##### Table of Contents

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

|                                                       |  |                                                                                                  
|------------------------------------------------------ |  | -------------------------------------------------------------------------------------------------
|[X]                                                    |  | ANNUAL REPORT PURSUANT TO
    SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934.    
|                                                      
|For the fiscal year ended
    December 31, 2005
    Or
|                                                      
|[  ]                                                   |  | TRANSITION REPORT PURSUANT TO
    SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934.

Commission File
Number 1-31310


HUB INTERNATIONAL LIMITED




|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Canada                                                             |  | 36-4412416                              
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer Identification
    No.)
|                                                                  
|55 East Jackson Boulevard,
    Chicago, IL                         |  | 60604                                   
|(Address of principal executive
    offices)                       |  | (Zip Code)                              

Registrants telephone number, including area code:


(877) 402-6601


Securities registered pursuant to Section 12(b) of the
Act:


|                            |  |                                                   
|--------------------------- |  | --------------------------------------------------
|Title of Each Class         |  | Name of Each Exchange on Which Registered         
|                            |  |                                                   
|Common Shares, no par value |  | New York Stock Exchange
    Toronto Stock Exchange

Securities registered pursuant to Section 12(g) of the
Act:


o x


o x


x o


S-K 10-K 10-K. x


12b-2 o x o


12b-2 o x




Documents Incorporated by Reference












---



##### 

HUB INTERNATIONAL LIMITED

TABLE OF CONTENTS

|                                                                                                                             |  |      |    | 
|---------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                             |  | Page |   
|                                                                                                                             |  |      |   
|PART I                                                                                                                       |  |      |    | 
|                                                                                                                            
|Item 1. Business                                                                                                             |  |      | 3  | 
|                                                                                                                            
|Item 1A. Risk
    Factors                                                                                                    |  |      | 9  | 
|                                                                                                                            
|Item 1B. Unresolved
    Staff Comments                                                                                       |  |      | 16 | 
|                                                                                                                            
|Item 2. Properties                                                                                                           |  |      | 16 | 
|                                                                                                                            
|Item 3. Legal
    Proceedings                                                                                                |  |      | 16 | 
|                                                                                                                            
|Item 4. Submission
    of Matters to a Vote of Security Holders                                                              |  |      | 17 | 
|                                                                                                                            
|PART II                                                                                                                      |  |      |    | 
|                                                                                                                            
|Item 5. Market
    for Registrants Common Equity, Related Shareholder Matters
    and Issuer Purchases of Equity Securities |  |      | 18 | 
|                                                                                                                            
|Item 6. Selected
    Financial Data                                                                                          |  |      | 18 | 
|                                                                                                                            
|Item 7. Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations                        |  |      | 22 | 
|                                                                                                                            
|Item 7A. Quantitative
    and Qualitative Disclosures about Market Risk                                                      |  |      | 41 | 
|                                                                                                                            
|Item 8. Financial
    Statements and Supplementary Data                                                                      |  |      | 42 | 
|                                                                                                                            
|Item 9. Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure                         |  |      | 78 | 
|                                                                                                                            
|Item 9A. Controls
    and Procedures                                                                                         |  |      | 78 | 
|                                                                                                                            
|Item 9B. Other
    Information                                                                                               |  |      | 78 | 
|                                                                                                                            
|PART III                                                                                                                     |  |      |    | 
|                                                                                                                            
|Item 10. Directors
    and Executive Officers of the Registrant                                                              |  |      | 78 | 
|                                                                                                                            
|Item 11. Executive
    Compensation                                                                                          |  |      | 78 | 
|                                                                                                                            
|Item 12. Securities
    Ownership of Certain Beneficial Owners and Management, and
    Related Stockholder Matters           |  |      | 78 | 
|                                                                                                                            
|Item 13. Certain
    Relationships and Related Transactions                                                                  |  |      | 79 | 
|                                                                                                                            
|Item 14. Principal
    Accountant Fees and Services                                                                          |  |      | 79 | 
|                                                                                                                            
|PART IV                                                                                                                      |  |      |    | 
|                                                                                                                            
|Item 15. Exhibits
    and Financial Statements Schedules                                                                     |  |      | 79 | 
|                                                                                                                            
|SIGNATURES                                                                                                                   |  |      | 82 | 
|EX-21.1                                                                                                                     
|EX-23.1                                                                                                                     
|EX-31.1                                                                                                                     
|EX-31.2                                                                                                                     
|EX-32.1                                                                                                                     
|EX-32.2                                                                                                                     







|                              |                                
|----------------------------- | -------------------------------
|2   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005



---



##### Table of Contents

PART I





Item 1. Business

The Company

Hub International Limited is one of the leading insurance
brokers in North America, providing a broad array of property
and casualty, life and health, employee benefits and risk
management products and services. We focus on both commercial
and personal accounts in the United States and Canada, which we
serve through our approximately 3,300 employees in nearly 200
offices, using a variety of retail and wholesale distribution
channels. Since our company was formed in 1998 through the
merger of 11 Canadian insurance brokerages, we have
acquired an additional 116 brokerages and have established a
strong presence in the northeastern, midwestern and western
United States and in the Canadian provinces of Ontario, Quebec
and British Columbia. We have grown our revenue from
$38.7 million in 1998 to $442.6 million in 2005, with
79% of the increase being attributable to acquisitions.

Hub International was formed under the corporate laws of the
province of Ontario, Canada in 1998. In 2004 we completed a
corporate continuation under the laws of Canada.

Reference in this Annual Report on
Form 10-K to
Hub, the company, we,
us, our and the registrant
refer to Hub International Limited and its subsidiaries, unless
otherwise expressly stated.

We publish our consolidated financial statements in
U.S. dollars. All reference in this report to
dollars or $ refer to U.S. dollars
and all reference to Canadian dollars and
C$ refer to Canadian dollars, unless otherwise
noted. Except as otherwise indicated, all financial statements
and financial data contained in this Annual Report on
Form 10-K have
been prepared in accordance with generally accepted accounting
principles in Canada, or Canadian GAAP, which differs in certain
respects from generally accepted accounting principles in the
United States of America, or U.S. GAAP. Please see
note 20 to our audited consolidated financial statements
for a description of the material differences between Canadian
GAAP and U.S. GAAP.

Our annual report on
Form 10-K,
quarterly reports on
Form 10-Q, current
reports on
Form 8-K, and all
amendments to those reports are made available free of charge
through the Investor Relations section of our Internet website
(http://www.hubinternational.com) as soon as practicable
after such material is electronically filed with, or furnished
to, the Securities and Exchange Commission.

Our principal executive office is located at 55 East Jackson
Boulevard, Chicago, Illinois 60604. Our telephone number is
(877) 402-6601.

Information Concerning Forward-Looking Statements

This Form 10-K
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 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;
    attaining greater market share;
    resolution of regulatory issues and litigation, including those
    related to compensation arrangements with insurance companies;
    the possibility that the receipt of contingent compensation from
    insurance companies could be prohibited;
    developing and implementing effective information technology
    systems;
    recruiting and retaining qualified employees;
    fluctuations in the demand for insurance products;



ANNUAL REPORT December 31, 2005
    HUB INTERNATIONAL LIMITED    3



---



##### Table of Contents


    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 actual costs of resolution of contingent
    liabilities; and
    the passage of new federal, state, provincial or territorial
    legislation subjecting our business to increased regulation in
    the jurisdictions in which we operate.Words that indicate outlook or expectation, such as
believe, anticipate,
project, expect, intend,
will likely result, will continue and
similar expressions indicate forward-looking statements. We
caution readers not to place undue reliance on these
forward-looking statements, which speak only as of their dates.
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.

Overview

Our Operations

We operate through an organizational structure comprised of our
head office, larger regional or specialty brokerages that we
call hub brokerages and smaller brokerages managed
by the regional hubs. Our head office implements the acquisition
of hub brokerages and oversees the acquisition of smaller
fold-in brokerages by the hubs. Our head office also
coordinates selling and marketing efforts, identifies
cross-selling opportunities among our brokerages and handles
certain general administrative functions. Our ten U.S. hubs
are HUB California, HUB Gulf South, HUB Financial U.S., HUB
Midwest, HUB Mountain States, HUB New England, HUB Northeast,
HUB Northwest, HUB Southwest, and THB Intermediaries. Our five
hubs in Canada are HUB Ontario, HUB Quebec, HUB TOS, HUB Barton,
and Hub Financial/ Hub Capital.

Each hub addresses a specific regional or specialty market,
operating with its own management team and structure, business
plan and operating benchmarks. Regional hubs are generally
larger than $10 million in annual revenue, while a hub that
focuses on a specialty product line or market might have a
smaller revenue base. Each hub brokerage is responsible for not
only the development of its own business, but also the
identification, acquisition and integration of smaller, fold-in
brokerages. Fold-in acquisitions allow a hub brokerage an
opportunity to strengthen its market position by acquiring new
or complementary products and services and management talent.
Fold-in acquisitions also provide the opportunity for improved
profit margins through the reduction or elimination of redundant
administrative functions, facilities and systems.

Our structure enables our hub brokerages to more effectively and
quickly meet the changing needs of our clients in various
markets, while benefiting from the operating efficiencies and
leverage of a large brokerage. We seek to operate largely on a
decentralized basis, believing that the best operating decisions
are made close to the customer. At the same time, we recognize
that our growth has created demand for increased coordination by
our head office. In 2004, we began investing more in the
coordination of additional functions from our head office to
enhance cross-selling, international collaboration, marketing
efficiencies, total expense management and financial control
initiatives. As a general operating objective, we work to
centralize those activities that do not touch the customer
directly, while adopting a more decentralized approach for
functions that connect directly with customers.

Our operations are currently conducted from principal offices
located in Albuquerque, Boston, Chicago, Dallas, Denver, Los
Angeles, Montreal, New York, Seattle, Toronto and Vancouver.

Our Products and Services

We offer commercial and specialized insurance products and
services to businesses, personal insurance products and services
to individuals and program products and services to affinity
groups and associations. We offer three categories of commercial
products and services: property and casualty products, employee
benefits and risk





4   HUB INTERNATIONAL LIMITED
    ANNUAL REPORT December 31, 2005



---



##### Table of Contents

management services. We offer two categories of personal
products and services: property and casualty products and life,
health and financial products and services. Within our property
and casualty products we offer program products and services
which involve development, in collaboration with insurance
companies, of baskets of insurance products for members of
affinity groups or associations, such as lawyers
associations, medical associations and other professional
groups. Our specialized risk products cover diverse exposures
such as environmental, professional liability and
directors and officers liability. THB Intermediaries
provides reinsurance brokerage services from offices in New
York, Chicago, Dallas and Los Angeles.

Our business is comprised of two geographic segments, the United
States and Canada. The mix of products and services we offer in
the United States differs from those we offer in Canada. In the
United States in 2005, 86% of our commission income was
generated from the sale of commercial lines and 14% from
personal lines. In Canada in 2005, 61% of our commission income
was generated from the sale of commercial lines and 39% from
personal lines. Our purchase of a major personal lines insurance
broker in 2005 is expected to increase the percentage of
U.S. commission income derived from personal lines to
approximately 19% in 2006.

The chart below lists a selection of our commercial and personal
insurance products and services.

Commercial insurance

|                                                                                                                                                                                                                                                                                          |  |                                                                                                                                  |  |                                                                                                                                         
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------
|Property and casualty                                                                                                                                                                                                                                                                     |  | Employee benefits                                                                                                                |  | Risk management services                                                                                                                
|                                                                                                                                                                                                                                                                                          |  |                                                                                                                                  |  |                                                                                                                                         
|   Business
    property
       Auto and trucking fleets
       Technology
       Intellectual property
       Natural disaster
       Workers compensation
       Liability
       Surety bonds
       Business income
       Accounts receivable
       Environmental risks |  |    Group life
    and health
       Employment issues
       Human resources
       Retirement plans
       Contract review |  |    Claims
    management
       Risk finance structuring
       Exposure evaluation
       Coverage analysis
       Contract review

Personal insurance


|                                                                                                                        |  |                                                                           
|----------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------
|Property and casualty                                                                                                   |  | Life, health and financial                                                
|                                                                                                                        |  |                                                                           
|   Home
       Personal property
       Auto and recreational vehicles
       Travel accident and trip cancellation |  |    Disability
       Life
       Investments
       Financial planning

Strategy




Organic growth. same-store-sales






|                                |                               
|------------------------------- | ------------------------------
|ANNUAL REPORT December 31, 2005 | HUB INTERNATIONAL LIMITED    5



---



##### Table of Contents

Acquisitions. We have acquired 116 brokerages since our
formation in 1998 and we intend to continue utilizing
acquisitions to increase our revenue base in terms of geography
and product depth. Since our founding, we have expanded our
geographic footprint in both Canada and the United States by
acquiring and growing larger hub brokerages and smaller
fold-ins. As of December 31, 2005, our U.S. presence
was strong in the West, Midwest and Northeast, but we have
relatively less presence in the Southeast. While we are seeking
appropriate acquisition candidates in the Southeast, we have not
set any timetable for achieving geographic expansion in that
region. Our acquisition strategy is guided more by the culture,
fit and talented staff we can acquire than by geography alone.
We continue to seek acquisitions, including hub acquisitions,
that bring new expertise in specialty product lines. In 2005,
for example, we acquired both a reinsurance broker and a large
personal lines brokerage, adding product expertise rather than
strictly geographic positioning. To increase both the pace and
quality of acquisition and integration activities, in 2004 we
created an acquisitions team, headed by Hubs president.

Profitability. While revenue growth and economies of
scale can provide improved financial performance on their own,
we have undertaken several initiatives to bolster our pursuit of
stronger returns for shareholders. Compensation packages for a
number of senior managers  both in the field and at
our head office  have been refined to increase
alignment of compensation with shareholder interests. In
addition, we emphasize expanded profitability of incremental
revenue. As an example, account retention and expanded product
purchases by an existing client tend to have higher margin flow
through than new account development. Selective adjustments to
staffing levels and careful hiring practices have helped
increase revenue per employee, a goal that is also furthered by
improved staff productivity. Our profitability goal is to
decrease expense, including cash compensation expense, as a
percentage of revenue.

Corporate development. Our goals for growth include
consistency and stability of performance, fueled by a
sustainable growth culture and operating discipline, including
leadership development, expanded collaboration across offices,
increased efficiency, more opportunity for cross-office transfer
or promotion, faster implementation of new operating procedures
and increasingly valuable human capital.

Competitive Advantages

Although we compete with a number of large, publicly traded
brokerage firms, most of the insurance brokerage industry is
made up of smaller, independent brokers that operate on a local
or regional basis. We believe we have a number of competitive
advantages which will enable us to achieve our objectives in
this highly fragmented industry.

Decentralized hub approach. Our decentralized hub
approach allows us to react to regional market conditions while
still centrally managing the growth and profitability of our
business. Our geographic diversity allows us to balance our
revenue stream across markets and better insulates us from
adverse regional developments. Our hub structure provides us
with a ready platform, capable of reacting quickly to smaller
brokerage acquisition opportunities, and to assimilate fold-ins
once acquired.

Broad array of products and services offered through multiple
distribution channels. We offer a broad array of products
and services, which allows us to maintain and maximize existing
client relationships and attract new clients. We offer these
insurance products and services through four distribution
channels: retail, wholesale property and casualty, wholesale
life and financial, and call-centers. Our diversity provides us
with the flexibility to determine not only the most appropriate
products and services, but also the distribution channels to
employ for particular market segments.

Benefits of scale. Our scale makes us attractive to
smaller brokerages as a potential acquirer, because we can offer
increased access to insurance products, stronger operating
systems, expanded recognition and other benefits to most
targets. In addition, our scale, geographic reach and
operational diversity provide insurers with greater incentives
to work with us. Enhanced insurer relationships often result in
mutual cost savings, collaborative marketing arrangements and
product design, exclusive distribution rights for certain
territories and products, and, in some cases, expanded authority
to price and approve insurance policies on behalf of insurance
companies. Hub discloses the nature of compensation received
from insurers through written materials provided to our clients
and on our website.

Committed and experienced management. Most of the senior
managers of our brokerages have over 20 years of experience
in the industry and extensive contacts in the insurance
brokerage sector, and participate in prominent





6   HUB INTERNATIONAL LIMITED
    ANNUAL REPORT December 31, 2005



---



##### Table of Contents

industry associations, brokerage networks and insurance company
brokerage councils. Most of management also has significant
shareholdings in our company. A significant number of the shares
held by management are subject to transfer restrictions. In
addition, designated key employees in each brokerage are
rewarded for their contribution to our success through a bonus
program that incorporates both brokerage and over-all company
performance. Members of our executive management team are also
awarded bonus compensation conditional on over-all company
performance. We believe that these strategies encourage loyalty
and align the interests of management with our corporate goals
and the interests of our shareholders.

Acquisitions

From 1998 through 2005, we acquired 116 brokerages, of which 40
were in the United States and 76 were in Canada. These
acquisitions have increased revenue in the United States to 70%
of our total revenue in 2005 from 0% in 1998.

Our senior management is responsible for identifying and
negotiating the acquisition of hub brokerages that are
strategically suited to our growth strategy. Often we are
familiar with the owners and management of the acquisition
target before we initiate discussions. Fold-ins and some of the
hub brokerages we acquire are owner operated. We perform
extensive due diligence on potential targets and we determine
what the budget of the acquired brokerage, including payroll and
other adjustments, will be prior to completing the acquisition.

We anticipate that we will selectively acquire more hub
brokerages in geographic regions where we currently have a
limited presence, most notably the southeastern United States.
When seeking a new hub, we look for the following attributes:




    an experienced and talented management team prepared to make a
    long-term commitment to executing our strategic business plan;
    the ability to identify, acquire and seamlessly integrate
    smaller brokerages (fold-ins) in its region;
    specialization in certain products or services that may be
    beneficial to or complement our other brokerages; and
    a demonstrated record of organic growth and profitability,
    operating at, or capable of achieving in the near term, minimum
    financial performance targets.We expect that future acquisitions will be financed with
available cash, the issuance of common shares, the proceeds of
other financings, or a combination of the foregoing.

