit Agreement contains, among other provisions, requirements for maintaining certain financial ratios and specific limits or restrictions on acquisitions, indebtedness, payment of dividends and repurchases of common stock. In September 2005, the company amended the Amended Credit Agreement to modify certain covenant requirements due to the regulatory charge recorded in the 2005 third quarter. Management does not believe that the restrictions contained in the Amended Credit Agreement will, in the foreseeable future, adversely affect the company’s ability to pay cash dividends at the current dividend rate.

The company has three interest rate swap agreements with a total notional amount of $100.0 million. The company uses these interest rate swaps to manage interest cost and cash flows associated with variable interest rates.

The company had a current ratio (current assets to current liabilities) of 1.13 to 1.00 as of December 31, 2005. Shareholders’ equity of $546.3 million at December 31, 2005 increased from $507.2 million at December 31, 2004. The debt to equity ratio of 0.46 to 1.00 at December 31, 2005 decreased from the prior year-end ratio of 0.52 to 1.00 due net income and issuances of common stock partially offset by common stock repurchases.

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.

4

Contractual Obligations

The company has the following future payments related to contractual obligations as of December 31, 2005:

Payments due by Period

(in millions) Contractual Obligations	Total		Less than 1 year		1 – 2 years		2 – 3 years		3 – 4 years		After 4 years
Long-term debt	$	264.0	$	22.0	$	19.6	$	15.4	$	17.0	$	190.0
Operating leases		115.8		26.8		23.7		18.4		13.9		33.0
Other long-term liabilities		32.2		2.4		4.5		6.1		3.9		15.3
Regulatory settlement		10.0		—		10.0		—		—		—
Total obligations	$	422.0	$	51.2	$	57.8	$	39.9	$	34.8	$	238.3

Market Risk

The company has variable rate debt, maintains 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.

Industry Regulatory Matters

On August 31, 2005, the company entered into an agreement with the Attorney General of the State of Connecticut (the Attorney General) and the Insurance Commissioner of the State of Connecticut (the Commissioner) to resolve all issues related to investigations conducted by the Attorney General and the Commissioner into certain insurance brokerage and insurance agency practices (the Investigations) and to settle an action commenced on August 31, 2005 by the Attorney General in the Connecticut Superior Court alleging violations of the Connecticut Unfair Trade Practices Act and the Connecticut Unfair Insurance Practices Act. In the agreement, the company agreed to take certain actions including establishing a $30.0 million national fund for distribution to certain clients, enhancing disclosure practices for agency and broker clients, and to not accept or request contingent compensation on brokerage business. For further information on this agreement, see “Note M-Regulatory Charge and Related Matters” of Notes to Consolidated Financial Statements. Following is additional information regarding governmental investigations into the insurance intermediary industry’s business practices and broker compensation arrangements.

On October 14, 2004, the Office of the Attorney General of the State of New York (NYAG) filed a lawsuit against Marsh & McLennan Companies, Inc. and its subsidiary Marsh Inc. (collectively Marsh), the world’s largest insurance broker, alleging statutory and common law fraud, securities fraud, bid-rigging and other antitrust violations in the placement of insurance business. On March 4, 2005, the NYAG filed a lawsuit against Aon Corporation (Aon), the world’s second largest insurance broker, alleging fraudulent business practices, common law fraud and securities fraud in connection with the conduct of its placement of insurance business. Marsh and Aon each entered into settlement agreements with the NYAG and certain state regulators in January 2005 and March 2005, respectively. On April 8, 2005, Willis Group Holdings Limited, Willis North America Inc. and Willis of New York, Inc. (collectively Willis) entered into an agreement with the NYAG and the New York state insurance regulator to resolve issues related to investigations of business practices conducted by the NYAG and the state regulator. On May 18, 2005, Arthur J. Gallagher & Co. and its subsidiaries and affiliates, except for Gallagher Bassett Services, Inc., (collectively Gallagher), entered into an Assurance of Voluntary Compliance with the Attorney General of the State of Illinois and the Illinois state insurance regulator to resolve issues related to investigations of business practices conducted by the Illinois regulators.

Under the terms of the agreements, Marsh, Aon, Willis and Gallagher are required to establish settlement funds in the amounts of $850 million, $190 million, $50 million and $27 million, respectively, to compensate certain policyholder clients who retained Marsh, Aon, Willis or Gallagher to place insurance between specified inception or renewal dates, where such policies resulted in Marsh, Aon, Willis and Gallagher recording

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contingent or override commissions. The Marsh, Aon, Willis and Gallagher agreements also place restrictions on the future business practices of these companies. Marsh, Aon, Willis and Gallagher may no longer accept (i) any contingent compensation for certain services in placing, renewing, consulting on or servicing any insurance policy and (ii) any compensation other than a specific fee to be paid by the client, a specific percentage commission on premiums to be paid by the insurer set at the time of the purchase, renewal, placement or servicing of the policy, or both types of compensation. If Marsh, Aon or Willis receives any commission, it must disclose to the client that it intends to collect the commission and obtain the client’s written consent prior to the binding of the policy.

Contingent and National Override Agreements Commissions

As a result of the industry and regulatory developments described above, controversy continues to surround the longstanding insurance industry practice of contingent and override commissions paid to agents and brokers by underwriters. The company has historically entered into contingent and override commission agreements with various underwriters. Contingent commissions are commissions paid by underwriters based on profitability of the business, premium growth, total premium volume or some combination of these factors. Revenue from contingent commissions is heavily weighted in the first and second quarters. Income from the National Override Agreements was typically volume-based and paid quarterly by underwriters in excess of the standard commission rates on specific classes of business. National Override Agreements are defined in “Note M-Regulatory Charge and Related Matters” of Notes to Consolidated Financial Statements.

For 2005, 2004 and 2003, the company recognized contingent and National Override Agreements commissions of $48.5 million, $42.4 million and $40.8 million, respectively. Of the 2005 amount, 94% was from standard contingency agreements and 6% was from National Override Agreements. Of the 2004 annual amount, 81% was from standard contingency agreements and 19% was from National Override Agreements. The standard contingency agreements are entered into and maintained at the local office level. Effective for business written on or after January 1, 2005, these National Override Agreements reverted into standard local contingency arrangements with those underwriters on an office by office basis, which will be paid and recorded, if at all, annually beginning in early 2006. There can be no assurance that the loss of National Override Agreements commissions resulting from the reversion to standard local contingency arrangements will be offset by additional contingent commissions in future periods.

The departments of insurance of various states may adopt new regulations addressing contingent commission arrangements and disclosure of such arrangements with insureds. In addition, the National Association of Insurance Commissioners has proposed model legislation to implement new disclosure requirements relating to agent and broker compensation arrangements. The company intends to monitor agent and broker compensation practices and, as warranted by market and regulatory developments, will review its compensation arrangements with underwriters. While it is not possible to predict the outcome of the governmental inquiries and investigations into the insurance industry’s commission payment practices or the responses by the market and regulators, any material decrease in the company’s contingent commissions is likely to have an adverse effect on its results of operations.

In addition to state regulatory inquiries, the company has been named as a defendant in four purported class actions brought against a number of brokers in the insurance industry and one purported securities class action. For information on industry litigation, see “Note P-Commitments and Contingencies” of Notes to Consolidated Financial Statements.

Critical Accounting Policies

The consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles, which require the company to make estimates and assumptions. The company believes that of its significant accounting policies (see “Note A-Significant Accounting Policies” of Notes to Consolidated Financial Statements) the following may involve a higher degree of judgment and complexity.

6

Revenue Recognition

The company is engaged in insurance agency and brokerage activities and derives revenues primarily from commissions on the sale of insurance products to clients that are paid by the insurance underwriters with whom its subsidiary agencies place their clients’ insurance. Generally, commission income (and fees in lieu of commission), as well as the related premiums receivable from clients and premiums payable to insurance companies, is recognized as of the effective date of insurance coverage or billing date, whichever is later, net of an allowance for estimated policy cancellations. Commissions on premiums billed and collected directly by insurance companies on its middle-market and major accounts property and casualty business are recorded as revenue on the later of the billing date or the effective date. Commissions on premiums billed and collected directly by insurance companies on other property and casualty and employee benefits business are recorded as revenue when received. Contingent commissions and miscellaneous commissions are recorded as revenue when received. Service fees are recognized over the period which the services are rendered. Override commissions are recorded as earned.

Allowance for Doubtful Accounts

The company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its clients to make required payments. The company monitors its allowance utilizing accounts receivable aging data as the basis to support the estimate. If the financial condition of the company’s clients were to deteriorate, resulting in an impairment of their ability to make payments, an additional allowance may be required. In addition, the company has the ability to cancel coverage for clients who have not made required payments.

Intangible Assets

The company has acquired significant intangible assets in business acquisitions. The valuation of intangible assets is subject to significant assumptions including projected future operating results. The determination of estimated useful lives and whether the assets are impaired requires significant judgment and affects the amount of future amortization and possible impairment charges. The company tests goodwill for impairment in accordance with Financial Accounting Standards Board Statement No. 142, “Goodwill and Other Intangible Assets.” In addition, intangible assets subject to amortization are periodically reviewed to determine that no conditions exist indicating a possible impairment.

Income Taxes

The company records an income tax provision for the expected tax consequences of its reported results. The company’s provision includes deferred income taxes to reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The company evaluates its ability to realize the deferred tax assets in the future and records a valuation allowance when necessary. The determination of income taxes and assessment of realization of deferred tax assets requires significant judgment due to the complexity of tax laws and the company’s operation in multiple states.

