Hilb Rogal & Hobbs Company Reports Third Quarter Results

For the quarter, total revenues were $164.5 million, compared with$153.7 million in the same period last year, an increase of 7.0%.Commissions and fees rose 6.3% to $161.1 million, during the quarter,compared with $151.6 million in the 2004 third quarter. The increasereflects acquisitions, partially offset by a continued decline inproperty and casualty premium rates, the elimination of nationaloverride commissions and lower than normal retention rates primarilyrelated to producer culling.

The company incurred a net loss of $(6.8) million, or $(0.19) pershare, versus net income of $21.3 million, or $0.58 per share, for thesame period last year. The net loss included an after-tax charge of$26.3 million, or $0.73 per share, for previously announced regulatorysettlements and related legal and administrative costs. This chargeprimarily relates to the company's settlement with the ConnecticutAttorney General. The Connecticut settlement provides for a $30million national fund for distribution to HRH's U. S. clients whoelect to participate in the fund. In addition, the charge includesamounts for the legal and administrative costs of complying with thesettlement, and estimated costs for related pending regulatorymatters.

The third quarter operating net income decreased 11.0% to $19.1million, or $0.53 per share, compared with $21.4 million, or $0.59 pershare, for the third quarter last year. Operating net income primarilyreflected higher revenues offset by the elimination of nationaloverride commissions and continued investment in sales and servicetalent.

For the nine months ended September 30, 2005, total revenues wereup 10.9% to $509.9 million from $459.7 million in the same period ayear ago. Commissions and fees increased 10.2% to $499.8 million from$453.7 million last year. The increase in revenues benefited fromacquisitions, partially offset by declining premium rates and thenegative impact of the culling of producers on retention rates. Netincome for the nine months, which included the regulatory charge notedabove, decreased 44.5% to $36.7 million, or $1.01 per share, from$66.1 million, or $1.81 per share, in the same period of 2004.Operating net income decreased 6.2% in the period to $62.7 million, or$1.73 per share, compared with $66.8 million, or $1.83 per share, inthe same period last year. Operating net income benefited from higherrevenues but was lowered by higher legal, compliance and claimsexpenses, investment in new sales and service talent and theelimination of national override commissions. Legal, compliance andclaims expenses for the nine months increased $7.3 million comparedwith the prior year period. These expenditures primarily related tosettled and pending regulatory and legal matters as well as theprotection of restrictive covenants in employment contracts andcompliance with Section 404 of the Sarbanes-Oxley Act, net ofinsurance recoveries on contested claims.

Organic growth is defined as the change in commissions and feesbefore the effect of acquisitions and divestitures. Excludingcontingent and override commissions, organic growth was 0.3% for thethird quarter and (1.1)% for the nine months. Including allcommissions and fees, organic growth was (1.0)% for the third quarterand (1.1)% for the nine months. In addition to volume, organic growthfor a given period reflects the timing of new business and renewals aswell as pricing trends and the economic environment.

The operating margin for the third quarter was 25.0% compared with27.1% for the year-ago quarter. For the nine months, the operatingmargin decreased to 25.8% in 2005 from 27.9% in 2004. The margindecline in both periods was primarily attributable to the eliminationof national override commissions and continued investment in sales andservice talent, and in the year-to-date period, to the higher legal,compliance and claims expenses.

Martin L. (Mell) Vaughan, III, chairman and chief executiveofficer, said, "From an industry perspective, the most significantevents of the quarter were the devastating hurricanes, which refocusedinsurance carriers, brokers and insureds on the nature of risk. We hada number of clients with operations in the areas directly affected,and many of our other clients will be impacted by ensuing rate andcoverage volatility, particularly for property risks. Helping clientsmanage their risks prudently and navigate volatile insurance marketsare the critical services on which our reputation and valueproposition stand."