The retention of existing management at the hub brokerages we
acquire is important to the successful integration and
subsequent operation of our larger brokerages. We have in the
past encouraged, and may continue in the future to encourage,
existing management to stay with the acquired hub brokerage by
using our common shares to pay a portion of the acquisition
price. The shares the owners/management receive typically are
subject to transfer restrictions of at least three years. We
also utilize our equity incentive plan to grant restricted share
units (in lieu of cash compensation or in consideration of
non-competition covenants) which have vesting, exercise and
transfer restrictions that are designed to encourage the
long-term commitment of management to our company.

Distribution Channels

We utilize retail, wholesale and call-center distribution
channels, and have the ability to employ these distribution
channels for specific market segments. Our brokerages use one or
a combination of the following different distribution channels:




    Retail sales and service centers that provide a broad range of
    property and casualty insurance, life and health insurance, risk
    management and financial services from traditional office
    locations leased by our brokerages in local communities;
    Retail call-centers that provide sales and services by telephone
    to individuals or members of employee groups, associations,
    affinity groups and specific communities. We operate
    call-centers in Chicago and Chilliwack, British Columbia;



ANNUAL REPORT December 31, 2005
    HUB INTERNATIONAL LIMITED    7



---



##### Table of Contents


    Wholesale life and financial services centers, known as managing
    general agents, provide life, financial and investment products
    and expertise to independent agents on a wholesale basis from
    our locations in Vancouver, Calgary, Montreal and Toronto.
    Wholesale property and casualty insurance centers provide
    products, international risk solutions, captive management
    programs and specialty lines in part to our own retail
    brokerages, but primarily to independent brokers and
    corporations in North America and internationally from our
    locations in New York, Toronto, Montreal and Vancouver.In addition, we are a member of the Worldwide Broker Network, a
consortium of international brokerages, which we can access to
service clients resident in the United States or Canada who
require insurance internationally.

Competition

We compete for clients in both the United States and in Canada
on the basis of reputation, client service, program and product
offerings and the ability to tailor our products and risk
management services to the specific needs of a client. We
believe that we are in a favorable competitive position in most
of the meaningful aspects of our business because of our local
market presence, broad array of products and services, diversity
of distribution channels, industry focus and expertise, and
management experience.

Like some of our competitors, we focus a substantial portion of
our sales efforts on middle-market commercial accounts. We
believe that the most likely source of competition for us in the
United States will be other brokerages who pursue an acquisition
or consolidation strategy similar to ours as well as other large
regional brokerages. We believe that our primary competitors in
Canada are local retail brokers and other large regional
brokerages.

The insurance brokerage industry is highly competitive as it
relates to acquisitions. We face several sources of competition
including other brokerages, insurance companies, banks and other
financial services companies. Consolidation among insurance
brokers has been prominent for several years. This consolidation
has been led by publicly traded corporations, that consolidate
small to medium size independent brokerages with a view to
strengthening their competitive position and increasing their
market share. In addition to direct competition from insurance
companies, other sources of competition exist as banks in Canada
continue their efforts to diversify their financial services to
include insurance brokerage services (often through the
acquisition of established insurance brokerages).

Government Regulation

Licenses

In every state, province and territory in which we do business,
the relevant brokerage is required to be licensed or to have
received regulatory approval to conduct business. In addition to
licensing requirements, most jurisdictions require individuals
who engage in brokerage and certain insurance service activities
to be licensed personally. In some jurisdictions new laws or
regulations require enhanced disclosure of contingent
compensation arrangements and other relationships with insurance
companies.

Our operations depend on the validity of and continued good
standing under the licenses and approvals pursuant to which we
operate. Licensing laws and regulations vary from jurisdiction
to jurisdiction and are always subject to amendment or
interpretation by regulatory authorities. Such authorities
generally have the discretion to grant, renew and revoke
licenses and approvals.

Privacy

The management and dissemination of information is critical to
our business. We gather information from our clients to assess
and address their insurance needs. We share information both
internally, among our employees, and, where appropriate and
permitted, between our brokerages, as well as externally with
insurers. We believe we have taken appropriate steps to
safeguard our clients information. In both the United
States and Canada comprehensive privacy laws have been
introduced to protect the privacy of individuals from the
undisclosed or non-consensual sharing of sensitive information
for commercial purposes. As the gathering and use of information
is such an integral





8   HUB INTERNATIONAL LIMITED
    ANNUAL REPORT December 31, 2005



---



##### Table of Contents

component of our business, we must always be alert for and
respond to changes in the information regulatory environment.

Employees

As of December 31, 2005, we employed 3,200 persons on a
full-time basis, 2,700 of whom were employed in sales and
customer service and 500 of whom were employed in corporate,
finance and administration. None of our employees are
represented by a labor union and we have never experienced a
work stoppage. We believe our relationship with our employees is
good.

We have generally entered into agreements containing
confidentiality and non-disclosure provisions with our employees
and consultants who have access to our proprietary information.
In addition, each member of executive management of our
brokerages is subject to an employment agreement that sets out
the terms of his or her employment. These agreements typically
include non-solicitation and non-competition covenants, which
continue for up to two years after the cessation of employment.





Item 1A. Risk Factors

Risks Related to Our Business

Regulatory investigations and class action lawsuits
related to the structure of compensation paid by insurance
companies to insurance brokers may result in prohibitions of
volume overrides and contingent commissions, affiliate
relationships and/or significant fines or judgments that could
have a material adverse effect on our financial condition,
results of operation and liquidity.

The insurance industry in general, and certain of our hubs, have
been the subject of scrutiny by various regulatory bodies,
including state attorneys general and the departments of
insurance for various states, with respect to certain contingent
commission arrangements between insurance companies and brokers.

As previously reported, our subsidiary HUB Northeast (formerly
known as Kaye Insurance Associates, Inc.), received three
subpoenas from the Office of the Attorney General of the State
of New York seeking information regarding certain contingent
agreements and other business practices. Since August 2004,
various other subsidiaries of Hub have received and responded to
letters of inquiry and subpoenas from authorities in California,
Connecticut, Texas, Illinois, Delaware, Pennsylvania, New
Hampshire and Quebec. To date, management is unaware of any
incidents of falsifying or inflating insurance quotes or other
illegal practices. State attorneys general and insurance
departments continue their investigations of various industry
practices. We continue to review our practices in light of these
investigations and resulting charges brought against other
brokers.

We have fully cooperated with the attorney general and
department of insurance inquiries. While it is not possible to
predict the outcome of these investigations, if contingent
compensation agreements were to be restricted or no longer
permitted, our financial condition, results of operation and
liquidity may be materially adversely affected.

We were first named as a defendant in a federal class action
lawsuit in October, 2004. The lawsuit alleges that the
defendants used the contingent commission structure to deprive
policyholders of independent and unbiased brokerage
services, as well as free and open competition in the market for
insurance. A number of substantially similar federal class
actions were filed against us and many other defendants. On
February 17, 2005, the Federal Judicial Panel on
Multidistrict Litigation transferred these and other class
actions in which we were not named to the District of New
Jersey. In August 2005 and February 2006, amended
complaints were filed in the consolidated federal court
proceedings pending in New Jersey and styled In re Insurance
Brokerage Antitrust Litigation. Certain of our subsidiaries have
been named as additional defendants. The case has now been
divided into two cases, one for employee benefits and the other
for commercial insurance. A handful of allegations specifically
pertaining to Hub have been added, but remain vague. The judge
in these actions has permitted limited discovery to take place,
which is continuing. We dispute the allegations made in these
lawsuits and intend to vigorously defend these cases.

In January, 2005 we and our affiliates were named as defendants
in a class action filed in the Circuit Court of Cook County,
Illinois. The named plaintiff is a Chicago law firm that
obtained its professional liability insurance through the





ANNUAL REPORT December 31, 2005
    HUB INTERNATIONAL LIMITED    9



---



##### Table of Contents

Chicago office of what is now HUB Midwest and claims that we
received an undisclosed contingent commission with respect to
its policy. We dispute the allegations of this lawsuit and are
vigorously defending this case.

The cost of defending against these lawsuits or others which may
be filed, and diversion of managements attention, are
significant and could have a material adverse effect on our
results of operations. In addition, an adverse finding in a
regulatory investigation or a class action or similar lawsuit
could result in a significant judgment or imposition of
liability against us that could have a material adverse effect
on our financial condition, results of operation and liquidity.
As of December 31, 2005, we have not recorded a liability
related to these matters.

In the normal course of business, we are involved in various
claims and legal proceedings relating to insurance placed by us
and other contractual matters which could have a material
adverse effect on our consolidated financial position or future
results of operations.

Additionally, regulatory investigations regarding the insurance
brokerage industry could lead to prohibition of certain
relationships, such as our ownership of wholesale brokerages or
the placement of business with Old Lyme Insurance Company, Ltd.,
which is indirectly owned primarily by our employees. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations  Related Party
Transactions. Any such prohibition could have a material
adverse effect on our financial condition, results of operations
and liquidity.

Insurance company contingent commissions and volume
overrides are less predictable than normal commissions, which
impairs our ability to forecast the amount of such revenue that
we will receive and may negatively impact our operating
results.

We derive a portion of our revenue from contingent commissions
and volume overrides. The aggregate of these sources of revenue
accounted for approximately 9% of our total revenue in 2005.
Contingent commissions may be paid by an insurance company based
on the profit it makes on the overall volume of business that we
place with it. Volume overrides and contingent commissions are
typically calculated in the first or second quarter of the
following year by the insurance companies and are paid once
calculated. As a result of recent developments in the property
and casualty insurance industry, including changes in
underwriting criteria due in part to the higher numbers and
dollar value of claims as compared to the premiums collected by
insurance companies and a series of natural disasters, we cannot
predict the payment of this performance-based revenue as
accurately as we have been able to in the past. Further, we have
no control over the process by which insurance companies
estimate their own loss reserves, which affects our ability to
forecast contingent commissions. Because these contingent
commissions affect our revenue, any decrease in the amount paid
to us could adversely affect our results of operations.

If we fail to comply with regulatory requirements for
insurance brokerages, we may not be able to conduct our
business.

Our business is subject to legal requirements and governmental
regulatory supervision in the jurisdictions in which we operate.
These requirements are designed to protect our clients by
establishing minimum standards of conduct and practice,
particularly regarding the provision of advice and product
information as well as financial criteria.

Our activities in the United States and Canada are subject to
regulation and supervision by state, provincial and territorial
authorities. Although the scope of regulation and form of
supervision by these authorities may vary from jurisdiction to
jurisdiction, insurance laws in the United States and Canada are
often complex and generally grant broad discretion to
supervisory authorities in adopting regulations and supervising
regulated activities. This supervision generally includes the
licensing of insurance brokers and agents and the regulation of
the handling and investment of client funds held in a fiduciary
capacity. Our ability to conduct our business in the
jurisdictions in which we currently operate depends on our
compliance with the rules and regulations promulgated from time
to time by the regulatory authorities in each of these
jurisdictions.

Our clients have the right to file complaints with the
regulators about our services, and the regulators may
investigate and require us to address these complaints. Our
failure to satisfy the regulators that we are in compliance with
their requirements or the legal requirements governing our
activities can result in disciplinary action, fines,
reputational damage and financial harm.





10   HUB INTERNATIONAL LIMITED
    ANNUAL REPORT December 31, 2005



---



##### Table of Contents

In addition, changes in legislation or regulations and actions
by regulators, including changes in administration and
enforcement policies, could from time to time require
operational improvements or modifications at various locations
which could result in higher costs or hinder our ability to
operate our business. See Business  Government
Regulation.

We may be unsuccessful in identifying and acquiring
suitable acquisition candidates, which could impede our growth
and ability to remain competitive in our industry.

Our strategic plan includes the regular and systematic
evaluation and acquisition of insurance brokerages in new and
existing markets. Since our formation in 1998, approximately 79%
of our revenue growth has been attributable to acquisitions.
However, we may not successfully identify suitable acquisition
candidates. Prospective acquisition candidates may not become
available or we may not be able to complete an acquisition once
negotiations have commenced. We compete for acquisition and
expansion opportunities with entities that have substantially
greater resources than we do and these entities may be able to
outbid us for these acquisition targets. If we fail to execute
our acquisition strategy, our revenue growth and ability to
remain competitive in our industry are likely to suffer.

Our continued growth is partly based on our ability to
successfully integrate acquired brokerages and our failure to do
so may have an adverse effect on our revenue and
expenses.

We may be unable to successfully integrate brokerages that we
may acquire in the future. The integration of an acquisition
involves 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.A failure to integrate acquired brokerages may be disruptive to
our operations and negatively impact our revenue or increase our
expenses.

Insurance brokerages that we have acquired may have
liabilities that we are not aware of and may not be as
profitable as we expect them to be.

Since our formation in November 1998 through the merger of 11
insurance brokerages, we have acquired an additional 116
brokerages. Although we conduct due diligence in respect of the
business and operations of each of the brokerages we acquire, we
may not have identified all material facts concerning these
brokerages. For example, on one occasion we discovered a
brokerages liability for unaccrued corporate taxes only
after we had completed the acquisition of the brokerage.
Unanticipated events or liabilities relating to these brokerages
could have a material adverse effect on our financial condition.
Furthermore, once we have integrated an acquired brokerage, it
may not achieve levels of revenue, profitability, or
productivity comparable to our existing locations, or otherwise
perform as expected. Our failure to integrate one or more
acquired brokerages so that they achieve our performance goals
may have a material adverse effect on our results of operations
and financial condition.

If we fail to obtain additional financing for
acquisitions, we may be unable to expand our business.

Our acquisition strategy may require us to seek additional
financing. If we are unable to obtain sufficient financing on
satisfactory terms and conditions, we may not be able to
maintain or increase our market share or expand our business
through acquisitions. Our ability to obtain additional financing
will depend upon a number of factors, many of which are beyond
our control. We may not be able to obtain additional
satisfactory financing because we already have debt outstanding
and because we may not have sufficient cash flow to service or
repay our existing or additional debt. For example, as of
December 31, 2005, we had $175.3 million of total debt
and our two credit





ANNUAL REPORT December 31, 2005
    HUB INTERNATIONAL LIMITED    11



---



##### Table of Contents

facilities contain covenants that, among other things, require
us to maintain certain financial ratios and restrict our ability
to incur additional debt.

We cannot accurately forecast our commission revenue
because our commissions depend on premium rates charged by
insurance companies, which historically have varied and are
difficult to predict. Any declines in premiums may adversely
impact our profitability.

In 2005, we derived approximately 88% of our revenue from
commissions paid by insurance companies on the sale of their
insurance products to our clients. Our revenue from commissions
fluctuates with premiums charged by insurers, as commissions
typically are determined as a percentage of premiums. When
premiums decline, we experience downward pressure on our revenue
and earnings. Historically, property and casualty premiums have
been cyclical in nature and have varied widely based on market
conditions. Significant reductions in premium rates occurred
during the years 1988 through 2000 as a result of expanded
underwriting capacity of property and casualty insurance
companies and increased competition. In some cases, property and
casualty insurance companies lowered commission rates. The years
2001 through 2003 saw premium rates increase. During the latter
part of 2003, the Canadian market remained firm, but the
U.S. market experienced some softening of premium rates for
property and casualty coverage. During the first six months of
2004 Canadian and U.S. markets both softened, although
rates for certain types of coverage continued to increase.
During the last half of 2004, however, insurance rates began
falling at a much more rapid pace than during the first six
months of the year. In 2005, in both Canada and the US we saw
average declines in premiums in the range of three to five
percent. Because we cannot determine the timing and extent of
premium pricing changes, we cannot accurately forecast our
commission revenue, including whether it will significantly
decline. If premiums decline or commission rates are reduced,
our revenue, earnings and cash flow could decline. In addition,
our budgets for future acquisitions, capital expenditures,
dividend payments, loan repayments and other expenditures may
have to be adjusted to account for unexpected changes in revenue.

Proposed tort reform legislation in the United States, if
enacted, could decrease demand for liability insurance, thereby
reducing our commission revenue.

Legislation concerning tort reform is currently being considered
in the United States Congress and in several states. Among the
provisions being considered for inclusion in such legislation
are limitations on damage awards, including punitive damages,
and various restrictions applicable to class action lawsuits,
including lawsuits asserting professional liability of the kind
for which insurance is offered under certain policies we sell.
Enactment of these or similar provisions by Congress, or by
states or countries in which we sell insurance, could result in
a reduction in the demand for liability insurance policies or a
decrease in policy limits of such policies sold, thereby
reducing our commission revenue.

A substantial portion of our total assets are represented
by goodwill and other intangible assets as a result of our
acquisitions and under accounting standards, we may be required
to write down the value of our goodwill and other intangible
assets.

When we acquire a brokerage, virtually the entire purchase price
for the acquisition is allocated to goodwill and other
identifiable intangible assets. The amount of purchase price
allocated to goodwill is determined by the excess of the
purchase price over the fair market value of identifiable net
assets we acquire.

Accounting rules require that we conduct an annual impairment
testing of goodwill and indefinite life intangible assets. A
deterioration in our operating results, including the loss of a
significant client or clients at one of our brokerages, could
result in an impairment of goodwill and other indefinite life
intangible assets associated with such brokerage, which would
cause us to take an impairment to goodwill and other indefinite
life intangible assets. Such an impairment could adversely
affect our earnings.





12   HUB INTERNATIONAL LIMITED
    ANNUAL REPORT December 31, 2005



---



##### Table of Contents

The loss of members of our senior management or a
significant number of our brokers could negatively affect our
financial plans, growth, marketing and other objectives.

The loss of or failure to attract key personnel could
significantly impede our financial plans, growth, marketing and
other objectives. Our success depends to a substantial extent
not only on the ability and experience of our senior management
but also on the individual brokers and teams that service our
clients and maintain client relationships. In the past, we have
experienced short-term disruptions to certain brokerage
operations due to the early retirement of senior members of
management at those brokerages. Our operations are not generally
dependent on any one individual; however, the loss of Martin
Hughes, our Chairman and Chief Executive Officer, could
negatively impact our acquisition strategy in the United States
due to his significant relationships and expertise in the
insurance industry.