New Accounting Standards

In December 2004, the Financial Accounting Standards Board issued Financial Accounting Standards Board Statement No. 123 (revised 2004), “Share-Based Payment” (Statement 123R). The revised standard requires all companies to recognize compensation costs related to all share-based payments (including stock options) in their financial statements at fair value, thereby, upon adoption, eliminating the use of pro forma disclosures to report such amounts. Statement 123R also requires that the benefits of tax deductions in excess of recognized compensation costs be reported as a financing cash flow, rather than as an operating cash flow as was required under previous literature. In April 2005, the Securities and Exchange Commission issued a rule to amend the

7

effective date of Statement 123R. Statement 123R is effective for a public company that is not a small business issuer at the beginning of the first fiscal year beginning after June 15, 2005.

Statement 123R permits public companies to account for the adoption of this revised standard using one of two methods: the modified-prospective method or the modified-retrospective method. The modified-prospective method requires a company to recognize compensation cost based upon fair value for only those share-based awards granted or modified with an effective date subsequent to the company’s date of adoption and share-based awards issued in prior periods that remain unvested at the date of adoption. The modified-retrospective method allows a company to restate, based upon pro forma amounts previously disclosed under the requirements of Financial Accounting Standards Board Statement No. 123, “Accounting for Stock-Based Compensation,” for either all prior periods presented or prior interim periods included in the year of adoption.

Effective January 1, 2006, the company adopted Statement 123R and will account for the adoption using the modified-prospective method. For fair value purposes, the company will use a Black-Scholes option-pricing model to estimate the fair value of stock option awards. The adoption of Statement 123R is expected to result in a decrease to 2006 net income of approximately $3.8 million ($0.11 per share), net of income taxes of $2.5 million, although it is not expected to have a significant impact on the company’s overall cash flows or financial position.

Forward-Looking Statements

When used in the company’s annual report, in Form 10-K or other filings by the company with the Securities and Exchange Commission, in the company’s press releases or other public or shareholder communications, or in oral statements made with the approval of an authorized company executive officer, the words or phrases “would be,” “will allow,” “expects to,” “will continue,” “is anticipated,” “estimate,” “project” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

While forward-looking statements are provided to assist in the understanding of the company’s anticipated future financial performance, the company cautions readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. Forward-looking statements are subject to significant risks and uncertainties, many of which are beyond the company’s control. Although the company believes that the assumptions underlying its forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Actual results may differ materially from those contained in or implied by such forward-looking statements for a variety of reasons. Risk factors and uncertainties that might cause such a difference include, but are not limited to, the following: the company’s commission revenues are highly dependent on premium rates charged by insurance underwriters, which are subject to fluctuation based on the prevailing economic conditions and competitive factors that affect insurance underwriters; the level of contingent commissions is difficult to predict and any material decrease in the company’s collection of them is likely to have an adverse impact on operating results; the company has eliminated National Override Agreements commissions effective for business written on or after January 1, 2005, and it is uncertain whether additional contingent commissions payable to the company will offset the loss of such revenues; the company’s failure to recruit, retain, train and integrate quality producers may have an adverse effect on the company; the company may be subject to increasing costs arising from errors and omissions claims against the company; the company’s growth has been enhanced through acquisitions, but the company may not be able to successfully identify and attract suitable acquisition candidates and complete acquisitions; the company’s failure to integrate an acquired insurance agency efficiently may have an adverse effect on the company; the general level of economic activity can have a substantial impact on revenues that is difficult to predict; a strong economic period may not necessarily result in higher revenues if the volume of insurance business brought about by favorable economic conditions is offset by premium rates that have declined in response to increased competitive conditions; a decline in the company’s ability to obtain new financing and/or refinance current borrowings may adversely effect the company’s borrowing costs and financial flexibility; if the company is unable to respond in a timely and cost-effective manner to rapid technological change in the insurance intermediary industry, there may be a resulting adverse effect on business and operating

8

results; the company is subject to governmental regulation which may adversely impact operating results and/or growth; the business practices and broker compensation arrangements of the company and the insurance intermediary industry are subject to uncertainty due to investigations by various governmental authorities and related private litigation; costs incurred related to investigations, private litigation and class actions are uncertain and difficult to predict; and quarterly and annual variations in the company’s commissions and fees that result from the timing of policy renewals and the net effect of new and lost business production may have unexpected impacts on the company’s results of operations.

The company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

9

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(in thousands)

	December 31,
	2005		2004
ASSETS
CURRENT ASSETS
Cash and cash equivalents, including $54,611 and $55,909, respectively, of restricted funds	$	224,471	$	210,470
Receivables:
Premiums and commissions, less allowance for doubtful accounts of $4,180 and $4,630, respectively		224,201		211,299
Other		28,887		29,122
		253,088		240,421
Prepaid expenses and other current assets		37,888		24,586
TOTAL CURRENT ASSETS		515,447		475,477
PROPERTY AND EQUIPMENT, NET		24,765		24,024
INTANGBILE ASSETS
Goodwill		625,349		608,427
Other intangible assets, net		138,187		149,515
		763,536		757,942
OTHER ASSETS		26,019		20,556
	$	1,329,767	$	1,277,999
LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES
Premiums payable to insurance companies	$	339,088	$	315,130
Accounts payable		16,150		13,417
Accrued expenses		49,618		48,192
Premium deposits and credits due customers		40,454		48,287
Current portion of long-term debt		12,511		16,248
TOTAL CURRENT LIABILITIES		457,821		441,274
LONG-TERM DEBT		251,507		265,384
DEFERRED INCOME TAXES		23,307		32,292
OTHER LONG-TERM LIABILITIES		50,875		31,893
SHAREHOLDERS’ EQUITY
Common stock, no par value; authorized 100,000 shares; outstanding 35,955 and 35,886 shares, respectively		233,292		233,785
Retained earnings		312,040		271,978
Accumulated other comprehensive income (loss)
Unrealized gain (loss) on interest rate swaps, net of deferred tax (expense) benefit of $(308) and $120, respectively		462		(181	)
Foreign currency translation adjustments		463		1,574
		546,257		507,156
	$	1,329,767	$	1,277,999

See notes to consolidated financial statements.

10

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED INCOME

(in thousands, except per share amounts)

	Year Ended December 31,
	2005		2004		2003
REVENUES
Commissions and fees	$	658,012	$	609,660	$	555,732
Investment income		6,581		3,176		3,151
Other		9,292		6,767		4,764
		673,885		619,603		563,647
OPERATING EXPENSES
Compensation and employee benefits		365,481		333,057		302,760
Other operating expenses		127,702		112,274		97,358
Depreciation		8,410		8,693		9,082
Amortization of intangibles		18,755		13,848		9,828
Interest expense		16,243		10,288		10,429
Regulatory charge and related costs		42,320		—		—
Severance charge		1,303		—		—
Integration costs		764		1,909		4,094
Loss on extinguishment of debt		—		1,557		—
Retirement benefit		—		—		5,195
		580,978		481,626		438,746
INCOME BEFORE INCOME TAXES		92,907		137,977		124,901
Income taxes		36,707		56,563		49,947
NET INCOME	$	56,200	$	81,414	$	74,954
Net Income Per Share:
Basic	$	1.57	$	2.27	$	2.17
Assuming Dilution	$	1.55	$	2.23	$	2.06

See notes to consolidated financial statements.

11

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED SHAREHOLDERS’ EQUITY

(in thousands, except per share amounts)

	COMMON STOCK			RETAINED EARNINGS			ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance at January 1, 2003	$	168,558		$	143,005		$	(915	)
Issuance of 3,095 shares of common stock		87,609
Repurchase of 1,133 shares of common stock		(33,516	)
Income tax benefit from exercise of stock options		4,800
Payment of dividends ($0.3675 per share)					(12,775	)
Unrealized gain on derivative contracts, net of deferred tax expense of $643								963
Retirement benefit		906
Foreign currency translation adjustments								678
Net income					74,954
Balance at December 31, 2003		228,357			205,184			726
Issuance of 1,376 shares of common stock		29,936
Repurchase of 936 shares of common stock		(31,474	)
Income tax benefit from exercise of stock options		6,966
Payment of dividends ($0.4075 per share)					(14,620	)
Unrealized gain on derivative contracts, net of deferred tax expense of $214								321
Foreign currency translation adjustments								346
Net income					81,414
Balance at December 31, 2004		233,785			271,978			1,393
Issuance of 682 shares of common stock		19,376
Repurchase of 613 shares of common stock		(21,848	)
Income tax benefit from exercise of stock options		1,979
Payment of dividends ($0.4500 per share)					(16,138	)
Unrealized gain on derivative contracts, net of deferred tax expense of $428								643
Foreign currency translation adjustments								(1,111	)
Net income					56,200
Balance at December 31, 2005	$	233,292		$	312,040		$	925

See notes to consolidated financial statements.

