HUB INTERNATIONAL LIMITED
NYSE : HBG
TSX : HBG

HUB INTERNATIONAL LIMITED

October 26, 2005 07:00 ET

Hub International Reports Third Quarter Results; Quarter Revenue Grows 7%; Organic Growth Reaches 5%; Operational Changes Lead to Improved Compensation Costs

CHICAGO--(CCNMatthews - Oct 26, 2005) -

Hub International Limited (NYSE:HBG) (TSX:HBG) announced today that 5% organic growth helped generate a 7% increase in consolidated revenue, while the company incurred a small loss for the third quarter due, in large part, to severance costs and the Talbot earnout charge.

The company recorded pre-tax severance expense of $1.6 million as staff reductions were implemented in several regions. The operational changes, announced in July, include a reduction of approximately 75 positions and an annualized payroll savings of about $3 million.

"This was a very solid quarter," said Martin P. Hughes, chairman and chief executive officer. "We continued to grow our existing business while adding attractive acquisitions to our revenue base. Strategies to control overhead expense and selective staff reductions pave the way for further improvement.

"These results are particularly gratifying in that the third quarter typically is our weakest reporting period and we had to deal with a soft rate environment," Hughes added. "We're quite pleased with the performance generated by our employees in the most recent period and for the year to date."

Hub Posts Organic Growth Rate of 5% in Third Quarter

Third quarter revenue grew 7% to $98.3 million from $92.0 million a year earlier. Organic growth, which includes results of businesses owned at least 12 months, was 5%, or 2% when currency effects are excluded.

In the United States, which represents approximately two thirds of consolidated revenue, the company reported that revenue grew 6% to $67.2 million from $63.6 million a year earlier. U.S. organic growth was 3%, including 2% for core commission income.

Canadian revenue grew 9%, net of dispositions, to $31.0 million from $28.4 million. In Canada, organic growth of 11% included 10% organic growth of core commissions. A stronger Canadian dollar added nine percentage points of the improvement in Canadian revenue growth rates. Organic growth rates were higher than total growth rates in Canada due to the sale of three small brokerages.

Severance Charges Add to Third-Quarter Compensation Expense

Employee cash compensation expense increased 5% to $58.5 million in the third quarter from $55.5 million a year earlier, including $1.6 million of severance charges. Excluding severance charges, cash compensation rose 3%, in contrast to a 7% increase in revenue. As a percentage of revenue--excluding severance charges--compensation declined to 58% in the seasonally weak third quarter, versus 60% a year earlier.

The company also recognized a higher compensation expense related to its 2004 Talbot acquisition. (See The Talbot Charge, below). Reflecting earnings growth at Talbot, this earnout compensation increased to $7.6 million in the third quarter of 2005 from $6.9 million a year earlier. As the three-year Talbot earnout period continues, the amount of compensation recognized for the earnout will decline, beginning in the fourth quarter of 2005.

Selling, occupancy and administration expense increased 8% to $20.4 million from $18.9 million a year earlier. Although this overhead expense category increased to 21% of revenue from 20% a year ago, Hughes said the increase, attributable primarily to the timing of expenses, ultimately would not impede the Company's progress in reducing these expenses as a percentage of revenue.

Interest expense increased 19% to $2.7 million from $2.3 million a year earlier, due to higher interest rates. The company also recognized a $0.2 million gain on disposition of assets in the third quarter of 2005, compared with a $1.0 million gain in the same period of 2004.

In anticipation of funding the acquisition of Personal Lines Insurance Brokerage, Inc., the company entered into a foreign exchange forward contract to convert Canadian dollars to U.S. dollars. The difference between the forward rate contracted and the spot rate at the date of conversion generated a foreign exchange loss of $0.6 million, or $0.4 million after tax, and reduced diluted earnings per share for the quarter by $0.01.

The low third quarter earnings level and the non-deductible nature of the Talbot charge led to a 110% effective tax rate in the third quarter, up from 71% a year earlier. Excluding the impact of the Talbot charge, the tax rate would have been 32% compared with 27% in 2004 (when adjustments were made to recognize the benefit of certain loss carryforwards).