The insurance brokerage industry has in the past experienced
intense competition for the services of leading individual
brokers and brokerage teams. We believe that our future success
will depend in large part on our ability to attract and retain
additional highly skilled and qualified personnel and to expand,
train and manage our employee base. We may not be successful in
doing so because the competition for qualified personnel in our
industry is intense. If we fail to recruit and retain top
producers, our organic growth may be adversely affected.

Competition in our industry is intense, and if we are
unable to compete effectively, we may lose market share and our
business may be materially adversely affected.

The insurance brokerage business is highly competitive and we
actively compete with other insurance brokerages for customers,
many of which have existing relationships with insurance
companies or have a significant presence in niche insurance
markets that may give them an advantage over us. Because
relationships between insurance brokers and insurance companies
or clients are often local or regional in nature, this potential
competitive disadvantage is particularly pronounced. See
Business  Competition for a further
discussion of the level of competition in our industry.

We face competition in all markets in which we operate, based on
product breadth, innovation, quality of service and price. We
compete with a number of brokerages who may have greater
resources than we do, as well as with numerous internet-based,
specialist and regional firms in the United States and Canada.
If we are unable to compete effectively against our competitors,
we will suffer a loss of market share, decreased revenue and
reduced operating margins.

In addition, regulatory changes in the financial services
industry in the United States and Canada have permitted banks,
securities firms and insurance companies to affiliate, causing
rapid consolidation in the insurance industry. Some insurance
companies are engaged in the direct sale of insurance, primarily
to individuals, and do not pay commissions to agents and brokers
on policies they sell directly. Increasing competition from
insurance companies and from within the financial services
industry generally could have a negative effect on our
operations.

We do business with certain subsidiaries of our largest
shareholder and if a conflict of interest were to arise it may
not be resolved in our favor and could adversely affect our
revenue.

As of December 31, 2005, Fairfax Financial Holdings Limited
owned or controlled 26% of our common shares, or 31% if Fairfax
was to convert our subordinated convertible debentures it holds.
We do business with certain subsidiaries of Fairfax which
represented approximately 7% of our revenue in 2005. We expect
that this percentage will decrease as we complete more
acquisitions in the United States. If a conflict of interest
arose between us and Fairfax or one of its subsidiaries, we
cannot be assured that this conflict would be resolved in a
manner that would favor us. In addition, if Fairfax were to sell
our common shares that it owns, it may no longer be as
interested in continuing to do business with us which could have
a material adverse effect on our revenue and expenses, and such
a sale by Fairfax could also negatively impact our share price.





ANNUAL REPORT December 31, 2005
    HUB INTERNATIONAL LIMITED    13



---



##### Table of Contents

We depend on our information processing systems.
Interruption or loss of our information processing systems could
have a material adverse effect on our business.

Our ability to provide administrative services depends on our
capacity to store, retrieve, process and manage significant
databases and expand and upgrade periodically our information
processing capabilities. Interruption or loss of our information
processing capabilities through loss of stored data, breakdown
or malfunctioning of computer equipment and software systems,
telecommunications failure, or damage caused by fire, tornadoes,
lightning, electrical power outage or other disruption could
have a material adverse effect on our business, financial
condition and results of operations. Although we have certain
disaster recovery procedures in place and insurance to protect
against such contingencies, such procedures may not be effective
and any insurance or recovery procedures may not continue to be
available at reasonable prices and may not address all such
losses or compensate us for the possible loss of clients
occurring during any period that we are unable to provide
services.

Privacy legislation may impede our ability to utilize our
customer database as a means to generate new sales.

We intend to utilize our extensive customer databases for
marketing and sales purposes, which we believe will enhance our
ability to meet our organic growth targets. However, privacy
legislation, such as the Gramm-Leach-Bliley Act and the Health
Insurance Portability and Accountability Act of 1996 in the
United States and the Personal Information Protection and
Electronic Documents Act in Canada, as well as other regulatory
changes, may restrict our ability to utilize personal
information that we have collected in our normal course of
operations to generate new sales. If we become subject to new
restrictions, or other regulatory restrictions of which we are
not aware, our ability to grow our business may be adversely
affected.

The security of the databases that contain our
customers personal information may be breached which could
subject us to litigation or adverse publicity.

We depend on computer systems to store information about our
customers, some of which is private. Database privacy, identity
theft and related computer and internet issues are matters of
growing public concern. We have installed privacy protection
systems and devices on our network in an attempt to prevent
unauthorized access to information in our database. However, our
technology may fail to adequately secure the private information
we maintain in our databases and protect it from theft or
inadvertent leakage. In such circumstances, we may be held
liable to our customers, which could result in litigation or
adverse publicity that could have a material adverse effect on
our business.

Our corporate structure and strategy of operating through
decentralized brokerages may make it more difficult for us to
become aware of and respond to adverse operating or financial
developments at our brokerages.

We depend on timely and accurate reporting of business
conditions and financial results from our brokerages to
implement and monitor our business plan and determine and report
our operating results. We receive end of month reports from each
of our brokerages regarding their financial condition and
operating results. If an adverse business or financial
development occurs at one or more of our brokerages near the
beginning of a month, we may not become aware of the occurrence
for several weeks which could make it more difficult for us to
effectively respond to that development. In addition, if one of
our brokerages were to report inaccurate financial information,
we might not learn of these inaccuracies for several weeks, if
at all, which could adversely affect our ability to determine
and report our financial results. For example, on occasion,
inconsistent accounting treatment at a brokerage has not been
detected until preparation of our quarterly financial
statements. We have implemented enterprise reporting software
that enables us to extract financial and operating data from our
brokerages electronically; however, in the event of a technical
or other failure we may be unable to use this software
effectively to compile our financial data or to prevent
inconsistent reporting of financial information.





14   HUB INTERNATIONAL LIMITED
    ANNUAL REPORT December 31, 2005



---



##### Table of Contents

Our profitability and liquidity may be materially
adversely affected by errors and omissions.

We have extensive operations and are subject to claims and
litigation in the ordinary course of business resulting from
alleged errors and omissions. Errors and omissions claims can
involve significant defense costs and may result in large damage
awards against us. Errors and omissions could include, for
example, our employees or sub-agents failing, whether
negligently or intentionally, to place coverage or to notify
insurance companies of claims on behalf of clients, to provide
insurance companies with complete and accurate information
relating to the risks being insured or to appropriately apply
funds that we hold for our clients on a fiduciary basis. It is
not always possible to prevent and detect errors and omissions
and the precautions we take may not be effective in all cases.

The amount of coverage limits and related deductible amounts of
our errors and omissions insurance policies are established
annually based upon our assessment of our errors and omissions
exposure, loss experience and the availability and pricing of
coverage within the marketplace. While we endeavor to purchase
coverage that is appropriate to our assessment of our risk, we
are unable to predict with certainty the frequency, nature or
magnitude of claims for direct or consequential damages.

Our profitability and liquidity may be adversely affected if in
the future our insurance coverage proves to be inadequate or
unavailable or there is an increase in liabilities for which we
self-insure. In addition, errors and omissions claims may harm
our reputation or divert management resources away from
operating our business.

Risks Related to Our Common Shares

The price of our common shares may fluctuate
substantially, which could negatively affect the holders of our
common shares.

The price of our common shares may fluctuate substantially due
to a variety of factors, including the following:
(1) fluctuations in the price of the shares of the small
number of public companies in the insurance brokerage business,
(2) announcements of acquisitions as part of our growth
strategy, (3) additions or departures of key personnel,
(4) write-downs of assets or operations, including
write-downs for intangible assets and goodwill impairment,
(5) announcements of legal proceedings or regulatory
matters, and (6) the general volatility in the stock
market. The market price of our common shares could also
fluctuate substantially if we fail to meet or exceed securities
analysts expectations of our financial results or if there
is a change in financial estimates or securities analysts
recommendations. Any downward pressure on the price of our
shares could be exacerbated by a lack of demand for our shares
at the time. From the beginning of 2004 to March 1, 2006,
the price of our common shares on the TSX has ranged from a low
of C$19.00 to a high of C$32.80 and on the NYSE has ranged from
a low of $15.94 to a high of $28.70.

In addition, the stock market has experienced volatility that
has affected the market prices of equity securities of many
companies, which has often been unrelated to the operating
performance of these companies. A number of other factors, many
of which are beyond our control, could also cause the market
price of our common shares to fluctuate substantially.

Significant fluctuation in the market price of our common
shares could result in securities class action claims against
us.

Significant price and value fluctuations have occurred with
respect to the securities of insurance and insurance-related
companies. Our common share price is likely to be volatile in
the future. In the past, following periods of downward
volatility in the market price of a companys securities,
class action litigation has often been pursued against the
respective company. If similar litigation were pursued against
us, it could result in substantial costs and a diversion of our
managements attention and resources.

Our largest shareholder may substantially influence
certain actions requiring shareholder approval.

As of December 31, 2005, Fairfax owned or controlled 26% of
our common shares. Fairfax also owns or controls
$35 million of subordinated convertible debentures, which
it can convert at any time into our common shares at
C$17.00 per share. If Fairfax converts the debentures it
would hold 31% of our common shares. Under our by-laws





ANNUAL REPORT December 31, 2005
    HUB INTERNATIONAL LIMITED    15



---



##### Table of Contents

and articles of incorporation, Fairfax has the ability to
substantially influence certain actions requiring shareholder
approval, including:




    electing members of our board of directors;
    adopting amendments to our articles and by-laws; and
    approving a merger or consolidation, liquidation or sale of all
    or substantially all of our assets.Fairfax may have different interests than other shareholders and
therefore may make decisions that are adverse to other
shareholders interests.

We are incorporated in Canada, and, as a result, it may
not be possible for shareholders to enforce civil liability
provisions of the securities laws of the United States.

We are organized under the laws of Canada and some of our assets
are located outside the United States. There is doubt as to
whether the courts of Canada would recognize or enforce
judgments of United States courts obtained against us or our
directors or officers based on the civil liability provisions of
the securities laws of the United States or any state or hear
actions brought in Canada against us or those persons based on
those laws.





Item 1B.    Unresolved Staff
Comments.

Not applicable.





Item 2.    Properties

We maintain our corporate headquarters in Chicago, Illinois at
premises that we sublet from HUB Midwest, one of our
subsidiaries. This facility, totaling approximately
12,300 square feet, contains corporate, finance,
administration, sales and customer support functions. The lease
on the premises expires on March 31, 2018. In addition, our
brokerages lease office space in the locations in which they
operate, none of which is individually material. In total, we
hold 192 leases covering approximately 1.1 million square
feet with a total annual base rent for all of these locations of
approximately $16.1 million.

We believe that our facilities are well maintained and in good
condition and are adequate for our current needs. We expect that
suitable additional space will be available as required.





Item 3.    Legal Proceedings

The insurance industry in general, and certain of our hubs, have
been the subject of scrutiny by various regulatory bodies,
including state attorneys general and the departments of
insurance for various states, with respect to certain contingent
commission arrangements between insurance companies and brokers.

As previously reported, our subsidiary HUB Northeast (formerly
known as Kaye Insurance Associates, Inc.), received three
subpoenas from the Office of the Attorney General of the State
of New York seeking information regarding certain contingent
agreements and other business practices. Since August 2004,
various other subsidiaries of Hub have received and responded to
letters of inquiry and subpoenas from authorities in California,
Connecticut, Texas, Illinois, Delaware, Pennsylvania, New
Hampshire and Quebec. We retained external counsel to assist us
in responding to the New York Attorney Generals and other
inquiries and, among other things, requested that such external
counsel conduct an investigation of HUB Northeast and of our
other hubs to determine whether any current or former employee
engaged in the practice of falsifying or inflating insurance
quotes or other illegal practices. To date, management is
unaware of any incidents of falsifying or inflating insurance
quotes or other illegal practices. State attorneys general and
insurance departments continue their investigations of various
industry practices. We continue to review our practices in light
of these investigations and resulting charges brought against
other brokers.





16   HUB INTERNATIONAL LIMITED
    ANNUAL REPORT December 31, 2005



---



##### Table of Contents

We have fully cooperated with the attorney general and
department of insurance inquiries. While it is not possible to
predict the outcome of these investigations, if contingent
compensation agreements were to be restricted or no longer
permitted, our financial condition, results of operation and
liquidity may be materially adversely affected.

We were first named as a defendant in a federal class action
lawsuit in October, 2004. The lawsuit alleges that the
defendants used the contingent commission structure to deprive
policyholders of independent and unbiased brokerage
services, as well as free and open competition in the market for
insurance. A number of substantially similar federal class
actions were filed against us and many other defendants. On
February 17, 2005, the Federal Judicial Panel on
Multidistrict Litigation transferred these and other class
actions in which we were not named to the District of New
Jersey. In August 2005 and February 2006, amended
complaints were filed in the consolidated federal court
proceedings pending in New Jersey and styled In re Insurance
Brokerage Antitrust Litigation. The case has now been divided
into two cases, one for employee benefits and the other for
commercial insurance. Certain of our subsidiaries have been
named as additional defendants. A handful of allegations
specifically pertaining to Hub have been added, but remain
vague. The judge in these actions has permitted limited
discovery to take place, which is continuing. We dispute the
allegations made in these lawsuits and intend to vigorously
defend these cases.

In January, 2005 we and our affiliates were named as defendants
in a class action filed in the Circuit Court of Cook County,
Illinois. The named plaintiff is a Chicago law firm that
obtained its professional liability insurance through the
Chicago office of what is now HUB Midwest and claims that we
received an undisclosed contingent commission with respect to
its policy. We dispute the allegations of this lawsuit and are
vigorously defending this case.

The cost of defending against the lawsuits, and diversion of
managements attention, may be significant and could have a
material adverse effect on our results of operations. In
addition, an adverse finding in a regulatory investigation or a
class action or similar lawsuit could result in a significant
judgment or imposition of liability against us that could have a
material adverse effect on our financial condition, results of
operation and liquidity. We have not recorded a liability at
December 31, 2005 related to these matters.

In the normal course of business, we are involved in various
claims and legal proceedings relating to insurance placed by us
and other contractual matters. Our management does not believe
that any such pending or threatened proceedings will have a
material adverse effect on our consolidated financial position
or future results of operations.







Item 4.
    Submission of Matters to a Vote of Security HoldersNo matters were submitted to a vote of security holders during
the fourth quarter ended December 31, 2005.





ANNUAL REPORT December 31, 2005
    HUB INTERNATIONAL LIMITED    17



---



##### Table of Contents

PART II







Item 5.
    Market for Registrants Common Equity, Related
    Shareholder Matters and Issuer Purchases of Equity SecuritiesOur common shares are listed on the New York Stock Exchange
(NYSE) and the Toronto Stock Exchange (TSX) in Canada
under the symbol HBG. The following table sets forth the high
and low sales prices per share for our common shares on the NYSE
and TSX and quarterly dividends paid:

|     |                                           |      |  |        |     |  |  |        |  |  |     |         |  |           |  |         |  |  |  |       | 
|---- | ----------------------------------------- | ---- |  | ------ | --- |  |  | ------ |  |  | --- | ------- |  | --------- |  | ------- |  |  |  | ----- | 
|     |                                           | NYSE |  |        | TSX |  |  |       
|     |                                           |      |  |        |     |  |  | Cash   | 
|     |                                           | High |  |        | Low |  |  | High   |  |  | Low |         |  | Dividends | 
|     |                                           |      |  |        |     |  |  |        |  |  |     |         |  |           | 
|2004 |                                           |      |  |        |     |  |  |        |  |  |     |         |  |           |  |         |  |  |  |      
|     | First Quarter                             |      |  | $19.25 |     |  |  | $15.94 |  |  |     | C$25.50 |  |           |  | C$20.42 |  |  |  | $0.05 | 
|     | Second Quarter                            |      |  | $19.40 |     |  |  | $17.85 |  |  |     | C$26.15 |  |           |  | C$24.00 |  |  |  | $0.05 | 
|     | Third Quarter                             |      |  | $19.62 |     |  |  | $17.37 |  |  |     | C$25.65 |  |           |  | C$22.20 |  |  |  | $0.05 | 
|     | Fourth Quarter                            |      |  | $18.84 |     |  |  | $16.00 |  |  |     | C$23.25 |  |           |  | C$19.00 |  |  |  | $0.05 | 
|2005 |                                           |      |  |        |     |  |  |        |  |  |     |         |  |           |  |         |  |  |  |      
|     | First Quarter                             |      |  | $20.08 |     |  |  | $17.60 |  |  |     | C$24.95 |  |           |  | C$21.45 |  |  |  | $0.06 | 
|     | Second Quarter                            |      |  | $19.56 |     |  |  | $16.80 |  |  |     | C$24.25 |  |           |  | C$21.38 |  |  |  | $0.06 | 
|     | Third Quarter                             |      |  | $23.17 |     |  |  | $19.28 |  |  |     | C$27.36 |  |           |  | C$23.51 |  |  |  | $0.06 | 
|     | Fourth Quarter                            |      |  | $25.95 |     |  |  | $22.37 |  |  |     | C$30.51 |  |           |  | C$26.39 |  |  |  | $0.06 | 
|2006 |                                           |      |  |        |     |  |  |        |  |  |     |         |  |           |  |         |  |  |  |      
|     | First Quarter (through
    March 1, 2006) |      |  | $28.70 |     |  |  | $25.19 |  |  |     | C$32.80 |  |           |  | C$29.16 |  |  |  | $0.07 | 














Item 6.    Selected Financial
Data


pooling-of








|                               |                                
|------------------------------ | -------------------------------
|18   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005



---



##### Table of Contents

are only included from the date of acquisition forward.
Accordingly, the results in each period are not directly
comparable.

