HUB INTERNATIONAL LTD - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended: June 30, 2002 Commission file number: 1-31310

HUB INTL. LOGO

HUB INTERNATIONAL LIMITED

(Exact name of registrant as specified in its Charter)

ONTARIO, CANADA 36-4412416
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
55 EAST JACKSON BOULEVARD, CHICAGO, 60604
ILLINOIS
(Zip Code)
(Address of principal executive offices)

(877) 402-6601

Registrant's telephone number, including area code

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes [ ] No [X]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

CLASS OUTSTANDING AT AUGUST 14, 2002
Common stock, no par value 28,564,118

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HUB INTERNATIONAL LIMITED

INDEX

2 HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2002

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

HUB INTERNATIONAL LIMITED
CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2002 AND DECEMBER 31, 2001
(IN THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)

(the accompanying notes form an integral part of the interim financial
statements)

INTERIM REPORT JUNE 30, 2002 HUB INTERNATIONAL LIMITED 3

HUB INTERNATIONAL LIMITED
CONSOLIDATED STATEMENTS OF EARNINGS

FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(IN THOUSAND OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

(the accompanying notes form an integral part of the interim financial
statements)

4 HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2002

HUB INTERNATIONAL LIMITED
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(IN THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)

(the accompanying notes form an integral part of the interim financial
statements)

INTERIM REPORT JUNE 30, 2002 HUB INTERNATIONAL LIMITED 5

HUB INTERNATIONAL LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS AND SIX MONTHS ENDED
JUNE 30, 2002 AND 2001
(IN THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)

(the accompanying notes form an integral part of the interim financial
statements)

6 HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2002

HUB INTERNATIONAL LIMITED
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS OR AS OTHERWISE
INDICATED)

1. NATURE OF OPERATIONS

BUSINESS OPERATIONS
Hub International Limited (the "Company") is an international insurance
brokerage that provides a variety of property and casualty, life and health,
employee benefits, investment and risk management products and services. The
Company's shares are listed on both the Toronto Stock Exchange (TSX: HBG) and
the New York Stock Exchange (NYSE: HBG).

INITIAL U.S. PUBLIC OFFERING
In June 2002, the Company completed its initial U.S. public offering ("U.S.
IPO") of 6.9 million common shares at a price of $14 per share. The cash
proceeds of the offering, net of issue costs of $8.5 million, were approximately
$88.1 million, of which approximately $86.0 million was used to repay bank debt,
long-term debt and a convertible subordinated debenture.

CHANGE IN REPORTING CURRENCY
The Company's consolidated financial statements historically have been expressed
in Canadian dollars. Effective September 30, 2001, the Company adopted the U.S.
dollar as its reporting currency. Comparative financial information has been
restated in U.S. dollars using the translation of convenience method. At
September 30, 2001, all historical financial statements, including financial
results for the three months and the six months ending June 30, 2001, were
converted from Canadian to U.S. dollars at the exchange rate in effect at
September 30, 2001 of one Canadian dollar to 0.6338 U.S. dollar.

BUSINESS COMBINATIONS
Acquisitions of subsidiaries have been accounted for using the purchase method,
whereby the results of acquired companies are included only from the date of
acquisition.

Effective June 28, 2001, the Company acquired Kaye Group Inc. (Kaye). Kaye,
primarily an insurance broker, also underwrote insurance risks through its
subsidiaries, Old Lyme Insurance Company of Rhode Island Inc. and Old Lyme
Insurance Company, Ltd. (collectively Old Lyme). The Company indicated prior to
the effective date of the acquisition that it intended to find a purchaser for
the Old Lyme operations as soon as possible after closing.

At December 31, 2001, the net assets and liabilities of Old Lyme were recorded
at their original cost as an investment held for sale in the Company's
consolidated balance sheet. The net earnings of the Old Lyme operations from the
date of acquisition in June, 2001 have been excluded from the Company's
consolidated statements of earnings. On December 31, 2001, the Company entered
into a stock purchase agreement with Fairfax Inc. to sell all of the issued and
outstanding shares of Old Lyme, pending regulatory approval. Fairfax Inc. is a
subsidiary of Fairfax Financial Holdings Limited (Fairfax), which owns
approximately 27.9% of the Company's outstanding shares as of June 30, 2002. The
sale of Old Lyme to Fairfax Inc. was completed on May 30, 2002. The agreed upon
purchase price (which is considered to be fair market value) was Old Lyme's
December 31, 2001 shareholder's equity of approximately $42.8 million determined
in accordance with accounting principles generally accepted in the United States
of America (U.S. GAAP), plus interest at four percent per annum from January 1,
2002 until May 30, 2002, resulting in total sale proceeds of approximately $43.5
million. The difference between the actual purchase price and the carrying
amount of the investment held for sale was recorded as a gain on the sale of
investment during the second quarter in the amount of approximately $2.6
million. This gain was not taxable. Approximately $36.5 million of the sale
proceeds were used to repay bank debt. As a result of agreements entered into
with Fairfax Inc. on the closing of the sale of Old Lyme, the Company is
eligible to earn contingent commissions from Fairfax Inc. related to loss ratios
on premium volume placed with Old Lyme.

INTERIM REPORT JUNE 30, 2002 HUB INTERNATIONAL LIMITED 7

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The interim consolidated financial statements do not include all disclosures
required by Canadian generally accepted accounting principles (Canadian GAAP)
for annual financial statements and accordingly, should be read in conjunction
with the Company's consolidated financial statements for the year ended December
31, 2001 as set out on pages 12 to 45 of the Company's 2001 Annual Report. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation of the accompanying
financial statements have been reflected therein. These interim consolidated
financial statements of the Company are expressed in United States (U.S.)
dollars and have been prepared in accordance with Canadian GAAP using the same
accounting principles as were used for the Company's consolidated financial
statements for the year ended December 31, 2001, except as noted below. Canadian
GAAP differs in certain respects from U.S. GAAP and to the extent that these
differences affect the Company, the differences are described in note 11
"Reconciliation to U.S. GAAP."

GOODWILL
Effective January 1, 2002, the Company adopted the Canadian Institute of
Chartered Accountants (CICA) Accounting Standards Board Handbook Section 3062,
"Goodwill and Other Intangible Assets" (Section 3062) without restatement of
prior periods.

Goodwill and intangible assets with indefinite useful lives are no longer
amortized but are subject to impairment tests on at least an annual basis.
Goodwill is allocated to reporting units and any potential goodwill impairment
is identified by comparing the carrying value of a reporting unit with its fair
value. If any potential impairment is indicated, it is quantified by comparing
the carrying value of goodwill to its fair value, based on the fair value of the
assets and liabilities of the reporting unit.

Intangible assets, other than goodwill, which do not have indefinite lives are
amortized over their useful lives. These intangible assets are subject to an
annual impairment test comparing carrying values to net recoverable amounts.

