Hub International reported a 32 percent increase in revenue and a 286% increase in net earnings from continuing operations for Hub International Limited in the second quarter ended June 30, 2006 attributing the results to strong internal growth, acquisition revenue and operational discipline. Excluding the impact of the Talbot Charge, a compensation expense related to Hub’s 2004 acquisition of Talbot brokerages from Safeco, net earnings increased by 38 percent over the prior year.
Margins improved as cash compensation, selling, occupancy and administration expenses declined to 71 percent of revenue in the second quarter from 73 percent in the second quarter of 2005. The company reported organic growth of 9 percent, including 8 percent growth of core commissions. Organic growth includes only revenue gains from businesses owned at least a year and excludes the impact of acquisitions made less than 12 months ago. A stronger Canadian dollar added approximately four percentage points to organic growth for the quarter.
“Second quarter performance was solid in essentially all areas of our business,” said Martin P. Hughes, chairman and chief executive officer of the North American insurance broker. “As revenue increased, we maintained strong control of expenses, which enabled us to achieve higher margins.”
For the first half of 2006, net earnings from continuing operations grew 62 percent as revenue increased 22 percent. Excluding the Talbot Charge and other items, net earnings increased 26 percent. The company recorded 6 percent organic growth for the first half, including 6 percent growth of core commissions.
Second quarter revenue increased 32 percent to $146.0 million from $111.0 million in the same period of 2005. Core commission income, which excludes contingent commissions, interest and other income, grew 29 percent to $134.2 million from $103.8 million. Contingent commissions increased 86 percent to $7.9 million from $4.2 million, while interest and other income rose 31 percent to $3.9 million from $3.0 million.
U.S. revenue increased 38 percent to $106.0 million from $76.9 million a year earlier, including organic growth of 5 percent. Core commissions increased 36 percent to $96.9 million from $71.1 million, while contingent commissions grew 76 percent to $6.1 million from $3.5 million.
In Canada, revenue increased 17 percent to $40.0 million from $34.1 million in the same period of 2005, as Hub posted organic growth of 16 percent. Core commissions rose 14 percent to $37.3 million from $32.7 million, while contingent commissions grew 127 percent to $1.8 million from $0.8 million. Foreign exchange impact added 11 percentage points to revenue growth rate in Canada in the second quarter.
“We benefited from strong account retention, along with new business generation, in the second quarter,” Hughes said. “In addition, we have begun to see some slowing in the pace of rate reductions on a year-over-year basis. It is too early to know whether this relative improvement is an indicator of future rate stability, however.
“We closed out the second quarter with a very strong balance sheet, which should enable us to continue our expansion in the coming year,” Hughes said.
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