Our historical consolidated financial statements are prepared in
accordance with Canadian GAAP, which differs in certain respects
from U.S. GAAP. For a discussion of the principal
differences between Canadian GAAP and U.S. GAAP as it
relates to us, see note 20 to our audited consolidated
financial statements included elsewhere in this
Form 10-K.

|                                                                |                                                                            |                         |         |         |      |   |         |         |   |   |         |         |   |      |         |         |   |   |         |         |  
|--------------------------------------------------------------- | -------------------------------------------------------------------------- | ----------------------- | ------- | ------- | ---- | - | ------- | ------- | - | - | ------- | ------- | - | ---- | ------- | ------- | - | - | ------- | ------- | -
|                                                                |                                                                            | Year Ended December 31, |        
|(in thousands of U.S. dollars, except per share                 |                                                                            |                         |        
|amounts)(1)                                                     |                                                                            | 2005                    |         |         | 2004 |   |         | 2003    |   |   | 2002    |         |   | 2001 |        
|                                                                |                                                                            |                         |         |         |      |   |         |         |   |   |         |         |   |      |        
|Consolidated Statements of
    earnings data:                   |                                                                            |                         |         |         |      |   |         |         |   |   |         |         |   |      |         |        
|Canadian GAAP                                                   |                                                                            |                         |         |         |      |   |         |         |   |   |         |         |   |      |         |         |   |   |         |        
|Revenue:                                                        |                                                                            |                         |         |         |      |   |         |         |   |   |         |         |   |      |         |         |   |   |         |        
|                                                                | Commission income                                                          |                         | $       | 389,907 |      |   | $       | 323,150 |   |   | $       | 258,099 |   |      | $       | 200,976 |   |   | $       | 143,063 |  
|                                                                | Contingent commissions and volume
    overrides                            |                         |         | 40,454  |      |   |         | 21,705  |   |   |         | 18,530  |   |      |         | 11,464  |   |   |         | 5,899   |  
|                                                                | Other                                                                      |                         |         | 12,195  |      |   |         | 10,226  |   |   |         | 9,730   |   |      |         | 7,520   |   |   |         | 5,031   |  
|                                                                |                                                                            |                         |         |         |      |   |         |         |   |   |         |         |   |      |        
|                                                                |                                                                            |                         | 442,556 |         |      |   | 355,081 |         |   |   | 286,359 |         |   |      | 219,960 |         |   |   | 153,993 |        
|                                                                |                                                                            |                         |         |         |      |   |         |         |   |   |         |         |   |      |        
|Expenses:                                                       |                                                                            |                         |         |         |      |   |         |         |   |   |         |         |   |      |         |         |   |   |         |        
|                                                                | Employee cash compensation                                                 |                         |         | 246,263 |      |   |         | 195,706 |   |   |         | 156,320 |   |      |         | 118,667 |   |   |         | 88,015  |  
|                                                                | Selling, occupancy and
    administration                                  |                         |         | 82,843  |      |   |         | 71,948  |   |   |         | 56,606  |   |      |         | 44,932  |   |   |         | 35,276  |  
|                                                                | Depreciation                                                               |                         |         | 8,714   |      |   |         | 7,242   |   |   |         | 6,244   |   |      |         | 5,492   |   |   |         | 3,940   |  
|                                                                | Interest expense                                                           |                         |         | 10,656  |      |   |         | 7,406   |   |   |         | 5,191   |   |      |         | 7,317   |   |   |         | 7,447   |  
|                                                                | Intangible asset amortization                                              |                         |         | 8,363   |      |   |         | 5,458   |   |   |         | 3,208   |   |      |         | 1,671   |   |   |         | 4,940   |  
|                                                                | Compensation for Talbot earnout                                            |                         |         | 28,716  |      |   |         | 14,388  |   |   |         |        |   |      |         |        |   |   |         |        |  
|                                                                | Other non-cash stock based
    compensation                                |                         |         | 7,184   |      |   |         | 6,502   |   |   |         | 4,801   |   |      |         | 1,089   |   |   |         |        |  
|                                                                | Gain on disposal of subsidiaries,
    property, equipment and other assets |                         |         | (2,943  | )    |   |         | (1,923  | ) |   |         | (202    | ) |      |         | (2,679  | ) |   |         | (173    | )
|                                                                | Loss on foreign exchange forward
    contract                              |                         |         | 555     |      |   |         |        |   |   |         |        |   |      |         |        |   |   |         |        |  
|                                                                | Gain on forgiveness of debt                                                |                         |         | (4,500  | )    |   |         |        |   |   |         |        |   |      |         |        |   |   |         |        |  
|                                                                | Loss on write-off of trademarks                                            |                         |         |        |      |   |         | 2,587   |   |   |         |        |   |      |         |        |   |   |         |        |  
|                                                                | Gain on put option liability                                               |                         |         |        |      |   |         |        |   |   |         | (160    | ) |      |         | (186    | ) |   |         | (719    | )
|                                                                | Proceeds from life insurance                                               |                         |         |        |      |   |         |        |   |   |         | (1,000  | ) |      |         |        |   |   |         |        |  
|                                                                |                                                                            |                         |         |         |      |   |         |         |   |   |         |         |   |      |        
|                                                                |                                                                            |                         | 385,851 |         |      |   | 309,314 |         |   |   | 231,008 |         |   |      | 176,303 |         |   |   | 138,726 |        
|                                                                |                                                                            |                         |         |         |      |   |         |         |   |   |         |         |   |      |        
|Net earnings from continuing
    operations before income taxes |                                                                            |                         | 56,705  |         |      |   | 45,767  |         |   |   | 55,351  |         |   |      | 43,657  |         |   |   | 15,267  |        
|Provision for income tax expense                                |                                                                            |                         | 30,958  |         |      |   | 19,984  |         |   |   | 18,842  |         |   |      | 14,256  |         |   |   | 5,262   |        
|                                                                |                                                                            |                         |         |         |      |   |         |         |   |   |         |         |   |      |        
|Net earnings from continuing
    operations                     |                                                                            |                         | 25,747  |         |      |   | 25,783  |         |   |   | 36,509  |         |   |      | 29,401  |         |   |   | 10,005  |        
|Net earnings (loss) from
    discontinued operations(2)         |                                                                            |                         | (29     | )       |      |   | 461     |         |   |   |        |         |   |      |        |         |   |   |        |        
|                                                                |                                                                            |                         |         |         |      |   |         |         |   |   |         |         |   |      |        
|Net earnings                                                    |                                                                            | $                       | 25,718  |         |      | $ | 26,244  |         |   | $ | 36,509  |         |   | $    | 29,401  |         |   | $ | 10,005  |        
|                                                                |                                                                            |                         |         |         |      |   |         |         |   |   |         |         |   |      |        
|Basic earnings per
    share                                    |                                                                            |                         |         |         |      |   |         |         |   |   |         |         |   |      |         |         |   |   |         |        
|                                                                | Continuing operations                                                      |                         | $       | 0.84    |      |   | $       | 0.85    |   |   | $       | 1.22    |   |      | $       | 1.27    |   |   | $       | 0.53    |  
|                                                                | Discontinued operations(2)                                                 |                         |         |        |      |   |         | 0.02    |   |   |         |        |   |      |         |        |   |   |         |        |  
|                                                                |                                                                            |                         |         |         |      |   |         |         |   |   |         |         |   |      |        
|                                                                | Total operations                                                           |                         | $       | 0.84    |      |   | $       | 0.87    |   |   | $       | 1.22    |   |      | $       | 1.27    |   |   | $       | 0.53    |  
|                                                                |                                                                            |                         |         |         |      |   |         |         |   |   |         |         |   |      |        





|                                |                                
|------------------------------- | -------------------------------
|ANNUAL REPORT December 31, 2005 | HUB INTERNATIONAL LIMITED    19



---



##### Table of Contents



|                                                |                                                                      |                                                                      |      |        |      |   |      |        |   |   |      |        |      |      |      |        |        |   |      |        |      |  
|----------------------------------------------- | -------------------------------------------------------------------- | -------------------------------------------------------------------- | ---- | ------ | ---- | - | ---- | ------ | - | - | ---- | ------ | ---- | ---- | ---- | ------ | ------ | - | ---- | ------ | ---- | -
|                                                |                                                                      | Year Ended December 31,                                              |     
|(in thousands of U.S. dollars, except per share |                                                                      |                                                                      |     
|amounts)(1)                                     |                                                                      | 2005                                                                 |      |        | 2004 |   |      | 2003   |   |   | 2002 |        |      | 2001 |     
|                                                |                                                                      |                                                                      |      |        |      |   |      |        |   |   |      |        |      |      |     
|Diluted earnings per
    share                  |                                                                      |                                                                      |      |        |      |   |      |        |   |   |      |        |      |      |      |        |        |   |      |       
|                                                | Continuing operations                                                |                                                                      | $    | 0.76   |      |   | $    | 0.79   |   |   | $    | 1.14   |      |      | $    | 1.06   |        |   | $    | 0.50   |     
|                                                | Discontinued operations(2)                                           |                                                                      |      |       |      |   |      | 0.01   |   |   |      |       |      |      |      |       |        |   |      |       |     
|                                                |                                                                      |                                                                      |      |        |      |   |      |        |   |   |      |        |      |      |     
|                                                | Total operations                                                     |                                                                      | $    | 0.76   |      |   | $    | 0.80   |   |   | $    | 1.14   |      |      | $    | 1.06   |        |   | $    | 0.50   |     
|                                                |                                                                      |                                                                      |      |        |      |   |      |        |   |   |      |        |      |      |     
|Weighted average shares outstanding:            |                                                                      |                                                                      |      |        |      |   |      |        |   |   |      |        |      |      |      |        |        |   |      |       
|                                                | Basic                                                                |                                                                      |      | 30,561 |      |   |      | 30,246 |   |   |      | 29,967 |      |      |      | 23,181 |        |   |      | 19,012 |     
|                                                | Diluted                                                              |                                                                      |      | 36,619 |      |   |      | 35,305 |   |   |      | 33,767 |      |      |      | 30,199 |        |   |      | 20,105 |     
|Dividends declared per share                    |                                                                      | $                                                                    | 0.24 |        |      | $ | 0.20 |        |   | $ | 0.20 |        |      | $    | 0.18 |        |        | $ | 0.18 |       
|U.S. GAAP                                       |                                                                      |                                                                      |      |        |      |   |      |        |   |   |      |        |      |      |      |        |        |   |      |       
|                                                | Net earnings from continuing
    operations (Canadian GAAP)          |                                                                      | $    | 25,747 |      |   | $    | 25,783 |   |   | $    | 36,509 |      |      | $    | 29,401 |        |   | $    | 10,005 |     
|                                                | Net earnings (loss) from
    discontinued operations (Canadian GAAP) |                                                                      |      | (29    | )    |   |      | 461    |   |   |      |       |      |      |      |       |        |   |      |       |     
|                                                |                                                                      |                                                                      |      |        |      |   |      |        |   |   |      |        |      |      |     
|                                                | Net earnings based on Canadian GAAP                                  |                                                                      | $    | 25,718 |      |   | $    | 26,244 |   |   | $    | 36,509 |      |      | $    | 29,401 |        |   | $    | 10,005 |     
|                                                |                                                                      | Cumulative effect of change in
    accounting policy for put options |      |        |     |   |      |        |  |   |      |        | 335  |      |      |        |       |   |      |        |     |  
|                                                |                                                                      | Adjustment to put option liability                                   |      |        |     |   |      |        |  |   |      |        | (409 | )    |      |        | (814   | ) |      |        | (811 | )
|                                                |                                                                      | Adjustment to investment held for
    sale                           |      |        |     |   |      |        |  |   |      |        |     |      |      |        | (2,236 | ) |      |        | 520  |  
|                                                |                                                                      | Change in reporting currency                                         |      |        |     |   |      |        |  |   |      |        |     |      |      |        |       |   |      |        | 144  |  
|                                                |                                                                      |                                                                      |      |        |      |   |      |        |   |   |      |        |      |      |     
|                                                | Net earnings (U.S. GAAP)                                             |                                                                      | $    | 25,718 |      |   | $    | 26,244 |   |   | $    | 36,435 |      |      | $    | 26,351 |        |   | $    | 9,858  |     
|                                                |                                                                      |                                                                      |      |        |      |   |      |        |   |   |      |        |      |      |     
|Net earnings per share
    (U.S. GAAP)          |                                                                      |                                                                      |      |        |      |   |      |        |   |   |      |        |      |      |      |        |        |   |      |       
|                                                | Basic                                                                |                                                                      | $    | 0.84   |      |   | $    | 0.87   |   |   | $    | 1.22   |      |      | $    | 1.14   |        |   | $    | 0.52   |     
|                                                | Diluted                                                              |                                                                      | $    | 0.76   |      |   | $    | 0.80   |   |   | $    | 1.14   |      |      | $    | 0.96   |        |   | $    | 0.49   |     






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Effective October 1, 2001, we adopted the U.S. dollar
    as our reporting currency. Our financial results for all periods
    prior to October 1, 2001 have been restated from Canadian
    dollars to U.S. dollars at the exchange rate in effect at
    September 30, 2001 of C$1.00 = $0.63.                                                                                                                                                                                                       
|   
|(2) | During 2005, the Company adopted a formal plan of disposition
    related to it U.S. financial services operation (the
    Discontinued Business). The Company sold this
    operation January 1, 2006. See note 5
    Discontinued Operations. As a result of this plan of
    disposal, the results of operations for the Discontinued
    Business have been reported as net earnings from discontinued
    operations in the Consolidated Statements of Earnings for all
    periods presented.



|                                                     |  |      |       |   |      |   |       |      |  |      |   |      |  |   |   |  |  |   |   | 
|---------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- |  | ---- | - | ---- |  | - | - |  |  | - | - | 
|(in thousands of U.S. dollars, except                |  |      |       |   |      |   |       |      |  |     
|per share amounts)                                   |  | 2005 |       |   | 2004 |   |       | 2003 |  | 2002 |   | 2001
|                                                     |  |      |       |   |      |   |       |      |  |      |   |     
|Revenue                                              |  | $    | 6,900 |   |      | $ | 5,769 |      |  | $    |  |      |  | $ |  |  |  | $ |  | 
|Net earnings before taxes                            |  | $    | 53    |   |      | $ | 511   |      |  | $    |  |      |  | $ |  |  |  | $ |  | 
|Provision for income tax expense                     |  | $    | 82    |   |      | $ | 50    |      |  | $    |  |      |  | $ |  |  |  | $ |  | 
|Net earnings (loss) from
    discontinued operations |  | $    | (29   | ) |      | $ | 461   |      |  | $    |  |      |  | $ |  |  |  | $ |  | 





|                               |                                
|------------------------------ | -------------------------------
|20   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005



---



##### Table of Contents



|                                           |                                                |                                                                                                                      |           |         |      |   |         |         |     |   |         |         |    |      |         |         |     |   |         |         |      |  
|------------------------------------------ | ---------------------------------------------- | -------------------------------------------------------------------------------------------------------------------- | --------- | ------- | ---- | - | ------- | ------- | --- | - | ------- | ------- | -- | ---- | ------- | ------- | --- | - | ------- | ------- | ---- | -
|                                           |                                                | As of December 31,                                                                                                   |          
|                                           |                                                |                                                                                                                      |          
|(in thousands of U.S. dollars)(1)          |                                                | 2005                                                                                                                 |           |         | 2004 |   |         | 2003    |     |   | 2002    |         |    | 2001 |        
|                                           |                                                |                                                                                                                      |           |         |      |   |         |         |     |   |         |         |    |      |        
|Consolidated balance sheet
    data        |                                                |                                                                                                                      |           |         |      |   |         |         |     |   |         |         |    |      |         |         |     |   |         |        
|Total assets                               |                                                | $                                                                                                                    | 1,001,353 |         |      | $ | 857,535 |         |     | $ | 699,288 |         |    | $    | 596,876 |         |     | $ | 502,296 |        
|Total debt(2)                              |                                                | $                                                                                                                    | 175,273   |         |      | $ | 186,797 |         |     | $ | 113,799 |         |    | $    | 107,038 |         |     | $ | 196,952 |        
|Total shareholders equity                 |                                                | $                                                                                                                    | 419,926   |         |      | $ | 381,783 |         |     | $ | 342,790 |         |    | $    | 284,274 |         |     | $ | 135,271 |        
|Reconciliation to
    U.S. GAAP:           |                                                |                                                                                                                      |           |         |      |   |         |         |     |   |         |         |    |      |         |         |     |   |         |        
|                                           | Total shareholders equity
    (Canadian GAAP) |                                                                                                                      | $         | 419,926 |      |   | $       | 381,783 |     |   | $       | 342,790 |    |      | $       | 284,274 |     |   | $       | 135,271 |     
|                                           | Adjustment to investment held for
    sale     |                                                                                                                      |           | (1,716  | )    |   |         | (1,716  | )   |   |         | (1,716  | )  |      |         | (1,716  | )   |   |         | 520     |     
|                                           | Accumulated other comprehensive
    income:    |                                                                                                                      |           |         |      |   |         |         |     |   |         |         |    |      |         |         |     |   |         |         |     
|                                           |                                                | Unrealized gains (losses), net of
    tax of $(2)  2005, $(99)  2004,
    $(56)  2003, $51  2002, $85 
    2001 |           |         | 4    |   |         |         | 157 |   |         |         | 90 |      |         |         | (83 | ) |         |         | (140 | )
|                                           | Cumulative translation account                 |                                                                                                                      |           |        |      |   |         |        |     |   |         |        |    |      |         | 496     |     |   |         |        |     
|                                           | Adjustment to put option liability             |                                                                                                                      |           |        |      |   |         |        |     |   |         |        |    |      |         | (1,702  | )   |   |         | (4,898  | )   
|                                           | Executive share purchase plan loan             |                                                                                                                      |           |        |      |   |         |        |     |   |         |        |    |      |         | (1,912  | )   |   |         | (2,142  | )   
|                                           |                                                |                                                                                                                      |           |         |      |   |         |         |     |   |         |         |    |      |        
|Total shareholders equity
    (U.S. GAAP) |                                                | $                                                                                                                    | 418,214   |         |      | $ | 380,224 |         |     | $ | 341,164 |         |    | $    | 279,357 |         |     | $ | 128,611 |        
|                                           |                                                |                                                                                                                      |           |         |      |   |         |         |     |   |         |         |    |      |        






