Hilb Rogal & Hobbs Company (NYSE:HRH), one of the world's largest insurance and risk management intermediaries, today reported financial results for the second quarter and six months ended June 30, 2007.

For the 2007 second quarter, total revenues were $200.1 million, compared with $178.4 million in the 2006 second quarter, an increase of 12.1%. Commissions and fees rose 13.9% to $195.8 million for the quarter, compared with $171.9 million for the same period in 2006. The 2007 second quarter revenue growth reflected acquisitions, new business production and amounts recorded under supplemental commission agreements with certain underwriters, offset by continued declines in property and casualty premium rates and two client-specific events.

Net income for the second quarter increased 7.7% to $22.2 million, or $0.60 per share, compared with $20.6 million, or $0.57 per share, for the same 2006 period. Operating net income increased 15.8% to $22.2 million, or $0.60 per share, compared with $19.2 million, or $0.53 per share, for the 2006 second quarter. The second quarter operating net income plus amortization increased on a per share basis by 17.9% to $0.79 per share from $0.67 per share.

For the first six months of 2007, total revenues rose 10.0% to $398.3 million from $362.2 million a year ago. Commissions and fees increased 10.2% to $388.0 million from $352.3 million last year, affected primarily by the same drivers that influenced the second quarter. Net income was $47.4 million, or $1.29 per share, compared with $46.6 million, or $1.28 per share, in the same period of 2006, an increase of 1.9%. Operating net income for the period was $46.1 million, or $1.25 per share, compared with $44.9 million, or $1.24 per share, a year ago, an increase of 2.6%. In addition to the revenue factors noted above, operating net income for the year-to-date period was impacted by dilution from acquisitions. For the first six months, operating net income plus amortization increased on a per share basis by 8.6% to $1.64 per share from $1.51 per share.

The operating margin for the 2007 second quarter increased to 24.6% from 23.4% for the 2006 second quarter. For the six months, the operating margin was 25.5% for 2007 compared with 25.9% for 2006.

Organic growth on core commissions and fees was 0.3% for the 2007 second quarter and (0.3)% for the first six months of 2007. Organic growth for each of the company's reportable segments is included in a separate table in this release. Organic growth is defined as the change in commissions and fees before the effect of acquisitions and divestitures.

Martin L. (Mell) Vaughan, III, chairman and chief executive officer, said, "We met or exceeded many of our internal objectives for the quarter despite a continuation of the soft market conditions which again weighed on our financial results and intensified competition in the marketplace. As a result, we had to perform at the top of our game in order to meet these goals. Acquisitions were again a highlight of the quarter. During the quarter, we announced the acquisition of three diverse firms, each with an impressive track record. Year to date, eight acquisitions with approximately $80 million in prior year revenues have been announced, and the pipeline of potential acquirees remains substantial in quality and quantity."

F. Michael Crowley, president, added, "Notable achievements in the quarter included growth in the number of new business sales, which surpassed its first quarter pace, and a continued strong pipeline of client prospects at quarter end. Retention rates remained encouraging in the context of falling renewal premiums, and excluding two client-specific events which reduced organic growth by approximately 2% in the quarter. In addition, we remain focused on improving productivity and efficiency during this difficult market, through continuous review of underperforming profit centers, analysis of producer performance, and improvement in processes and systems, all of which are designed to enhance our customers' experience."

Vaughan concluded, "HRH's team, immeasurably strengthened over the past few years and guided by a new five-year strategic plan, is meeting challenges and seizing opportunities posed by industry conditions. During the quarter, we retained and won business based on the breadth and depth of our national, regional and local capabilities, team work, sales culture and superior service. But far from complacent, especially in a soft market, we are relentlessly dedicated to further improvement of our competitiveness and our current and long-term financial performance."

About HRH

Hilb Rogal & Hobbs Company (HRH) is the eighth largest insurance intermediary in the United States, with over 120 offices throughout the United States and the world. HRH helps clients manage their risks in property and casualty, employee benefits, professional liability and other areas of specialized exposure. In addition, HRH offers a full range of personal and corporate financial products and services. HRH is focused on understanding our clients' businesses, employees and risks, as well as the insurance and financial markets, so that we can develop insurance, risk management and employee benefits solutions that best fit their needs. The company's common stock is traded on the New York Stock Exchange, symbol HRH. More information about HRH, including instructions for the quarterly conference call, may be found at www.hrh.com.

Forward-Looking Statements

Forward-looking statements made during the course of our conference calls, in filings by the company with the Securities and Exchange Commission, in the company's press releases or other public or shareholder communications, or in oral statements made with the approval of an authorized company executive officer, may include the words or phrases ?would be,? ?will allow,? ?expects to,? ?will continue,? ?is anticipated,? ?estimate,? ?project? or similar expressions and are intended to identify ?forward-looking statements? within the meaning of the Private Securities Litigation Reform Act of 1995.