12

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

STATEMENT OF CONSOLIDATED CASH FLOWS

(in thousands)

	Year Ended December 31,
	2005			2004			2003
OPERATING ACTIVITIES
Net income	$	56,200		$	81,414		$	74,954
Adjustments to reconcile net income to net cash provided by operating activities:
Regulatory charge and related costs		42,320			—			—
Severance charge		1,303			—			—
Integration costs		764			1,909			4,094
Retirement benefit		—			—			5,195
Depreciation		8,410			8,693			9,082
Amortization of intangibles		18,755			13,848			9,828
Loss on extinguishment of debt		—			1,557			—
Provision for losses on receivables		753			1,588			1,362
Provision for deferred income taxes		(4,115	)		685			3,462
Gain on sale of assets		(5,104	)		(2,076	)		(385	)
Income tax benefit from exercise of stock options		1,979			6,966			4,800
Changes in operating assets and liabilities net of effects from regulatory charge and related costs, severance charge, integration costs, retirement benefit and insurance agency acquisitions and dispositions:
(Increase) decrease in receivables		(10,238	)		29,001			(16,352	)
(Increase) decrease in prepaid expenses		2,046			(5,880	)		8,954
Increase (decrease) in premiums payable to insurance companies		21,670			(30,908	)		13,738
Increase (decrease) in premium deposits and credits due customers		(7,833	)		13,997			2,214
Increase (decrease) in accounts payable		2,611			561			(4,188	)
Decrease in accrued expenses		(6,737	)		(4,422	)		(11,637	)
Decrease in regulatory charge accrual		(22,264	)		—			—
Other operating activities		(452	)		(2,137	)		5,233
NET CASH PROVIDED BY OPERATING ACTIVITIES		100,068			114,796			110,354
INVESTING ACTIVITIES
Purchase of property and equipment		(9,224	)		(8,760	)		(11,827	)
Purchase of insurance agencies, net of cash acquired		(23,797	)		(65,798	)		(46,041	)
Proceeds from sale of assets		7,738			11,800			1,311
Purchase of investments		(13,800	)		—			—
Other investing activities		2,462			(471	)		771
NET CASH USED IN INVESTING ACTIVITIES		(36,621	)		(63,229	)		(55,786	)
FINANCING ACTIVITIES
Proceeds from long-term debt		—			320,000			30,000
Principal payments on long-term debt		(14,297	)		(239,921	)		(45,908	)
Debt issuance costs		(204	)		(1,923	)		(557	)
Repurchase of common stock		(21,848	)		(31,474	)		(33,516	)
Proceeds from issuance of common stock, net of tax payments for options exercised		3,041			377			(40	)
Dividends		(16,138	)		(14,620	)		(12,775	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		(49,446	)		32,439			(62,796	)
Increase (decrease) in cash and cash equivalents		14,001			84,006			(8,228	)
Cash and cash equivalents at beginning of year		210,470			126,464			134,692
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	224,471		$	210,470		$	126,464

See notes to consolidated financial statements.

13

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005

Hilb Rogal & Hobbs Company, a Virginia corporation, operates offices located in 29 states and in London, England. Its principal activity is the performance of insurance and risk management intermediary services which involves placing various types of insurance, including property and casualty, employee benefits and many other areas of specialized exposure, with insurance underwriters on behalf of its clients.

NOTE A—SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation—The accompanying financial statements include the accounts of the company and its subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation. Certain amounts for the prior years have been reclassified to conform to current year presentation.

Use of Estimates—The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Revenues—Commission income (and fees in lieu of commission) as well as the related premiums receivable from clients and premiums payable to insurance companies are recorded as of the effective date of insurance coverage or the billing date, whichever is later. Commissions on premiums billed and collected directly by insurance companies on middle-market and major accounts property and casualty business are recorded as revenue on the later of the billing date or effective date. Commissions on premiums billed and collected directly by insurance companies on other property and casualty and employee benefits business are recorded as revenue when received which, in many cases, is the company’s first notification of amounts earned due to the lack of policy and renewal information. Contingent commissions are recorded as revenue when received. Contingent commissions are commissions paid by insurance underwriters and are based on the estimated profit and/or overall volume of business placed with the underwriter. The data necessary for the calculation of contingent commissions cannot be reasonably obtained prior to receipt of the commission which, in many cases, is the company’s first notification of amounts earned.

The company carries a reserve for policy cancellations which is periodically evaluated and adjusted as necessary. Miscellaneous premium and commission adjustments are recorded as they occur. The policy cancellation reserve as of December 31, 2005 and 2004 was $2.5 million. For 2005, the cancellation reserve activity was primarily comprised of reserve decreases related to changes in observed policy cancellation trends offset by new reserves related to acquisitions.

Service fee revenue is recorded on a pro rata basis as the services are provided. Service fee revenue typically relates to claims management and loss control services, program administration and workers compensation consultative services which are provided over a period of time, typically one year. Override commissions are commissions paid by insurance underwriters in excess of the standard commission rates on specific classes of business. These amounts are paid as a percentage of premiums on certain classes of business written with the specific underwriter and are recorded as earned.

Investment income is recorded as earned. The company’s investment policy provides for the investment of premiums between the time they are collected from the client and remitted (net of commission) to the underwriter. Typically, premiums are due to the underwriters 45 days after the end of the month in which the policy renews. This investment activity is part of normal operations and, accordingly, investment income earned is reported in revenues.

Cash Equivalents—The company considers all highly liquid investments with a maturity of three months or less at the date of acquisition to be cash equivalents. The carrying amounts reported on the balance sheet approximate the fair values.

14

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

Allowance for Doubtful Accounts—The company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its clients to make required payments. The company monitors its allowance utilizing accounts receivable aging data as the basis to support the estimate.

Property and Equipment—Property and equipment are stated on the basis of cost. Depreciation is computed by the straight-line method over the estimated useful lives (generally 3 to 7 years for furniture and equipment). Leasehold improvements are generally amortized using the straight-line method over the shorter of the term of the related lease or the estimated useful life of the corresponding asset.

Intangible Assets—The company accounts for goodwill and other intangible assets in accordance with the provisions of Financial Accounting Standards Board Statements No. 141, “Business Combinations,” and No. 142, “Goodwill and Other Intangible Assets” (Statement 142). Goodwill represents the excess of the purchase price over the fair value of identifiable net assets of businesses acquired and accounted for under the purchase method. The fair value of identifiable intangible assets is estimated based upon discounted future cash flow projections. Goodwill is tested for impairment annually, or more frequently if impairment indicators arise. In reviewing goodwill for impairment, potential impairment is identified by comparing the estimated fair value of a reporting unit with its carrying value. Intangible assets with finite lives are amortized over their useful lives and are periodically reviewed to ensure that no conditions exist indicating that the recorded amount of intangible assets is not recoverable from future undiscounted cash flows.

Accounting for Stock-Based Compensation—At December 31, 2005 and 2004, the company had three stock-based compensation plans, which are described more fully in Note H. Through December 31, 2005, the company continued 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” (APB No. 25), and related interpretations. No stock-based compensation cost is reflected in net income for options except as disclosed in Note O, 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. See Note B regarding the company’s adoption of new accounting standards for share-based payments (including stock options) as of January 1, 2006.

Financial Accounting Standards Board Statement No. 123, “Accounting for Stock-Based Compensation” (Statement 123), as amended by Financial Accounting Standards Board Statement No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure,” 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. The 2005 net expense of $3.3 million includes a $1.7 million net expense reduction for stock options that were forfeited prior to vesting. These stock option forfeitures relate to stock options granted from 2002 through 2004.

(in thousands, except per share amounts)	2005			2004			2003
Net Income—as reported	$	56,200		$	81,414		$	74,954
Deduct: Total stock-based compensation expense determined under fair value based method for all awards, net of related tax effects		(3,264	)		(5,388	)		(6,817	)
Pro forma net income	$	52,936		$	76,026		$	68,137
Net Income Per Share:
Basic—as reported	$	1.57		$	2.27		$	2.17
Basic—pro forma	$	1.48		$	2.12		$	1.97
Assuming Dilution—as reported	$	1.55		$	2.23		$	2.06
Assuming Dilution—pro forma	$	1.46		$	2.08		$	1.88

15

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

The fair value of these options was estimated at the grant date using a Black-Scholes option-pricing model with the following weighted average assumptions for 2005, 2004 and 2003, respectively: risk free rates of 3.72%, 3.62% and 3.50%; dividend yields of 1.27%, 1.14% and 0.99%; volatility factors of 0.293, 0.292 and 0.267; and an expected life of approximately five years, seven years and seven years. The weighted average fair value per option granted in 2005, 2004 and 2003 was $9.71, $10.79 and $11.40, respectively.

Rent Expense—Minimum rental expenses are recognized over the term of the lease. When a lease contains a predetermined fixed escalation of the minimum rent, the related rent expense is recognized on a straight-line basis. Lease incentives are amortized as a reduction to rent expense over the lease term. Contingent rent and rent escalations are included in rent expense when it is probable that the expense has been incurred and the amount is reasonably estimable.

Fair Value of Financial Instruments—The carrying amounts reported in the balance sheet for cash and cash equivalents, receivables, premiums payable to insurance companies, accounts payable, accrued expenses, premium deposits and credits due customers, and long-term debt approximate those assets’ and liabilities’ fair values. Fair values for interest rate swaps are based on third-party pricing models or formulas using current assumptions and are disclosed in Note D.

Derivatives—The company accounts for derivative and hedging instruments in accordance with the provisions of Financial Accounting Standards Board Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities” (Statement 133), as amended by Statement No. 138. Statement 133 requires the company to recognize all derivatives as either assets or liabilities on the balance sheet at fair value. Gains and losses resulting from changes in fair value must be recognized currently in earnings unless specific hedge criteria are met. If a derivative is a hedge, depending upon the nature of the hedge, a change in its fair value is either offset against the change in the fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in accumulated other comprehensive income (OCI) until the hedged item is recognized in earnings. Any difference between fair value of the hedge and the item being hedged, known as the ineffective portion, is immediately recognized in earnings.

The company’s use of derivative instruments is limited to interest rate swap agreements used to modify the interest characteristics for a portion of its outstanding variable rate debt. These interest rate swaps are designated as cash flow hedges and are structured so that there is no ineffectiveness.

The change in value of the interest rate swaps is reported as a component of the company’s OCI and reclassified into interest expense in the same period or periods during which the hedged transaction affects earnings. Derivative instruments are carried at fair value on the balance sheet in the applicable line item, other assets or other long-term liabilities.

Termination of an interest rate swap agreement would result in the amount previously recorded in OCI being reclassified to interest expense related to the debt over the remaining term of the original contract life of the terminated swap agreement. In the event of the early extinguishment of a debt obligation, any amounts in OCI relating to designated hedge transactions of the extinguished debt would be reclassified to earnings coincident with the extinguishment.

Income Taxes—The company (except for its foreign subsidiaries) files a consolidated federal income tax return with its subsidiaries. Deferred taxes result from temporary differences between the income tax and financial statement bases of assets and liabilities and are based on tax laws as currently enacted.