During the quarter, HRH signed an agreement on industrycompensation issues with the Connecticut State Attorney General'soffice, which distinguishes between brokerage business for whichclients pay fees, and agency business for which underwriters paycommissions. The agreement allows contingent commissions to becollected on agency business, but eliminates them on brokeragebusiness. HRH voluntarily discontinued contingent commissions onbrokerage business effective on January 1, 2005. The agreement alsocalls for HRH to establish a $30 million fund to be distributed toparticipating clients, make enhanced disclosures to clients and adoptadditional corporate governance practices. Vaughan commented, "Theagreement with the Connecticut Attorney General set compliance anddisclosure standards that we consider worthy of adoption across theentire industry. We believe the settlement was in the best interestsof the company, its clients and its shareholders. While there areadditional pending and potential legal and regulatory issues, thesettlement represents a major step toward getting these issues behindus."

Vaughan continued, "While the company completed the acquisition ofKYBA Benefits during the quarter, acquisition closings in the thirdquarter and year to date were lower than expected reflecting, amongother things, the unpredictability of deals and timing in adisciplined acquisition program. While the low end of this year'sexpected range for acquired annualized revenues, $30 million, is stilla possibility, below that level is more probable. Meanwhile, thecompany's interest in acquisitions remains as strong as ever, itspipeline attractive, and its disciplines intact."

Vaughan concluded, "From a company perspective, the highlights ofthe quarter were the promotion of Michael Crowley to president and theappointment of Michael Dinkins as executive vice president and chieffinancial officer. Among his new responsibilities, Mike Crowley isfocusing the regions and the lines of business on restoring positiveoperating earnings and margin comparisons by optimizing ouropportunities and performance. He is also supervising the integrationof the talented professionals who joined HRH over the past year intotheir assigned roles and as catalysts for raising company-wideperformance. Michael Dinkins is providing critical financialleadership in support of our long-term growth and profitabilityobjectives. We are increasingly confident that the investments madeover the past several years in our operating model, product mix,geographic reach, talent and leadership, will pay off in steadyprogress toward those objectives."

Hilb Rogal & Hobbs Company is the eighth largest insurance andrisk management intermediary in the U.S. and tenth largest in theworld. From offices throughout the U.S. and in London, HRH assistsclients in managing risks in property and casualty, employee benefitsand many other areas of specialized exposure. The company is traded onthe New York Stock Exchange, symbol HRH. Additional information aboutHRH, including instructions for the quarterly conference call, may befound at www.hrh.com.

Forward-Looking Statements

The company cautions readers that the statements about thecompany's future operations and business prospects are forward-lookingstatements and are made pursuant to the safe harbor provisions of thePrivate Securities Litigation Reform Act of 1995. Forward-lookingstatements are based upon management's current knowledge andassumptions about future events and involve risks and uncertaintiesthat could cause actual results to differ materially from anticipatedresults. Risk factors and uncertainties that might cause such adifference include, but are not limited to, the following: thecompany's commission revenues are highly dependent on premium ratescharged by insurance underwriters, which are subject to fluctuationbased on the prevailing economic conditions and competitive factorsthat affect insurance underwriters; the level of contingentcommissions is difficult to predict and any material decrease in thecompany's collection of them is likely to have an adverse impact onoperating results; the company has eliminated override commissionseffective for business written on or after January 1, 2005, and it isuncertain whether additional contingent commissions payable to thecompany will offset the loss of such revenues; the company's growthhas been enhanced through acquisitions, which may or may not beavailable on acceptable terms in the future and which, if consummated,may or may not be advantageous to the company; the company's failureto integrate an acquired insurance agency efficiently may have anadverse effect on the company; the general level of economic activitycan have a substantial impact on revenues that is difficult topredict; a strong economic period may not necessarily result in higherrevenues if the volume of insurance business brought about byfavorable economic conditions is offset by premium rates that havedeclined in response to increased competitive conditions; if thecompany is unable to respond in a timely and cost-effective manner torapid technological change in the insurance intermediary industry,there may be a resulting adverse effect on business and operatingresults; the business practices and broker compensation arrangementsof the company and the insurance intermediary industry are subject touncertainty due to investigations by various governmental authoritiesand related private litigation; costs incurred related to the aboveinvestigations and private litigation are uncertain and difficult topredict; and quarterly and annual variations in the company'scommissions and fees that result from the timing of policy renewalsand the net effect of new and lost business production may haveunexpected impacts on the company's results of operations. For moredetails on factors that could affect expectations, see the company'sAnnual Report on Form 10-K for the year ended December 31, 2004 andother reports from time to time filed with or furnished to theSecurities and Exchange Commission.
HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES
COMPARATIVE FINANCIAL ANALYSIS
(In thousands, except per share data)

