This filing is made pursuant
to Rule 424(b)(3) under the
Securities Act of 1933, as
amended, in connection with
Registration No. 333-50018.
PROSPECTUS
6,469,470 Shares
[LOGO]
Hilb, Rogal and Hamilton Company
Common Stock
This prospectus relates to 6,469,470 shares of our common stock that we
may offer and issue from time to time in connection with acquisitions of
independent insurance agencies and other businesses or assets.
This prospectus updates and replaces our prospectus dated June 18, 2001
with respect to 3,234,735 shares of our common stock. The number of shares of
our common stock to which this prospectus relates reflects a 2-for-1 common
stock split effective December 31, 2001. As of December 3, 2002, 4,596,402 of
the 6,469,470 shares of our common stock remain reserved or available for
issuance.
See "Risk Factors" beginning on page 3 for a discussion of certain
factors that should be considered in connection with an investment in shares of
our common stock.
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Our common stock is listed on the New York Stock Exchange under the
symbol "HRH." On December 3, 2002, the closing sales price of our common stock
as reported on the New York Stock Exchange was $38.00 per share.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is December 3, 2002.
TABLE OF CONTENTS
Page
Incorporation of Information that We File with the SEC........2
Risk Factors..................................................3
Forward-Looking and Cautionary Statements.....................6
The Company...................................................7
Use of Proceeds...............................................7
Plan of Distribution..........................................8
Restrictions on Resales.......................................8
Experts.......................................................9
Legal Matters................................................10
Where You Can Find More Information..........................10
INCORPORATION OF INFORMATION THAT WE FILE WITH THE SEC
This prospectus incorporates by reference important business and
financial information that we file with the SEC and that we are not including in
or delivering with this prospectus. As the SEC allows, incorporated documents
are considered part of this prospectus, and we can disclose important
information to you by referring you to those documents.
We incorporate by reference the documents listed below, which have been
filed with the SEC:
* Our Annual Report on Form 10-K for the year ended December 31, 2001;
* Those portions of our 2001 Annual Report to Shareholders and Proxy
Statement for the Annual Meeting of Shareholders held on May 7, 2002
that have been incorporated by reference into our Form 10-K;
* Our Quarterly Reports on Form 10-Q for the periods ended
March 31, 2002, June 30, 2002 and September 30, 2002;
* Our Current Reports on Form 8-K dated May 13, 2002 and July 1, 2002;
and
* The description of our common stock as set forth in our Current
Report on Form 8-K dated January 23, 2001.
We also incorporate by reference all documents filed with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after
the date of this prospectus and prior to the termination of this offering.
Information in this prospectus supersedes related information in the documents
listed above, and information in subsequently filed documents supersedes related
information in both this prospectus and the incorporated documents.
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We will promptly provide, without charge to you, upon written or oral
request, a copy of any or all of the documents incorporated by reference in this
prospectus, other than exhibits to those documents, unless the exhibits are
specifically incorporated by reference in those documents. Requests should be
directed to:
Walter L. Smith, Esquire
Senior Vice President and General Counsel
Hilb, Rogal and Hamilton Company
4951 Lake Brook Drive, Suite 500
Glen Allen, Virginia 23060
Telephone: (804) 747-6500
Facsimile: (804) 747-3194
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. No one else is authorized to
provide you with different information. We are not making an offer of shares of
our common stock in any state where the offer is not permitted. You should not
assume that the information in this prospectus or any supplement is accurate as
of any date other than the date on the front of those documents because our
financial condition and results may have changed since that date.
RISK FACTORS
Before you invest in shares of our common stock, you should be aware of
various risks, including the risks described below. You should carefully
consider these risk factors, together with all of the other information included
in, or incorporated by reference into, this prospectus, before you decide
whether to purchase shares of our common stock.
Because our commission revenues are based on premiums set by insurers, any
decreases in these premium rates could result in revenue decreases for us.