16

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

Foreign Currency Translation—The accounts of the company’s foreign subsidiaries are measured using local currency as the functional currency. Accordingly, assets and liabilities are translated into U.S. dollars at period-end exchange rates, and income and expense are translated at average monthly exchange rates. Net exchange gains or losses resulting from such translations are excluded from net earnings and accumulated as a separate component of OCI. The company does not provide income taxes on such gains and losses.

Accrued Expenses—Accrued expenses included compensation and employee benefits of $29.5 million and $31.3 million at December 31, 2005 and 2004, respectively.

NOTE B—ACCOUNTING PRONOUNCEMENTS

In December 2004, the Financial Accounting Standards Board issued Financial Accounting Standards Board Statement No. 123 (revised 2004), “Share-Based Payment” (Statement 123R). Statement 123R revises Statement 123. See Note A regarding the company’s accounting for stock-based compensation prior to January 1, 2006. The revised standard requires all companies to recognize compensation costs related to all share-based payments (including stock options) in their financial statements at fair value, thereby, upon adoption, eliminating the use of pro forma disclosures to report such amounts. Statement 123R also requires that the benefits of tax deductions in excess of recognized compensation costs be reported as a financing cash flow, rather than as an operating cash flow as was required under previous literature. In April 2005, the Securities and Exchange Commission issued a rule to amend the effective date of Statement 123R. Statement 123R is effective for a public company that is not a small business issuer at the beginning of the first fiscal year beginning after June 15, 2005.

Statement 123R permits public companies to account for the adoption of this revised standard using one of two methods: the modified-prospective method or the modified-retrospective method. The modified-prospective method requires a company to recognize compensation cost based upon fair value for only those share-based awards granted or modified with an effective date subsequent to the company’s date of adoption and share-based awards issued in prior periods that remain unvested at the date of adoption. The modified-retrospective method allows a company to restate, based upon pro forma amounts previously disclosed under the requirements of Statement 123, for either all prior periods presented or prior interim periods included in the year of adoption.

Effective January 1, 2006, the company adopted Statement 123R and accounted for the adoption using the modified-prospective method. For fair value purposes, the company will use a Black-Scholes option-pricing model to estimate the fair value of stock option awards. The adoption of Statement 123R is expected to result in a decrease to 2006 net income of approximately $3.8 million ($0.11 per share), net of income taxes of $2.5 million, although it is not expected to have a significant impact on the company’s overall cash flows or financial position.

NOTE C—PROPERTY AND EQUIPMENT

Property and equipment on the consolidated balance sheet consists of the following:

(in thousands)	2005		2004
Furniture and equipment	$	58,369	$	55,474
Leasehold improvements		11,326		9,200
		69,695		64,674
Less accumulated depreciation		44,930		40,650
	$	24,765	$	24,024

17

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

NOTE D—LONG-TERM DEBT

Long-term debt on the consolidated balance sheet consists of the following:

(in thousands)	2005		2004
Credit facility, interest currently 6.3% to 6.8%	$	243,000	$	250,000
Installment notes payable primarily incurred in acquisitions of insurance agencies, 1.2% to 8.0% due in various installments to 2008		21,018		31,632
		264,018		281,632
Less current portion		12,511		16,248
	$	251,507	$	265,384

Maturities of long-term debt for the four years ending after December 31, 2006 are $7.6 million in 2007, $0.9 million in 2008, $53.0 million in 2009, $2.0 million in 2010 and $188.0 million thereafter. At December 31, 2005, the company had term loans included in the credit facility with $9.5 million due within one year classified as long-term debt in accordance with the company’s intent and ability to refinance this obligation on a long-term basis under its revolving credit facility.

Interest paid was $16.1 million, $10.2 million and $10.9 million in 2005, 2004 and 2003, respectively.

On December 15, 2004, the company signed the Amended and Restated Credit Agreement (the Amended Credit Agreement) which provided for a revolving credit facility of $175.0 million, a Tranche A term loan of $50.0 million, and a Tranche B term loan of $200.0 million. The Amended Credit Agreement further permits the company to request additional term borrowings of up to $75.0 million prior to December 31, 2006 and provides that a portion of the revolving credit facility will be available for the issuance of letters of credit. Borrowings under this facility bear interest at variable rates based on LIBOR plus a negotiated spread. In addition, the company pays commitment fees (0.3% at December 31, 2005) on the unused portion of the revolving credit facility. The term loan facility is payable quarterly and the revolving credit facility is due and payable upon the maturity date. Both the Tranche A term loan and revolving credit facility mature on December 15, 2009, and the Tranche B term loan matures on December 15, 2011. At December 31, 2005 and 2004, the company had borrowings of $243.0 million and $250.0 million, respectively, under the term loan facilities and had $174.6 million and $174.7 million, respectively, available for future borrowings under the revolving credit facility. The Amended Credit Agreement represents senior secured indebtedness and contains, among other provisions, requirements for maintaining certain financial ratios and specific limits or restrictions on acquisitions, indebtedness, investments, payment of dividends and repurchases of common stock. In September 2005, the company amended the Amended Credit Agreement to modify certain covenant requirements due to the regulatory charge recorded in the 2005 third quarter. See Note M regarding the regulatory charge.

The Amended Credit Agreement replaced the Second Amended and Restated Credit Agreement. The company recognized losses of $1.6 million in 2004 related to the extinguishment of the Second Amended and Restated Credit Agreement. This loss on extinguishment primarily included various financing and professional costs previously deferred in connection with the financing of the company’s former credit agreement and certain lending fees paid in obtaining the Amended Credit Agreement.

18

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

On July 1, 2004, the company entered into an interest rate swap agreement with a notional amount of $30.0 million and a maturity date of June 30, 2007. On December 29, 2004, the company entered into a second interest rate swap agreement with a notional amount of $20.0 million and a maturity date of December 31, 2010. These two interest rate swap agreements replaced the company’s previous hedging arrangements, which matured on June 30, 2004. The combined notional amount of these former interest rate swaps was originally $45.0 million, which was subsequently reduced by $0.9 million on a quarterly basis beginning September 30, 2000 through their maturity. On December 20, 2005, the company entered into a third interest rate swap agreement with a notional amount of $50.0 million and a maturity date of December 31, 2010.

The company has designated all of its interest rate swaps as cash flow hedges under Statement 133. The company enters into interest rate swap agreements to manage interest cost and cash flows associated with variable interest rates, primarily short-term changes in LIBOR; changes in cash flows of the interest rate swaps offset changes in the interest payments on the covered portion of the company’s credit facility. The notional amounts of the interest rate swap agreements are used to measure interest to be paid or received and do not represent the amount of exposure to credit loss. The credit risk to the company would be a counterparty’s inability to pay the differential in the fixed rate and variable rate in a rising interest rate environment. The company’s exposure to credit loss on its interest rate swap agreements in the event of non-performance by a counterparty is believed to be remote due to the company’s requirement that a counterparty have a strong credit rating. The company is exposed to market risk from changes in interest rates.

Under the current interest rate swap agreements, the company makes payments based on fixed pay rates of approximately 4.4% and receives payments based on the counterparties’ variable LIBOR pay rates. At the end of the year, the variable rate was approximately 4.5% for each agreement. In connection with these interest rate swap agreements, the company recorded after-tax income in other comprehensive income of $0.6 million, $0.3 million and $1.0 million in 2005, 2004 and 2003, respectively. There was no impact on net income due to ineffectiveness. The fair market value of the interest rate swaps resulted in an asset of $0.8 million at December 31, 2005, which is included in other non-current assets, and in a liability of $0.3 million at December 31, 2004, which is included in other long-term liabilities.

NOTE E—RETIREMENT PLANS

The company sponsors the HRH Retirement Savings Plan (the Retirement Savings Plan) which covered substantially all employees of the company and its subsidiaries. The Retirement Savings Plan, which may be amended or terminated by the company at any time, provides that the company shall contribute a matching contribution of up to 3% of a participant’s eligible compensation and such amounts as the board of directors shall determine to a trust fund.

In 2002, the company acquired Hobbs Group, LLC (Hobbs). Hobbs sponsored the Hobbs Group, LLC 401(k) Savings Plan (the Hobbs Savings Plan) which covered substantially all employees of Hobbs and its subsidiaries. Effective January 1, 2004, the Hobbs Savings Plan was terminated and merged into the Retirement Savings Plan.

Prior to merger with the company, certain of the other merged companies had separate profit sharing or benefit plans. These plans were terminated or frozen at the time of merger with the company.

The total expense recorded by the company under the Retirement Savings Plan and the Hobbs Savings Plan for 2005, 2004 and 2003 was $5.9 million, $5.3 million and $5.3 million, respectively.

19

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

The company has the Supplemental Executive Retirement Plan (the Plan) for key executives. The Plan provides that participants shall be credited each year with an amount that is calculated by determining the total company match and profit sharing contribution that the participant would have received under the Retirement Savings Plan absent the compensation limitation that applies to such plan, reduced by the amount of actual company match and profit sharing contributions to such plan. The Plan also provides for the crediting of interest to participant accounts. Expense recognized by the company in 2005, 2004 and 2003 related to these Plan provisions amounted to $0.9 million, $0.9 million and $0.6 million, respectively. At December 31, 2005 and 2004, the company’s accrued liability for benefits under the Plan was $4.0 million and $3.3 million, respectively, and is included in other long-term liabilities.