|    |                                                                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Effective October 1, 2001, we adopted the U.S. dollar
    as our reporting currency. Our financial results for all periods
    prior to October 1, 2001 have been restated from Canadian
    dollars to U.S. dollars using the exchange rate in effect
    at September 30, 2001 of C$1.00 = $0.63.
|   
|(2) | Includes long-term debt and capital leases (including current
    portion), bank debt and subordinated convertible notes.                                                                                                                                                                          



|                                         |  |                         |        |   |      |   |       |      |  |      |   |      |  |   |   |  |  |   |   | 
|---------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ----- | ---- |  | ---- | - | ---- |  | - | - |  |  | - | - | 
|                                         |  | Year Ended December 31,
|                                         |  |                        
|(in thousands of U.S. dollars)           |  | 2005                    |        |   | 2004 |   |       | 2003 |  | 2002 |   | 2001
|                                         |  |                         |        |   |      |   |       |      |  |      |   |     
|Canadian GAAP                            |  |                         |        |   |      |   |       |      |  |      |   |      |  |   |   |  |  |   |   | 
|Total current assets                     |  | $                       | 2,265  |   |      | $ | 3,720 |      |  | $    |  |      |  | $ |  |  |  | $ |  | 
|Total assets                             |  | $                       | 5,054  |   |      | $ | 6,498 |      |  | $    |  |      |  | $ |  |  |  | $ |  | 
|Total current liabilities                |  | $                       | 5,173  |   |      | $ | 5,122 |      |  | $    |  |      |  | $ |  |  |  | $ |  | 
|Total liabilities                        |  | $                       | 6,057  |   |      | $ | 6,180 |      |  | $    |  |      |  | $ |  |  |  | $ |  | 
|Total shareholders equity
    (deficit) |  | $                       | (1,003 | ) |      | $ | 318   |      |  | $    |  |      |  | $ |  |  |  | $ |  | 



|                                                                |  |                         |        |   |      |   |       |      |  |      |   |      |  |   |   |  |  |   |   | 
|--------------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ----- | ---- |  | ---- | - | ---- |  | - | - |  |  | - | - | 
|                                                                |  | Year Ended December 31,
|                                                                |  |                        
|(in thousands of U.S. dollars)                                  |  | 2005                    |        |   | 2004 |   |       | 2003 |  | 2002 |   | 2001
|                                                                |  |                         |        |   |      |   |       |      |  |      |   |     
|Canadian GAAP                                                   |  |                         |        |   |      |   |       |      |  |      |   |      |  |   |   |  |  |   |   | 
|Net cash flows provided by
    operating activities             |  | $                       | 873    |   |      | $ | 1,548 |      |  | $    |  |      |  | $ |  |  |  | $ |  | 
|Net cash flows provided by (used
    in) investing activities   |  |                         | 115    |   |      |   | (19   | )    |  |      |  |      |  |   |  |  |  |   |  | 
|Net cash flows used in financing
    activities                 |  |                         | (1,359 | ) |      |   | (810  | )    |  |      |  |      |  |   |  |  |  |   |  | 
|                                                                |  |                         |        |   |      |   |       |      |  |      |   |      |  |   |  
|Net cash flow provided by (used in)
    discontinued operations |  | $                       | (371   | ) |      | $ | 719   |      |  | $    |  |      |  | $ |  |  |  | $ |  | 
|                                                                |  |                         |        |   |      |   |       |      |  |      |   |      |  |   |  





|                                |                                
|------------------------------- | -------------------------------
|ANNUAL REPORT December 31, 2005 | HUB INTERNATIONAL LIMITED    21



---



##### Table of Contents

Item 7.
    Managements Discussion and Analysis of Financial
    Condition and Results of OperationsThe following discussion and analysis should be read in
conjunction with our consolidated financial statements and
accompanying notes included elsewhere in this report. 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. Our actual results may differ materially from the
results discussed in the forward-looking statements because of
various factors, including those discussed below and elsewhere
in this Form 10-K,
particularly under the heading Risk Factors.
Reference to Hub, the company,
we, us,, our and the
registrant refer to Hub International Limited and
its subsidiaries, unless otherwise expressly stated. Unless
otherwise indicated, all dollar amounts are expressed in, and
the term dollars and the symbol $ refer
to, U.S. dollars. The term Canadian dollars and
the symbol C$ refer to Canadian dollars. Our
financial statements are prepared in accordance with Canadian
generally accepted accounting principles (Canadian GAAP). These
principles differ in certain respects from United States
generally accepted accounting principles (U.S. GAAP) and to
the extent that they affect us are described in Note 20 to
our audited consolidated financial statements.

Introduction

The following will be discussed and analyzed:

|  |  |                                                 |  |   
|- |  | ----------------------------------------------- |  | --
| |  | Overview of Business                            |  | 22
| |  | Results of Operations                           |  | 24
| |  | Cash Flow, Liquidity and Capital
    Resources  |  | 31
| |  | Contractual Obligations                         |  | 34
| |  | Shareholders Equity                            |  | 35
| |  | Market Risk                                     |  | 35
| |  | Goodwill and Intangible Assets                  |  | 36
| |  | Related Party Transactions                      |  | 37
| |  | Off-Balance Sheet Transactions                  |  | 38
| |  | Critical Accounting Policies and
    Estimates  |  | 38
| |  | Effects of Recent Accounting
    Pronouncements |  | 41

Overview of Business




same-store-sales








|                               |                                
|------------------------------ | -------------------------------
|22   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005



---



##### Table of Contents

achieve organic revenue growth is not solely dependent on rising
or declining rates, but results from a more complex mixture of
general economic growth and demand, access to coverage from
insurers and our marketing and sales performance.

Our business is comprised of two geographic segments, the United
States and Canada. The mix of products and services we offer in
the United States differs from those we offer in Canada. In the
United States in 2005, 86% of our commission income was
generated from the sale of commercial lines and 14% from
personal lines. In Canada in 2005, 61% of our commission income
was generated from the sale of commercial lines and 39% from
personal lines. Our purchase of a major personal lines insurance
broker in 2005 is expected to increase the percentage of
U.S. commission income derived from personal lines to
approximately 19% in 2006.

Commission income, which usually ranges from 5% to 20% of the
premium charged by insurers, provides approximately 88% of our
revenue base. In addition to these core commissions,
the company derives revenue from:




    Volume overrides  additional compensation based on
    the overall volume of business a brokerage places with the
    insurance company (See Contractual Obligations 
    Other for information regarding our legal proceedings)
    Contingent commissions  additional compensation based
    on the profit the insurance company makes on the book of
    business a brokerage places with the insurance company (See
    Contractual Obligations  Other for
    information regarding our legal proceedings) and
    Other income  comprised primarily of premium finance
    fees, fees charged to clients in lieu of commissions and
    interest income, including income earned while we hold client
    premiums on behalf of insurance companies.We operate through an organizational structure comprised of our
head office, larger regional or specialty brokerages that we
call hub brokerages and smaller brokerages managed
by the regional hubs. Our head office implements the acquisition
of hub brokerages and oversees the acquisition of smaller,
fold-in brokerages by the hubs. Our head office also
coordinates selling and marketing efforts, identifies
cross-selling opportunities among our brokerages, and handles
certain general administrative functions. At December 31,
2005, we had 15 hub brokerages  ten in
the United States and five in Canada.

Each hub addresses a specific regional or specialty market,
operating with its own management team and structure, business
plan and operating benchmarks. Regional hubs are generally
larger than $10 million in annual revenue, while a hub that
focuses on a specialty product line or market might have a
smaller revenue base. Each hub brokerage is responsible for not
only the development of its own business, but also the
identification, acquisition and integration of smaller, fold-in
brokerages. Fold-in acquisitions allow each hub brokerage an
opportunity to strengthen its market position by acquiring new
or complementary products and services and management talent.
Fold-in acquisitions also provide the opportunity for improved
profit margins through the reduction or elimination of redundant
administrative functions, facilities and systems.

Our structure enables our hub brokerages to more effectively and
quickly meet the changing needs of our clients in various
markets, while benefiting from the operating efficiencies and
leverage of a large brokerage. We seek to operate largely on a
decentralized basis, believing that the best operating decisions
are made close to the customer. At the same time, we recognize
that our growth has created demand for increased coordination by
our head office. In 2004 and 2005, we invested more in the
coordination of additional functions from our head office to
enhance cross-selling, international collaboration, marketing
efficiencies, total expense management and financial control
initiatives. As a general operating guideline, we work to
centralize those activities that do not touch the customer
directly, while adopting a more decentralized approach for
functions that connect directly with customers.

During the two years after September 11, 2001 premium rates
remained firm for most types of coverage, rising 10% to
15% per year in many cases. During the latter part of 2003,
the Canadian market remained firm, but the U.S. market
experienced some softening of premium rates for property and
casualty coverage. During 2004 insurance rates in both Canada
and in the U.S., for many types of coverage, declined. In 2005,
in both Canada and the US we saw average declines in premiums in
the range of three to five percent. As a result of the 2005
hurricane





ANNUAL REPORT December 31, 2005
    HUB INTERNATIONAL LIMITED    23



---



##### Table of Contents

season, property rates for coastal areas in 2006 will increase.
However, we anticipate all other areas of North America to see
modest decreases in rates in the range of two to three percent.
We do not have a significant client base in the coastal areas.

For us, as for other brokers, falling rates can present both
positive and negative effects. Falling premiums usually yield
reduced commissions, if the insurance buyer maintains its
coverage levels. However, many insurance buyers will respond to
falling rates by increasing total coverage, often by lowering
deductibles, increasing limits of coverage, or by adding new
risks to those already insured. During 2005, we started to see
more evidence of insurance buyers increasing coverage levels as
a result of the softening of insurance rates. For 2006 we expect
a slower pace of rate reductions as the year unfolds. We also
anticipate that contingent commissions could decline this year
due to loss experience for insurers in 2005. In addition, the
economic environment could lead to higher or lower sales and
employee headcounts at client companies, leading in turn to
increased or reduced demand for employee benefits, liability and
other types of coverage tied to business activity levels.

Because we are a service organization, compensation and other
personnel costs make up the largest component of total
expenses  56% in 2005. Property and equipment are
comprised primarily of furniture, computer systems and office
equipment. Therefore, our capital resources, including external
borrowings, internally generated cash flow and proceeds from the
issuance of common shares, are devoted primarily toward
acquisitions.

Results of Operations

Year ended December 31, 2005 compared to year ended
December 31, 2004

Revenue

As a result of acquisitions and 6% organic growth, which
includes the strengthening of the Canadian dollar as compared to
the U.S. dollar in 2005, we reported a 25% increase in
revenue to $442.6 million in 2005. During 2005, we acquired
15 insurance brokerages, including Personal Lines Insurance
Brokerage, Inc. (PLI) from The Chubb Corporation on
October 1, 2005, and divested of three offices in the
United States and Canada.

The table below shows a breakdown of our revenue by segment and
type for 2005 and 2004 and organic growth for 2005:

|                                                   |  |         |         |  |           |   |         |           |                |   |                |  |  |               |     |   |           |   |         |           |  |   |        |  |  |  |    |  
|-------------------------------------------------- |  | ------- | ------- |  | --------- | - | ------- | --------- | -------------- | - | -------------- |  |  | ------------- | --- | - | --------- | - | ------- | --------- |  | - | ------ |  |  |  | -- | -
|(in thousands of U.S. dollars, except percentages) |  |         |         |  |           |   |         |           |               
|                                                   |  | Revenue |         |  |           |   |         |           | Adjustment for |   |                |  |  |              
|                                                   |  |         |         |  | Total Net |   |         | Total Net |                |   | (Acquisitions) |  |  | Organic       |     |   | Organic   |  
|                                                   |  | 2005    |         |  | 2004      |   |         | Change($) |                |   | Growth(%)      |  |  | and Disposals |     |   | Growth($) |   |         | Growth(%) | 
|                                                   |  |         |         |  |           |   |         |           |                |   |                |  |  |               |     |   |           |   |         |           | 
|Total                                              |  |         |         |  |           |   |         |           |                |   |                |  |  |               |     |   |           |   |         |           |  |   |        |  |  |  |    |  
|Commission Income                                  |  | $       | 389,907 |  |           | $ | 323,150 |           |                | $ | 66,757         |  |  |               | 21  | % |           | $ | (55,487 | )         |  | $ | 11,270 |  |  |  | 3  | %
|Contingent Commissions and Volume
    Overrides    |  |         | 40,454  |  |           |   | 21,705  |           |                |   | 18,749         |  |  |               | 86  | % |           |   | (11,547 | )         |  |   | 7,202  |  |  |  | 33 | %
|Other Income                                       |  |         | 12,195  |  |           |   | 10,226  |           |                |   | 1,969          |  |  |               | 19  | % |           |   | (210    | )         |  |   | 1,759  |  |  |  | 17 | %
|                                                   |  |         |         |  |           |   |         |           |                |   |                |  |  |               |     |   |           |   |         |           | 
|Total                                              |  | $       | 442,556 |  |           | $ | 355,081 |           |                | $ | 87,475         |  |  |               | 25  | % |           | $ | (67,244 | )         |  | $ | 20,231 |  |  |  | 6  | %
|                                                   |  |         |         |  |           |   |         |           |                |   |                |  |  |               |     |   |           |   |         |           | 
|U.S.                                               |  |         |         |  |           |   |         |           |                |   |                |  |  |               |     |   |           |   |         |           |  |   |        |  |  |  |    |  
|Commission Income                                  |  | $       | 269,828 |  |           | $ | 210,481 |           |                | $ | 59,347         |  |  |               | 28  | % |           | $ | (58,507 | )         |  | $ | 840    |  |  |  |   | %
|Contingent Commissions and Volume
    Overrides    |  |         | 30,811  |  |           |   | 14,864  |           |                |   | 15,947         |  |  |               | 107 | % |           |   | (11,869 | )         |  |   | 4,078  |  |  |  | 27 | %
|Other Income                                       |  |         | 9,631   |  |           |   | 7,957   |           |                |   | 1,674          |  |  |               | 21  | % |           |   | (281    | )         |  |   | 1,393  |  |  |  | 18 | %
|                                                   |  |         |         |  |           |   |         |           |                |   |                |  |  |               |     |   |           |   |         |           | 
|Total                                              |  | $       | 310,270 |  |           | $ | 233,302 |           |                | $ | 76,968         |  |  |               | 33  | % |           | $ | (70,657 | )         |  | $ | 6,311  |  |  |  | 3  | %
|                                                   |  |         |         |  |           |   |         |           |                |   |                |  |  |               |     |   |           |   |         |           | 
|Canada                                             |  |         |         |  |           |   |         |           |                |   |                |  |  |               |     |   |           |   |         |           |  |   |        |  |  |  |    |  
|Commission Income                                  |  | $       | 120,079 |  |           | $ | 112,669 |           |                | $ | 7,410          |  |  |               | 7   | % |           | $ | 3,020   |           |  | $ | 10,430 |  |  |  | 9  | %
|Contingent Commissions and Volume
    Overrides    |  |         | 9,643   |  |           |   | 6,841   |           |                |   | 2,802          |  |  |               | 41  | % |           |   | 322     |           |  |   | 3,124  |  |  |  | 46 | %
|Other Income                                       |  |         | 2,564   |  |           |   | 2,269   |           |                |   | 295            |  |  |               | 13  | % |           |   | 71      |           |  |   | 366    |  |  |  | 16 | %
|                                                   |  |         |         |  |           |   |         |           |                |   |                |  |  |               |     |   |           |   |         |           | 
|Total                                              |  | $       | 132,286 |  |           | $ | 121,779 |           |                | $ | 10,507         |  |  |               | 9   | % |           | $ | 3,413   |           |  | $ | 13,920 |  |  |  | 11 | %
|                                                   |  |         |         |  |           |   |         |           |                |   |                |  |  |               |     |   |           |   |         |           | 





|                               |                                
|------------------------------ | -------------------------------
|24   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005



---



##### Table of Contents

Organic growth figures include the impact of foreign exchange
rate changes between the U.S. and Canadian dollars. In 2005, the
rise of the Canadian dollar versus the U.S. dollar
contributed three percentage points of our 6% organic growth
rate in total revenue.

In addition to the variations that can result from changes in
organic growth rates, acquisitions and other variables related
to operations, both 2005 and 2004 results included a number of
factors that can complicate direct comparisons. To increase
investor understanding the following chart shows the impact
specific items would have had if they had not occurred, on net
earnings and diluted earnings per share over the past two years.

|                                                                  |  |              |        |   |             |   |       |              |  |   |             |   |  |   |       |  
|----------------------------------------------------------------- |  | ------------ | ------ | - | ----------- | - | ----- | ------------ |  | - | ----------- | - |  | - | ----- | -
|                                                                  |  | 2005         |        |   | 2004        |  
|(in thousands of U.S. dollars, except per                         |  |              |        |   |             |  
|share amounts)                                                    |  | Net Earnings |        |   | Diluted EPS |   |       | Net Earnings |  |   | Diluted EPS |  
|                                                                  |  |              |        |   |             |   |       |              |  |   |             |  
|Impact of compensation for Talbot
    earnout                     |  | $            | 28,716 |   |             | $ | 0.78  |              |  | $ | 14,388      |   |  | $ | 0.41  |  
|Impact of severance costs                                         |  | $            | 1,004  |   |             | $ | 0.03  |              |  | $ |            |   |  | $ |      |  
|Impact of gain on forgiveness of
    debt                         |  | $            | (2,925 | ) |             | $ | (0.08 | )            |  | $ |            |   |  | $ |      |  
|Impact of write-off of trademarks                                 |  | $            |       |   |             | $ |      |              |  | $ | 1,656       |   |  | $ | 0.05  |  
|Impact of gain on disposition of
    assets of certain brokerages |  | $            | (1,914 | ) |             | $ | (0.05 | )            |  | $ | (1,112      | ) |  | $ | (0.03 | )
|Impact of loss on foreign exchange
    forward contract           |  | $            | 354    |   |             | $ | 0.01  |              |  | $ |            |   |  | $ |      |  
|Impact of foreign exchange gains                                  |  | $            | (1,475 | ) |             | $ | (0.04 | )            |  | $ | (1,972      | ) |  | $ | (0.06 | )





U.S. Results








|                                |                                
|------------------------------- | -------------------------------
|ANNUAL REPORT December 31, 2005 | HUB INTERNATIONAL LIMITED    25



---



##### Table of Contents

and other income. Core commission income increased 28%, while
contingent commissions and volume overrides grew 107%.

