Hilb, Rogal & Hobbs Company reported fourth-quarter net income rose 27 percent despite a challenging year in which it abandoned volume-based contingent commissions and agreed to set up a $30 million injured client reimbursement fund.
Martin L. "Mell" Vaughan III, chairman and chief executive officer for the Richmond, Va.-based insurance brokerage firm, said the results were "not as robust as we had planned."
For the fourth quarter of 2005, net income increased $4.2 million, going from $15.3 million, or 42 cents a share, to $19.5 million, or 54 cents a share. Revenues increased 3 percent, or $4 million, going from $160 million to $164 million.
For the year, net income declined 31 percent, or $25.2 million, going from $81.4 million, or $2.23 a share in 2004, to $56.2 million, or $1.55 a share. Revenues for the year were up 9 percent, or $54 million, going from $620 million to $674 million.
The firm reported a charge of more than $42 million for the year covering the agreement with Connecticut Attorney General Richard Blumenthal to settle allegations of steering insurance contracts to carriers to optimize the commission payments, and other legal and administrative costs related to the settlement and ongoing class action suits.
As a result of the agreement, HRH abandoned taking volume-based contingent commissions, but retained contingent commissions based on profitability. The loss of volume-based contingents amounts to 5 percent of the firm's revenues, said Mr. Vaughn, and it is still too early to tell how it will make up that difference.
HRH also added 120 positions to the firm, taking advantage of a strong labor pool available because of "higher than normal talent turnover" throughout the industry, said Mr. Vaughn.
He called this a once in a lifetime opportunity to bring people into the firm who are expected to help generate long-term growth for HRH.
As far as premium pricing is concerned, Mr. Vaughn said the market is seeing some signs of improvement. While catastrophe property is seeing dramatic increases, some casualty pricing saw decreases of only 5 percent, compared with 10 percent earlier in the year, which he said he hopes is a sign of improvement.
"We would be very happy if we can get back to zero [premium decreases]," commented Mr. Vaughn.
Earlier this month, HRH declared a quarterly dividend of 11.5 cents per share, payable on March 31 to shareholders of record as of March 15.
Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader
Your access to unlimited PropertyCasualty360 content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking insurance news and analysis, on-site and via our newsletters and custom alerts
- Weekly Insurance Speak podcast featuring exclusive interviews with industry leaders
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the employee benefits and financial advisory markets on our other ALM sites, BenefitsPRO and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