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2005 2004 2005 2004
----------------------------------------
(Unaudited) (Unaudited)
Revenues
Commissions and fees $161,119 $151,622 $499,808 $453,692
Investment income 1,633 788 4,221 2,099
Other 1,739 1,290 5,834 3,891
----------------------------------------
164,491 153,700 509,863 459,682
Operating expenses
Compensation and employee
benefits 90,742 81,474 274,597 244,344
Other operating expenses 29,893 28,313 95,423 80,290
Depreciation 2,122 2,136 6,402 6,465
Amortization of intangibles 4,783 3,444 14,197 9,125
Interest expense 4,300 2,546 12,097 7,460
Regulatory charge and
related costs(1) 42,320 - 42,320 -
Severance charge(2) - - 1,303 -
Integration costs(3) - 176 764 1,803
----------------------------------------
174,160 118,089 447,103 349,487
----------------------------------------

INCOME (LOSS) BEFORE INCOME
TAXES (9,669) 35,611 62,760 110,195
Income tax expense (benefit) (2,821) 14,262 26,083 44,108
----------------------------------------
NET INCOME (LOSS) $(6,848) $21,349 $36,677 $66,087
========================================

Net Income Per Share:
Basic $ (0.19) $ 0.60 $ 1.03 $ 1.85
========================================
Assuming Dilution $ (0.19) $ 0.58 $ 1.01 $ 1.81
========================================

Dividends Per Share $0.1150 $0.1050 $0.3350 $0.3025
========================================

Weighted Average Shares
Outstanding:
Basic 35,670 35,872 35,755 35,793
========================================
Assuming Dilution 35,670 36,520 36,294 36,480
========================================

(1) The company recorded a regulatory charge representing the
Connecticut settlement, related legal and administrative costs, and
estimated costs for related pending regulatory matters.
(2) The company recorded a severance charge for the quarter ended
June 30, 2005, representing an estimated severance benefit for Robert
B. Lockhart, the company's former president and chief operating
officer, who resigned in May 2005.
(3) Integration costs represent one-time costs including severance
and other employee-related costs, facility and lease termination costs
and branding expenses.

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands)

SEPTEMBER 30, DECEMBER 31,
2005 2004
---------------------------
(Unaudited)

ASSETS
CURRENT ASSETS
Cash and cash equivalents $219,788 $210,470
Receivables (net) 239,912 240,421
Prepaid expenses and other 35,706 24,586
-------------------------------
TOTAL CURRENT ASSETS 495,406 475,477

PROPERTY & EQUIPMENT (NET) 25,374 24,024

INTANGIBLE ASSETS (NET) 768,467 757,942

OTHER ASSETS 26,381 20,556
-------------------------------
$1,315,628 $1,277,999
===============================

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Premiums payable to insurance companies $308,429 $315,130
Accounts payable 12,925 13,417
Accrued expenses 66,138 46,371
Premium deposits and credits due
customers 47,949 48,287
Current portion of long-term debt 12,540 16,248
-------------------------------
TOTAL CURRENT LIABILITIES 447,981 439,453

LONG-TERM DEBT 260,471 265,384

DEFERRED INCOME TAXES 33,658 34,113

OTHER LONG-TERM LIABILITIES 49,008 31,893

SHAREHOLDERS' EQUITY
Common Stock (outstanding 35,774 and
35,886 shares, respectively) 226,635 233,785
Retained earnings 296,654 271,978
Accumulated other comprehensive income 1,221 1,393
-------------------------------
524,510 507,156
-------------------------------
$1,315,628 $1,277,999
===============================

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES
GAAP MEASURES RECONCILIATION
(In thousands, except per share data)

This press release contains references to financial measures that
exclude certain charges and non-recurring items. The company believes
that these adjusted financial measures provide additional measures of
performance that investors can use in evaluating the company's
performance. The schedule below provides a reconciliation of these
financial measures to those prepared in accordance with United States
generally accepted accounting principles (GAAP).