Results described are Q3 2005 Q3 2004 Q3 2005 Q3 2004
net of income tax ($000) ($000) (Per Diluted (Per Diluted
Share) Share)
----------------------------------------------------------------------
Net Earnings Reported
under GAAP $(741) $1,146 $(0.02) $0.04
----------------------------------------------------------------------
Impact of Foreign
Exchange $(252) $(388) $(0.01) $(0.01)
----------------------------------------------------------------------
Impact of Severance
Costs $1,004 $--- $0.03 $---
----------------------------------------------------------------------
Impact of Compensation
for Talbot Earnout $7,576 $6,889 $0.25 $0.21
----------------------------------------------------------------------
Loss on Foreign
Exchange Forward
Contract $354 $--- $0.01 $---
----------------------------------------------------------------------
Impact of Gain on
Disposition Assets of
Certain Brokerages $--- $(605) $--- $(0.02)
----------------------------------------------------------------------
Impact of Discontinued
Operations $421 $66 $0.01 $--
----------------------------------------------------------------------
Net Earnings Excluding
Above Items $8,362 $7,108 $0.27 $0.22
----------------------------------------------------------------------



Reflecting all charges, Hub reported a net loss of $0.7 million, or $0.02 per diluted share, in the third quarter of 2005, versus earnings of $1.1 million, or $0.04 per share, in the same period of the prior year. To provide greater clarity regarding the performance of the company, the table above shows the effect of such charges as severance, the Talbot earnout and other costs. Excluding the effect of these items, net earnings would have increased 18% to $8.4 million from $7.1 million in 2004, while earnings per diluted share would have grown 23% to $0.27 from $0.22.

Hub Generates 7% Organic Growth Rate for Nine-Month Period

For the nine months ended September 30, 2005, Hub reported a 30% increase in revenue to $328.5 million from $253.6 million. The strong revenue increase reflected both acquisitions and 7% organic growth, 4% after foreign exchange effects are excluded. Core commissions grew 25% to $283.3 million from $226.0 million, including organic growth of 5%, or 2% when currency effects are excluded.

In the United States, total revenue grew 40% to $228.8 million from $163.1 million, while core commissions grew 36% to $194.9 million from $143.8 million. The company posted 4% organic growth of U.S. revenue, including 1% of core commissions, in the first nine months of 2005. Canadian revenue increased 10% to $99.7 million from $90.5 million, while core commissions grew 7% to $88.4 million from $82.3 million. The stronger Canadian dollar added nine percentage points to Canadian organic growth of 14% for total revenue and eight percentage points to Canadian core commissions organic growth of 11%.

Employee cash compensation expense increased 31% to $181.2 million from $138.2 million, including $1.6 million of severance expense related to staff reductions at several regions in the third quarter. Excluding severance charges, employee cash compensation expense as a percentage of revenue was approximately 55% in 2005, which was the same as in 2004.

Compensation related to the Talbot earnout increased 241% to $23.5 million from $6.9 million. Due to the July 1, 2004 timing of the acquisition, three quarters of charges for this earnout are recorded in 2005, versus just one quarter in the first nine months of 2004.

Selling, occupancy and administration expense increased 19% to $60.3 million from $50.5 million a year earlier. As a percentage of revenue, this overhead expense declined to 18% from 20% a year earlier, largely due to cost control efforts.

Interest expense increased 36% to $7.6 million from $5.6 million, reflecting both higher interest rates and the higher debt levels resulting from the Talbot acquisition.

During the first nine months of 2005, Hub recognized a gain of $2.7 million on the sale of brokerages in Canada, up from a gain of $1.5 million in the prior year, while the company recorded a loss of $2.6 million for the write-off of trademarks in the first quarter of 2004 related to brokerage name changes. In addition, Hub recognized a gain of $4.5 million in the first nine months of 2005, due to the early payment of a loan from an insurance company. Hub's effective tax rate increased to 55% in the first nine months of 2005 from 40% a year earlier, largely due to the non-deductible nature of the Talbot earnout. Excluding the Talbot charge, the effective tax rate increased to 36% from 34%.