In accordance with Section 3062, the Company has completed its impairment
testing on the balance of goodwill and intangible assets with an indefinite life
as of January 1, 2002. Based on the testing, no impairment losses were incurred
for the three months and the six months ended June 30, 2002.

As required under Section 3062, no goodwill amortization expense was incurred
for the three months and the six months ended June 30, 2002. For the three
months and the six months ended June 30, 2001, the Company incurred goodwill
amortization expense of $906 and $1,677 before tax and approximately $761 and
$1,434 after tax ($0.04 and $0.08 per share), respectively.

The effect of the adoption of Section 3062 on net earnings and earnings per
share for the three months and the six months ended June 30, 2002 and 2001 was
as follows:

8 HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2002

ACCOUNTING POLICY FOR STOCK BASED COMPENSATION PLANS
The Company accounts for stock options awarded to employees under its equity
incentive plan using the intrinsic value method of accounting. The Company has
disclosed pro-forma net earnings and pro-forma earnings per share as if the fair
value method of accounting has been used for stock options granted after January
1, 2002 in note 9.

3. EARNINGS PER SHARE
Basic earnings per share, excluding the dilutive effect of common share
equivalents, is calculated by dividing net earnings by the weighted average
number of common shares outstanding for the period. Diluted earnings per share
is calculated using the treasury stock method and includes the effects of all
potentially dilutive securities. Stock options under the equity incentive plan
are anti-dilutive for the three months and six months ended June 30, 2002 and
are not included in the calculation of diluted earnings per share as the
exercise price of the options exceeds the average market price of the Company's
common shares for the period that the options were outstanding. Earnings per
common share has been compiled below:

4. COMMITMENTS AND CONTINGENCIES
(a) Under certain circumstances, the Company may be obligated to purchase loans
for officers, directors and employees from a Canadian chartered bank
totaling $5,636 and $5,542 as of June 30, 2002 and December 31, 2001,
respectively, to assist in purchasing common shares of the Company. As
collateral, the employees have pledged 652 and 669 common shares as of June
30, 2002 and December 31, 2001, respectively, which have a market value of
$9,762 and $6,389 as of June 30, 2002 and December 31, 2001, respectively.
Interest in the amount of $66 and $127 for the three months and six months
ended June 30, 2002 and $105 and $222 for the respective periods in 2001 on
the loans was paid by the Company.

(b) The Company has committed to award, under the Company's equity incentive
plan, an aggregate of 266 restricted shares that will be paid for by the
participants, subject to the provisions of the Sarbanes-Oxley Act of 2002,
with loans either from the Company or from a bank and guaranteed by the
Company, and an aggregate of 471 restricted share units that are
exercisable for common shares, without payment of cash consideration. As of
June 30, 2002, no restricted shares or restricted share units had been
awarded or issued.

(c) The former owners of Burnham Insurance Group, Inc. could be entitled to
contingent consideration in the event that the acquired Burnham operations
meet certain profitability targets for the twelve-month period

INTERIM REPORT JUNE 30, 2002 HUB INTERNATIONAL LIMITED 9

ended December 31, 2002. The contingent consideration to be issued, if the
profitability criteria are met, shall be a portion of actual profitability in
excess of the target. Any contingent consideration issued by the Company shall
be paid 38% in cash, 51% in restricted common shares of the Company, and
11% in unrestricted common shares of the Company.

Contingent consideration may also be issued in connection with the
acquisition of J. P. Flanagan Corporation as follows:

An additional $400 of contingent consideration, based primarily on revenue
targets, may also be issued in connection with other acquisitions made by
the Company in 2001.

(d) In the ordinary course of business, the Company and its subsidiaries are
subject to various claims and lawsuits consisting primarily of alleged
errors and omissions in connection with the placement of insurance. In the
opinion of management, the ultimate resolution of all asserted and potential
claims and lawsuits will not have a material adverse effect on the
consolidated financial position or results of operations of the Company.

5. DISPOSITIONS
During the second quarter of 2002, the Company sold assets and shares of certain
insurance brokerages for approximately $1,758. The gain on these sales was
approximately $163. These dispositions are not material to the consolidated
financial statements.

6. OTHER INTANGIBLE ASSETS AND GOODWILL
As of June 30, 2002 and December 31, 2001 the gross carrying amount and
accumulated amortization of intangible assets were as follows:

The Company is unable to estimate the useful life of non-competition covenants
and trademarks. These indefinite life intangible assets will be reviewed at
least annually for impairment. Once a non-competition covenant is triggered, the
Company's policy is to amortize the related intangible asset over the remaining
period of the contractual obligation.

10 HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2002

The changes in the carrying amount of goodwill for the three months and the six
months ended June 30, 2002, are as follows:

For the three months and six months ended June 30, 2002 and 2001, amortization
was comprised of the following:

We estimate that our amortization charges for 2002 through 2006 for all
acquisitions consummated to date will be:

7. DEBT
Bank debt

At June 30, 2002 the Company has two separate credit facilities:

(a) $25 million facility. Borrowings under this facility are accessed at a
floating rate of 135 basis points above LIBOR. This facility is guaranteed
by certain of the Company's subsidiaries and by Fairfax. The Company fully
repaid this facility with proceeds from the sale of Old Lyme. At June 30,
2002 no amount was drawn on this facility. This facility expired on July
18, 2002.

(b) $25 million facility. Borrowings under this facility are accessed either at
a floating rate of 150 basis points above LIBOR, (maximum of $23.5 million)
or at a fixed interest rate of 9% (maximum of $1.5 million). This facility
is guaranteed by certain of the Company's subsidiaries. The facility subject
to a floating interest rate was repaid with proceeds from the sale of Old
Lyme as well as from the U.S. IPO. As of June 30, 2002 approximately $1.3
million was drawn on the fixed interest rate facility and is included in
long-term debt, due October 31, 2005. As of June 30, 2002, no amounts were
drawn on the floating rate facility. The floating rate facility expired on
July 17, 2002.

The Company fully paid and terminated its $7.9 million facility with the
proceeds from the sale of Old Lyme.

INTERIM REPORT JUNE 30, 2002 HUB INTERNATIONAL LIMITED 11

Long-term debt and capital leases

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* Certain capital assets have been pledged as collateral in amounts not less
than the outstanding balance at June 30, 2002 and December 31, 2001,
respectively.

Revolving U.S. dollar LIBOR loans

Borrowings under this $50 million facility total $10 million and $49.5 million
at June 30, 2002 and December 31, 2001, respectively, and are accessed at a
floating rate of 112.5 basis points above LIBOR. This facility expires on June
20, 2003 and requires the Company to maintain certain financial ratios. The
Company intends to extend the facility for a further period of one year;
however, if the revolving period is not extended, any amounts outstanding will
automatically convert into a three-year term loan at a fixed interest rate equal
to the Canadian dollar interest swap rate quoted by the lender plus 1.375%. The
Company paid down approximately $39.5 million of this facility during the
quarter with the proceeds from the U.S. IPO. At June 30, 2002, $40 million under
this facility remained available to be drawn by the Company. The Company was in
compliance with all financial covenants governing this facility as of June 30,
2002 and December 31, 2001.

