Brokerage Watch

April 17, 2006

Stock Prices: Although P/C broker stocks were up 7 percent during the February/March period, Aon Corp. continued to outperform the sector trading up 21 percent for the two-month period. The company reported fourth quarter and full year 2005 results in February. Net income for the fourth quarter of 2005 was $224 million or $0.65 per share compared to $81 million or $0.24 per share in the same quarter 2004. Full year 2005 net income increased 35 percent from the prior year to $737 million, and earnings per share were up 33 percent to $2.17. USI Holdings Corp., who also performed exceptionally well in February/March, was up 16 percent. USI announced that its board of directors adopted a plan that authorizes the company to repurchase up to $20 million of its common stock during 2006 under a new $285 million credit facility. Brown & Brown was also up an impressive 16 percent. In February, the company announced record earnings for 2005. Net income for 2005 increased to $150.5 million or $1.08 per share, an increase of 16.8 percent over the $128 million or $0.93 per share in 2004. Total revenues for the year increased to $785.8 million, up 21.5 percent compared with $646.9 million in 2004.

M&A Activity: Only 20 deals were announced during the February and March period compared to 15 in the month of January. The largest deal occurred on March 1, when The Royal Bank of Scotland announced it was selling three large insurance agencies to Hub International. All three companies generate combined revenues of $44.8 million and are full service brokers providing a range of property/casualty, life and health, employee benefits, surety and personal lines insurance. Citizens Clair Insurance Group is one of the largest insurance agencies in eastern Pennsylvania with annual revenue of $16.5 million. Boston-based Brewer & Lord has 11 offices throughout Massachusetts and Rhode Island with annual revenue of $19.7 million. Feitelberg Insurance, based in Fall River, Mass., has six offices in eastern Massachusetts with annual revenue of $8.6 million. The purchase price is $80 million payable in cash on closing, as well as an earn-out of at least $3 million. In March, Hub also announced the acquisition of eBenefits Group LLC, a Conn.-based employee benefits firm with $3 million in revenue in 2005. Hilb Rogal & Hobbs announced two acquisitions and Brown & Brown and USI each announced one during the two month period.

LMC Capital LLC is a national investment banking firm focused exclusively on the insurance industry. The firm can be contacted at (704) 943-2600, by e-mail at or visit the firm’s Web site at

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