Net earnings declined to $20.0 million, or $0.59 per diluted share, for the first nine months of 2005 from $22.4 million, or $0.68 per diluted share, in the first nine months of 2004. The decline included the impact of the Talbot earnout, foreign exchange effects, early retirement of the insurance company loan, severance costs, gain on disposition of assets, the trademark write-off, loss on foreign exchange forward contract and discontinued operations. These charges can mask the underlying performance of Hub's operations, so the table below shows both reported earnings under Generally Accepted Accounting Principles and net earnings excluding these charges.



Results described Nine Months Nine Months Nine Months Nine Months
are net of income Ended Ended Ended Ended
tax 9/30/2005 9/30/2004 9/30/2005 9/30/2004
($000) ($000) (Per Diluted (Per Diluted
Share) Share)
----------------------------------------------------------------------
Net Earnings Reported
under GAAP $20,007 $22,360 $0.59 $0.68
----------------------------------------------------------------------
Impact of Foreign
Exchange $(1,341) $(1,473) $(0.04) $(0.04)
----------------------------------------------------------------------
Impact of Severance
Costs $1,004 $--- $0.03 $---
----------------------------------------------------------------------
Impact of Compensation
for Talbot Earnout $23,491 $6,889 $0.64 $0.20
----------------------------------------------------------------------
Impact of Gain on
Forgiveness of Debt $(2,925) $--- $(0.08) $---
----------------------------------------------------------------------
Impact of Gain on
Disposition of Assets
of Certain Brokerages $(1,914) $(1,019) $(0.05) $(0.03)
----------------------------------------------------------------------
Loss on Foreign
Exchange Forward
Contract $354 $--- $0.01 $---
----------------------------------------------------------------------
Impact of Write-off of
Trademarks $--- $1,656 $--- $0.05
----------------------------------------------------------------------
Impact of Discontinued
Operations $136 $66 $--- $---
----------------------------------------------------------------------
Net Earnings Excluding
Above Items $38,812 $28,479 $1.10 $0.86
----------------------------------------------------------------------



Excluding the items in the table above, Hub's net earnings for the nine months ended September 30, 2005 would have increased 36% to $38.8 million from $28.5 million, while revenue grew at a 30% rate. Net earnings per diluted share, excluding the items above, would have grown 28% to $1.10 from $0.86 in the same period.

Hub ended the third quarter with cash and equivalents of $122.4 million, up 25% from $98.2 million at December 31, 2004 and up from $114.6 million at June 30, 2005. Operating activities generated $36.4 million of cash in the first nine months of the current year, up from $30.9 million in the first nine months of 2004. Of the $122.4 million of cash and equivalents at September 30, 2005, approximately $78.0 was available for use in acquisitions.

Favorable Outlook for Continued Long-Term Growth

Looking ahead into 2006, Hughes expressed confidence that Hub can continue to compete effectively as the company pursues its growth strategies.

"Our sales pipeline is strong and we are gaining further traction in the development of our sales culture," he noted. "We anticipate some firming of rates during 2006, both due to fundamental underwriting economics and the aftermath of a disastrous hurricane season.

"We are also making measurable progress in our plan to increase the profitability of our business, both by controlling expenses, such as employee cash compensation, and by building the sales base in each office. The combined impact of these initiatives should be favorable for Hub as we pursue our strategies for expansion."

The Talbot Charge

Hub discloses the impact of compensation related to the Talbot acquisition in order to give investors increased insight into Hub's results of operations and the effective cost of the Talbot acquisition.

Total consideration paid to acquire Talbot includes both $90 million cash paid to Safeco Corporation and the issuance of restricted and non-restricted Hub shares--or comparable amounts of cash--to approximately 70 Talbot executives. The total consideration is within Hub's target range of paying 5-7 times EBITDA (earnings before interest, taxes, depreciation and amortization) for acquired brokerages.

As the executives participating in this earnout were not shareholders of Talbot prior to the sale, the earnout compensation they receive under the terms of the purchase agreement is recorded as compensation expense. This compensation expense, which is not deductible for tax purposes, will be charged to earnings through the first quarter of 2007 and will affect earnings comparisons through 2007, making it difficult for investors to analyze the company's results in comparison to prior years and industry peers.