We are engaged in insurance agency and brokerage activities and derive
revenues primarily from commissions on the sale of insurance products to clients
that are paid by the insurance underwriters with whom our offices place their
clients' insurance. These commissions are based on the premiums that the
insurance underwriters charge, and we do not determine insurance premium rates.
In addition, these premiums historically have been cyclical in nature and have
displayed a high degree of volatility based on the prevailing economic and
competitive factors that affect insurance underwriters. These factors, which are
not within our control, include the capacity of insurance underwriters to place
new business, non-underwriting profits of insurance underwriters, consumer
demand for insurance products, the availability of comparable products from
other insurance underwriters at a lower cost and the availability of alternative
insurance products, such as government benefits and self-insurance plans, to
consumers.
We cannot predict the timing or extent of future changes in premiums
and thus commissions. As a result, we cannot predict the effect that future
premium rates will have on our operations. While increases in premium rates may
result in revenue increases for us,
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decreases in premium rates may result in revenue decreases for us. These
decreases may adversely affect our results of operations for the periods in
which they occur.
Carrier override and contingent commissions are difficult to predict, and any
decreases in our collection of them may have an impact on our operating results
that we are unable to anticipate.
We derive a portion of our revenues from carrier override and
contingent commissions based upon the terms of the contractual relationships
between the insurance underwriters and our offices. Carrier override commissions
are commissions paid by insurance underwriters in excess of the standard
commission rates on specific classes of business. These amounts are not
contingent on achieving a specific premium volume or profitability of the
business. Contingent commissions are commissions paid by insurance underwriters
and are based on the estimated profit that the underwriter makes on the overall
volume of business that we place with it. We generally receive these contingent
commissions in the first and second quarters of each year. In the aggregate,
carrier override and contingent commissions generally account for five to ten
percent of our total revenues.
Due to the nature of these commissions, it is difficult for us to
predict their payment. Increases in loss ratios experienced by insurance
carriers will result in a decreased profit to them and may result in decreases
in the payment of contingent commissions to us. Furthermore, we have no control
over insurance carriers' ability to estimate loss reserves, which affects our
profit-sharing calculation. In addition, tightening of underwriting criteria by
certain insurance underwriters, due in part to the high loss ratios, may result
in a lower volume of business that we are able to place with them. Carrier
override and contingent commissions affect our revenues, and decreases in their
payment to us may have an adverse effect on our results of operations.
We expect our continued growth to be enhanced through acquisitions of insurance
agencies, but we may not be able successfully to identify and attract suitable
acquisition candidates and complete acquisitions.
Our strategic plan includes the regular and systematic evaluation and
acquisition of insurance agencies and, since 1984, we have acquired
approximately 200 independent agencies. While we generally expect our revenues
to increase over time from internal growth, acquisitions directly enhance our
revenue growth.
There can be no assurance, however, that we will be able to identify
and attract suitable acquisition candidates successfully that will permit us to
expand into new or existing markets. We are unable to predict whether or when
any prospective acquisition candidates will become available or the likelihood
that any acquisition will be completed once negotiations have commenced. We
compete for acquisition and expansion opportunities with entities that have
substantially greater resources than we do. The failure to acquire additional
agencies at the same rate that we have in the past may adversely affect the
expected growth in our operating revenues.
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Any failure to integrate an acquired insurance agency efficiently may have an
adverse effect on our operations.
The integration of an acquisition may involve a number of factors that
may affect our operations. These factors include diversion of management's
attention, difficulties in the integration of acquired operations and retention
of personnel, entry into unfamiliar markets, unanticipated problems or legal
liabilities and tax and accounting issues. Furthermore, once we have integrated
an acquired insurance agency, the office may not achieve levels of revenue,
profitability or productivity comparable to our existing locations, or otherwise
perform as expected. However, the failure to integrate one or more acquired
agencies so that they achieve expected performance goals may have a material
adverse effect on our results of operations and financial condition.
