Hub International Limited said the firm has made its first payment of $16.4 million in cash to approximately 70 employees of the acquired Talbot insurance brokerage firm.

Under the agreement, the Chicago-based Hub said it anticipates paying $52-to-$55 million over three years under the performance payment agreement or earn-out.

The Albuquerque, N.M.-based Talbot was purchased from Seattle-based insurer Safeco in March 2004 for $90 million.

"Because Hub's current market price is significantly greater than the share price calculated under the Talbot earn-out agreement, our company, with board approval, elected to make the first earn-out payment in cash," said Martin P. Hughes, Hub's chairman and chief executive officer.

The decision to use cash for the first payment to Talbot employees will not affect net earnings for the first nine months of 2005. It will have a small, positive impact on diluted earnings per share, the firm said. Had the initial payment been made in shares, approximately 856,000 shares would have been issued.

Future payments under the agreement may be made in cash or common shares depending on circumstances at the time.

"Our decisions on the form of earn-out payments will be specific to each payment period, reflecting our judgment on how to serve the best interests of our shareholders," Mr. Hughes said. "Based on our recent share price and interest rates, we believe a cash payment is the right choice for the first installment."

The earn-out payments will be recorded as compensation expense, whether payment is made in cash or common shares. Hub said the compensation expense, which is not deductible for tax purposes, would be charged to earnings through the first quarter of 2007 and would affect earnings comparisons through 2007.

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