Hub has the option to pay the executives with cash or shares. The first Talbot earnout payment in the amount of $16.4 million was paid in cash on September 1, 2005. Management expects future payments to be made in common shares; however, the choice of cash or shares will depend on circumstances at the time of payment.

In the first nine months of 2005, Hub recorded $23.5 million of compensation for Talbot, based on a total estimated earnout liability of approximately $53 million. The amount of this compensation may vary from quarter to quarter, reflecting profitability of Talbot. Based on the current expected earnout of approximately $53 million, the estimated charge to earnings will be:



2004 $14.4 million (actual)
2005 $27.9 million
2006 $9.3 million
2007 $1.7 million



Conference Call and Webcast

Hub International will discuss its financial results and outlook on a conference call scheduled for 9:30 a.m. (CT), 10:30 a.m. (ET) today, October 26, 2005. This call is being webcast by Thompson/CCBN and can be accessed at Hub International's web site at www.hubinternational.com. The webcast is also being distributed through the Thomson StreetEvents Network to both institutional and individual investors. Individual investors can listen to the call at www.fulldisclosure.com, Thomson/CCBN's individual investor portal, powered by StreetEvents. Institutional investors can access the call via Thomson's password-protected event management site, StreetEvents (www.streetevents.com).

Headquartered in Chicago, IL, Hub International Limited is a leading North American insurance brokerage that provides a broad array of property and casualty, life and health, employee benefits, investment and risk management products and services through offices located in the United States and Canada.

This press release may contain forward-looking statements that reflect our current views with respect to future events and financial performance. These forward-looking statements relate, among other things, to our plans and objectives for future operations and are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. These uncertainties and other factors include, but are not limited to, risks associated with implementing our business strategies, identifying and consummating acquisitions, integrating acquired brokerages, attaining greater market share, developing and implementing effective information technology systems, recruiting and retaining qualified employees, fluctuations in the premiums charged by insurance companies with corresponding fluctuations in our premium-based revenue, any loss of services of key executives, industry consolidation, increased competition in the industry, fluctuations in the demand for insurance products, exchange rates, resolution of regulatory issues, including those related to compensation arrangements with insurance companies, the actual costs of resolution of contingent liabilities and the passage of new legislation subjecting our business to regulation in jurisdictions where we operate. We caution readers not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Additional information regarding these risks and other factors that could cause Hub International's actual results to differ materially from our expectations is contained in the company's filings with the Securities and Exchange Commission and the Canadian securities commissions. Except as otherwise required by federal securities laws, Hub International undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.



HUB INTERNATIONAL LIMITED
Consolidated Organic Growth
For the three months and nine months ended September 30, 2005
(in thousands of U.S. dollars, except percentages)


Net
Revenue Adjustments
------------------ Total Total For Organic
Third quarter Change Growth (Acquisitions) Growth
2005 2004 ($) (%) And Disposals (%)
-------------------------------------------------------
Total
-----
Commission
Income $92,560 $87,524 $5,036 6% $(1,401) 4%
Contingent
Commissions
and Volume
Overrides 2,391 1,866 525 28% - 28%
Other Income 3,332 2,636 696 26% (55) 24%
-------------------------------------------------------
Total $98,283 $92,026 $6,257 7% $(1,456) 5%
-------------------------------------------------------

USA
---
Commission
Income $62,672 $59,913 $2,759 5% $(1,805) 2%
Contingent
Commissions
and Volume
Overrides 1,952 1,606 346 22% - 22%
Other Income 2,623 2,100 523 25% (55) 22%
-------------------------------------------------------
Total $67,247 $63,619 $3,628 6% $(1,860) 3%
-------------------------------------------------------

Canada
------
Commission
Income $29,888 $27,611 $2,277 8% $404 10%
Contingent
Commissions
and Volume
Overrides 439 260 179 69% - 69%
Other Income 709 536 173 32% - 32%
-------------------------------------------------------
Total $31,036 $28,407 $2,629 9% $404 11%
-------------------------------------------------------