12 HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2002

Put Options

Long-term debt includes the estimated value of the financial liability of
$17,885 and $17,274 at June 30, 2002 and December 31, 2001, respectively,
relating to written put option agreements on 2,153 common shares, exercisable at
a price of C$17.00 per share, issued to former owners of brokerages acquired who
are officers and employees of the Company. The put options are exercisable as
follows:

The Company will not be required to settle the liabilities in cash if the common
share price exceeds C$17.00 on each of the above mentioned exercise dates. Any
options not exercised on the exercise date immediately expire.

Subordinated convertible debentures

In connection with the acquisition of Kaye on June 28, 2001, the Company issued
(1) a $28.2 million aggregate principal amount, 8.5% convertible subordinated
debenture due June 28, 2006 to a third party (the third-party note); and (2) $35
million aggregate principal amount, 8.5% convertible subordinated debentures due
June 28, 2007 to certain subsidiaries of Fairfax (the Fairfax notes). These
convertible debentures were dilutive at June 30, 2002 and anti-dilutive to
earnings per share as of December 31, 2001.

The third-party note was fully repaid with the proceeds of the U.S. IPO and as
of June 30, 2002 no amount was outstanding thereunder.

The Fairfax notes are convertible by the holders at any time into the Company's
common shares at C$17.00 per share. Beginning June 28, 2006, the Company may
require conversion of the Fairfax notes into common shares at C$17.00 per share
if, at any time, the weighted average closing price of the Company's common
shares on the TSX for twenty consecutive trading days equals or exceeds C$19.00
per share. If converted, Fairfax would own approximately 35% of the total
outstanding common shares as of June 30, 2002.

Future repayments of long-term debt and capital leases are as follows:

FOR THE TWELVE MONTHS ENDING JUNE 30,
2003........................................................ $ 3,388
2004........................................................ 1,499
2005........................................................ 12,382
2006........................................................ 4,748
2007........................................................ 8,689
2008 and thereafter......................................... 8,027
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$38,733
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INTERIM REPORT JUNE 30, 2002 HUB INTERNATIONAL LIMITED 13

8. SHARE CAPITAL

At June 30, 2002 and December 31, 2001, there were an unlimited number of
non-voting, preferred shares authorized, issuable in series on such terms and
conditions as set by the Board of Directors, of which no shares were issued. At
June 30, 2002 and December 31, 2001, there were an unlimited number of common
shares authorized, of which 28,564 in 2002 and 21,656 in 2001 were issued and
outstanding.

In June 2002, the Company completed its U.S. IPO of 6,900 shares.

9. EQUITY INCENTIVE PLAN

On May 10, 2002, the shareholders of the Company approved an equity incentive
plan under which up to 2,100 awards of common shares may be issued to employees
and directors of the Company. Awards under the plan may be in the form of
restricted shares, restricted share units or stock options. Currently, the
maximum number of awards under the equity incentive plan that may be newly
issued common shares is limited to 500 and the maximum number of common shares
that may be subject to an award granted to participants in any calendar year may
not exceed 1,000 common shares. However, subject to shareholder ratification,
the Company's Board of Directors has approved removing the 500 and 1,000 share
limitations currently in the plan.

The Company has made a commitment to award 266 restricted shares and 471
restricted share units. Subject to the provisions of the Sarbanes-Oxley Act of
2002, the restricted shares will be paid for by the participants with loans
either from the Company or from a bank and guaranteed by the Company. The
Company will pay the interest on the loans on behalf of the participants. The
restricted shares will be held by a trustee in escrow and as security for the
outstanding loan of the respective participant. Subject to payment of the loan,
a participant's entitlement to the release of restricted shares from escrow will
vest at the rate of 10% per year while the participant continues to be employed
by the Company.

Restricted share units are exercisable for common shares, without payment of
cash consideration. Common shares derived from restricted share units will be
subject to transfer restrictions that will cease to apply and, subject to
applicable securities laws, be freely tradable as to 50% after five years and
the balance after ten years of continuous employment.

As of June 30, 2002, no restricted shares or restricted share units have been
awarded or issued.

On June 17, 2002 the Company granted options exercisable for 1,270 common shares
at an exercise price of $15.67 per share, the U.S. dollar equivalent of the
closing price of the Company's common shares on the TSX on that date. The
maximum option term is seven years, and the options vest over three years. No
options were exercised or forfeited from the date of grant through June 30,
2002. Accordingly, at June 30, 2002, 1,270 options were outstanding at a
weighted average exercise price of $15.67.

14 HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2002

If the compensation cost for the stock options had been measured at its fair
value and charged as an expense, net earnings and earnings per share would have
been reduced to the pro-forma amounts indicated below:

The fair value of each option grant was estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions: (i) dividend
yield of 1.15%, (ii) expected volatility range of 30%, (iii) risk-free interest
rate of 4.14% and (iv) expected life of five years.

10. SEGMENTED INFORMATION

The Company is an international insurance brokerage which provides a variety of
property and casualty, life and health, employee benefits, investment and risk
management products and services. In addition to its Corporate Operations, the
Company has two operating segments within its insurance brokerage business:
Canadian Operations and U.S. Operations. Corporate Operations consist primarily
of investment income, unallocated administrative costs, interest expense and the
income tax expense or benefit which is not allocated to the Company's operating
segments. The elimination of intra-segment revenue relates to intra-company
interest charges, management fees and dividends.

INTERIM REPORT JUNE 30, 2002 HUB INTERNATIONAL LIMITED 15

Geographic revenue is determined based upon the functional currency of the
various subsidiaries. Financial information by operating and geographic segment
are as follows:

16 HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2002

11. RECONCILIATION TO U.S. GAAP

The interim consolidated financial statements have been prepared in accordance
with Canadian GAAP which differs in certain respects from U.S. GAAP.

INTERIM REPORT JUNE 30, 2002 HUB INTERNATIONAL LIMITED 17

NET EARNINGS AND COMPREHENSIVE INCOME

The table below represents the differences between Canadian and U.S. GAAP
affecting net earnings and comprehensive insurance for the three months and the
six months ended June 30, 2002 and 2001:

SHAREHOLDERS' EQUITY

The table below sets out the differences between Canadian GAAP and U.S. GAAP
that affect shareholders' equity at June 30, 2002 and December 31, 2001:

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Notes:

(1) Under Canadian GAAP, Old Lyme was recorded as an investment held for sale at
its cost, which was equivalent to its fair value, of $40,938 on June 28,
2001. No further adjustments were made to the carrying value of the
investment until Old Lyme was sold on May 30, 2002, when the Company
recorded a gain of $2,613, equal to the difference between the sale proceeds
(which were agreed to be its net asset value under U.S. GAAP as of December
31, 2001 plus interest at 4% per annum from December 31, 2001 until
disposal) and its carrying value. Interest on debt financing the purchase of
Old Lyme was charged to income as it accrued.