NOTE F—INCOME TAXES

The components of income taxes shown in the statement of consolidated income are as follows:

(in thousands)	2005			2004		2003
Current expense
Federal	$	35,405		$	46,673	$	39,833
State		5,417			9,205		6,652
		40,822			55,878		46,485
Deferred expense (benefit)
Federal		(3,156	)		568		2,937
State		(959	)		117		525
		(4,115	)		685		3,462
	$	36,707		$	56,563	$	49,947

The company operates in multiple tax jurisdictions and its tax returns are subject to audit by various taxing authorities. The company believes that adequate accruals have been made for all tax returns subject to audit. Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

The effective income tax rate varied from the statutory federal income tax rate as follows:

	2005		2004		2003
Statutory federal income tax rate	35.0	%	35.0	%	35.0	%
Tax exempt investment income	(0.6	)	(0.1	)	(0.2	)
State income taxes, net of federal tax benefit	3.2		4.4		3.8
Basis difference on sale of insurance accounts	0.1		1.0		—
Nondeductible portion of regulatory charge	0.9		—		—
Other	0.9		0.7		1.4
Effective income tax rate	39.5	%	41.0	%	40.0	%

Income taxes paid were $38.1 million, $56.5 million and $33.3 million in 2005, 2004 and 2003, respectively.

20

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

Significant components of the company’s deferred tax liabilities and assets on the consolidated balance sheet are as follows:

(in thousands)	2005		2004
Deferred tax liabilities:
Intangible assets	$	44,249	$	45,289
Unrealized gain on interest rate swaps		195		—
Other		1,860		2,777
Total deferred tax liabilities		46,304		48,066
Deferred tax assets:
Deferred compensation		13,983		11,437
Allowance for doubtful accounts		1,578		1,763
Deferred rent and income		3,408		3,148
Unrealized loss on interest rate swaps		—		121
Regulatory charge and related costs		6,969		—
Retirement benefits		754		1,049
Other		3,360		3,564
Total deferred tax assets		30,052		21,082
Net deferred tax liabilities	$	16,252	$	26,984

The net current deferred tax asset, which is included in prepaid expenses and other current assets, was $7.1 million and $5.3 million at December 31, 2005 and 2004, respectively.

NOTE G—LEASES

The company and its subsidiaries have noncancellable lease contracts for office space, equipment and automobiles which expire at various dates through the year 2018 and generally include escalation clauses for increases in lessors’ operating expenses and increased real estate taxes.

Future minimum rental payments required under such operating leases are summarized as follows (in thousands):

2006	$	26,852
2007		23,742
2008		18,365
2009		13,883
2010		10,521
Thereafter		22,473
	$	115,836

Rental expense for all operating leases in 2005, 2004 and 2003 amounted to $28.2 million, $25.5 million and $22.1 million, respectively. Included in rental expense for 2005, 2004 and 2003 is approximately $1.4 million, $1.9 million and $1.8 million, respectively, which was paid to employees or related parties.

21

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

NOTE H—SHAREHOLDERS’ EQUITY

The company has adopted and the shareholders have approved the 2000 Stock Incentive Plan (as amended and restated in 2003), the Non-employee Directors Stock Incentive Plan and the Hilb, Rogal and Hamilton Company 1989 Stock Plan which provide for the granting of options to purchase up to an aggregate of approximately 5,522,000 and 5,465,000 shares of common stock as of December 31, 2005 and 2004, respectively. Stock options granted have seven to ten year terms and vest and become fully exercisable at various periods up to five years. Stock option activity under the plans was as follows:

	Shares	Weighted Average Exercise Price
Outstanding at January 1, 2003	3,364,151	$	23.00
Granted	650,000		36.72
Exercised	498,675		9.26
Expired	314,175		42.14
Outstanding at December 31, 2003	3,201,301		26.04
Granted	798,250		33.27
Exercised	722,286		10.73
Expired	223,015		35.97
Outstanding at December 31, 2004	3,054,250		30.83
Granted	877,998		33.49
Exercised	260,487		15.29
Expired	201,950		36.32
Outstanding at December 31, 2005	3,469,811		32.34
Exercisable at December 31, 2005	1,884,754		30.65
Exercisable at December 31, 2004	1,531,387		26.74
Exercisable at December 31, 2003	1,770,609		18.88

The following table summarizes information about stock options outstanding at December 31, 2005:

Options Outstanding					Options Exercisable
Ranges of     Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life (years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$  4.52 –   9.03	72,400	1.5	$	8.16	72,400	$	8.16
9.03 – 13.55	60,000	3.0		10.81	60,000		10.81
13.55 – 18.06	191,750	2.3		14.23	191,750		14.23
18.06 – 22.58	282,750	3.0		19.33	282,750		19.33
22.58 – 27.09	—	—		—	—		—
27.09 – 31.61	31,700	4.2		29.66	20,675		29.44
31.61 – 36.12	1,439,786	5.5		33.18	256,457		34.07
36.12 – 40.64	1,107,800	3.9		37.25	783,787		37.24
40.64 – 45.15	283,625	3.3		45.15	216,935		45.15
	3,469,811	4.3	$	32.34	1,884,754	$	30.65

There were 1,509,000 and 2,155,000 shares available for future grant under these plans as of December 31, 2005 and 2004, respectively.

22

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

No compensation expense related to these options was recognized in operations for 2005, 2004 or 2003 except as disclosed in Note O. As disclosed in Note A, the company accounts for its stock options using the intrinsic value method prescribed in APB No. 25. The company has also disclosed in Note A the effect on net income and earnings per share if the company had applied the fair value recognition provisions of Statement 123 to its granted stock options. See Note B regarding the company’s adoption of new accounting standards for share-based payments (including stock options) as of January 1, 2006.

During 2005, 2004 and 2003, the company awarded 98,350, 96,950 and 142,200 shares, respectively, of restricted stock under the 2000 Stock Plan with a weighted average fair value at the grant date of $34.33, $33.74 and $33.62 per share, respectively. Restricted shares generally vest ratably over a four year period beginning in the second year of continued employment. During 2005, 2004 and 2003, 51,360, 25,313 and 10,476 shares, respectively, of restricted stock were forfeited. Compensation expense related to the vested awards was $2.1 million, $2.5 million and $1.9 million for 2005, 2004 and 2003, respectively.

NOTE I—NET INCOME PER SHARE

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

(in thousands, except per share amounts)	2005		2004		2003
Numerator for basic and diluted net income per share
Net Income	$	56,200	$	81,414	$	74,954
Denominator
Weighted average shares		35,522		35,535		34,357
Effect of guaranteed future shares to be issued in connection with agency acquisitions		234		298		238
Denominator for basic net income per share		35,756		35,833		34,595
Effect of dilutive securities:
Employee stock options		308		407		697
Employee non-vested stock		139		129		113
Contingent stock—acquisitions		111		124		899
Dilutive potential common shares		558		660		1,709
Denominator for diluted net income per share—adjusted weighted average shares		36,314		36,493		36,304
Net Income Per Share:
Basic	$	1.57	$	2.27	$	2.17
Assuming Dilution	$	1.55	$	2.23	$	2.06

23

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

NOTE J—INTANGIBLE ASSETS

The company accounts for goodwill and other intangible assets as disclosed in Note A. In accordance with Statement 142, the company performed the annual impairment tests of goodwill in 2005, 2004 and 2003. No impairment charge resulted from these tests.

Intangible assets on the consolidated balance sheet consist of the following:

	2005				2004
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortizable intangible assets:
Customer relationships	$	136,614	$	31,465	$	129,687	$	17,797
Noncompete/nonpiracy agreements		50,109		18,472		49,865		13,729
Tradename		1,922		521		1,737		248
Total	$	188,645	$	50,458	$	181,289	$	31,774
	Net Carrying Amount				Net Carrying Amount
Indefinite-lived intangible assets:
Goodwill	$	625,349			$	608,427

Aggregate amortization expense for 2005, 2004 and 2003 was $18.8 million, $13.8 million and $9.8 million, respectively.

Future amortization expense is estimated as follows (in thousands):

2006	$	19,067
2007		18,999
2008		18,808
2009		18,039
2010		17,192

The changes in the net carrying amount of goodwill for 2005 are as follows (in thousands):

Balance at December 31, 2004	$	608,427
Goodwill acquired		21,198
Goodwill disposed		(4,276	)
Balance at December 31, 2005	$	625,349

NOTE K—ACQUISITIONS

During 2005, the company acquired certain assets and liabilities of four insurance agencies and other accounts for $15.0 million ($10.7 million in cash, $1.9 million in guaranteed future cash and common stock payments, and 68,796 shares of common stock) in purchase accounting transactions. Assets acquired include intangible assets of $14.5 million at the date of purchase. The combined purchase price may be increased by $3.4 million in 2006, $3.4 million in 2007 and $1.5 million in 2008 based upon net profits realized. For certain acquisitions, the allocation of purchase price is preliminary and subject to refinement as the valuations of certain intangible assets are not final.

24

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

During 2004, the company acquired certain assets and liabilities of nine insurance agencies and other accounts for $142.6 million ($99.1 million in cash, $20.4 million in guaranteed future cash and common stock payments and 667,256 shares of common stock) in purchase accounting transactions. Assets acquired include intangible assets of $146.9 million at the date of purchase. The combined purchase price increased by $8.1 million in 2005, and may be increased by $14.6 million in 2006, $11.9 million in 2007 and $3.2 million in 2008 based upon net profits realized.

During 2003, the company acquired certain assets and liabilities of six insurance agencies and other accounts for $64.4 million ($20.1 million in cash, $15.5 million in guaranteed future cash and common stock payments and 843,106 shares of common stock) in purchase accounting transactions. Assets acquired include intangible assets of $67.9 million at the date of purchase. The combined purchase price increased by $9.1 million in 2005 and $7.8 million in 2004, and may be increased by $4.7 million in 2006 and $8.6 million in 2007 based upon net profits realized.

The financial statements of the company reflect the combined operations of the company and each acquisition from the respective closing date of each acquisition.

NOTE L—SALE OF ASSETS AND OTHER GAINS

During 2005, 2004 and 2003, the company disposed of certain insurance accounts and other assets resulting in net gains of $5.1 million, $2.1 million and $0.4 million, respectively. These amounts are included in other revenues in the statement of consolidated income. Income taxes related to these gains were $2.2 million, $2.4 million and $0.2 million in 2005, 2004 and 2003, respectively. Revenues, expenses and assets of these operations were not material to the consolidated financial statements.

