Canadian Underwriter

Hub profits up 8% in first quarter

April 29, 2004   by Canadian Underwriter

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Broker network Hub International (NYSE/TSX: HBG) posted net income up 8% in the first quarter 2004, to US$9.6 million, compared with US$8.9 million in the first quarter of 2003.
This is dispute a US$1.7 million after-tax write-off following the company’s move to incorporate all of its operating units under the Hub International brand.
Earnings translate to US$0.29 per share for the most recent quarter, compared to US$0.28 a year ago.
Revenue for the same comparative period was up 15% to 79.3 million from US$68.9 million in 2003. Commission income was up 13% year-on-year to US$61.6 million from US$54.5 million, with contingent commissions and volume overrides up 21% to US$15.0 million from US$12.4 million. Hub’s Kaye Group is amongst those companies currently offering information to the New York Attorney General for a probe of contingent commissions. The company notes in its results that while cash compensation grew 10% during the quarter, to US$40.6 million, it declined as a percentage of revenue to 51% due to contingent commissions and volume overrides, which do not add to compensation expense.
The company’s Canadian operations performed well, with revenue up 30% to US$30.6 million in Q1 2004 from US$23.6 million a year ago. “Approximately 17 percentage points of the Canadian growth rate resulted from the increased value of the Canadian dollar compared to the U.S. dollar,” the company notes. “Absent this impact, Canadian revenue still increased a solid 13%.”
This compares with U.S. operations, which produced revenue growth of 8%, to US$48.8 million from US$45.3 million a year before.
“Our brokerages have begun the year with strong sales efforts and effective cost management, adding to our confidence for the coming year,” says Hub chairman and CEO Martin P. Hughes. “We remain comfortable with the 2004 earnings guidance range of US$1.13-$1.17 we issued earlier this year.”
The company has declared a quarterly dividend of US$0.05 per share.

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