18 HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2002

Under U.S. GAAP, Old Lyme was recorded as an investment held for sale at its
fair value of $40,938. Between acquisition and disposal the carrying value
of the investment was adjusted for increases in fair value due to changes in
its U.S. GAAP net asset value and interest accretion. Such adjustments were
reflected as changes in goodwill arising on the Kaye acquisition. Interest
on debt financing the purchase of Old Lyme was debited to the carrying value
of the investment and did not impact earnings. The difference between the
carrying value of the investment as of the date of disposal and the sale
proceeds was reflected as an adjustment to goodwill arising on the Kaye
acquisition and accordingly no gain or loss was recorded in income.

The impact of the above noted Canadian and U.S. GAAP differences on earnings
were as follows:

(2) The Company's consolidated financial statements historically have been
expressed in Canadian dollars. Effective September 30, 2001, the Company
adopted the U.S. dollar as its reporting currency. Under Canadian GAAP,
comparative financial information has been restated in U.S. dollars using
the translation of convenience method. At September 30, 2001, all historical
financial statements were converted from Canadian to U.S. dollars at the
exchange rate in effect at September 30, 2001 of one Canadian dollar to
0.6338 U.S. dollar. Revenue and expenses subsequent to September 30, 2001
were translated to U.S. dollars at the average exchange rate for the period.

Under U.S. GAAP, historical financial statements are translated using a
different exchange rate, which: for assets and liabilities is the exchange
rate at the balance sheet date; for the income statement is the average
exchange rate for the period; and for the share capital accounts is the
historical exchange rate.

Under Canadian GAAP, foreign exchange differences are included in the
cumulative translation account without adjustment for taxes. Under US GAAP,
foreign exchange differences are included in the cumulative translation
account net of tax.

The aggregate impact of these differences has been presented in the
reconciliation of shareholders' equity for Canadian to U.S. GAAP under the
caption "cumulative translation account."

(3) Under Canadian GAAP, the fair value of the put options (determined using the
Black-Scholes model) issued in connection with the Burnham and Flanagan
acquisitions was allocated to equity instruments on the balance sheet. The
balance of the purchase price was allocated to debt. Changes in the value of
the put options in periods subsequent to the acquisition dates are included
in earnings. Under U.S. GAAP, the fair value of the share consideration and
the attached put options is initially recorded in equity. The redemption
value of the shares to which the put options are attached has been
reclassified as mezzanine equity outside of shareholders' equity as a result
of the put options granted on those shares to certain of the selling
shareholders. The fair value of the put options at the date of issuance is
also recorded as a debit to shareholders' equity, representing an unearned
compensation expense, as the put options require the selling shareholders to
remain employed by the Company in order to be able to exercise the put
options. Compensation expense is being recognized using the straight-line
method over the period from the issue date to the exercise date.

(4) The condensed consolidated statements of earnings and cash flows for the
three months and six months ended June 30, 2002 and 2001 and the condensed
consolidated balance sheets as at June 30, 2002 and December 31, 2001 under
U.S. GAAP are as follows:

INTERIM REPORT JUNE 30, 2002 HUB INTERNATIONAL LIMITED 19

(5) Under U.S. GAAP, comprehensive income is measured in accordance with
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income" (SFAS 130). This standard defines comprehensive income
as all changes in equity other than those resulting from investments by
owners and distributions to owners and includes the change in unrealized
gains (losses) on debt and equity securities and foreign currency
translation adjustments. Under Canadian GAAP unrealized gains and losses on
debt and equity securities are not recorded and foreign currency translation
adjustments are presented as movements in the cumulative translation
account. Certain disclosures required by SFAS 115, Accounting for Certain
Investments in Debt and Equity Securities, have not been included as such
disclosures related to the Company's investments in debt and equity
securities are immaterial to the overall financial statement presentation.

(6) Under Canadian GAAP, loans granted by the Company to employees under the
executive share purchase plan are treated as a receivable and included in
the balance sheet caption "Accounts and other receivables." Under U.S. GAAP,
these loans are included as a reduction to shareholders' equity.

(7) Under Canadian GAAP, the statement of cash flows reconciles changes in cash
and cash equivalents and trust cash for each of the periods presented. The
statement of cash flows includes changes in trust cash as it is available to
settle accounts payable to insurance companies which are included as part of
current liabilities. Under U.S. GAAP, the statement of cash flows reconciles
changes in cash and cash equivalents only. Under U.S. GAAP, changes in trust
cash are included as part of the change in non-cash working capital in the
determination of cash provided from operating activities.

20 HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2002

PART 1 -- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the
Company's consolidated financial statements and accompanying notes. Certain
information contained in "Management's discussion and analysis of financial
condition and results of operations" are forward-looking statements that involve
risks and uncertainties. The Company's actual results may differ materially from
the results discussed in the forward-looking statements because of various
factors, including those discussed below and elsewhere. Unless otherwise
indicated, all dollar amounts are expressed in, and the term "dollars" and the
symbol "$" refer to, U.S. dollars.

RESULTS OF OPERATIONS
Three months ended June 30, 2002
Compared with three months ended June 30, 2001

Revenue. Total revenue for the three months ended June 30, 2002 increased by
$28.0 million, or 95%, to $57.3 million from $29.3 million for the three months
ended June 30, 2001. Of this increase, $25.7 million was attributable to
acquisitions. For the three months ended June 30, 2002, commission income
increased by $24.8 million, or 91%, to $52.1 million from $27.3 million for the
three months ended June 30, 2001. Excluding the effects of acquisitions,
commission income increased by $2.7 million or 10%. This increase was mainly due
to organic growth, including the continued firming of insurance premium rates.
For the three months ended June 30, 2002 revenue from contingent commissions and
volume overrides increased by $2.2 million, or 193%, to $3.3 million from $1.1
million for the three months ended June 30, 2001. Excluding the effects of
acquisitions of $2.3 million, contingent commissions and volume overrides
decreased $0.1 million, or 15%, compared with the prior period. This decrease
was primarily the result of the timing of the receipt of contingent commissions.
For the six month period ended June 30, 2002, excluding acquisitions, contingent
commissions and volume overrides were greater than the prior year period. As a
result of agreements entered into with Fairfax Inc. on the closing of the sale
of Old Lyme, the Company could earn contingent commissions from Fairfax Inc.
related to the premium volume placed with Old Lyme. Included in the increase of
$2.3 million related to acquisitions is approximately $1.0 million of revenues
recorded from Fairfax Inc. relating to the first quarter 2002 that were not
previously recognized due to the timing of the closing of the sale of Old Lyme.
For the three months ended June 30, 2002, other income, which includes fees and
interest income, increased by $1.0 million or 105% to $1.9 million from $0.9
million for the three months ended June 30, 2001. Excluding the effects of
acquisitions of $1.3 million, other income decreased $0.3 million or 34% as a
result of a decrease in interest rates as compared to the prior year period.