The general level of economic activity can have an impact on our business that
is difficult to predict; a strong economic period may not necessarily result in
higher revenues for us.
The volume of insurance business available to our offices has
historically been influenced by factors such as the health of the overall
economy. The specific impact of the health of the economy on our revenues,
however, can be difficult to predict. When the economy is strong, insurance
coverages typically increase as payrolls, inventories and other insured risks
increase. Insurance commissions to our offices generally would be expected to
increase. As discussed above, however, our commission revenues are dependent on
premium rates charged by insurers, and these rates are subject to fluctuation
based on prevailing economic and competitive conditions. As a result, the higher
commission revenues that our company generally would expect to see in a strong
economic period may not necessarily occur, as any increase in the volume of
insurance business brought about by favorable economic conditions may be offset
by premium rates that have declined in response to increased competitive
conditions, among other factors.
If we are unable to respond in a timely and cost-effective manner to rapid
technological change in our industry, there may be a resulting adverse effect on
our business and operating results.
The insurance industry is increasingly influenced by rapid
technological change, frequent new product and service introductions and
evolving industry standards. For example, the insurance brokerage industry has
increased use of the internet to communicate benefits and related information to
consumers and to facilitate business-to-business information exchange and
transactions. We believe that we have responded to these changes in the industry
quickly and in a timely manner. We actively explore the opportunities that
information technology affords the insurance brokerage industry and, in
particular, the operations of our offices. We are specifically expanding our
technological communications through HRH Online, a management tool that allows
our clients to view their accounts and coverages and make changes online.
We believe that our future success will depend on our ability to
continue to anticipate technological changes and to offer additional product and
service opportunities that meet evolving standards on a timely and
cost-effective basis. In the past three calendar years, we have
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spent approximately $10.8 million on computer software and hardware. We believe
that the development and implementation of new technologies will require
additional investment of our capital resources in the future. We have not
determined, however, the amount of resources and the time that this development
and implementation may require. There is a risk that we may not successfully
identify new product and service opportunities or develop and introduce these
opportunities in a timely and cost-effective manner. In addition, opportunities
that our competitors develop or introduce may render our products and services
noncompetitive. As a result, we can give no assurances that technological
changes that may affect our industry in the future will not have a material
adverse effect on our business and operating results.
Quarterly and annual variations in our commissions that result from the timing
of policy renewals and the net effect of new and lost business production may
have unexpected impacts on our results of operations.
Our commission income, which typically accounts for approximately 90%
of our total annual revenues, is subject to both quarterly and annual
fluctuations as a result of the timing of policy renewals and the net effect of
new and lost business production. The factors that cause these fluctuations are
not within our control. Specifically, consumer demand for insurance products can
influence the timing of renewals, new business and lost business, which includes
generally policies that are not renewed, and cancellations. These fluctuations
in our commission income may be difficult to predict for any period.
FORWARD-LOOKING AND CAUTIONARY STATEMENTS
We caution you that this prospectus includes "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 and is subject to the safe harbor created by that act. Among other
things, these statements relate to our financial condition, results of
operations and business. These forward-looking statements are generally
identified by the words or phrases "would be," "will allow," "expects to," "will
continue," "is anticipated," "estimate," "project" or similar expressions.
While we provide forward-looking statements to assist in the
understanding of our anticipated future financial performance, we caution
readers not to place undue reliance on any forward-looking statements, which
speak only as of the date that we make them. Forward-looking statements are
subject to significant risks and uncertainties, many of which are beyond our
control. Although we believe that the assumptions underlying our 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 these
forward-looking statements for a variety of reasons.
We have included risk factors and uncertainties that might cause
differences between anticipated and actual future results in the "Risk Factors"
section of this prospectus beginning on page 3.
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THE COMPANY
We serve as an intermediary between our clients and insurance companies
that underwrite client risks. Through our network of over 100 offices in the
United States, we assist clients in managing their risks in areas such as
property and casualty, executive and employee benefits and other areas of
specialized exposure.