While forward-looking statements are provided to assist in the understanding of the company's anticipated future financial performance, the company cautions readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. Forward-looking statements are subject to significant risks and uncertainties, many of which are beyond the company's control. Although the company believes that the assumptions underlying its forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Actual results may differ materially from those contained in or implied by such forward-looking statements for a variety of reasons. Risk factors and uncertainties that might cause such a difference include, but are not limited to, the following: the company's commission revenues are based on premiums set by insurers and any decreases in these premium rates could result in revenue decreases for the company; the level of contingent commissions is difficult to predict and any material decrease in the company's collection of them is likely to have an adverse impact on operating results; the company has eliminated National Override Agreements commissions effective for business written on or after January 1, 2005, and it is uncertain whether additional contingent commissions payable to the company will offset the loss of such revenues; the company's growth has been enhanced through acquisitions, but the company may not be able to successfully identify and attract suitable acquisition candidates and complete acquisitions; the company's failure to integrate an acquired insurance agency efficiently may have an adverse effect on the company; the general level of economic activity can have a substantial impact on revenues that is difficult to predict; a strong economic period may not necessarily result in higher revenues; the company's success in the future depends, in part, on the company's ability to attract and retain quality producers; the company has international operations, particularly in the United Kingdom, which expose the company to various legal, economic and market risks including foreign currency exchange rate fluctuations; the company may be subject to increasing costs arising from errors and omissions claims against the company; the company is subject to governmental regulation which may impact operating results and/or growth; the business practices and broker compensation arrangements of the company are subject to uncertainty due to investigations by governmental authorities and related private litigation; the company is subject to a number of investigations and legal proceedings, which if determined unfavorably for the company, may adversely affect the company's results of operations; a decline in the company's ability to obtain new financing and/or refinance current borrowings may adversely affect the company; if the company is unable to respond in a timely and cost-effective manner to rapid technological change in the insurance intermediary industry, there may be a resulting adverse effect on business and operating results; quarterly and annual variations in the company's commissions and fees that result from the timing of policy renewals and the net effect of new and lost business production may have unexpected impacts on the company's results of operations; and the company's operating results could be adversely affected if the value of intangible assets is not fully realized.

The company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements. For more details on factors that could affect expectations, see the company's Annual Report on Form 10-K for the year ended December 31, 2006 and other reports from time to time filed with or furnished to the Securities and Exchange Commission.

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

COMPARATIVE FINANCIAL ANALYSIS

(In thousands, except per share data)

 
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2007   2006   2007   2006
(Unaudited) (Unaudited)
REVENUES
Core commissions and fees $ 187,391 $ 164,474 $ 346,460 $ 311,145
Contingent commissions 8,456 7,401 41,575 41,126
Investment income 3,123 2,374 6,160 4,564
Other   1,121     4,174     4,089     5,373
200,091 178,423 398,284 362,208
OPERATING EXPENSES
Compensation and employee benefits 111,554 98,563 220,672 197,114
Other operating expenses 36,837 33,618 69,859 64,593
Depreciation 2,189 2,050 4,302 4,127
Amortization of intangibles 7,095 4,999 14,509 9,805
Interest expense 5,154 4,582 10,645 9,193

Loss on extinguishment of debt1

   --     897     --     897
  162,829     144,709     319,987     285,729
 
INCOME BEFORE INCOME TAXES 37,262 33,714 78,297 76,479
Income taxes   15,050     13,085     30,863     29,926
NET INCOME $ 22,212   $ 20,629   $ 47,434   $ 46,553
 
Net Income Per Share:
Basic $ 0.61   $ 0.58   $ 1.30   $ 1.30
Assuming Dilution $ 0.60   $ 0.57   $ 1.29   $ 1.28
 
Dividends Per Share $ 0.130   $ 0.120   $ 0.250   $ 0.235
 
Weighted Average Shares Outstanding:
Basic   36,582     35,830     36,398     35,871
Assuming Dilution   37,067     36,290     36,896     36,356
 

1 The company recorded a one-time loss on the extinguishment of its Amended and Restated Credit Agreement, which included various financing and professional costs previously deferred and certain lending fees associated with obtaining the company's new credit facility.

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© Business Wire - 2007

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HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(In thousands)

JUNE 30, DECEMBER 31,
2007   2006

(Unaudited)

ASSETS

CURRENT ASSETS

Cash and cash equivalents $ 303,914 $ 254,811
Receivables (net) 391,455 307,692
Prepaid expenses and other current assets   32,096     33,869
TOTAL CURRENT ASSETS 727,465 596,372
 
PROPERTY & EQUIPMENT (NET) 24,456 22,178
 
INTANGIBLE ASSETS (NET) 897,257 785,654
 
OTHER ASSETS   46,464     33,943
$ 1,695,642   $ 1,438,147
 
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Premiums payable to insurance companies $ 506,300 $ 385,556
Accounts payable 20,032 22,572
Accrued expenses 54,327 70,703
Premium deposits and credits due customers 47,929 38,760
Current portion of long-term debt   9,391     9,060
TOTAL CURRENT LIABILITIES 637,979 526,651
 
LONG-TERM DEBT 305,189 231,957
 
DEFERRED INCOME TAXES 42,838 32,231
 
OTHER LONG-TERM LIABILITIES 44,548 43,939
 
SHAREHOLDERS' EQUITY

Common Stock (outstanding 36,856 and 36,312 shares, respectively)

272,704 250,359
Retained earnings 388,339 350,084
Accumulated other comprehensive income   4,045     2,926
  665,088     603,369
$ 1,695,642   $