Hilb Rogal & Hobbs Company Reports Results for 2008 Second Quarter

Business Wire, July 31, 2008

RICHMOND, Va. -- In the release dated July 30, 2008, the Consolidated Balance Sheet should read: June 30, 2008/December 31, 2007 (sted June 30, 2007/December 31, 2008). The corrected Consolidated Balance Sheet is included in the corrected version of the release below.

The corrected release reads:

HILB ROGAL & HOBBS COMPANY REPORTS RESULTS FOR 2008 SECOND QUARTER

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, 2008. On June 8, 2008, HRH and Willis Group Holdings Limited (Willis) announced a definitive agreement providing for the merger of HRH and a wholly-owned subsidiary of Willis. Under the terms of the agreement, if the merger is completed, all of the outstanding shares of HRH common stock will be converted into the right to receive cash, Willis common stock or a combination of cash and stock. The transaction, which is expected to close in the fourth quarter of 2008, is subject to customary closing conditions, including HRH shareholder approval.

Net income for the second quarter 2008 reflected a non-cash $18.4 million ($0.51 per share) intangible asset impairment charge related to HRH Reinsurance Brokers Limited, a London-based reinsurance subsidiary, as a result of the departure of certain key producers prior to the HRH/Willis merger announcement who were responsible for a significant portion of the operation's revenue. Subsequent to the end of the second quarter, the company entered into a revenue sharing agreement with Willis to retain the subsidiary's clients. This operation, which was acquired in 2003 prior to the 2007 acquisition of Glencairn Group Limited, represents less than 0.8% of the company's revenues and less than 1.4% of the company's operating profit for the twelve-month period ended June 30, 2008.

Net income for the second quarter decreased to $1.1 million, or $0.03 per share, compared with $22.2 million, or $0.60 per share, for the same 2007 period. Operating net income decreased to $1.5 million, or $0.04 per share, compared with $22.2 million, or $0.60 per share, for the 2007 second quarter. The second quarter operating net income plus amortization and the intangible asset impairment charge increased on a per share basis by 5.1% from $0.79 per share to $0.83 per share. The operating margin for the 2008 second quarter decreased to 22.7% from 24.6% for the 2007 second quarter.

For the quarter, the continued sharp decline in property and casualty premium rates and the aforementioned intangible asset impairment charge significantly influenced financial results. In addition, the operating earnings per share comparison for the quarter was affected by the dilutive impact from the acquisition of Banc of America Corporate Insurance Agency, LLC (BACIA) ($0.04) and increased professional and claims fees ($0.04), the latter in part related to a legal matter for which the company received a settlement in July 2008 of $9.8 million. These two factors reduced the operating profit margin by 2.5 percentage points in the quarter.

For the 2008 second quarter, total revenues were $210.6 million, compared with $200.1 million in the 2007 second quarter, an increase of 5.3%. Core commissions and fees rose 4.4% to $195.6 million for the quarter, compared with $187.4 million for the same period in 2007. The 2008 second quarter revenue increase reflected acquisitions and new business, offset by the effects of continued declines in property and casualty premium rates. Contingent commissions increased $3.6 million to $12.0 million from the same period in 2007.

Organic growth on core commissions and fees was (5.0)% for the 2008 second quarter. 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 which closed less than one year ago.

For the first six months of 2008, net income was $16.6 million, or $0.46 per share, compared with $47.4 million, or $1.29 per share, in the same period of 2007. Operating net income for the period was $16.8 million, or $0.46 per share, compared with $46.1 million, or $1.25 per share, a year ago. For the period, operating net income plus amortization and the intangible asset impairment charge decreased on a per share basis by 7.9% from $1.64 per share to $1.51 per share. For the six months, the operating margin was 21.5% for 2008 compared with 25.5% for 2007.

In addition to the difficult rate environment and intangible asset impairment charge, the year-to-date results were adversely affected by the dilutive impact from the BACIA acquisition ($0.09); increased professional and claims fees ($0.08), related in part to the aforementioned settlement in July 2008; the timing related to the shift from contingent to supplemental commissions ($0.05); and increased costs related to the employee medical program ($0.02). These four factors reduced the operating profit margin by 3.2 percentage points in the six-month period ended June 30, 2008.