Our client base ranges from personal to large national accounts and is
primarily comprised of middle-market and top-tier commercial and industrial
accounts. Middle-market businesses are generally businesses that do not have
internal risk management departments and outsource that function to an
intermediary. Top-tier businesses, which may have risk management departments,
typically generate annual commissions and fees in excess of $50,000.
Insurance commissions typically account for approximately 89% to 91% of
our total revenues. We also advise clients on risk management and employee
benefits and provide claims administration and loss control consulting services
to clients, which account for approximately 6% to 8% of our annual revenues.
We have grown historically principally through acquisitions of
independent insurance intermediaries with significant local market shares in
metropolitan areas. Since 1984, we have acquired approximately 200 independent
intermediaries. Since 1997, our acquisition program has been focused on
established independent intermediaries that fit into our current operating
models and strategic plans and targets entities that strengthen our regional
operating platforms and middle-market position or add to our specialty lines of
business and increase our range of services. Our offices are staffed by local
professionals with the centralization of certain administrative functions to
allow our staff to focus on business production and retention. We believe that a
key to our success has been a strong emphasis on local client service by
experienced personnel with established community relations.
Our offices act as independent agents representing a large number of
insurance companies, which gives us access to specialized products and capacity
needed by our clients. Our offices and regions are staffed to handle the broad
variety of insurance needs of their clients. Additionally, certain offices and
regions have developed special expertise in areas such as professional
liability, equipment maintenance and construction, and this expertise is made
available to clients throughout the regions and our network.
Our corporate headquarters are located at 4951 Lake Brook Drive, Suite
500, in Glen Allen, Virginia 23060, and our telephone number is (804) 747-6500.
USE OF PROCEEDS
This prospectus relates to shares of our common stock that may be
offered and issued by us from time to time in connection with acquisitions by us
of independent insurance agencies and other businesses or assets. We do not
expect to receive any cash proceeds from the sale of these shares of common
stock.
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PLAN OF DISTRIBUTION
This prospectus relates to 6,469,470 shares of our common stock that we
may offer and issue from time to time in connection with acquisitions of
independent insurance agencies and other businesses or assets. The consideration
for these acquisitions may consist of shares of our common stock, cash, notes or
other evidences of debt, assumption of liabilities or any combination of these
or other items.
The amount and type of the consideration that we will offer and the
other specific terms of each acquisition will be determined by negotiations with
the owners or controlling persons of the independent agencies and other
businesses or assets to be acquired after taking into account the current and
anticipated future value of these businesses or assets, along with all other
relevant factors. These factors may include the following items:
* the established quality and reputation of the business and its
management;
* gross commission revenues;
* earning power;
* cash flow;
* growth potential;
* location of the business and properties to be acquired; and
* geographical and service diversification resulting from the
acquisition.
We expect that any shares of our common stock issued to the owners of these
businesses or assets to be acquired will be valued at a price reasonably related
to the current market value of our common stock either at the time an agreement
is reached regarding the terms of the acquisition or upon delivery of the
shares.
We will pay all expenses of this offering. We will not pay underwriting
discounts or commissions in connection with issuing these shares, although we
may pay finder's fees in specific acquisitions. Any person receiving a finder's
fee may be deemed an underwriter within the meaning of the Securities Act of
1933.
We may be required to provide further information with respect to a
specific acquisition by means of a post-effective amendment to the registration
statement or a supplement to this prospectus once we know the actual information
concerning the acquisition. Any post-effective amendment must become effective
under the Securities Act before we may sell any additional shares of our common
stock by means of this prospectus.
RESTRICTIONS ON RESALES
Shares of common stock that we issue under this prospectus to the
shareholders or owners of independent insurance agencies and other businesses
may be subject to substantial resale restrictions. These restrictions may depend
on whether we have obtained from the
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acquired business and filed with the SEC both financial statements for the
acquired business, some of which may need to be audited depending on the
financial significance of the business to us, and pro forma financial
information with respect to us that reflects the acquisition.