Net
Revenue Adjustments
------------------ Total Total For Organic
First nine months Change Growth (Acquisitions) Growth
2005 2004 ($) (%) And Disposals (%)
-------------------------------------------------------
Total
-----
Commission
Income $283,271 $226,032 $57,239 25% $(46,528) 5%
Contingent
Commissions
and Volume
Overrides 35,794 19,940 15,854 80% (9,537) 32%
Other Income 9,413 7,634 1,779 23% (444) 17%
-------------------------------------------------------
Total $328,478 $253,606 $74,872 30% $(56,509) 7%
-------------------------------------------------------

USA
---
Commission
Income $194,889 $143,767 $51,122 36% $(49,453) 1%
Contingent
Commissions
and Volume
Overrides 26,369 13,437 12,932 96% (9,859) 23%
Other Income 7,521 5,940 1,581 27% (515) 18%
-------------------------------------------------------
Total $228,779 $163,144 $65,635 40% $(59,827) 4%
-------------------------------------------------------

Canada
------
Commission
Income $88,382 $82,265 $6,117 7% $2,925 11%
Contingent
Commissions
and Volume
Overrides 9,425 6,503 2,922 45% 322 50%
Other Income 1,892 1,694 198 12% 71 16%
-------------------------------------------------------
Total $99,699 $90,462 $9,237 10% $3,318 14%
-------------------------------------------------------


Notes: 1. Organic growth is a non-GAAP measure.
2. Total and Canadian organic growth rates above
include the impact of changes in foreign currency.



HUB INTERNATIONAL LIMITED
Consolidated Statements of Earnings
For the three months and nine months ended September 30, 2005 and 2004
(in thousands of U.S. dollars, except per share amounts)


Third quarter First nine months
--------------------- ----------------------
2005 2004 2005 2004
--------------------- ----------------------
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Revenue
Commission income $92,560 $87,524 $283,271 $226,032
Contingent commissions
and volume overrides 2,391 1,866 35,794 19,940
Other 3,332 2,636 9,413 7,634
--------------------- ----------------------
98,283 92,026 328,478 253,606
--------------------- ----------------------

Expenses
Employee cash
compensation 58,518 55,493 181,246 138,244
Selling, occupancy and
administration 20,358 18,857 60,270 50,496
Depreciation 2,200 1,950 6,378 5,267
Interest expense 2,710 2,275 7,626 5,638
Intangible asset
amortization 1,961 1,901 5,657 3,617
Compensation for Talbot
Earnout 7,576 6,889 23,491 6,889
Other non-cash stock
based compensation 1,565 1,457 5,300 4,772
Gain on disposal of
subsidiaries,
property, equipment
and other assets (224) (986) (2,657) (1,545)
Loss on foreign exchange
forward contract 555 - 555 -
Gain on forgiveness of
debt - - (4,500) -
Loss on write-off of
trademarks - - - 2,587
--------------------- ----------------------
95,219 87,836 283,366 215,965
--------------------- ----------------------

Net earnings before income
taxes 3,064 4,190 45,112 37,641
--------------------- ----------------------

Provision for income tax
expense (benefit)
Current 1,609 5,055 24,102 16,785
Future 1,775 (2,077) 867 (1,570)
--------------------- ----------------------
3,384 2,978 24,969 15,215
--------------------- ----------------------
Net earnings (loss) from
continuing operations (320) 1,212 20,143 22,426
Net loss from
discontinued operations (421) (66) (136) (66)
--------------------- ----------------------
Net earnings (loss) $(741) $1,146 $20,007 $22,360
--------------------- ----------------------
Interest on subordinated
convertible debentures - - 1,425 1,425
Dividends in lieu on
restricted share units - 23 83 88
--------------------- ----------------------
Diluted net earnings (loss) $(741) $1,169 $21,515 $23,873
--------------------- ----------------------
--------------------- ----------------------

Basic earnings (loss)
per share
Continuing operations $(0.01) $0.04 $0.66 $0.74
Discontinued operations (0.01) - - -
--------------------- ----------------------
Total operations $(0.02) $0.04 $0.66 $0.74
--------------------- ----------------------