U.S. Operations

For the three months ended June 30, 2002, total revenue from U.S. Operations
increased by $25.8 million, or 330%, to $33.6 million from $7.8 million for the
three months ended June 30, 2001. This increase was attributable primarily to
acquisitions. For the three months ended June 30, 2002, commission income
increased by $22.5 million, or 304%, to $29.9 million from $7.4 million for the
three months ended June 30, 2001. Excluding the effects of acquisitions,
commission income increased by $0.3 million, or 4%. This increase was mainly due
to organic growth. For the three months ended June 30, 2002 revenue from
contingent commissions and volume overrides increased by $2.1 million, or
1,138%, to $2.3 million from $0.2 million for the three months ended June 30,
2001. Excluding the effects of acquisitions of $2.3 million, contingent
commissions and volume overrides decreased by $0.2 million, or 103%, as compared
with the prior year period. This decrease is primarily the result of the timing
of the receipt of contingent commissions. For the six month period ended June
30, 2002, excluding acquisitions, contingent commissions and volume overrides
increased $0.4 million, or 33%, from the prior year period. As mentioned above
included in the increase of $2.3 million related to acquisitions is
approximately $1.0 million of revenue recorded from Fairfax that relates to the
first quarter of 2002. For the three months ended June 30, 2002, other income,
which includes fees and interest income, increased by $1.2 million, or 509%, to
$1.4 million from $0.2 million for the three months ended June 30, 2001.
Excluding the effect of acquisitions of $1.3 million, other income decreased
$0.1 million, or 63%, as a result of a decrease in interest rates as compared to
the prior year period.

INTERIM REPORT JUNE 30, 2002 HUB INTERNATIONAL LIMITED 21

Canadian Operations

For the three months ended June 30, 2002, total revenue from Canadian Operations
increased by $2.2 million, or 10%, to $23.7 million from $21.5 million for the
three months ended June 30, 2001. This increase was primarily attributable to
organic growth and the continued firming of insurance premium rates. For the
three months ended June 30, 2002, commission income increased by $2.4 million,
or 12%, to $22.3 million from $19.9 million for the three months ended June 30,
2001, mainly due to organic growth, including the continued firming of insurance
premium rates. For the three months ended June 30, 2002 and 2001, revenue from
contingent commissions and volume overrides remained the same at $0.9 million.
For the three months ended June 30, 2002, other income, which includes fees and
interest income, decreased by $0.2 million, or 25%, to $0.5 million from $0.7
million for the three months ended June 30, 2001, primarily as a result of lower
interest rates.

Remuneration. Remuneration costs for the three months ended June 30, 2002
increased by $12.7 million, or 75%, to $29.8 million from $17.1 million for the
three months ended June 30, 2001. Remuneration costs as a percentage of total
revenue decreased to 52% from 58% in 2001. The decrease in remuneration as a
percentage of revenue is the result of organic growth, fixed costs within
remuneration and a decrease in the accrual of management profitability bonuses
of $2.1 million associated with the granting of stock options. During the
quarter, the Company changed its management bonus compensation plan whereby
approximately 50% of bonuses to be paid were replaced with stock option awards.
Of the $2.1 million decrease, $0.2 million relates to a reduction of bonuses in
the first quarter of 2002, as the change in the management bonus compensation
plan was retroactive to January 1, 2002.

Selling. Selling expenses for the three months ended June 30, 2002 increased by
$1.2 million, or 85%, to $2.7 million from $1.5 million for the three months
ended June 30, 2001. Selling expenses as a percentage of total revenue of 5%
remained unchanged for 2002 compared with 2001.

Occupancy. Occupancy expenses for the three months ended June 30, 2002
increased by $1.3 million, or 83%, to $2.9 million from $1.6 million for the
three months ended June 30, 2001. Occupancy expenses as a percentage of total
revenue of 5% remained unchanged for 2002 compared with 2001.

Depreciation. Depreciation expenses for the three months ended June 30, 2002
increased by $0.8 million, or 137%, to $1.4 million from $0.6 million for the
three months ended June 30, 2001. Depreciation expenses as a percentage of total
revenue of 2% remained unchanged for 2002 compared with 2001.

Administration. Administration expenses for the three months ended June 30,
2002 increased by $2.8 million, or 90%, to $5.8 million from $3.0 million for
the three months ended June 30, 2001. Administration expenses as a percentage of
total revenue of 10% remained unchanged for 2002 compared with 2001.

Interest expense. Interest expense for the three months ended June 30, 2002
increased by $1.8 million, or 273%, to $2.4 million from $0.6 million for the
three months ended June 30, 2001. The increase was largely attributable to
additional debt incurred to fund the acquisitions of Kaye Group Inc. and other
brokerages acquired in 2001.

Goodwill and other intangible asset amortization. Goodwill and other intangible
asset amortization for the three months ended June 30, 2002 decreased by $0.5
million, or 58%, to $0.4 million from $0.9 million for the three months ended
June 30, 2001. The decrease was attributable to the elimination of goodwill
amortization effective January 1, 2002 under The Canadian Institute of Chartered
Accountants Accounting Standards Board Handbook Section 3062, "Goodwill and
Other Intangible Assets."

Other income -- put option liability. Other income -- put option liability of
$0.3 million for the three months ended June 30, 2002 reflects a change in the
fair value of the put options. The put options were issued by the Company as
consideration for certain businesses acquired in the second and third quarters
of 2001 and the put option liability is classified as long-term debt at fair
value until such time as the option is exercised or expires.

Gain on disposal of property and equipment and investments. Gain on disposal of
property and equipment and investments for the three months ended June 30, 2002
increased by $2.2 million, or 693%, to $2.5 million from $0.3 million for the
three months ended June 30, 2001. Included in the second quarter of 2002 is the
gain on the sale of Old Lyme of $2.6 million, which is not taxable.

22 HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2002

Provision for income tax expense. Income taxes for the three months ended June
30, 2002 and 2001 were $4.1 million and $1.8 million, respectively, resulting in
an effective tax rate of 28% and 41% for 2002 and 2001, respectively. Of the
total 13% decrease, 5% was the result of the non-taxable gain on the sale of Old
Lyme and the remainder was the result of a greater proportion of our revenues
earned outside of Canada, where income is taxed at lower rates.

Net earnings. Net earnings for the three months ended June 30, 2002 increased
by $8.1 million, or 319%, to $10.7 million compared with $2.6 million in 2001.
Basic earnings per share increased 279% to $0.53 for 2002 from $0.14 per share
for 2001. Diluted earnings per share increased 193% to $0.41 for 2002 from $0.14
for 2001. Excluding the gain on the sale of Old Lyme of $2.6 million, net
earnings, basic earnings per share and diluted earnings per share would have
been $8.1 million, $0.40 and $0.32, respectively.