Shareholders and owners that are deemed to be "affiliates" of the
acquired business generally may make resales of the common stock that they
acquired from us under this prospectus in accordance with Rule 145(d) of the
Securities Act of 1933. The SEC, however, will not permit these affiliates to
make resales until we have filed the required financial statements and pro forma
financial information described above. In addition, affiliates of the acquired
business who have become affiliates of us following the acquisition may make
resales of common stock only in compliance with Rule 144 of the Securities Act.
Shareholders and owners that are not deemed to be affiliates of the acquired
business or of us following the acquisition generally may make resales of the
common stock that they acquired from us without restriction.
To the extent that it is not practicable to prepare and present the
required financial information, neither affiliates nor non-affiliates of the
acquired business may make resales of common stock until we have filed with the
SEC financial statements for us that cover an appropriate period of time and
that reflect the acquisition as required by SEC accounting regulations.
All shareholders and owners should seek the advice of their own counsel
with respect to the legal requirements for any resales.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule incorporated by reference or included in our
Annual Report on Form 10-K for the year ended December 31, 2001, as set forth in
their report, which we have incorporated by reference in this prospectus and
elsewhere in the registration statement. Our financial statements and schedule
are incorporated by reference in reliance on Ernst & Young LLP's report, given
on their authority as experts in accounting and auditing.
Ernst & Young LLP, independent auditors, have audited the combined
financial statements of Hobbs Group, LLC at December 31, 2001 and 2000 and for
each of the three years in the period ended December 31, 2001, included in our
Current Report on Form 8-K dated July 1, 2002, as set forth in their report,
which we have incorporated by reference in this prospectus and elsewhere in the
registration statement. The financial statements of Hobbs Group, LLC are
incorporated by reference in reliance on Ernst & Young LLP's report, given on
their authority as experts in accounting and auditing.
Documents that we have not yet filed and that we have incorporated by
reference into this prospectus will include financial statements, related
schedules (if required) and auditors' reports. Those financial statements and
schedules will have been audited to the extent and for the periods set forth in
those reports by the firm or firms rendering the reports and, to the extent so
audited
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and consent to incorporation by reference is given, will be incorporated by
reference in reliance upon those reports given upon the authority of the firm or
firms as experts in accounting and auditing.
LEGAL MATTERS
Williams Mullen, A Professional Corporation, Richmond, Virginia, our
counsel, will pass upon the validity of the shares of our common stock to be
issued by us through this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the information requirements of the Securities
Exchange Act of 1934, and we file annual, quarterly and current reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any document that we file at the SEC's public reference
room facility located at 450 Fifth Street, N.W., Washington, D.C. 20549. Please
call the SEC at 1-800-SEC-0330 for further information on the public reference
room. The SEC maintains an internet site at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
issuers, including us, that file documents with the SEC electronically through
the SEC's electronic data gathering, analysis and retrieval system known as
EDGAR.
Our common stock is listed on the New York Stock Exchange under the
symbol "HRH." Our reports, proxy statements and other information may also be
reviewed at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
This prospectus is part of a registration statement filed by us with
the SEC. Because the rules and regulations of the SEC allow us to omit certain
portions of the registration statement from this prospectus, this prospectus
does not contain all the information set forth in the registration statement.
You may review the registration statement and the exhibits filed with the
registration statement for further information regarding us and the shares of
our common stock being sold by this prospectus. The registration statement and
its exhibits may be inspected at the public reference facilities of the SEC at
the addresses set forth above.
We also maintain an Internet site at www.hrh.com, which contains
information relating to us and our business.
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6,469,470 Shares
[LOGO]
Hilb, Rogal and Hamilton Company
Common Stock
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PROSPECTUS
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December 3, 2002
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