NET INCOME
PER SHARE
ASSUMING
NET INCOME DILUTION
THREE MONTHS THREE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2005 2004 2005 2004
-------------------------------
(Unaudited) (Unaudited)

GAAP NET INCOME (LOSS) $(6,848) $21,349 $(0.19) $0.58
Excluding:
Non-operating gains, net of tax (387) (51) (0.01) --
Regulatory charge and related
costs, net of tax 26,292 -- 0.73 --
Integration costs, net of tax -- 106 -- 0.01
------------------------------
OPERATING NET INCOME $19,057 $21,404 $ 0.53 $0.59
==============================


OPERATING MARGIN OPERATING REVENUE
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2005 2004 2005 2004
-------------------------------------
(Unaudited) (Unaudited)

GAAP NET INCOME (LOSS)/ REVENUE $(6,848) $21,349 $164,491 $153,700
Excluding:
Non-operating gains (900) (85) (900) (85)
Amortization of intangibles 4,783 3,444 -- --
Interest expense 4,300 2,546 -- --
Regulatory charge and related
costs 42,320 -- -- --
Integration costs -- 176 -- --
Income tax expense (benefit) (2,821) 14,262 -- --
-----------------------------------
OPERATING MARGIN / REVENUE $40,834 $41,692 $163,591 $153,615
===================================


HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES
GAAP MEASURES RECONCILIATION
(In thousands, except per share data)

NET INCOME PER
SHARE ASSUMING
NET INCOME DILUTION NINE
NINE MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2005 2004 2005 2004
----------------------------------------
(Unaudited) (Unaudited)

GAAP NET INCOME $36,677 $66,087 $1.01 $1.81
Excluding:
Non-operating gains, net of
tax (1,522) (336) (0.04) (0.01)
Regulatory charge and
related costs, net of tax 26,292 -- 0.73 --
Severance charge, net of tax 782 -- 0.02 --
Integration costs, net of
tax 459 1,082 0.01 0.03
----------------------------------------
OPERATING NET INCOME $62,688 $66,833 $1.73 $1.83
========================================

OPERATING MARGIN OPERATING REVENUE
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2005 2004 2005 2004
------------------------------------
(Unaudited) (Unaudited)

GAAP NET INCOME / REVENUE $ 36,677 $ 66,087 $509,863 $459,682
Excluding:
Non-operating gains (2,791) (560) (2,791) (560)
Amortization of intangibles 14,197 9,125 -- --
Interest expense 12,097 7,460 -- --
Regulatory charge and related
costs 42,320 -- -- --
Severance charge 1,303 -- -- --
Integration costs 764 1,803 -- --
Income tax expense (benefit) 26,083 44,108 -- --
-----------------------------------
OPERATING MARGIN / REVENUE $130,650 $128,023 $507,072 $459,122
===================================

HILB ROGAL & HOBBS COMPANY AND SUBSIDIARIES
GAAP MEASURES RECONCILIATION
(In thousands)

ORGANIC GROWTH
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2005 2004 2005 2004
-------------------------------------
(Unaudited) (Unaudited)

GAAP COMMISSIONS AND FEES $161,119 $151,622 $499,808 $453,692
Commissions and fees from
acquired agencies, net of
divestitures (11,004) -- (51,177) --
-------------------------------------
COMMISSIONS AND FEES,
EXCLUDING THE EFFECT OF
REVENUES FROM ACQUIRED/
DIVESTED AGENCIES $150,115 $151,622 $448,631 $453,692
=====================================

ORGANIC GROWTH,
NET OF CONTINGENT AND OVERRIDE COMMISSIONS
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2005 2004 2005 2004
------------------------------------------
(Unaudited) (Unaudited)



GAAP COMMISSIONS AND FEES $161,119 $151,622 $499,808 $453,692
Contingent and override
commissions (2,957) (4,366) (47,633) (39,435)
Commissions and fees from acquired
agencies, net of divestitures (10,434) -- (42,568) --
COMMISSIONS AND FEES, NET OF
CONTINGENT AND OVERRIDE
COMMISSIONS, EXCLUDING
THE EFFECT OF REVENUES
FROM ACQUIRED/DIVESTED ------------------------------------
AGENCIES $147,728 $147,256 $409,607 $414,257
====================================