View this article online: https://www.claimsjournal.com/news/east/2008/04/24/89420.htm
Hilb Rogal & Hobbs Company (NYSE:HRH) reported total revenues were up 4.4 percent for first quarter 2008 over the same period in 2007, but net income for the first quarter decreased 38.5 percent
HRH reported that total revenues were $206.8 million in the first quarter of 2008, compared with $198.2 million in the first quarter 2007.
Core commissions and fees rose 12.6 percent to $179.1 million for the quarter, compared with $159.1 million for the same period in 2007 reflecting acquisitions, new business and amounts recorded under supplemental commission agreements with certain underwriters, offset by the effects of continued sharp declines in property/casualty premium rates and the timing of certain transactions, the company said. Contingent commissions decreased $9.0 million to $24.2 million from the same period in 2007.
Organic growth on core commissions and fees was 1.1 percent for the 2008 first quarter. Organic growth is defined as the change in commissions and fees before the effect of acquisitions and divestitures which closed less than one year ago.
Net income for the first quarter decreased 38.5 percent to $15.5 million, or $0.42 per share, compared with $25.2 million, or $0.69 per share, for the same 2007 period. Operating net income decreased 35.9 percent to $15.3 million, or $0.42 per share, compared with $23.8 million, or $0.65 per share, for the 2007 first quarter. The operating margin for the 2008 first quarter decreased to 20.3 percent from 26.4 percent for the 2007 first quarter.
For the quarter, the accelerating decline in property/casualty rates significantly influenced financial results, the company noted. In addition, the operating earnings per share comparison for the quarter was adversely affected by the following factors:
–The quarterly timing related to the shift from contingent to supplemental commissions ($0.11);
–Increased professional and claims fees related, in part, to quarter-specific matters ($0.04);
–The dilutive impact of an acquisition ($0.05); and
–Increased costs related to the employee medical program ($0.02).
These four factors reduced the operating profit margin by 5.1 percentage points in the quarter.
Martin L. (Mell) Vaughan, III, chairman and CEO, said, “We began 2008 with a better start than our disappointing financial comparison implies. In addition to the unprecedented rate environment, the quarter was affected by the timing of compensation from certain underwriters, quarter-specific expenses and dilution from an acquisition. While the switch from contingent to supplemental commissions complicated quarterly comparability, our expected level of compensation under these agreements for the full year has not changed. In light of the continued sharp decline in property and casualty premium rates and the effects of macroeconomic weakness on insurance demand, our positive organic growth of 1.9 percent in domestic retail is further evidence of our sustained gains in market share and an indication of the effectiveness and resiliency of our operating models.”
F. Michael Crowley, president, added, “The strength in new business was broadly distributed across middle-market and major account property and casualty products, our growing range of employee benefits products, and our geographic regions. Evidence strongly indicates that our sales and service operating models, national practice specialties and regional organizations are contributing to our success resulting in growth in market share. We recognize the urgency of cost control and our process improvement initiatives which are designed to improve efficiency as well as service quality.”
Vaughan noted that HRH’s “growth strategies are to focus on increasing market share through new business and retaining existing clients through effective and responsive service; managing costs through process improvements and performance accountability; and deploying our cash flow and capital effectively through acquisitions and share repurchases.”
Source: HRH, www.hrh.com