Canadian Results

Canadian revenue grew 9% to $132.3 million, or 30% of
consolidated revenue, in 2005 as a result of organic growth and
strengthening of the Canadian dollar against the
U.S. dollar. Canadian brokerages posted organic growth of
11%, of which seven percentage points reflected a stronger
Canadian dollar. Dispositions net of acquisitions lowered
revenue by $3.4 million, reflecting the sale of certain
assets and revenue acquired in prior years. In addition,
Canadian operations benefited from an increase in contingent
commissions and volume overrides, which grew 41% in 2005.

Compensation Expense

Employee cash compensation expense for 2005 increased 26% to
$246.3 million from $195.7 million. Excluding
severance costs, the increase was 25%. As a percentage of
revenue, employee cash compensation expense, excluding
severance, remained constant at 55% in 2005 as compared to 2004.
The increase in compensation for the Talbot earnout in 2005
reflects twelve months of expense as compared to 2004, which
only reflects six months of expense from the July 1, 2004
acquisition date. Compensation for the Talbot earnout includes a
cash and a non-cash stock based component as set out in the
table below. The first Talbot earnout payment in the amount of
$16.4 million was paid in cash on September 1, 2005.
The second earnout payment of approximately $19.0 million
will be paid on March 31, 2006. Management expects this
payment and future payments to be made in common shares although
the earnout may be made in cash, common shares or a combination
thereof depending on circumstances at the time.

|                                                           |  |      |         |   |      |   |         |              |  |  |      |   |  |      |    |    |  |  |    |  
|---------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ------------ |  |  | ---- | - |  | ---- | -- | -- |  |  | -- | -
|                                                           |  |      |         |   |      |   |         | % of Revenue | 
|                                                           |  |      |         |   |      |   |         |              | 
|(in thousands of U.S. dollars, except percentages)         |  | 2005 |         |   | 2004 |   |         | % Change     |  |  | 2005 |   |  | 2004 |   
|                                                           |  |      |         |   |      |   |         |              |  |  |      |   |  |      |   
|Employee cash compensation                                 |  | $    | 246,263 |   |      | $ | 195,706 |              |  |  | 26   | % |  |      | 56 | %  |  |  | 55 | %
|Less: severance costs                                      |  |      | (1,568  | ) |      |   |        |              |  |  |     | % |  |      | (1 | )% |  |  |   | %
|                                                           |  |      |         |   |      |   |         |              |  |  |      |   |  |      |   
|Cash compensation excluding
    severance                  |  |      | 244,695 |   |      |   | 195,706 |              |  |  | 25   | % |  |      | 55 | %  |  |  | 55 | %
|                                                           |  |      |         |   |      |   |         |              |  |  |      |   |  |      |   
|Compensation for Talbot
    earnout  cash                 |  |      | 9,800   |   |      |   | 6,634   |              |  |  | 48   | % |  |      | 2  | %  |  |  | 2  | %
|Compensation for Talbot
    earnout  non-cash stock based |  |      | 18,916  |   |      |   | 7,754   |              |  |  | 144  | % |  |      | 4  | %  |  |  | 2  | %
|                                                           |  |      |         |   |      |   |         |              |  |  |      |   |  |      |   
|Total compensation for Talbot
    earnout                  |  |      | 28,716  |   |      |   | 14,388  |              |  |  | 100  | % |  |      | 6  | %  |  |  | 4  | %
|                                                           |  |      |         |   |      |   |         |              |  |  |      |   |  |      |   
|Other non-cash stock based
    compensation                |  |      | 7,184   |   |      |   | 6,502   |              |  |  | 10   | % |  |      | 2  | %  |  |  | 2  | %
|                                                           |  |      |         |   |      |   |         |              |  |  |      |   |  |      |   
|Total                                                      |  | $    | 280,595 |   |      | $ | 216,596 |              |  |  | 30   | % |  |      | 63 | %  |  |  | 61 | %
|                                                           |  |      |         |   |      |   |         |              |  |  |      |   |  |      |   





|                                                      |  |      |       |  |      |   |       | 
|----------------------------------------------------- |  | ---- | ----- |  | ---- | - | ----- | 
|(in thousands of U.S. dollars)                        |  | 2005 |       |  | 2004 |  
|                                                      |  |      |       |  |      |  
|Stock options granted June 2002                       |  | $    | 843   |  |      | $ | 1,955 | 
|Stock options granted February 2003                   |  |      | 366   |  |      |   | 445   | 
|Stock based compensation granted
    for 2003 bonuses |  |      | 3,264 |  |      |   | 2,368 | 
|Restricted share units                                |  |      | 2,545 |  |      |   | 1,609 | 
|Common shares for acquisitions                        |  |      | 166   |  |      |   | 125   | 
|                                                      |  |      |       |  |      |  
|Total other non-cash stock based
    compensation     |  | $    | 7,184 |  |      | $ | 6,502 | 
|                                                      |  |      |       |  |      |  





|                               |                                
|------------------------------ | -------------------------------
|26   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005



---



##### Table of Contents

Compensation for the Talbot earnout for the years ended
December 31, 2005 and 2004 is comprised of the following:

|                                              |  |      |        |  |      |   |        | 
|--------------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | 
|                                              |  | 2005 |        |  | 2004 |  
|                                              |  |      |        |  |      |  
|Cash compensation                             |  | $    | 9,800  |  |      | $ | 6,634  | 
|Non-cash stock based compensation             |  |      | 18,916 |  |      |   | 7,754  | 
|                                              |  |      |        |  |      |  
|Total compensation for the Talbot
    earnout |  | $    | 28,716 |  |      | $ | 14,388 | 
|                                              |  |      |        |  |      |  



|                                                      |  |                         |       |  |      |   |       |      |  |   |       |  |  |      |       |  |      |   |       |  |  |   |     | 
|----------------------------------------------------- |  | ----------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- |  |  | ---- | ----- |  | ---- | - | ----- |  |  | - | --- | 
|                                                      |  | Year Ended December 31, |      
|                                                      |  |                         |      
|(in thousands of U.S. dollars)                        |  | 2006                    |       |  | 2007 |   |       | 2008 |  |   | 2009  |  |  | 2010 |       |  | 2011 |  
|                                                      |  |                         |       |  |      |   |       |      |  |   |       |  |  |      |       |  |      |  
|Stock based compensation granted
    for 2003 bonuses |  | $                       | 2,137 |  |      | $ | 2,046 |      |  | $ | 2,046 |  |  | $    | 2,046 |  |      | $ | 1,990 |  |  | $ |    | 
|Restricted share units                                |  |                         | 2,911 |  |      |   | 2,945 |      |  |   | 2,944 |  |  |      | 1,048 |  |      |   | 423   |  |  |   | 106 | 
|Common shares for acquisitions                        |  |                         | 18    |  |      |   | 5     |      |  |   |      |  |  |      |      |  |      |   |      |  |  |   |    | 
|                                                      |  |                         |       |  |      |   |       |      |  |   |       |  |  |      |       |  |      |  
|Total other non-cash stock based
    compensation     |  | $                       | 5,066 |  |      | $ | 4,996 |      |  | $ | 4,990 |  |  | $    | 3,094 |  |      | $ | 2,413 |  |  | $ | 106 | 
|                                                      |  |                         |       |  |      |   |       |      |  |   |       |  |  |      |       |  |      |  



|                                              |  |                         |        |  |      |   |       |      |  |      |   |      |  |      |   |  |  |   |   |  |  |   |   | 
|--------------------------------------------- |  | ----------------------- | ------ |  | ---- | - | ----- | ---- |  | ---- | - | ---- |  | ---- | - |  |  | - | - |  |  | - | - | 
|                                              |  | Year Ended December 31,
|                                              |  |                        
|(in thousands of U.S. dollars)                |  | 2006                    |        |  | 2007 |   |       | 2008 |  | 2009 |   | 2010 |  | 2011
|                                              |  |                         |        |  |      |   |       |      |  |      |   |      |  |     
|Cash compensation                             |  | $                       |       |  |      | $ |      |      |  | $    |  |      |  | $    |  |  |  | $ |  |  |  | $ |  | 
|Non-cash stock based compensation             |  |                         | 10,888 |  |      |   | 1,854 |      |  |      |  |      |  |      |  |  |  |   |  |  |  |   |  | 
|                                              |  |                         |        |  |      |   |       |      |  |      |   |      |  |      |   |  |  |  
|Total compensation for the Talbot
    earnout |  | $                       | 10,888 |  |      | $ | 1,854 |      |  | $    |  |      |  | $    |  |  |  | $ |  |  |  | $ |  | 
|                                              |  |                         |        |  |      |   |       |      |  |      |   |      |  |      |   |  |  |  



Selling, Occupancy and Administration Expense




Depreciation




Interest Expense




Intangible Asset Amortization








|                                |                                
|------------------------------- | -------------------------------
|ANNUAL REPORT December 31, 2005 | HUB INTERNATIONAL LIMITED    27



---



##### Table of Contents

Gain on Disposal of Subsidiaries, Property, Equipment and
Other Assets

During 2005 we sold assets and shares of certain brokerages
primarily in Canada resulting in a gain of $2.9 million,
compared with a gain of $1.9 million in 2004. Approximately
$0.5 million of the 2005 gain is non-taxable.

Loss on Foreign Exchange Forward Contract

In anticipation of funding an acquisition we entered into a
foreign exchange forward contract to convert Canadian dollars to
U.S. dollars. The difference between the forward rate
contracted and the spot rate at the date of conversion generated
a foreign exchange loss of $0.6 million, or
$0.4 million after tax, and reduced diluted earnings per
share for 2005 by $0.01.

Gain on Forgiveness of Debt

During 2005 an early payment settlement was negotiated in
respect of our $7.5 million loan from an insurance carrier.
The early settlement negotiations resulted in the
$7.5 million principal amount of the term loan being
reduced to $3.0 million and interest payments for 2005
being reduced to zero.

Loss on Write-off of Trademarks

In January 2004, we adopted a corporate marketing and
positioning strategy to build awareness of the Hub brand across
all of our markets and to encourage greater coordination and
collegial identity among our employees. As a result, certain of
our subsidiaries changed their names and we recognized a
non-cash pre-tax expense of approximately $2.6 million
related to the write-off of trademarks.

Provision for Income Tax Expense

Our effective tax rate increased to 55% in 2005 from 44% in 2004
due primarily to increased compensation related to the
acquisition of Talbot which is not deductible for tax purposes.
Excluding the compensation for the Talbot earnout, the effective
tax rate was 36% and 33% for 2005 and 2004, respectively. The
lower effective tax rate for 2004 is primarily due to
adjustments made in 2004 to record the tax benefits of the
utilization of certain tax losses.

Net Earnings and Earnings Per Share from Continuing
Operations

Our net earnings from continuing operations remained constant at
$25.7 million, notwithstanding higher compensation related
to Talbot and severance costs as discussed above. Diluted
earnings per share from continuing operations was $0.76 per
diluted share compared to $0.79 per diluted share for 2005
and 2004, respectively. This decrease in diluted earnings per
share was primarily due to an increase in the number of dilutive
shares related to the Talbot earnout estimate in 2005 compared
to 2004.

As reflected on the table on page 25 net earnings for
2005 decreased $1.0 million or $0.03 per diluted share
due primarily to the impact of severance costs in 2005 and
decreased $28.7 million or $0.78 per diluted share due
to the impact of compensation for the Talbot earnout in 2005.

Net Earnings (Loss) and Diluted Earnings (Loss) per Share
from Discontinued Operations

During 2005, we adopted a formal plan of disposition related to
our U.S. financial services operation. We completed the
sale of this operation January 1, 2006. See note 5
Discontinued Operations. Results for discontinued
operations have been removed from continuing operations for 2005
and 2004 and reflected on our Consolidated Statements of
Earnings, as Net earnings (loss) from discontinued
operations. Net earnings from discontinued operations were
NIL and $0.5 million for 2005 and 2004, respectively.
Diluted earnings per share from discontinued operations were NIL
and $0.01 for 2005 and 2004, respectively.

Year ended December 31, 2004 compared to year ended
December 31, 2003

Revenue

A significant portion of our revenue growth in 2004 was the
result of brokerages acquired. During 2004, we acquired seven
insurance brokerages, including Talbot, and divested of three
small brokerages in Canada. As a result of these acquisitions
and 5% organic growth, which includes the strengthening of the
Canadian dollar in 2004 compared to the U.S. dollar, we
reported a 24% increase in revenue to $355.1 million in
2004.





28   HUB INTERNATIONAL LIMITED
    ANNUAL REPORT December 31, 2005



---



##### Table of Contents

The table below shows a breakdown of our revenue by segment and
type for 2004 and 2003 and organic growth for 2004:

(in thousands of U.S. dollars, except percentages)

|                                                |  |         |         |  |           |   |         |           |                |   |                |   |  |               |     |    |           |   |         |           |  |   |        |   |  |  |     |   
|----------------------------------------------- |  | ------- | ------- |  | --------- | - | ------- | --------- | -------------- | - | -------------- | - |  | ------------- | --- | -- | --------- | - | ------- | --------- |  | - | ------ | - |  |  | --- | --
|                                                |  | Revenue |         |  |           |   |         |           | Adjustment for |   |                |   |  |              
|                                                |  |         |         |  | Total Net |   |         | Total Net |                |   | (Acquisitions) |   |  | Organic       |     |    | Organic   |  
|                                                |  | 2004    |         |  | 2003      |   |         | Change($) |                |   | Growth(%)      |   |  | and Disposals |     |    | Growth($) |   |         | Growth(%) | 
|                                                |  |         |         |  |           |   |         |           |                |   |                |   |  |               |     |    |           |   |         |           | 
|Total                                           |  |         |         |  |           |   |         |           |                |   |                |   |  |               |     |    |           |   |         |           |  |   |        |   |  |  |     |   
|Commission Income                               |  | $       | 323,150 |  |           | $ | 258,099 |           |                | $ | 65,051         |   |  |               | 25  | %  |           | $ | (52,441 | )         |  | $ | 12,610 |   |  |  | 5   | % 
|Contingent Commissions and Volume
    Overrides |  |         | 21,705  |  |           |   | 18,530  |           |                |   | 3,175          |   |  |               | 17  | %  |           |   | (897    | )         |  |   | 2,278  |   |  |  | 12  | % 
|Other Income                                    |  |         | 10,226  |  |           |   | 9,730   |           |                |   | 496            |   |  |               | 5   | %  |           |   | (457    | )         |  |   | 39     |   |  |  |    | % 
|                                                |  |         |         |  |           |   |         |           |                |   |                |   |  |               |     |    |           |   |         |           | 
|Total                                           |  | $       | 355,081 |  |           | $ | 286,359 |           |                | $ | 68,722         |   |  |               | 24  | %  |           | $ | (53,795 | )         |  | $ | 14,927 |   |  |  | 5   | % 
|                                                |  |         |         |  |           |   |         |           |                |   |                |   |  |               |     |    |           |   |         |           | 
|U.S.                                            |  |         |         |  |           |   |         |           |                |   |                |   |  |               |     |    |           |   |         |           |  |   |        |   |  |  |     |   
|Commission Income                               |  | $       | 210,481 |  |           | $ | 156,663 |           |                | $ | 53,818         |   |  |               | 34  | %  |           | $ | (54,247 | )         |  | $ | (429   | ) |  |  |    | % 
|Contingent Commissions and Volume
    Overrides |  |         | 14,864  |  |           |   | 13,493  |           |                |   | 1,371          |   |  |               | 10  | %  |           |   | (898    | )         |  |   | 473    |   |  |  | 4   | % 
|Other Income                                    |  |         | 7,957   |  |           |   | 7,131   |           |                |   | 826            |   |  |               | 12  | %  |           |   | (513    | )         |  |   | 313    |   |  |  | 4   | % 
|                                                |  |         |         |  |           |   |         |           |                |   |                |   |  |               |     |    |           |   |         |           | 
|Total                                           |  | $       | 233,302 |  |           | $ | 177,287 |           |                | $ | 56,015         |   |  |               | 32  | %  |           | $ | (55,658 | )         |  | $ | 357    |   |  |  |    | % 
|                                                |  |         |         |  |           |   |         |           |                |   |                |   |  |               |     |    |           |   |         |           | 
|Canada                                          |  |         |         |  |           |   |         |           |                |   |                |   |  |               |     |    |           |   |         |           |  |   |        |   |  |  |     |   
|Commission Income                               |  | $       | 112,669 |  |           | $ | 101,436 |           |                | $ | 11,233         |   |  |               | 11  | %  |           | $ | 1,806   |           |  | $ | 13,039 |   |  |  | 13  | % 
|Contingent Commissions and Volume
    Overrides |  |         | 6,841   |  |           |   | 5,037   |           |                |   | 1,804          |   |  |               | 36  | %  |           |   | 1       |           |  |   | 1,805  |   |  |  | 36  | % 
|Other Income                                    |  |         | 2,269   |  |           |   | 2,599   |           |                |   | (330           | ) |  |               | (13 | )% |           |   | 56      |           |  |   | (274   | ) |  |  | (11 | )%
|                                                |  |         |         |  |           |   |         |           |                |   |                |   |  |               |     |    |           |   |         |           | 
|Total                                           |  | $       | 121,779 |  |           | $ | 109,072 |           |                | $ | 12,707         |   |  |               | 12  | %  |           | $ | 1,863   |           |  | $ | 14,570 |   |  |  | 13  | % 
|                                                |  |         |         |  |           |   |         |           |                |   |                |   |  |               |     |    |           |   |         |           | 





|                                              |  |              |        |   |             |   |       |              |  |   |             |   |  |   |       |  
|--------------------------------------------- |  | ------------ | ------ | - | ----------- | - | ----- | ------------ |  | - | ----------- | - |  | - | ----- | -
|                                              |  | 2004         |        |   | 2003        |  
|(in thousands of U.S. dollars,                |  |              |        |   |             |  
|except per share amounts)                     |  | Net Earnings |        |   | Diluted EPS |   |       | Net Earnings |  |   | Diluted EPS |  
|                                              |  |              |        |   |             |   |       |              |  |   |             |  
|Impact of write-off of trademarks             |  | $            | 1,656  |   |             | $ | 0.05  |              |  | $ |            |   |  | $ |      |  
|Impact of compensation for Talbot
    earnout |  | $            | 14,388 |   |             | $ | 0.41  |              |  | $ |            |   |  | $ |      |  
|Impact of foreign exchange gains              |  | $            | (1,972 | ) |             | $ | (0.06 | )            |  | $ | (2,260      | ) |  | $ | (0.07 | )
|Impact of life insurance proceeds             |  | $            |       |   |             | $ |      |              |  | $ | (1,000      | ) |  | $ | (0.03 | )









|                                |                                
|------------------------------- | -------------------------------
|ANNUAL REPORT December 31, 2005 | HUB INTERNATIONAL LIMITED    29



---



##### Table of Contents

underlying operations. In 2004, the strength of the Canadian
dollar versus the U.S. dollar had a less positive impact on
our results than in 2003. Any decline in the Canadian dollar
relative to the U.S. dollar would have a negative effect on
our results. See Market Risk.