Diluted earnings (loss)
per share
Continuing operations $(0.01) $0.04 $0.59 $0.68
Discontinued operations (0.01) - - -
--------------------- ----------------------
Total operations $(0.02) $0.04 $0.59 $0.68
--------------------- ----------------------

Weighted average shares
outstanding
- Basic (000's) 30,600 30,292 30,471 30,192
Weighted average shares
outstanding
- Diluted (000's) 30,600 32,612 36,657 34,952



HUB INTERNATIONAL LIMITED
Consolidated Balance Sheets
As of September 30, 2005 and December 31, 2004
(in thousands of U.S. dollars)


2005 2004
---------- -----------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $122,443 $98,204
Trust cash 64,120 71,718
Accounts and other receivables 158,306 162,841
Income taxes receivable 7,061 6,208
Future income taxes 3,635 3,901
Prepaid expenses 8,173 5,835
---------- -----------
Total current assets 363,738 348,707

Goodwill 396,246 376,676
Other intangible assets 88,387 88,842
Property and equipment 26,589 27,907
Future income taxes 11,549 4,368
Other assets 10,445 11,035
---------- -----------
Total assets $896,954 $857,535
---------- -----------
---------- -----------

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $273,319 $271,843
Income taxes payable 4,199 2,273
Future income taxes 440 34
Current portion long-term debt and capital
leases 14,779 5,195
---------- -----------
Total current liabilities 292,737 279,345

Long-term debt and capital leases 135,112 146,602
Subordinated convertible debentures 35,000 35,000
Future income taxes 22,761 14,805
---------- -----------
Total liabilities 485,610 475,752
---------- -----------

Commitments and Contingencies

Shareholders' equity
Share capital 267,150 259,617
Contributed surplus 15,830 12,681
Cumulative translation account 31,386 26,983
Retained earnings 96,978 82,502
---------- -----------
Total shareholders' equity 411,344 381,783
---------- -----------
Total liabilities and shareholders' equity $896,954 $857,535
---------- -----------
---------- -----------


HUB INTERNATIONAL LIMITED
Consolidated Statements of Cash Flows
For the three months and nine months ended September 30, 2005 and 2004
(in thousands of U.S. dollars)


Third quarter First nine months
--------------------- ----------------------
2005 2004 2005 2004
--------------------- ----------------------
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Operating activities
Net earnings (loss) $(741) $1,146 $20,007 $22,360
Items not affecting cash:
Amortization and
depreciation 4,267 3,866 12,229 8,900
Gain on disposal of
subsidiaries,
property, equipment and
other assets (229) (981) (2,623) (1,540)
Compensation for Talbot
earnout - non-cash
stock based 4,289 6,889 13,691 6,889
Other non-cash stock based
compensation 1,565 1,457 5,300 4,772
Gain on forgiveness of
debt - - (4,500) -
Loss on write-off of
trademarks - - - 2,587
Future income taxes 1,742 (2,077) 846 (1,570)
Non-cash working capital
items
Trust cash 8,169 1,850 13,933 1,867
Accounts and other
receivables 71,316 54,259 29,193 40,669
Prepaid expenses (1,233) (203) (2,149) (3,837)
Accounts payable and
accrued liabilities (64,168) (50,118) (44,368) (49,628)
Compensation for Talbot
earnout - cash (13,147) - (6,634) -
Other assets 129 128 387 384
Income taxes (3,518) (837) 1,074 (981)
--------------------- ----------------------
Net cash flows from
operating activities 8,441 15,379 36,386 30,872
--------------------- ----------------------

Investing activities
Property and equipment -
purchases (2,057) (2,086) (4,714) (4,993)
Property and equipment -
proceeds on sale 6 60 20 142
Purchase of
subsidiaries, net of
cash received (10,259) (78,495) (18,418) (90,385)
Sale of subsidiaries 1,007 1,895 4,863 6,062
Other assets 580 34 5,102 388
--------------------- ----------------------
Net cash flows (used
for) investing
activities (10,723) (78,592) (13,147) (88,786)
--------------------- ----------------------