NOTE M—REGULATORY CHARGE AND RELATED MATTERS

The company and certain other companies in the insurance intermediary industry have been subject to investigations and inquiries by various governmental authorities regarding business practices and broker compensation arrangements. On August 31, 2005, the company entered into an agreement (the Agreement) with the Attorney General of the State of Connecticut (the Attorney General) and the Insurance Commissioner of the State of Connecticut (the Commissioner) to resolve all issues related to investigations conducted by the Attorney General and the Commissioner into certain insurance brokerage and insurance agency practices (the Investigations) and to settle an action commenced on August 31, 2005 by the Attorney General in the Connecticut Superior Court alleging violations of the Connecticut Unfair Trade Practices Act and the Connecticut Unfair Insurance Practices Act (the Action).

Following is a summary of the material terms of the Agreement:

1. The company will pay $30.0 million into a fund (the Fund) in two installments to be distributed to certain eligible U.S. policyholder clients (the Affected Policyholders). These payments are in full satisfaction of the company’s obligations under the Agreement and the Attorney General and the Commissioner have agreed not to impose any other financial obligation or liability on the company related to the Investigations and/or the Action, except for the fine as provided for in the Stipulation and Consent Order with the Commissioner (see below for additional detail). The company is not permitted to seek or accept, directly or indirectly, indemnification for payments made by the company pursuant to the Agreement and the fine described below to the State of Connecticut Insurance Department. No portion of the payments by the company for the Fund is considered a fine or penalty. The company will make payments into the Fund as follows:

• On or before February 1, 2006, the company shall pay $20.0 million into the Fund,

25

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

• On or before August 1, 2007, the company shall pay $10.0 million into the Fund.

2. The Fund, plus interest, will be used to compensate the Affected Policyholders according to procedures set forth in the Agreement.

3. Affected Policyholders are a) all company U.S. brokerage business clients on whose insurance placements, renewals, consultations or service the company was eligible to receive Contingent Compensation (as defined in the Agreement) between January 1, 2001 and December 31, 2004 (the Broker Clients); b) all company U.S. agency clients on whose insurance placements, renewals, consultations or service the company was eligible to receive Contingent Compensation pursuant to a National Override Agreement between January 1, 2001 and December 31, 2004 (the National Override Clients); and c) all company U.S. agency clients, other than National Override Clients, on whose insurance placements, renewals, consultations or service the company was eligible to receive Contingent Compensation between January 1, 2001 and December 31, 2004 (the Agent Clients).

The Fund will be allocated $19.5 million between Broker Clients and National Override Clients (the Broker/Override Fund) and $10.5 million to Agent Clients (the Agency Fund), and an Affected Policyholder arising from an acquisition by the company after December 31, 2000 shall be included only as of the date of acquisition by the company.

National Override Agreements, as defined in the Agreement, mean corporate-wide compensation agreements negotiated by the company with those certain insurance companies on behalf of all of the company’s offices to receive commissions in lieu of standard contingent compensation arrangements with each office of the company.

4. By August 21, 2006, the company will send notice to each client setting forth the amount it will be paid from the Fund if it elects to participate. Clients will have until November 21, 2006 to make an election to receive distributions from the Fund.

5. The company will make distributions from the Fund on January 15, 2007 and, if necessary, January 15, 2008 to participating clients that elected to receive a distribution.

6. In the event that any Affected Policyholder elects not to participate or otherwise does not respond (the Non-Participating Policyholders), that Affected Policyholder’s allocated share may be used by the company to satisfy any pending or other claims of policyholders relating to the matters covered by the Agreement. The funds attributable to Non-Participating Policyholders also may be used to reimburse the company for any payments made to policyholders between September 1, 2005 and April 15, 2008 for claims related to this Agreement. In no event shall a distribution be made from the Fund to any Non-Participating Policyholder or as reimbursement to the company for prior payments to any Non-Participating Policyholder until all participating clients have been paid the full aggregate amount due, nor shall total payments to any Non-Participating Policyholder exceed 80% of that Non-Participating Policyholder’s original allocated share. If any funds remain in the Fund as of April 15, 2008, such funds will be distributed pro rata to the participating policyholders and clients. In no event shall any of the monies in or from the Fund be used to pay attorney fees.

7. Within 60 days of executing the Agreement, the company will undertake the implementation of certain business reforms for both brokerage business and agency business. These reforms include:

• to not accept or request contingent compensation on brokerage business,

• to make enhanced disclosures to clients regarding compensation and customer rights,

• to accept certain types of compensation only after disclosing such compensation to a client,

• to adopt additional corporate governance practices.

26

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

In conjunction with executing the Agreement, the company entered into a Stipulation and Consent Order with the Commissioner to resolve all issues relating to the Commissioner’s investigation into the placement or attempted placement of professional liability insurance in Connecticut. Pursuant to the Stipulation and Consent Order, the company paid an administrative fine of $250,000 to the State of Connecticut Insurance Department. The cost of this fine is included in the 2005 third quarter regulatory charge of $42.3 million described below.

In the 2005 third quarter, the company recorded a $42.3 million charge, and related income tax benefit of $16.0 million, primarily relating to the Agreement with the Attorney General and the Commissioner. This charge includes the $30.0 million national fund established by the Agreement; $5.1 million of estimated legal and administrative costs to be incurred related to the Fund and complying with the Agreement’s other provisions; and $1.4 million of legal costs relating to the Agreement incurred in the 2005 third quarter. The regulatory charge also includes $5.8 million of estimated costs for pending regulatory matters. These estimated costs represent the company’s best estimate of the probable outcomes of the various pending regulatory matters and include related legal and administrative costs incurred or expected to be incurred for these regulatory matters.

These pending regulatory matters relate to subpoenas issued and/or inquiries made by state attorneys general and insurance departments into, among other things, the industry’s commission payment practices. The company has received subpoenas and/or requests for information from attorneys general and/or insurance departments in fourteen states. The company may receive additional subpoenas and/or requests for information in the future from attorneys general and/or insurance departments of other states. The company will continue to evaluate and monitor all such subpoenas and requests.

The current liability portion of this charge as of December 31, 2005 is $8.2 million and is included in accrued expenses. The remaining liability is included in other long-term liabilities.

A summary of the activity with respect to the regulatory charge liability is as follows (in thousands):

Balance at December 31, 2004	$	—
Regulatory charge		42,320
Payments into the Fund		(20,000	)
Payments-legal and administrative		(2,264	)
Balance at December 31, 2005	$	20,056

NOTE N—INTEGRATION COSTS

In 2002, the company acquired Hobbs Group, LLC (Hobbs). The company began the integration of Hobbs subsequent to June 30, 2003 with the completion of the Hobbs earn-out. The company recognized integration costs of $0.8 million, $1.9 million and $4.1 million and related income taxes of $0.3 million, $0.8 million and $1.6 million in 2005, 2004 and 2003, respectively. No additional integration costs for Hobbs are anticipated after 2005. These amounts represent costs such as severance and other employee-related costs, facility and lease termination costs, and branding expenses. Included as severance cost in 2003 is $2.2 million related to a contractual termination benefit for Hobbs’ former chief executive officer.

NOTE O—SEVERANCE CHARGE AND RETIREMENT BENEFIT

In May 2005, Robert B. Lockhart, the company’s former president and chief operating officer, resigned. In connection with Mr. Lockhart’s resignation, the company recorded a severance charge of $1.3 million, and related income tax benefit of $0.5 million, representing estimated payments due to Mr. Lockhart under the terms of his employment agreement.

27

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

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 of $5.2 million, and related income taxes of $2.0 million, 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.

NOTE P—COMMITMENTS AND CONTINGENCIES

Included in cash and cash equivalents and premium deposits and credits due customers are $2.2 million and $6.3 million of funds held in escrow at December 31, 2005 and 2004, respectively. In addition, premiums collected from insureds but not yet remitted to insurance companies are restricted as to use by laws in certain states in which the company operates. The amount of cash and cash equivalents so restricted was approximately $52.4 million and $49.6 million at December 31, 2005 and 2004, respectively.

Industry Litigation

The company has been named as a defendant in certain legal proceedings against brokers and insurers relating to broker compensation arrangements and other business practices.

MDL 1663 Class Action

In August 2004, OptiCare Health Systems Inc. filed a putative class action in the U.S. District Court for the Southern District of New York (Case No. 04-CV-06954) against a number of the country’s largest insurance brokers and several large commercial insurers. The company was named as a defendant in the OptiCare suit in November 2004. In December 2004, two other purported class actions were filed in the U.S. District Court for the Northern District of Illinois, Eastern Division, by Stephen Lewis (Case No. 04-C-7847) and Diane Preuss (Case No. 04-C-7853), respectively, against certain insurance brokers, including the company, and several large commercial insurers. On February 17, 2005, the Judicial Panel on Multidistrict Litigation (the Panel) ordered that the OptiCare suit, along with three other purported antitrust class actions filed in New York, New Jersey and Pennsylvania against industry participants, be centralized and transferred to the U.S. District Court for the District of New Jersey. In addition, by Conditional Transfer Order dated March 10, 2005, the Panel conditionally transferred the Lewis and Preuss cases to the U.S. District Court for the District of New Jersey. The transfer subsequently became effective and as a result of the Panel’s transfer orders, the OptiCare, Lewis and Preuss cases are proceeding on a consolidated basis with other purported class action suits styled as In re: Insurance Brokerage Antitrust Litigation (MDL 1663).