U.S. Results

U.S. revenue grew 32% to $233.3 million, or 66% of
consolidated revenue in 2004. Acquisitions in 2004 added
$55.7 million to revenue. Our U.S. operations posted
an organic growth rate of 0% in 2004, as compared to 3% in 2003,
primarily as a result of the rapid softening of premium rates
for property and casualty coverage in the third and fourth
quarters of 2004. Core commission income increased 34%, while
contingent commissions and volume overrides grew 10%. Higher
premium rates in 2003 contributed strongly to a significant
increase in contingent profitability income from insurance
companies in 2004.

Canadian Results

Canadian revenue grew 12% to $121.8 million, or 34% of
consolidated revenue in 2004 primarily as a result of organic
growth and strengthening of the Canadian dollar against the
U.S. dollar. Canadian brokerages posted organic growth of
13%, of which eight percentage points reflected a stronger
Canadian dollar. Dispositions lowered revenue by
$2.5 million while acquisitions added $0.6 million,
for a net decrease of $1.9 million. Similar to the United
States, premium rates in Canada fell significantly in the third
and fourth quarters of 2004. Canadian operations benefited from
an increase in contingent commissions and volume overrides,
which grew 36% in 2004. Higher premium rates in 2003 contributed
strongly to a significant increase in contingent profitability
income from insurance companies in 2004.

Compensation Expense

Employee cash compensation expense for 2004 increased 25% to
$195.7 million from $156.3 million. Compensation for
the Talbot earnout was $14.4 million for 2004, while other
non-cash stock based compensation grew 35% to $6.5 million
from $4.8 million in 2003. As a percentage of revenue,
employee cash compensation expense increased to 55% in 2004 from
54% in 2003, primarily due to a relatively higher level of
compensation costs as a percentage of revenue at Talbot.

|                                                           |  |      |         |  |      |   |         |          |  |  |      |  |  |      |     |  |  |  |     | 
|---------------------------------------------------------- |  | ---- | ------- |  | ---- | - | ------- | -------- |  |  | ---- |  |  | ---- | --- |  |  |  | --- | 
|                                                           |  |      |         |  |      |   |         | % of     | 
|                                                           |  |      |         |  |      |   |         | Revenue  | 
|                                                           |  |      |         |  |      |   |         |          | 
|(in thousands of U.S. dollars, except percentages)         |  | 2004 |         |  | 2003 |   |         | % Change |  |  | 2004 |  |  | 2003 |    
|                                                           |  |      |         |  |      |   |         |          |  |  |      |  |  |      |    
|Employee cash compensation                                 |  | $    | 195,706 |  |      | $ | 156,320 |          |  |  | 25%  |  |  |      | 55% |  |  |  | 54% | 
|                                                           |  |      |         |  |      |   |         |          |  |  |      |  |  |      |    
|Compensation for Talbot
    earnout  cash                 |  |      | 6,634   |  |      |   |        |          |  |  | %   |  |  |      | 2%  |  |  |  | %  | 
|Compensation for Talbot
    earnout  non-cash stock based |  |      | 7,754   |  |      |   |        |          |  |  | %   |  |  |      | 2%  |  |  |  | %  | 
|                                                           |  |      |         |  |      |   |         |          |  |  |      |  |  |      |    
|Total compensation for Talbot
    earnout                  |  |      | 14,388  |  |      |   |        |          |  |  | %   |  |  |      | 4%  |  |  |  | %  | 
|                                                           |  |      |         |  |      |   |         |          |  |  |      |  |  |      |    
|Other non-cash stock based
    compensation                |  |      | 6,502   |  |      |   | 4,801   |          |  |  | 35%  |  |  |      | 2%  |  |  |  | 2%  | 
|                                                           |  |      |         |  |      |   |         |          |  |  |      |  |  |      |    
|Total                                                      |  | $    | 216,596 |  |      | $ | 161,121 |          |  |  | 34%  |  |  |      | 61% |  |  |  | 56% | 
|                                                           |  |      |         |  |      |   |         |          |  |  |      |  |  |      |    





Selling, Occupancy and Administration Expense








|                               |                                
|------------------------------ | -------------------------------
|30   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005



---



##### Table of Contents

implementation of the Sarbanes-Oxley Act of 2002 of
$2.5 million and legal costs associated with various
investigations regarding contingent commissions arrangements of
$0.4 million.

Depreciation

Depreciation increased 16% to $7.2 million in 2004 but
remained constant at 2% of revenue.

Interest Expense

Interest expense increased 43% to $7.4 million from
$5.2 million in 2003. This increase reflected borrowings
for the Talbot acquisition in July 2004, partially offset by the
benefits of an interest rate swap in 2004. The interest rate
swap effectively converted $65 million of fixed interest
rate senior notes into floating rate instruments, reducing
interest expense on our outstanding senior notes by
$1.3 million in 2004 compared to $0.8 million in 2003.

Intangible Asset Amortization

Intangible asset amortization increased 70% to $5.5 million
in 2004 as a result of the acquisition of Talbot.

Gain on Disposal of Subsidiaries, Property, Equipment and
Other Assets

Our 2004 results included gains of $1.9 million on the sale
of investments and assets and shares of certain brokerages
compared with a gain of $0.2 million in 2003. Approximately
$1.6 million of the 2004 gain was non-taxable.

Loss on Write-off of Trademarks

In January 2004, we adopted a corporate marketing and
positioning strategy to build awareness of the Hub brand across
all of our markets and to encourage greater coordination and
collegial identity among our employees. As part of this
corporate consolidation and identity development program, we
have reassigned a number of key executives to new or expanded
areas of responsibility and determined that future marketing and
communications will be conducted under the Hub International
name, rather than the traditional corporate names of acquired
brokerages. In the first quarter of 2004 certain of our
subsidiaries changed their names and as a result, we recognized
a non-cash impairment expense of approximately $2.6 million
before tax related to trademarks.

Provision for Income Tax Expense

Our effective tax rate increased to 44% in 2004 from 34% in 2003
due primarily to compensation expense related to the acquisition
of Talbot which is not deductible for tax purposes. Excluding
this compensation the effective tax rate for 2004 was 33%.

Net Earnings and Earnings Per Share from Continuing
Operations

Our net earnings decreased 29% or $10.7 million to
$25.8 million in 2004 due to the impact of compensation for
the Talbot earnout, other non-cash stock based compensation,
write off of trademarks and the impact of foreign exchange.
Diluted earnings per share decreased $0.35 per diluted
share to $0.79 in 2004.

Net Earnings and Diluted Earnings per Share from Discontinued
Operations

During 2005, we adopted a formal plan of disposition related to
our U.S. financial services operation. The sale was
completed January 1, 2006. See note 5
Discontinued Operations. Results for discontinued
operations have been removed from continuing operations for 2004
and reflected on our Consolidated Statements of Earnings as
Net earnings (loss) from discontinued operations.
These results are not applicable to 2003 as the operation was
not acquired until 2004. Net earnings and diluted earnings per
share from discontinued operations were $0.5 million and
$0.01 per diluted share for 2004.

Cash Flow, Liquidity and Capital Resources

We began 2005 with cash and cash equivalents of
$98.2 million. Operating activities in 2005 generated
$46.0 million of cash. In 2005 we paid $66.1 million
for acquisitions, including PLI which was $38.0 million. In
addition, we repaid long-term debt net of advances of
$8.9 million, made property and equipment purchases of
$8.0 million and paid





ANNUAL REPORT December 31, 2005
    HUB INTERNATIONAL LIMITED    31



---



##### Table of Contents

dividends of $7.4 million in 2005. Funding these
acquisitions was the primary reason cash decreased by
$28.1 million in 2005 to $70.1 million at
December 31, 2005.

At the close of 2005, our cash position of $70.1 million
included approximately $19.2 million available for
acquisitions. This amount combined with available lines of
credit leaves us with a total amount of $39.5 million
available for acquisitions compared to the $61.1 million
available at December 31, 2004. It is impossible to define
exactly how many acquisitions or how much new revenue could be
acquired through the use of this cash, additional cash flow from
operations and application of credit facilities, as acquisition
pricing and other factors vary during the course of the year.
However, we intend to use our common shares as partial
consideration for any hub acquisition, and generally have paid a
multiple of 5-8 times earnings before interest, taxes,
depreciation and amortization (frequently referred to as EBITDA,
which is a non-GAAP measure) for acquired brokerages. We believe
that our capital resources, including existing cash, funds
generated from operations and borrowings available under credit
facilities, will be sufficient to satisfy the companys
financial requirements, excluding some acquisitions, during the
next twelve months. We may finance acquisitions with available
cash or an existing credit facility, but may, depending on the
number and size of future acquisitions, need to supplement our
finance requirements with the proceeds from debt financing, the
issuance of additional equity securities, or a combination of
both. In November 2003, a universal shelf
registration statement that we filed with the Securities and
Exchange Commission (SEC) covering the public offering and
sale, from time to time, of an aggregate of up to
$100 million of debt and/or equity securities, was declared
effective. The net proceeds from the sale of such securities
could be used to fund acquisitions and for general corporate
purposes, including capital expenditures, and to meet working
capital needs. As of December 31, 2005, the full amount of
the $100 million of the universal shelf
registration remained available. If we need to publicly raise
additional funds, we may need to register additional securities
with the SEC.

On March 1, 2006, we signed a definitive agreement to
purchase three large insurance brokerages, based in
Massachusetts and Pennsylvania, from subsidiaries of Citizens
Financial Group, Inc. The transaction is expected to close in
April, 2006. The purchase price is expected to be
$80 million in cash as well as an earnout in cash and our
common shares based on future performance. The earnout will be
at least $3 million. Subsequent to December 31, 2005,
we have secured a commitment for a new $75 million
non-revolving credit facility to have terms similar to our
current $75 million revolving U.S. dollar Libor loan.
These funds will be available for this acquisition. In addition,
we will continue to investigate and evaluate all avenues for
expansion capital.

Net debt, defined as long-term debt ($140.3 million) and
subordinated convertible debentures ($35.0 million) less
non-trust cash (cash and cash equivalents of $70.1 million)
as of December 31, 2005, was $105.2 million compared
with $88.6 million as of December 31, 2004. Our debt
to capitalization ratio (debt as a percentage of debt and
shareholders equity) decreased to 29% at December 31,
2005, compared with 33% at December 31, 2004. If we had
fully utilized all lines of credit and other loan facilities at
December 31, 2005, our ratio of debt to capitalization
would have been 32%, which is below the range of 35% to 38% that
our management believes is suitably conservative for our
business model. Under our loan covenants, our debt to
capitalization ratio must be less than the 45%. As of
December 31, 2005, we were in compliance with the financial
covenants under all of our debt instruments.

Our principal source of liquidity is our operating cash flow and
borrowings under our credit facilities. Operating cash flow is
affected by net earnings, non-cash items such as amortization,
depreciation, compensation for the Talbot earnout, and non-cash
working capital items. For 2005, operating cash flows were lower
than for 2004 by $12.0 million primarily due to payment of
the Talbot earnout in cash of $16.4 million.

As an insurance broker, we collect and hold premiums paid by
clients, deduct commissions and other expenses from these
payments, and hold the remainder in trust, which we remit to the
insurers who provide coverage to clients. We earn interest on
these funds during the time between receipt of the cash and the
time the cash is paid to insurers. The cash held in trust is
shown separately on our balance sheet under the caption
Trust Cash. On the statement of cash flows,
changes in trust cash are included as part of the change in
non-cash working capital and the determination of cash provided
from operating activities.





32   HUB INTERNATIONAL LIMITED
    ANNUAL REPORT December 31, 2005



---



##### Table of Contents

In addition to internally generated cash, we maintain two
separate credit facilities:



(1)
    Revolving U.S. dollar LIBOR loan  This unsecured
    facility totals $75 million and bears interest at a
    floating rate of prime plus 1% or 112.5 basis points above
    LIBOR. The LIBOR was 4.39% and 2.40% at December 31, 2005
    and 2004, respectively. The facility is available on a revolving
    basis for one year. In April 2005 we successfully renewed this
    loan with terms identical to the existing loan. The new loan
    expires April 19, 2006. However if the revolving period is
    not extended, we may convert the outstanding balance under the
    facility to a three year non-revolving term loan repayable at
    the end of three years with an interest rate of 137.5 basis
    points above the Canadian dollar interest swap rate which was
    4.14% and 3.45% at December 31, 2005 and 2004,
    respectively. An annual commitment fee of 20 basis points
    is assessed on the unused balance. Borrowings under this
    facility totaled $65 million at December 31, 2005 and
    2004, respectively. As of December 31, 2005 we were in
    compliance with all financial covenants governing this facility.(2)
    Demand U.S. dollar base rate loan  We have an
    undrawn $10.3 million facility which bears interest at the
    banks U.S. base rate, which was 7.75% and 5.75% at
    December 31, 2005 and 2004, respectively, plus
    50 basis points. Borrowings under this facility are
    repayable on demand.As of December 31, 2005, we had outstanding
$65 million in principal amount of unsecured senior notes
issued June 10, 2002. The senior notes were issued in two
series. Series A represents $10 million aggregate
principal amount of 5.71% senior notes with interest due
semi-annually, and principal due of $3.3 million due
annually, June 15, 2008 through June 15, 2010.
Series B represents $55 million aggregate principal
amount of 6.16% senior notes with interest due
semi-annually, and principal due of $11 million due
annually June 15, 2009 through June 15, 2013. The
senior notes were sold on a private basis in the United States
to institutional accredited investors. We incurred approximately
$0.7 million in fees and expenses related to the offering
of these notes, which were capitalized and are being amortized
to expense over the term of the senior notes. As of
December 31, 2005 we were in compliance with all financial
covenants governing the senior notes.

On July 15, 2003, we entered into an interest rate swap
agreement. The effect of the swap is to convert the fixed rate
interest payments of 5.71% senior notes and
6.16% senior notes in amounts of $10 million and
$55 million, respectively, to a floating rate resulting in
a savings of approximately $0.2 million and
$1.3 million for the years ended December 31, 2005 and
2004, respectively. We account for the swap transaction using
the synthetic instruments method under which the net interest
expense on the swap and associated debt is reported in earnings
as if it were a single, synthetic, financial instrument. As at
December 31, 2005, we estimated the fair value of the swap
to be $4.0 million, which is not recognized in our
financial statements. Accordingly, $4.0 million is the
estimated amount that we would need to pay to terminate the swap
as of December 31, 2005.

During the first quarter 2005 an early payment settlement was
negotiated in respect of our $7.5 million loan from an
insurance carrier. The loan agreement provided for an incentive
agreement whereby a credit could be earned to reduce interest
payments (based on target premiums placed with the carrier) and
principal amounts (based on target premiums placed with the
carrier as well as loss ratios on those premiums). The early
settlement negotiations resulted in the $7.5 million
principal amount of the term loan being reduced to
$3.0 million and interest payments for the first quarter
2005 being reduced to zero. We paid $3.0 million in March
2005 and recorded a gain on forgiveness of debt of
$4.5 million for the first quarter 2005.

In addition to these primary credit sources, we ended 2005 with
$10.0 million of subsidiary debt comprised of various notes
payable, term loans and capital leases. We intend to repay these
liabilities from internally generated cash flow, existing cash
balances and/or borrowings under our credit facilities as the
subsidiary debt becomes due during 2006 through 2011. Of the
outstanding subsidiary debt, $4.1 million is secured by
liens on certain assets of our subsidiaries.

Also at December 31, 2005, we had outstanding
8.5% subordinated convertible debentures in the amount of
$35.0 million due June 28, 2007 held by certain
subsidiaries of Fairfax (the Fairfax notes). The
Fairfax notes are convertible by the holders at any time into
our common shares at C$17.00 per share. Beginning
June 28, 2006, we 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 our common shares on
the TSX for twenty consecutive trading days equals or exceeds





ANNUAL REPORT December 31, 2005
    HUB INTERNATIONAL LIMITED    33



---



##### Table of Contents

C$19.00 per share. If converted, Fairfax would have owned
approximately 31% of our total outstanding common shares as of
December 31, 2005, versus the 26% of outstanding shares
which it held on that date. Based on the current price of our
common shares, it is more likely than not that the Fairfax notes
will be converted into our common shares.