RESULTS OF OPERATIONS
Six months ended June 30, 2002
Compared with six months ended June 30, 2001

Revenue. Total revenue for the six months ended June 30, 2002 increased by
$49.4 million, or 86%, to $106.8 million from $57.4 million for the six months
ended June 30, 2001. Of this increase, $44.5 million was attributable to
acquisitions. For the six months ended June 30, 2002, commission income
increased by $43.1 million, or 85%, to $93.6 million from $50.5 million for the
six months ended June 30, 2001. Excluding the effects of acquisitions,
commission income increased by $5.4 million, or 11%. This increase was mainly
due to organic growth, including the continued firming of insurance premium
rates. For the six months ended June 30, 2002 revenue from contingent
commissions and volume overrides increased by $4.3 million, or 85%, to $9.4
million from $5.1 million for the six months ended June 30, 2001. This increase
was attributable primarily to acquisitions. For the six months ended June 30,
2002, other income, which includes fees and interest income, increased by $2.0
million, or 111%, to $3.8 million from $1.8 million for the six months ended
June 30, 2001. Excluding the effects of acquisitions of $2.6 million, other
income decreased $0.6 million, or 36%, as a result of a decrease in interest
rates compared with the prior year period.

U.S. Operations

For the six months ended June 30, 2002, total revenue from U.S. Operations
increased by $46.3 million, or 266%, to $63.7 million from $17.4 million for the
six months ended June 30, 2001. Excluding the effect of acquisitions, total
revenue increased $1.5 million, or 9%, primarily due to organic growth and the
continued firming of insurance premium rates. For the six months ended June 30,
2002, commission income increased by $39.4 million, or 253%, to $55.0 million
from $15.6 million for the six months ended June 30, 2001. Excluding the effect
of acquisitions, commission income increased $1.4 million, or 9%. This increase
was mainly due to organic growth, including the continued firming of insurance
premium rates. For the six months ended June 30, 2002, revenue from contingent
commissions and volume overrides increased by $4.6 million, or 355%, to $5.9
million from $1.3 million for the six months ended June 30, 2001. Excluding the
effects of acquisitions of $4.2 million, contingent commissions and volume
overrides increased by $0.4 million, or 33%, as compared with the prior year
period. This increase was attributable primarily to volume overrides related to
enhanced relationships with insurance carriers. For the six months ended June
30, 2002, other income, which includes fees and interest income, increased by
$2.3 million, or 447%, to $2.8 million from $0.5 million for the six months
ended June 30, 2001. Excluding the effect of acquisitions of $2.7 million, other
income decreased $0.3 million, or 59%, as a result of a decrease in interest
rates compared with the prior year period.

Canadian Operations

For the six months ended June 30, 2002, total revenue from Canadian Operations
increased by $3.0 million, or 8%, to $43.0 million from $40.0 million for the
six months ended June 30, 2001. This increase was primarily due to organic
growth and the continued firming of insurance premium rates. For the six months
ended June 30, 2002, commission income increased by $3.7 million, or 11%, to
$38.6 million from $34.9 million for the six months ended June 30, 2001. This
increase was mainly due to organic growth, including the continued firming of
insurance premium

INTERIM REPORT JUNE 30, 2002 HUB INTERNATIONAL LIMITED 23

rates. For the six months ended June 30, 2002 revenue from contingent
commissions and volume overrides decreased by $0.3 million, or 7%, to $3.5
million from $3.8 million for the six months ended June 30, 2001. This decrease
was primarily attributable to deteriorating loss ratios on business placed with
insurance carriers during 2001. For the six months ended June 30, 2002, other
income, which includes fees and interest income, decreased by $0.4 million, or
28%, to $0.9 million from $1.3 million for the six months ended June 30, 2001.
This decrease was attributable primarily to a decrease in interest rates
compared with the prior year period.

Remuneration. Remuneration costs for the six months ended June 30, 2002
increased by $24.3 million, or 73%, to $57.5 million from $33.2 million for the
six months ended June 30, 2001. Remuneration costs as a percentage of total
revenue decreased to 54% from 58% in 2001. The decrease in remuneration as a
percentage of revenue is the result of organic growth, fixed costs within
remuneration and a decrease in the accrual of management profitability bonuses
of $2.1 million associated with the granting of stock options. In the second
quarter of 2002 the Company changed its management bonus compensation plan
(retroactive to January 1, 2002) whereby approximately 50% of bonuses to be paid
were replaced with stock option awards.

Selling. Selling expenses for the six months ended June 30, 2002 increased by
$2.4 million, or 77%, to $5.6 million from $3.2 million for the six months ended
June 30, 2001. Selling expenses as a percentage of total revenue decreased to 5%
in 2002 from 6% in 2001. This decrease was due to a combination of strong
organic growth and certain fixed selling expenses.

Occupancy. Occupancy expenses for the six months ended June 30, 2002 increased
by $2.4 million, or 78%, to $5.6 million from $3.2 million for the six months
ended June 30, 2001. Occupancy expenses as a percentage of total revenue of 5%
remained unchanged for 2002 compared with 2001.

Depreciation. Depreciation expenses for the six months ended June 30, 2002
increased by $1.5 million, or 130%, to $2.6 million from $1.1 million for the
six months ended June 30, 2001. Depreciation expenses as a percentage of total
revenue of 2% remained unchanged for 2002 compared with 2001.

Administration. Administration expenses for the six months ended June 30, 2002
increased by $5.1 million, or 87%, to $11.0 million from $5.9 million for the
year ended June 30, 2001. Administration expenses as a percentage of total
revenue of 10% remained unchanged for 2002 compared with 2001.

Interest expense. Interest expense for the six months ended June 30, 2002
increased by $3.9 million, or 313%, to $5.1 million from $1.2 million for the
six months ended June 30, 2001. The increase is largely attributable to
additional debt incurred to fund the acquisitions of Kaye Group Inc. and other
brokerages we acquired in 2001.

Goodwill and other intangible asset amortization. Goodwill and other intangible
asset amortization for the six months ended June 30, 2002 decreased by $0.9
million, or 55%, to $0.8 million from $1.7 million for the six months ended June
30, 2001. This decrease is attributable to the elimination of goodwill
amortization effective January 1, 2002 under The Canadian Institute of Chartered
Accountants Accounting Standards Board Handbook Section 3062, "Goodwill and
Other Intangible Assets."

Gain on disposal of property and equipment and investments. Gain on disposal of
property and equipment and investments for the six months ended June 30, 2002
increased by $2.3 million, or 775%, to $2.6 million from $0.3 million for the
six months ended June 30, 2001. Included in the six months ended June 30, 2002
is the gain on the sale of Old Lyme of $2.6 million which is not taxable.