On August 1, 2005, the plaintiffs in MDL 1663 filed a First Consolidated Amended Commercial Class Action Complaint (the Commercial Complaint) in the U.S. District Court for the District of New Jersey (Civil No. 04-5184) against the company and certain other insurance brokers and insurers. In the Commercial Complaint, the named plaintiffs purport to represent a class consisting of all persons who, between August 26, 1994 and the date on which class certification may occur, engaged the services of any one of the broker defendants or any of their subsidiaries or affiliates to obtain advice with respect to the procurement or renewal of insurance and who entered into or renewed a contract of insurance with one of the insurer defendants. The plaintiffs allege in the Commercial Complaint, among other things, that the broker defendants engaged in improper steering of clients to the insurer defendants for the purpose of obtaining undisclosed additional compensation in the form of contingent commissions from insurers; that the defendants were engaged in a bid-rigging scheme involving the submission of false and/or inflated bids from insurers to clients; that the broker defendants improperly placed their clients’ insurance business with insurers through related wholesale entities where an intermediary was unnecessary for the purpose of generating additional commissions from insurers; that the broker defendants entered into unlawful tying arrangements to obtain reinsurance business from the

28

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

defendant insurers; and that the defendants created centralized internal departments for the purpose of monitoring, facilitating and advancing the collection of contingent commissions, payments and other improper fees. The plaintiffs allege violations of federal and state antitrust laws, violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(c) and (d), fraudulent misrepresentation, breach of fiduciary duty, aiding and abetting breach of fiduciary duty and unjust enrichment. The plaintiff seeks monetary relief, including treble damages, injunctive and declaratory relief, restitution, interest, attorneys’ fees and expenses, costs and other relief. The company has not yet filed a responsive pleading in this case but believes it has substantial defenses to these claims and intends to defend itself vigorously. However, at this time, the company cannot predict the outcome of this case or its effect on the company’s financial position or results of operations.

In addition, the plaintiffs in MDL 1663 also filed on August 1, 2005 a First Consolidated Amended Employee Benefits Class Action Complaint (the Employee Benefits Complaint) in the U.S. District Court for the District of New Jersey against the company; Frank F. Haack & Associates, Inc.; O’Neill, Finnegan & Jordan Insurance Agency Inc.; and certain other insurance brokers and insurers. In the Employee Benefits Complaint (Civil Nos. 04-5184, et al.), the named plaintiffs purport to represent two separate classes consisting of ERISA and non-ERISA plan employees and employers, respectively, that have acquired insurance products from the defendants in connection with an employee benefit plan between August 26, 1994 and the date on which class certification may occur. The plaintiffs allege in the Employee Benefits Complaint, among other things, that the broker defendants secretly conspired with the insurer defendants to steer plaintiffs and members of the classes to the insurer defendants in exchange for undisclosed fees, including communication fees, enrollment fees, service fees, finders fees and/or administrative fees, contingent commissions and other payments, including broker bonuses, trips and entertainment, from the insurer defendants; that the defendants were engaged in a bid-rigging scheme involving the submission of false and/or inflated bids from insurers to clients; that the broker defendants improperly placed their clients’ insurance business with insurers through related wholesale entities where an intermediary was unnecessary for the purpose of generating additional commissions from insurers; and that the defendants entered into unlawful tying arrangements under which the broker defendants would place primary insurance contracts with insurers on the condition that the insurers use the broker defendants for placing their reinsurance coverage with reinsurance carriers. The plaintiffs allege violations of federal and state antitrust laws, violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(c) and (d), fraudulent misrepresentation, breach of fiduciary duty, aiding and abetting breach of fiduciary duty and unjust enrichment. The plaintiff seeks monetary relief, including treble and punitive damages, injunctive and declaratory relief, restitution, interest, attorneys’ fees and expenses, costs and other relief. The company, along with other defendants, filed a motion to dismiss both cases. The motion is now fully briefed and awaiting a decision from the U.S. District Court for the District of New Jersey. Also, on February 13, 2006, the plaintiffs filed their motions for class certification in each case. The defendants’ response is due on April 13, 2006. The company believes it has substantial defenses in these cases and intends to defend itself vigorously. However, at this time, the company cannot predict the outcome of these cases or their effects on the company’s financial position or results of operations.

Bensley Class Action

In May 2005, Bensley Construction, Inc. filed a putative class action in the Superior Court of the Commonwealth of Massachusetts (Case No. ESCV2005-00277) against the company and certain large commercial insurers and brokers. In the amended complaint, the plaintiff alleges, among other things, that the broker defendants entered into contingent commission agreements with the insurer defendants without disclosing the existence and/or terms of the agreements to clients to whom the defendants owed a fiduciary duty and that certain of the defendants engaged in a bid-rigging and customer allocation scheme to maximize their revenues under the contingent commission agreements. The plaintiff alleges breach of fiduciary duty, unjust enrichment,

29

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

aiding and abetting breaches of fiduciary duty, breach of contract and breach of implied covenant of good faith and fair dealing. The plaintiff seeks monetary damages for each member of the class in an amount not to exceed $74,999 per class member, costs and other relief. The defendants removed the case to federal court and it has now been transferred to the U.S. District Court for the District of New Jersey to be consolidated with the other cases that comprise MDL 1663. The company believes it has substantial defenses to these claims and intends to defend itself vigorously. However, at this time, the company cannot predict the outcome of these claims or their effects on the company’s financial position or results of operations.

Securities Class Action

In June 2005, the Iron Workers Local 16 Pension Fund filed a putative class action complaint in the U.S. District Court for the Eastern District of Virginia (Case No. 1:05-CV-00735-GBL-TCB) against the company and Andrew L. Rogal, Martin L. Vaughan, III, Timothy J. Korman, Carolyn Jones, Robert W. Blanton, Jr. and Robert B. Lockhart. The plaintiff alleged violations by each of the defendants of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and violations by the individual defendants of Section 20(a) of the Securities Exchange Act of 1934.

In September 2005, the Iron Workers Local 16 Pension Fund was appointed Lead Plaintiff. In October 2005, Lead Plaintiff filed an amended putative class action complaint against the company and Andrew L. Rogal, Martin L. Vaughan, III, Carolyn Jones and Robert B. Lockhart. Each of the individual defendants is a current or former officer and/or director of the company. In the amended complaint, the Lead Plaintiff alleges, among other things, that the defendants made false and misleading statements to the public in the company’s filings with the Securities and Exchange Commission, press releases and other public statements between August 11, 2000 and May 26, 2005 by failing to disclose that the company’s contingent and override commissions were designed to allow the company to steer its flow of business to those insurance carriers that agreed to pay it such commissions; that the company’s business practices were in direct conflict of interest with its customers and were fraudulent and illegal; that the company’s business practices exposed the company to the risk of legal proceedings, reputational damage, and other harms; and that the company’s financial results were materially inflated as a result of the recognition of improper commissions as revenues.

The amended complaint further alleges that the individual defendants were able to and did control the content of the company’s public statements as a result of their positions as officers and/or directors of the company. The amended complaint alleges violations by each of the defendants of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and violations by the individual defendants of Section 20(a) of the Securities Exchange Act of 1934. The Lead Plaintiff seeks monetary damages, interest, costs, legal fees and other relief.

On November 22, 2005, the defendants moved to dismiss the amended complaint. On January 27, 2006, the U.S. District Court for the Eastern District of Virginia held a hearing on the defendants’ motion to dismiss. The company believes it has substantial defenses to the claims made in the amended complaint and intends to defend itself vigorously. However, at this time, the company cannot predict the outcome of these claims or their effects on the company’s financial position or results of operations.

Other

There are in the normal course of business various other outstanding commitments and contingent liabilities. Management does not anticipate material losses as a result of such matters.

30

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

NOTE Q—QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of the quarterly results of operations for the years ended December 31, 2005 and 2004:

	Three Months Ended(1)
(in thousands, except per share amounts)	March 31		June 30		September 30			December 31
2005
Total Revenues	$	183,345	$	162,027	$	164,491		$	164,022
Net Income (Loss)		27,722		15,803		(6,848	)(2)		19,523
Net Income (Loss) Per Share:
Basic		0.77		0.44		(0.19	)(2)		0.55
Assuming Dilution		0.76		0.44		(0.19	)(2)		0.54
2004
Total Revenues	$	158,227	$	147,755	$	153,700		$	159,921
Net Income		24,234		20,504		21,349			15,327
Net Income Per Share:
Basic		0.68		0.57		0.60			0.43
Assuming Dilution		0.67		0.56		0.58			0.42

(1) Quarterly financial information is affected by seasonal variations. The timing of contingent commissions, policy renewals and acquisitions may cause revenues, expenses and net income to vary significantly from quarter to quarter.

(2) See Note M for discussion of the regulatory charge recorded in the 2005 third quarter.

31

Report of Independent Registered Public Accounting Firm on Financial Statements

Shareholders and Board of Directors

Hilb Rogal & Hobbs Company

We have audited the accompanying consolidated balance sheets of Hilb Rogal & Hobbs Company as of December 31, 2005 and 2004, and the related consolidated statements of earnings, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of Hilb Rogal & Hobbs Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Hilb Rogal & Hobbs Company at December 31, 2005 and 2004, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Hilb Rogal & Hobbs Company’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 3, 2006, expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Richmond, Virginia

March 3, 2006

32

Management’s Report on Internal Control over Financial Reporting

Management of Hilb Rogal & Hobbs (the company) is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision of the company’s principal executive and principal financial officers, the company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the company’s financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. Management conducted an assessment of the effectiveness of the company’s internal control over financial reporting based on the framework established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In conducting its evaluation of the effectiveness of its internal control over financial reporting, management has excluded the following acquisitions completed by the company in 2005: True Benchmark Insurance Services, LLC; Ed Murray & Sons, Inc; Doherty, Inc.; and Benefits Solutions, Inc. which are included in the 2005 consolidated financial statements and constituted less than 1.5% of total assets as of December 31, 2005 and less than 1.3% of revenues and 2.4% of net income for the year then ended.

Based on its assessment using the criteria outlined in Internal Control—Integrated Framework issued by COSO, management has determined that the company’s internal control over financial reporting was effective as of December 31, 2005. Management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2005 has been audited by Ernst & Young LLP, an independent registered public accounting firm that has also audited the company’s consolidated financial statements, as stated in accompanying Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting.

