Insurance broker and rsk management firm Hilb Rogal & Hobbs Co. reported 2007 first quarter total revenues were $198.2 million, compared with $183.8 million in the 2006 first quarter. Commissions and fees were $192.2 million for the quarter, compared with $180.4 million for the same period in 2006.
Revenues for the first quarter of 2007 primarily reflected the effects of acquisitions and new business, partially offset by accelerated declines in property and casualty premium rates, the effect of divested businesses, and reduced contingent commissions.
Net income for the quarter decreased 2.7% to $25.2 million, or $0.69 per share, compared with $25.9 million, or $0.71 per share, for the same period of 2006. The first quarter operating net income decreased 7.4% to $23.8 million, or $0.65 per share, compared with $25.7 million, or $0.71 per share, for the 2006 first quarter. In addition to the revenue-related factors mentioned above, operating net income was impacted by dilution from recent acquisitions. The first quarter operating net income plus amortization increased on a per share basis by 1.2% from $0.84 per share to $0.85 per share.
According to the Richmond, Va.-based company, a “difficult property and casualty rate environment” was the biggest factor affecting earnings growth in the quarter. In addition, three other factors affected earnings growth rate for the quarter: the dilutive impact of certain recent acquisitions; contingent commissions of recently acquired companies received but not recognized as income and recorded as a reduction to the purchase price; and lower same store contingent commissions. These three items, in the aggregate, reduced operating net income by $0.12 per share.
The operating margin for the 2007 first quarter was 26.4%, compared with 28.3% for the 2006 first quarter. The margin decline was attributable to continued pressure from declining property and casualty premium rates, the aforementioned impact of recent acquisitions, and lower contingent commissions.
Organic growth is defined as the change in commissions and fees before the effect of acquisitions and divestitures. Organic growth on core commissions and fees was (0.9)% for the 2007 first quarter.
Acquisitions continue to be a key growth strategy for the company. During the first quarter, the company completed four acquisitions with aggregate annualized revenues of $52 million.
Martin L. (Mell) Vaughan, III, chairman and chief executive officer, said, called the results unsatisfactory. “For the first quarter, our new business and renewal retention metrics were strong; sales, prospecting, and acquisition pipelines were encouraging; and company-wide service and efficiency initiatives were underway and gathering momentum. Nevertheless, our financial results for the quarter were unsatisfactory, pressured primarily by accelerating insurance rate declines and by period-specific issues, including dilution from recent acquisitions,” he said.
Source: Hilb Rogal & Hobbs Co.
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