Other income -- put option liability. Other income -- put option liability of
$0.7 million for the six months ended June 30, 2002 reflects a change in the
fair value of the put options. The put options were issued by the Company as
consideration for certain businesses acquired in the second and third quarters
of 2001 and the put option liability is classified as long-term debt at fair
value until such time as the option is exercised or expires.

Provision for income tax expense. Income taxes for the six months ended June
30, 2002 and 2001 amounted to $6.1 million and $3.3 million, respectively,
resulting in an effective tax rate of 28% and 39% for 2002 and 2001,
respectively. Of the total 11% decrease, 4% was the result of the non-taxable
gain on the sale of Old Lyme and the remainder was the result of a greater
proportion of our revenues earned outside of Canada, where income is taxed at
lower rates.

24 HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2002

Net earnings. Net earnings for the six months ended June 30, 2002 increased by
$10.7 million, or 212%, to $15.7 million compared with $5.0 million in 2001.
Basic earnings per share increased 193% to $0.79 compared with $0.27 per share
for 2001. Diluted earnings per share increased 133% to $0.63 for 2002 from $0.27
for 2001. Excluding the gain on the sale of Old Lyme of $2.6 million, net
earnings, basic earnings per share and diluted earnings per share would have
been $13.0 million, $0.66 and $0.53, respectively.

CASH FLOW, LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2002, the Company had cash and cash equivalents and trust cash of
$75.0 million, of which $44.8 million was trust cash, a decrease of $2.4 million
from $77.4 million as of December 31, 2001. For the six months ended June 30,
2002, $6.0 million of cash was used by operating activities, of which $5.7
million was trust cash, primarily as a result of timing differences between the
payment of accounts payable and the collection of accounts receivable, partially
offset by net earnings adjusted for items not affecting working capital. For the
six months ended June 30, 2002, $39.0 million of cash was used in financing
activities, of which $125.1 million was used in repayment of bank debt,
long-term debt and capital leases and $2.0 million was used for the payment of
dividends, offset by $88.1 million of net proceeds raised by the Company in its
U.S. IPO. For the six months ended June 30, 2002, $42.5 million of cash was
provided by investing activities, primarily from the sale of Old Lyme and other
brokerages for $44.2 million, partially offset by capital asset purchases of
$1.7 million.

Net debt, defined as long-term debt, including the current portion of long-term
debt, bank debt and subordinated convertible debentures less non-trust cash and
the investment held for sale, as of June 30, 2002, was $43.5 million, compared
with $129.2 million as of December 31, 2001. The decrease in net debt is due to
the repayment of bank debt and a subordinated convertible debenture from the
proceeds of the sale of Old Lyme and the U.S. IPO in the six months ended June
30, 2002. The Company's net debt-to-equity ratio decreased to 0.18:1 at June 30,
2002 from 0.96:1 at December 31, 2001. As of June 30, 2002 the Company was in
compliance with the financial covenants under all credit facilities.

We believe that the Company's existing cash, funds generated from operations and
borrowings available under our credit facilities, will be sufficient to satisfy
the Company's financial requirements, including strategic acquisitions, during
the next twelve months.

SHAREHOLDERS' EQUITY
Share repurchases. For the three months and six months ended June 30, 2002 no
common shares were purchased and cancelled.

Shares reserved for issuance. As of June 30, 2002, 2,100 common shares were
reserved for issuance under the Company's equity incentive plan.

Shareholders' equity increased by $107.5 million, or 79%, to $242.8 million as
of June 30, 2002 from $135.3 million as of December 31, 2001. This increase
resulted from net earnings of $15.7 million and an increase in share capital of
$90.6 million related to the U.S. IPO, and an increase of the cumulative
translation account of $3.2 million. The increase in shareholders' equity was
offset by the payment of dividends of $2.0 million.

MARKET RISK

Interest rate risk
The Company is exposed to interest rate risk in connection with its credit
facilities. The Company had approximately $10 million of floating rate bank debt
outstanding at June 30, 2002. Each 100 basis point increase in the interest
rates charged on the balance of the Company's outstanding floating rate debt
will result in a $0.06 million decrease annually in its net earnings. The
Company currently does not engage in any derivatives or hedging transactions.
However, the Company is investigating and may enter into an interest rate swap
for its outstanding subordinated convertible debentures.

INTERIM REPORT JUNE 30, 2002 HUB INTERNATIONAL LIMITED 25

EXCHANGE RATE SENSITIVITY
The Company reports its revenue in U.S. dollars. The Company's Canadian
Operations earn revenue and incur expenses in Canadian dollars. Given the
Company's significant Canadian dollar revenue, it is sensitive to the
fluctuations in the value of the Canadian dollar and is therefore exposed to
foreign currency exchange risk. Foreign currency exchange risk is the potential
for loss in revenue and net income as a result of a decline in the U.S. dollar
value of Canadian dollar revenue due to a decline in the value of the Canadian
dollar compared to the U.S. dollar.

The Canadian dollar is subject to volatility and has experienced a significant
decline in its value compared to the U.S. dollar in recent years. The table
below summarizes the effect that a $0.01 decline or increase in the value of the
Canadian dollar would have had on the Company's revenue, debt, cumulative
translation account and net earnings in prior periods.

The increasing proportion of revenue derived from U.S. Operations and earned in
U.S. dollars has, in part, offset the potential risk of a decline in the
Canadian dollar. The Company expects that the proportion of revenue earned by
the Company in U.S. dollars will continue to increase, further mitigating its
foreign currency exchange sensitivity. The Company has not entered into, and
does not intend to enter into, foreign currency forward exchange agreements.

PART 1 -- ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Market Risk".

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the ordinary course of business, the Company and its subsidiaries are subject
to various claims and legal proceedings relating to insurance placed by us and
other contractual matters. In the opinion of management, the ultimate resolution
of such pending or threatened proceedings will not have a material effect on the
consolidated financial position or results of operations of the Company.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Information required by Item 701 of Regulation S-K:

(1) The effective date of the Company's first registration statement, filed on
Form S-1 under the Securities Act of 1933, for which the use of proceeds
information is being disclosed is June 17, 2002, and the Commission file
number assigned to such registration statement is 333-84734.

(2) The offering commenced on June 17, 2002.

(3) N/A.

(4) (i) The Company completed the offering on June 21, 2002 and the
over-allotment was completed on June 27, 2002.

26 HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2002

(ii) The managing underwriters were: J.P. Morgan Securities Inc.,
Cochran, Caronia Securities LLC, Stephens Inc., BMO Nesbitt Burns
Corp. and Ferris, Baker Watts, Incorporated.

(iii) Common Shares.

(iv) 6.9 million shares were registered and sold at an aggregate offering
price of $96.6 million.

(v) Expenses incurred in the offering were approximately $8.5 million,
including $6.3 million of underwriting commissions. All such
payments were direct payments to others.

(vi) The net offering proceeds to the Company after deducting the total
expenses described in paragraph (4) (v) of this Item were
approximately $88.1 million.