/s/    MARTIN L. VAUGHAN, III        

Martin L. Vaughan, III

Chairman and Chief Executive Officer

/s/    MICHAEL DINKINS        

Michael Dinkins

Executive Vice President and

Chief Financial Officer

Hilb Rogal & Hobbs Company

Glen Allen, Virginia

March 3, 2006

33

Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting

Shareholders and Board of Directors

Hilb Rogal & Hobbs Company

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that Hilb Rogal & Hobbs Company maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Hilb Rogal & Hobbs Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of Hilb Rogal & Hobbs Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the following acquisitions completed by Hilb Rogal & Hobbs Company in 2005: True Benchmark Insurance Services, LLC; Ed Murray & Sons, Inc; Doherty, Inc.; and Benefits Solutions, Inc., which are included in the 2005 consolidated financial statements of Hilb Rogal & Hobbs Company and constituted less than 1.5% of total assets as of December 31, 2005 and 1.3% and 2.4% of revenues and net income, respectively, for the year then ended. Our audit of internal control over financial reporting of Hilb Rogal & Hobbs Company also did not include an evaluation of the internal control over financial reporting of the entities referred to above.

In our opinion, management’s assessment that Hilb Rogal & Hobbs Company maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Hilb Rogal & Hobbs Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the COSO criteria.

34

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Hilb Rogal & Hobbs Company as of December 31, 2005 and 2004 and the related consolidated statements of earnings, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2005 and our report dated March 3, 2006 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Richmond, Virginia

March 3, 2006

35

EX-21

Exhibit 21

Subsidiaries of Hilb Rogal & Hobbs Company

Name of Subsidiary	State/Province of Incorporation
Bay Technology Group, LLC	Delaware
Bliss & Glennon, Inc. (3 locations)	California
Dominion Specialty Group, Inc.	Florida
Ed Murray & Sons, Inc.	Wyoming
Essenale, Ltd.	Bermuda
Frank F. Haack & Associates, Inc.	Wisconsin
Freberg & Company of Wyoming, Inc.	Wyoming
Freberg Environmental, Inc. (4 locations)	Colorado
HRH Consulting, LLC	Virginia
HRH Consulting Group, LLC	New York
HRH Insurance Services of Nevada, Inc.	Nevada
HRH Investment Advisors, LLC	Delaware
HRH Reinsurance Brokers Limited	United Kingdom
HRH Risk Mitigation, Inc. (4 locations)	Pennsylvania
HRH Securities, LLC	New York
Hilb, Rogal and Hamilton Insurance Services of Orange County, Inc.	California
Hilb Rogal & Hobbs of Alabama, Inc. (5 locations)	Alabama
Hilb Rogal & Hobbs of Appleton, Inc.	Wisconsin
Hilb Rogal & Hobbs of Arizona, Inc. (3 locations)	Arizona
Hilb Rogal & Hobbs of Atlanta, Inc.	Georgia
Hilb Rogal & Hobbs of Baltimore, Inc.	Maryland
Hilb Rogal & Hobbs of Chicago, Inc.	Illinois
Hilb Rogal & Hobbs of Colorado, Inc.	Colorado
Hilb Rogal & Hobbs of Connecticut, LLC (3 locations)	Connecticut
Hilb Rogal & Hobbs of Florida, Inc. (9 locations)	Florida
Hilb Rogal & Hobbs of Gainesville, Inc.	Georgia
Hilb Rogal & Hobbs of Grand Rapids, Inc.	Michigan
Hilb Rogal & Hobbs of Illinois, LLC (2 locations)	Illinois
Hilb Rogal & Hobbs of Kansas, Inc. (3 locations)	Kansas
Hilb Rogal & Hobbs of Lansing, Inc. (2 locations)	Michigan
Hilb Rogal & Hobbs of Massachusetts, LLC (3 locations)	Virginia
Hilb Rogal & Hobbs of Metropolitan Washington, Inc.	Delaware
Hilb Rogal & Hobbs of Nebraska, Inc.	Nebraska
Hilb Rogal & Hobbs of New York, LLC	New York
Hilb Rogal & Hobbs of Northern New England, Inc. (4 locations)	Maine
Hilb Rogal & Hobbs of New Jersey, LLC (2 locations)	New Jersey
Hilb Rogal & Hobbs of Oak Brook, LLC	Illinois
Hilb Rogal & Hobbs of Ohio, Inc.	Ohio
Hilb Rogal & Hobbs of Oklahoma, Inc.	Oklahoma
Hilb Rogal & Hobbs of Oregon, Inc. (2 locations)	Oregon

Exhibit 21 (Continued)

Subsidiaries of Hilb Rogal & Hobbs Company

Name of Subsidiary	State/Province of Incorporation
Hilb Rogal & Hobbs of Philadelphia, LLC	Pennsylvania
Hilb Rogal & Hobbs of Pittsburgh, LLC	Pennsylvania
Hilb Rogal & Hobbs of Port Huron, Inc.	Michigan
Hilb Rogal & Hobbs of Savannah, Inc.	Georgia
Hilb Rogal & Hobbs of Tennessee, Inc.	Tennessee
Hilb Rogal & Hobbs of Texas, LP (11 locations)	Texas
Hilb Rogal & Hobbs of Upstate New York, LLC (2 locations)	Delaware
Hilb Rogal & Hobbs of Virginia (3 locations)	Virginia
Hilb Rogal & Hobbs Insurance Services of Aliso Viejo, LLC	California
Hilb Rogal & Hobbs Insurance Services of California, Inc. (19 locations)	California
Hilb Rogal & Hobbs Insurance Services of Long Beach, LLC	California
Hilb Rogal & Hobbs Professional Practice Insurance Brokers, Inc.	California
Hilb Rogal & Hobbs Services Company	Virginia
Hobbs Group Insurance Brokers, LLC	Massachusetts
Hobbs Group, LLC	Delaware
Hobbs Group, Inc.	Maryland
Hobbs Group, Inc.	Massachusetts
Hobbs Group, Inc.	Texas
Hobbs Group (NY), LLC	New York
Integrated Risk Solutions Insurance Services, LLC	California
Integrated Risk Solutions Insurance Services, LLC	Delaware
Kirklin & Company, LLC	Delaware
Lees Preston Fairy Holdings Limited	United Kingdom
Maclean, Oddy & Associates, Inc.	Texas
New World E & S, LLC	Delaware
NIB (Holdings) Limited	United Kingdom
Premium Funding Associates, Inc.	Connecticut
Smith, Bell and Thompson, Inc.	Vermont
The Managing Agency Group, Inc.	Connecticut
Westport Financial Services, LLC (5 locations)	Delaware
Westport Insurance Agency, Inc.	Delaware
Westport Insurance Agency, LLC	Delaware
Westport Insurance Brokerage, LLC	Massachusetts
Westport Insurance Agency, LLC	Texas
Westport Worldwide, LLC	Delaware
Zutz Associates, Inc.	Delaware

Each of the above subsidiaries is 100% owned by the Registrant except for Lees Preston Fairy Holdings Limited, NIB (Holdings) Limited and HRH Reinsurance Brokers Limited which are owned 70% by the Registrant.

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in this Annual Report (Form 10-K) of Hilb Rogal & Hobbs Company of our reports dated March 3, 2006, with respect to the Hilb Rogal & Hobbs Company management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of Hilb Rogal & Hobbs Company, included in the 2005 Annual Report to Shareholders of Hilb Rogal & Hobbs Company.

We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-103191, Form S-8 333-103262, Form S-8 333-44735, Form S-8 No. 333-53417, Form S-8 333-93633, Form S-8 No. 333-30650, Form S-8 333-37142, Form S-8 No. 333-110666, Form S-4 No. 333-50018, Form S-8 No. 333-74344, Form S-8 No. 333-74340, Form S-3 No. 333-99873 and Form S-3 No. 333-74564) of Hilb Rogal & Hobbs Company and in the related Prospectuses of our reports dated March 3, 2006, with respect to the consolidated financial statements and schedule of Hilb Rogal & Hobbs Company, Hilb Rogal & Hobbs Company management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of Hilb Rogal & Hobbs Company, included and incorporated by reference into this Annual Report (Form 10-K) for the year ended December 31, 2005.

/s/ Ernst & Young LLP

Richmond, Virginia

March 7, 2006

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, Chairman and Chief Executive Officer of Hilb Rogal & Hobbs Company, certify that:

1. I have reviewed this report on Form 10-K 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) 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

(d) 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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    March 8, 2006	/s/    MARTIN L. VAUGHAN, III
	Martin L. Vaughan, III
	Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

STATEMENT OF CHIEF FINANCIAL OFFICER

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

I, Michael Dinkins, Executive Vice President and Chief Financial Officer of Hilb Rogal & Hobbs Company, certify that:

1. I have reviewed this report on Form 10-K 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) 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

(d) 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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    March 8, 2006	/s/    MICHAEL DINKINS
	Michael Dinkins
	Executive Vice President and
	Chief Financial Officer

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-K of Hilb Rogal & Hobbs Company for the year ended December 31, 2005, I, Martin L. Vaughan, III, Chairman and 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-K for the year ended December 31, 2005 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-K for the year ended December 31, 2005 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-K.

By:	/s/    MARTIN L. VAUGHAN, III	Date:    March 8, 2006
	Martin L. Vaughan, III
	Chairman and 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-K of Hilb Rogal & Hobbs Company for the year ended December 31, 2005, I, Michael Dinkins, Executive Vice President and Chief Financial 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-K for the year ended December 31, 2005 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-K for the year ended December 31, 2005 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-K.

By:	/s/    MICHAEL DINKINS	Date:    March 8, 2006
	Michael Dinkins
	Executive Vice President and
	Chief Financial Officer