Financing activities
Long-term debt and
capital leases -
advances 10,000 - 10,000 65,000
Long-term debt and
capital leases -
repayments (2,273) (3,449) (7,471) (8,169)
Share capital - issued
for cash, net of issue
costs - - 15 480
Proceeds from exercise
of stock options 1,597 - 2,253 -
Dividends paid (1,851) (1,527) (5,531) (4,570)
--------------------- ----------------------
Net cash flows from
(used for) financing
activities 7,473 (4,976) (734) 52,741
--------------------- ----------------------

Effect of exchange rate
changes on cash and cash
equivalents 2,675 1,770 1,734 1,229
--------------------- ----------------------
Change in cash and cash
equivalents 7,866 (66,419) 24,239 (3,944)
Cash and cash equivalents
- Beginning of period 114,577 144,527 98,204 82,052
--------------------- ----------------------
Cash and cash equivalents
- End of period $122,443 $78,108 $122,443 $78,108
--------------------- ----------------------
--------------------- ----------------------


HUB INTERNATIONAL LIMITED
Compensation for Talbot Earnout and Other non-cash stock based
compensation
For the three months and nine months ended September 30, 2005 and 2004
(in thousands of U.S. dollars)

Compensation for the Talbot earnout including both cash and non-cash
stock based compensation is detailed below.

Non-cash stock based compensation, including both compensation for
Talbot and other non-cash stock based compensation of $5,854 and
$5,168 for the three months ended September 30, 2005 and 2004,
respectively and $18,991 and $8,483 for the nine months ended
September 30, 2005 and 2004, respectively, was expensed with
offsetting credits to contributed surplus, and accounts payable and
accrued liabilities. The Company recognizes the fair value of
non-cash stock based compensation as an expense over the period in
which entitlement to the compensation vests. Shares derived from the
options may be held in escrow and subject to transfer restrictions for
a period of five years from the date the options are granted, subject
to early release in certain circumstances. In the first quarter 2005,
226,000 restricted share units were granted to the Company's Executive
Management Team ("EMT"). In addition, 25,000 restricted share units
were granted in relation to employment agreements entered into by the
Company with other non-EMT employees. In the third quarter 2005,
12,000 restricted share units were granted in connection with an
acquisition.


Other non-cash stock based compensation for the three months and nine
months ended September 30, 2005 and 2004 is comprised of the
following:

Third quarter First nine months
2005 2004 2005 2004
----------------- -----------------
Stock options granted June 2002 $(8) $470 $843 $1,471
Stock options granted February
2003 91 99 281 329
Stock based compensation granted
for 2003 bonuses 758 529 2,272 1,796
Restricted share units 722 359 1,885 1,176
Common shares for acquisitions 2 - 19 -
----------------- -----------------
Total other non-cash stock
based compensation 1,565 1,457 5,300 4,772
----------------- -----------------
----------------- -----------------


Compensation for the Talbot earnout is comprised of the following:

Third quarter First nine months
2005 2004 2005 2004
----------------- -----------------
Cash compensation $3,287 $3,178 $9,800 $3,178
Non-cash stock based
compensation 4,289 3,711 13,691 3,711
----------------- -----------------
Total compensation for the
Talbot earnout $7,576 $6,889 $23,491 $6,889
----------------- -----------------
----------------- -----------------


The Company estimates the non-cash stock based compensation expense
for 2005 through 2010 will be:

Year ended December 31, 2005 2006 2007 2008 2009 2010
------------------------------------------
Stock options granted
June 2002 $843 $- $- $- $- $-
Stock options granted
February 2003 366 - - - - -
Stock based compensation
granted for 2003
bonuses 2,842 2,195 2,105 2,104 2,105 2,047
Common shares for
acquisitions 138 19 5 - - -
------------------------------------------
$4,189 $2,214 $2,110 $2,104 $2,105 $2,047
------------------------------------------
------------------------------------------


The Company estimates the compensation for the Talbot earnout for 2005
through 2010 will be:

Year ended December 31, 2005 2006 2007 2008 2009 2010
-------------------------------------------
Cash compensation $9,800 $- $- $- $- $-
Non-cash stock based 18,103 9,337 1,676 - - -
-------------------------------------------
Total compensation for the
Talbot earnout $27,903 $9,337 $1,676 $- $- $-
-------------------------------------------
-------------------------------------------



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