October, November see 29 M&As; stock prices continue to vary

December 24, 2006

Stock Prices: Stock prices have varied year-to-date among brokers. Brown & Brown Inc.’s (NYSE:BRO) stock was down 4.4 percent through Nov. 30, 2006, while Hub International Ltd.’s (NYSE:HBG) stock was up 19.2 percent for the same time period. Holding the middle ground are Willis Group Holdings Ltd. (NYSE:WSH) and Hilb Rogal & Hobbs Co. (NYSE:HRH) who are having very respectable years, up 11.2 percent and 9 percent respectively. During the third quarter of 2006, Hub reported a 29 percent increase in revenue for the quarter. Hub’s U.S. brokerage revenues grew 35 percent to $90.7 million from $67.2 million a year ago. Organic growth only contributed 1 percent to the overall revenue growth for the quarter. The slow organic growth is evident in Hub’s robust acquisition activity year-to-date, with 11 announced acquisitions including the $83 million acquisition of three agencies from The Royal Bank of Scotland Plc. Willis Group Holdings Ltd.’s stock has performed well as the market responds favorably to the company’s “Shaping our Future” expense initiative, similar to Aon’s restructuring announcements during 2005. Willis’ net income for the nine months ended Sept. 30, 2006, was $301 million, compared with $226 million a year ago. These results were significantly affected by the gain in the sale of the company’s London headquarters and the aforementioned future initiatives.

M&A Activity: Sixteen more acquisitions were announced in November, bringing the year-to-date total to 160. Six of the sixteen acquisitions were made by commercial banks. Tompkins Trustco Inc. (AMEX:TMP), Alaska USA Federal Credit Union, First Niagara Financial Group Inc. (Nasdaq:FNFG), Wells Fargo & Company (NYSE:WFC), Community Banks Inc. (Nasdaq:CMTY), and BB&T Corporation (NYSE:BBT) all announced acquisitions in November. As usual middle market brokers were also in the acquisition mix. Arthur J. Gallagher & Co. (NYSE:AJG) announced two acquisitions which bring their total for the year to nine. USI Holdings Corporation (Nasdaq:USIH) also had nine acquisitions year-to-date following the announcement of the purchase of Carlson Group Inc., a Clifton Park, N.Y.-based insurance agency.

M&A activity was slower in October with 13 acquisitions announced. One acquirer was responsible for five of the acquisitions. Berkshire Hills Bancorp Inc. (Nasdaq:BHLB) announced plans to acquire five Western Massachusetts insurance agencies: Reynolds, Barnes & Hebb and McCormick, Smith & Curry Insurance Agency, both of Pittsfield; Minkler Insurance Agency of Stockbridge; H.S. Andrews Insurance Agency of Great Barrington; and MassOne Insurance Agency of Greenfield. Each insurance agency will retain its name, identity, management and personnel, but will operate as a division of Berkshire Insurance Group.

In the largest deal in October, USI Holdings Corporation (Nasdaq:USIH) announced it entered into a definitive agreement to acquire Seattle, Wash.-based Kibble & Prentice Holding Company. Kibble & Prentice is expected to contribute approximately $37 million of revenues to USI on an annual basis. Kibble & Prentice is one of the largest independent insurance brokers in the Pacific Northwest and has a diversified revenue mix with approximately 44 percent of revenues derived from property/casualty, 34 percent of revenues from employee benefits and 22 percent of revenues from other financial services. According to SEC Filings, USI paid $83 million upfront with an additional potential earn-out over three years.

LMC Capital LLC is a national investment banking firm focused exclusively on the insurance industry. Services include highly-qualified, industry-specific advisory relating to mergers and acquisitions, capital raises and valuations. The firm may be contacted at 704-943-2600, by e-mail at Info@LMCCapital.com or visit www.LMCCapital.com.

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