Chicago-based brokerage Hub International Ltd. reported that 2003 net earnings increased 24 percent to $36.5 million as revenue grew 30 percent to $286.4 million, boosted by organic growth and a strong Canadian dollar.
Diluted earnings per share for the year rose 8 percent to $1.14 per share, in line with the company’s most recent guidance. In the fourth quarter, net earnings increased 28 percent to $10.7 million, while revenue increased 24 percent to $78.7 million. Diluted earnings per share grew 27 percent to 33 cents in the fourth quarter.
Hub’s brokerages posted a combined organic growth rate of 12 percent for the full year and 10 percent in the fourth quarter. Foreign exchange benefits from Hub’s Canadian operations contributed 5 percentage points of the organic growth rate in 2003 and 7 percentage points in the fourth quarter.
Martin P. Hughes, Hub’s chairman and chief executive officer, described the growth as encouraging, although he noted that the company did not attain an increase in net margin in 2003 and did not achieve its goals for acquisitions.
Hughes said the company benefited in 2003 from organic growth, contributions from brokerages acquired in 2002 and the currency exchange benefits of a strengthening Canadian dollar. Highlights included increased penetration of the commercial middle market in British Columbia, expansion of the professional liability practice based in Chicago and growth of wholesale brokerage operations in New York and Toronto.
As a result of these and other factors, Hub increased revenue by 30 percent to $286.4 million from $220.0 million, including organic growth of 12 percent, or $26.4 million. Foreign exchange effects, due to a strengthening Canadian dollar, contributed 5 percentage points of organic growth.
Core commissions, which provide approximately 91 percent of Hub’s revenue base, increased 29 percent to $259.5 million from $201.0 million. Contingent commissions and volume overrides (additional payments from insurers based on the profitability and premium volume of policies placed by Hub) grew 62 percent to $18.5 million from $11.5 million, reflecting stronger premium rates on business placed by Hub in 2002. Other income (fees and interest income) grew 11 percent to $8.4 million from $7.5 million.
Looking at the current year, Hughes said an economic recovery that adds to sales and staffing at client organizations could be an important driver of organic growth and could offset any softening of premium rates. Hughes said the company anticipates stronger earnings, with initial 2004 earnings guidance of $1.13-$1.17 per diluted share, which includes the non-cash impairment expense related to trademarks associated with the name change. Excluding that non-cash charge of 5 cents, the company expects diluted earnings per share of $1.18-$1.22.
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