(vii) The Company used the net proceeds from the offering to repay (1) the
C$42.5 million, or approximately $28.2 million, of 8.5% convertible
subordinated debenture due June 28, 2006, issued to a third party in
connection with the acquisition of Kaye Group Inc. and (2) $57.7
million outstanding under the Company's credit facilities incurred
in connection with the Company's 2001 U.S. acquisitions. The
remaining proceeds have been used for working capital and general
corporate purposes. No other direct or indirect payments to others
were made, and this description of the use of proceeds does not
represent a material change from the use of proceeds described in
the Company's prospectus related to the U.S. IPO.

ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company's 2002 Annual and Special Meeting of Shareholders (the "Meeting")
was held on May 10, 2002. Five matters were submitted to a vote of shareholders
at the Meeting:

(1) Appointment and Remuneration of Auditors. PricewaterhouseCoopers LLP was
appointed Auditors of the Company to serve until the Company's Annual
Meeting of Shareholders to be held in 2003, at a remuneration to be fixed by
the Board of Directors. In support of the vote, which was conducted by a
show of hands, proxies in favour of such appointment and authorization had
been received prior to the Meeting from the holders of 9,785,654 voting
securities of the Company (common shares), with the holders of NIL common
shares abstaining from voting or withholding their votes on the motion.

(2) Election of Directors. Prior to the Meeting, proxies had been received in
favour of the election of each of the nominees to the Board of Directors
from the holders of 9,558,443 common shares of the Company, with the holders
of 227,211 common shares of the Company abstaining from or withholding their
votes for the election of such directors. The following directors were
nominated and, in the absence of further nominations, elected to hold office
for the term expiring at the Company's Annual Meeting of Shareholders to be
held in 2003:

R. Craig Barton
Anthony F. Griffiths
Richard A. Gulliver
Bruce D. Guthart
Martin P. Hughes
Bradley P. Martin
Jean Martin
Paul Murray

(3) Ratification of Amendment to By-Laws. An ordinary resolution was voted on
to ratify the amendment of By-Law No. 1 of the Company, previously approved
by the Board of Directors, to allow for the appointment of presidents of
divisions and operational units of the Company.

To become effective, the approval of at least a majority of the votes cast
in person or proxy at the Meeting was required. The requisite ratification
of shareholders was obtained at the Meeting. In support of the vote, which
was conducted by a show of hands, proxies in favour of such ratification had
been received prior to the Meeting from the holders of 9,592,433 common
shares of the Company, with the holders of NIL common shares voting against
the motion.

INTERIM REPORT JUNE 30, 2002 HUB INTERNATIONAL LIMITED 27

(4) Approval of Change of Address of Registered Office of the Company. A
special resolution was voted on to approve a change of the Company's
registered office from Toronto, Ontario to Brampton, Ontario.

To become effective, the approval of at least two-thirds of the votes cast
in person or proxy at the Meeting was required. The requisite approval of
shareholders was obtained at the Meeting. In support of the vote, which was
conducted by a show of hands, proxies in favour of such approval had been
received prior to the Meeting from the holders of 9,785,254 common shares of
the Company, with the holders of NIL common shares voting against the
motion.

(5) Approval of Equity Incentive Plan. A resolution of disinterested
shareholders was voted on to approve an equity incentive plan as previously
adopted by the Board of Directors (the "Equity Incentive Plan").

To become effective, the approval of at least a majority of the votes cast
in person or proxy at the Meeting, excluding any votes in respect of common
shares beneficially owned by insiders of the Company who are entitled to
participate in the Equity Incentive Plan ("Insider Participants") and their
associates, was required. To the knowledge of management of the Company,
there were 6,063,119 common shares of the Company beneficially owned by
Insider Participants and their associates. The votes of Insider Participants
and their associates were not counted at the Meeting for the purpose of the
vote to approve the Equity Incentive Plan. The requisite approval of
shareholders was obtained at the Meeting. The results of the vote, including
all common shares of the Company represented at the Meeting other than
common shares held by Insider Participants and their associates, were as
follows: the holders of 4,428,309 common shares voted in favour of the
approval, the holders of 541,445 common shares voted against approval and
the holders of 20,461 common shares abstained from or withheld their votes.

ITEM 5. OTHER INFORMATION

INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
This Form 10-Q includes, and from time to time management may make
forward-looking statements which 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.
These forward-looking statements 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;

- - successfully integrating acquired businesses;

- - developing and implementing effective information technology systems;

- - recruiting and retaining qualified employees;

- - fluctuations in the demand for insurance products;

- - fluctuations in the premiums charged by insurance companies (with
corresponding fluctuations in our premium-based revenue);

- - any loss of services of key executive officers;

- - industry consolidation;

- - increased competition in the industry;

- - the passage of new federal or state legislation subjecting our business to
regulation in the jurisdictions in which we operate.

The words "believe," "anticipate," "project," "expect," "intend," "will likely
result" or "will continue" and similar expressions identify forward-looking
statements. We caution readers not to place undue reliance on these forward-
looking statements, which speak only as of their dates.

Additional information regarding these risks and other factors that could cause
the Company's actual results to differ materially from its expectations is
included in the prospectus dated June 17, 2002 (the "Prospectus") filed pursuant

28 HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2002

to Rule 424(b) under the Securities Act relating to the Company's registration
statement on Form S-1. The information appearing under the heading "Risk
factors" in the Prospectus, except for those risks discussed under the captions
"Our common shares have no prior trading history in the United States and an
active trading market may not develop" and "Investors will incur immediate
dilution and may experience further dilution," and as modified in Exhibit 99.1
of this Form 10-Q, is incorporated by reference into and made a part of this
Form 10-Q. Except as otherwise required by federal securities laws, we undertake
no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.

Dividends
On May 9, 2002, the Board of Directors declared a dividend of C$0.07 on the
Company's common shares, payable June 30, 2002 for the quarter ended March 31,
2002 to shareholders of record on June 14, 2002.

Audit committee approval of non-audit services provided by Auditors
The Company's Audit Committee has approved the following non-audit services to
be performed by the Company's Auditors, PricewaterhouseCoopers LLP:

- provide tax planning advice;

- provide advice in connection with the estimated value of the Company's
financial liability relating to written put option agreements;

- provide advice in connection with the Company's stock-based compensation
plans.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

99.1 Information incorporated by reference into Part II of Form 10-Q.

(b) Reports on Form 8-K

There were no reports on Form 8-K for the period April 1, 2002 to June 30, 2002.

INTERIM REPORT JUNE 30, 2002 HUB INTERNATIONAL LIMITED 29

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

HUB INTERNATIONAL LIMITED

/s/ Dennis J. Pauls
---------------------------------------
Dennis J. Pauls
Vice President And Chief Financial
Officer
(duly authorized officer and principal
financial
officer)

DATE: August 14, 2002

30 HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2002