Contractual Obligations

The table below summarizes our contractual obligations and
commercial commitments as of December 31, 2005:

|                                    |  |          |  |           |        |  |       |   |        |       |  |   |         |  |  |   |        | 
|----------------------------------- |  | -------- |  | --------- | ------ |  | ----- | - | ------ | ----- |  | - | ------- |  |  | - | ------ | 
|Payments due by period              |  |          |  | Less than |        |  | 1-3   |   |        | 4-5   |  |   | After   | 
|(in thousands of U.S. dollars)      |  | Total    |  | 1 Year    |        |  | Years |   |        | Years |  |   | 5 Years | 
|                                    |  |          |  |           |        |  |       |   |        |       |  |   |         | 
|Long-term debt                      |  | $140,087 |  | $         | 4,726  |  |       | $ | 8,192  |       |  | $ | 94,169  |  |  | $ | 33,000 | 
|Subordinated convertible debentures |  | 35,000   |  |           |       |  |       |   | 35,000 |       |  |   |        |  |  |   |       | 
|Interest on long-term debt          |  | 35,705   |  |           | 8,218  |  |       |   | 16,250 |       |  |   | 7,747   |  |  |   | 3,490  | 
|Capital lease obligations           |  | 185      |  |           | 184    |  |       |   | 1      |       |  |   |        |  |  |   |       | 
|Operating lease obligations         |  | 101,747  |  |           | 19,329 |  |       |   | 33,166 |       |  |   | 24,453  |  |  |   | 24,799 | 
|Executive share purchase plan loans |  | 236      |  |           |       |  |       |   | 236    |       |  |   |        |  |  |   |       | 
|                                    |  |          |  |           |        |  |       |   |        |       |  |   |         | 
|Total                               |  | $312,960 |  | $         | 32,457 |  |       | $ | 92,845 |       |  | $ | 126,369 |  |  | $ | 61,289 | 
|                                    |  |          |  |           |        |  |       |   |        |       |  |   |         | 

Acquisitions






Other








|                               |                                
|------------------------------ | -------------------------------
|34   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005



---



##### Table of Contents

In connection with our executive share purchase plan, under
certain circumstances, we may be obligated to purchase loans for
certain employees from a Canadian chartered bank totaling
$3.9 million and $4.3 million as of December 31,
2005 and 2004, respectively, to assist in purchasing our common
shares. As collateral, the employees have pledged 383,000 and
431,000 common shares as of December 31, 2005 and 2004,
respectively, which had a market value of $9.9 million and
$7.9 million as of December 31, 2005 and 2004,
respectively. The loans will mature during 2009 and 2010 and
bear interest at a rate of prime plus 0.5%. The interest rate at
December 31, 2005 was 5.5%. Interest on the loans in the
amount of $197,000, $192,000 and $279,000 for the years ended
December 31, 2005, 2004 and 2003, respectively, was paid by
us and is included in employee cash compensation expense.

In the normal course of business, we 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 our management, the ultimate resolution of all such
asserted and potential claims and lawsuits will not have a
material adverse effect on our consolidated financial position
or results of operations.

Shareholders Equity

Restricted share units. In 2005, 226,000 restricted share
units were granted to our Executive Management Team (EMT). In
addition 26,000 restricted share units were granted in relation
to employment agreements entered into with other non-EMT
employees and 12,000 restricted share units were granted in
connection with an acquisition.

Share repurchases. During 2005, we repurchased 160,608
common shares from a private related party in exchange for an
equal number of our common shares.

Shareholders equity as of December 31, 2005 is
comprised of the following:

|                                                                        |  |         |         |  |             |            |        |             |  |   |          |   |  |       |         |   |  |   |         |  
|----------------------------------------------------------------------- |  | ------- | ------- |  | ----------- | ---------- | ------ | ----------- |  | - | -------- | - |  | ----- | ------- | - |  | - | ------- | -
|                                                                        |  |         |         |  |             | Cumulative |        |             |  |   |         
|                                                                        |  | Share   |         |  | Contributed |            |        | Translation |  |   | Retained |   |  |      
|(in thousands of U.S. dollars)                                          |  | Capital |         |  | Surplus     |            |        | Account     |  |   | Earnings |   |  | Total |        
|                                                                        |  |         |         |  |             |            |        |             |  |   |          |   |  |       |        
|Balance, December 31, 2004                                              |  | $       | 259,617 |  |             | $          | 12,681 |             |  | $ | 26,983   |   |  | $     | 82,502  |   |  | $ | 381,783 |  
|                                                                        |  |         |         |  |             |            |        |             |  |   |          |   |  |       |        
|Non-cash stock based compensation                                       |  |         |        |  |             |            | 6,763  |             |  |   |         |   |  |       |        |   |  |   | 6,763   |  
|Shares issued, net of cancellation                                      |  |         | 2,358   |  |             |            | (1,523 | )           |  |   |         |   |  |       |        |   |  |   | 835     |  
|Shares issued for contingent
    consideration                          |  |         | 1,895   |  |             |            |       |             |  |   |         |   |  |       |        |   |  |   | 1,895   |  
|Stock options exercised                                                 |  |         | 4,810   |  |             |            |       |             |  |   |         |   |  |       |        |   |  |   | 4,810   |  
|Restricted share units released                                         |  |         | 1,274   |  |             |            | (1,020 | )           |  |   |         |   |  |       |        |   |  |   | 254     |  
|Executive share purchase plan
    shares, net of cancellation           |  |         | 245     |  |             |            |       |             |  |   |         |   |  |       |        |   |  |   | 245     |  
|Other                                                                   |  |         |        |  |             |            | 88     |             |  |   |         |   |  |       |        |   |  |   | 88      |  
|Translation of self-sustaining
    foreign operations                   |  |         |        |  |             |            |       |             |  |   | 4,921    |   |  |       |        |   |  |   | 4,921   |  
|Translation of debt financing of
    self-sustaining foreign operations |  |         |        |  |             |            |       |             |  |   | (11      | ) |  |       |        |   |  |   | (11     | )
|Net earnings                                                            |  |         |        |  |             |            |       |             |  |   |         |   |  |       | 25,718  |   |  |   | 25,718  |  
|Dividends paid                                                          |  |         |        |  |             |            |       |             |  |   |         |   |  |       | (7,375  | ) |  |   | (7,375  | )
|                                                                        |  |         |         |  |             |            |        |             |  |   |          |   |  |       |        
|                                                                        |  |         | 10,582  |  |             |            | 4,308  |             |  |   | 4,910    |   |  |       | 18,343  |   |  |   | 38,143  |  
|                                                                        |  |         |         |  |             |            |        |             |  |   |          |   |  |       |        
|Balance, December 31, 2005                                              |  | $       | 270,199 |  |             | $          | 16,989 |             |  | $ | 31,893   |   |  | $     | 100,845 |   |  | $ | 419,926 |  
|                                                                        |  |         |         |  |             |            |        |             |  |   |          |   |  |       |        

Market Risk


Interest rate risk








|                                |                                
|------------------------------- | -------------------------------
|ANNUAL REPORT December 31, 2005 | HUB INTERNATIONAL LIMITED    35



---



##### Table of Contents

point increase in interest rates charged on the balance of our
outstanding floating rate debt as of December 31, 2005 will
result in a decrease of approximately $0.8 million in our
annual earnings.

Exchange rate sensitivity

We report our revenue in U.S. dollars. Our Canadian
operations earn revenue and incur expenses in Canadian dollars.
Given our significant Canadian dollar revenue, we are sensitive
to the fluctuations in the value of the Canadian dollar and are
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.
Unrealized foreign currency translation gains and losses are
recorded in the cumulative translation account (CTA), a balance
sheet account, and does not currently impact net earnings.

The Canadian dollar is subject to volatility, and has
experienced significant changes in its value compared to the
U.S. dollar during 2001 through 2005. At December 31,
2005 and 2004 one U.S. dollar equaled $1.17 and $1.20
Canadian dollars, respectively. The table below summarizes the
effect that a $0.01 decline or increase in the value of the
Canadian dollar would have had on our revenue, net earnings and
CTA for the twelve months ended December 31, 2005, 2004 and
2003.

|                                                  |  |      |     |  |      |      |     |      |  |      |     | 
|------------------------------------------------- |  | ---- | --- |  | ---- | ---- | --- | ---- |  | ---- | --- | 
|(in millions of U.S. dollars, except percentages) |  | 2005 |     |  | 2004 |      |     | 2003 | 
|                                                  |  |      |     |  |      |      |     |      | 
|Revenue                                           |  | +/-$ | 1.6 |  |      | +/-$ | 1.6 |      |  | +/-$ | 1.5 | 
|Net earnings                                      |  | +/-$ | 0.3 |  |      | +/-$ | 0.4 |      |  | +/-$ | 0.2 | 
|CTA                                               |  | +/-$ | 1.9 |  |      | +/-$ | 2.6 |      |  | +/-$ | 1.9 | 



Goodwill and Other Intangible Assets




|                               |       |      |         |         |      |   |         |         | 
|------------------------------ | ----- | ---- | ------- | ------- | ---- | - | ------- | ------- | 
|(in thousands of U.S. dollars) |       | 2005 |         |         | 2004 |  
|                               |       |      |         |         |      |  
|Customer relationships         |       | $    | 116,878 |         |      | $ | 95,982  |        
|Non-competition covenants      |       |      | 7,917   |         |      |   | 4,110   |        
|Goodwill                       |       |      | 438,926 |         |      |   | 394,063 |        
|Accumulated amortization       |       |      | (37,556 | )       |      |   | (28,637 | )      
|                               |       |      |         |         |      |  
|                               | Total |      | $       | 526,165 |      |   | $       | 465,518 | 
|                               |       |      |         |         |      |  











|                               |                                
|------------------------------ | -------------------------------
|36   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005



---



##### Table of Contents

of the covenant. During the first quarter 2004, certain of our
subsidiaries changed their names and as a result we recognized a
non-cash loss on the write-off of trademarks of
$2.6 million before tax.

For the years ended December 31, 2005, 2004 and 2003, our
amortization has been comprised of the following:

|                               |       |      |       |       |      |   |       |       |  |   |       |       | 
|------------------------------ | ----- | ---- | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- | 
|(in thousands of U.S. dollars) |       | 2005 |       |       | 2004 |   |       | 2003  | 
|                               |       |      |       |       |      |   |       |       | 
|Customer relationships         |       | $    | 8,147 |       |      | $ | 5,290 |       |  | $ | 3,040 |      
|Non-competition covenants      |       |      | 216   |       |      |   | 168   |       |  |   | 168   |      
|                               |       |      |       |       |      |   |       |       | 
|                               | Total |      | $     | 8,363 |      |   | $     | 5,458 |  |   | $     | 3,208 | 
|                               |       |      |       |       |      |   |       |       | 



|                               |       |      |        |        |      |   |        |        |  |   |       |       |  |      |       |       |  |   |       |       | 
|------------------------------ | ----- | ---- | ------ | ------ | ---- | - | ------ | ------ |  | - | ----- | ----- |  | ---- | ----- | ----- |  | - | ----- | ----- | 
|Year Ended December 31,        |       |      |        |        |      |   |        |        |  |  
|(in thousands of U.S. dollars) |       | 2006 |        |        | 2007 |   |        | 2008   |  |   | 2009  |       |  | 2010 |      
|                               |       |      |        |        |      |   |        |        |  |   |       |       |  |      |      
|Customer relationships         |       | $    | 10,882 |        |      | $ | 10,091 |        |  | $ | 9,664 |       |  | $    | 9,414 |       |  | $ | 8,992 |      
|Non-competition covenants      |       |      | 194    |        |      |   | 156    |        |  |   | 161   |       |  |      | 122   |       |  |   | 80    |      
|                               |       |      |        |        |      |   |        |        |  |   |       |       |  |      |      
|                               | Total |      | $      | 11,076 |      |   | $      | 10,247 |  |   | $     | 9,825 |  |      | $     | 9,536 |  |   | $     | 9,072 | 
|                               |       |      |        |        |      |   |        |        |  |   |       |       |  |      |      

Related Party Transactions




|                                           |  |      |        |  |      |   |        |      |  |   |        | 
|------------------------------------------ |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|Year Ended December 31,                    |  |      |        |  |      |  
|(in thousands of U.S. dollars)             |  | 2005 |        |  | 2004 |   |        | 2003 | 
|                                           |  |      |        |  |      |   |        |      | 
|Northbridge Financial Corporation          |  | $    | 29,415 |  |      | $ | 23,378 |      |  | $ | 18,504 | 
|Crum & Forster Holdings,
    Inc.          |  |      | 941    |  |      |   | 682    |      |  |   | 1,259  | 
|Fairfax Inc.                               |  |      | 585    |  |      |   | 3,638  |      |  |   | 8,411  | 
|                                           |  |      |        |  |      |   |        |      | 
|                                           |  |      | 30,941 |  |      |   | 27,698 |      |  |   | 28,174 | 
|Old Lyme Insurance Company, Ltd
    (OLIC) |  |      | 6,017  |  |      |   | 2,113  |      |  |   |       | 
|                                           |  |      |        |  |      |   |        |      | 
|                                           |  | $    | 36,958 |  |      | $ | 29,811 |      |  | $ | 28,174 | 
|                                           |  |      |        |  |      |   |        |      | 











|                                |                                
|------------------------------- | -------------------------------
|ANNUAL REPORT December 31, 2005 | HUB INTERNATIONAL LIMITED    37



---



##### Table of Contents

have pledged 122,000 and 143,000 common shares as of
December 31, 2005 and 2004, respectively, which have a
market value of $3.2 million and $2.6 million as of
December 31, 2005 and 2004, respectively.

Off-Balance Sheet Arrangements

Under Canadian GAAP, we use the synthetic instruments method to
account for the interest rate swap transaction, which converted
fixed rate interest payments of 5.71% and 6.16% on the senior
notes of $10 million and $55 million, respectively to
a floating rate resulting in a savings of approximately
$0.2 million and $1.3 million for the years ended
December 31, 2005 and 2004, respectively, or 0.54% and
2.00% for the years ended December 31, 2005 and 2004,
respectively. Under this method, we report in earnings the net
interest expense on the swap and associated debt as if it were a
single, synthetic, financial instrument. The fair value of the
swap, estimated at $4.0 million, is not recognized in our
Canadian GAAP financial statements. We have no other material
off-balance sheet arrangements, that have or are reasonably
likely to have a current or future effect on our financial
condition, changes in financial condition, revenue or expenses,
results of operations, liquidity, capital expenditures or
capital resources.

Critical Accounting Policies and Estimates

We prepare our financial statements in accordance with Canadian
GAAP. Our significant accounting polices are more fully
described in Note 2 to our audited consolidated financial
statements. Certain of our accounting policies are particularly
important to the portrayal of our financial position and results
of operations and require our management to make significant
estimates and judgments; as a result they are subject to an
inherent degree of uncertainty. In applying those policies, our
management uses its judgment to determine the appropriate
assumptions to be used in the determination of certain
estimates. Those estimates are based on our historical
experience, terms of existing contracts and policies, our
observance of trends in the insurance industry, information
provided by our clients and information provided by outside
sources, as appropriate, and other factors that management
believes to be relevant at the time the consolidated financial
statements are prepared. Our critical accounting policies
include the recognition of commission income, the allocation of
the purchase price of an acquisition, the measurement of
goodwill and other intangibles and related impairment
evaluation, the valuation of stock-based compensation, the
measurement of income tax liabilities and recoverability of
future tax assets, and the measurement of contingent liabilities
and self-insured liabilities. Management has reviewed these
critical accounting policies and related disclosures with our
independent auditor and the Audit Committee of our Board of
Directors. These policies are discussed below.

Recognition of Commission Income

We recognize commission income and fees as of the effective date
of our clients policy unless information is not available
relating to the determination of their policy premiums, in which
case we recognize commission income and fees related to that
policy when that information becomes available and the revenue
can be reasonably determined. The term effective date means the
date from which protection is afforded under an insurance
policy. At the effective date, we become entitled to the
commission because the insurance coverage has been placed with
the underwriter and the premium is owed by the client. On the
effective date our work has been substantially completed and the
related costs to produce, market and place the coverage have
been incurred. We generally bill in the month of the effective
date. As such, the amount of the commission related to the
services provided has been determined and the premium is
receivable as of that date. Accordingly, on the policy effective
date the earnings process is complete and the services which we
have been contracted to perform have been provided. This is in
accordance with the criteria set forth in SAB 101 and
SAB 104.

As an insurance brokerage we generally have two types of
commissions: direct billed commissions and agency billed
commissions. With direct bill, the insured is billed by the
underwriter directly. The underwriter collects directly from the
insured. We are then paid for our brokerage services (generally
commission income) directly by the underwriter. Accordingly, we
do not bill or collect fees directly from the insured.
Commission income for direct billed commissions is recognized on
the policy effective date. The other type of commission income
is agency billed commission. In these arrangements we bill the
insured directly, normally on or before the effective date of
the policy. Premiums collected are remitted net of commission
income to the insurance carriers.





38   HUB INTERNATIONAL LIMITED
    ANNUAL REPORT December 31, 2005



---



##### Table of Contents

We maintain an allowance for estimated policy cancellations and
commission returns based upon the application of historical
policy cancellation and commission return rates to the current
year revenue, adjusted for any known items. Adjustments to the
allowance for policy cancellations are recorded in commission
revenue on our consolidated statements of earnings. The
allowance for estimated policy cancellations is based on our
managements judgment, and is regularly evaluated by
management by taking into consideration factors such as changes
in the nature and volume of policies; trends in actual and
forecasted policy cancellations; and current economic conditions
that may affect the likelihood of client policy changes or
cancellations. If our actual policy cancellation rates are
significantly different from our historical policy cancellation
rates, and those changes have not been adjusted for in the
allowance, our actual commission income may be significantly
different from what we estimated. We maintain an allowance for
doubtful accounts that estimates uncollectible receivables based
on the length of time receivables are past due and the financial
health of specific customers. Adjustments to the allowance for
doubtful accounts are recorded in selling, occupancy and
administration expenses on our consolidated statements of
earnings. If our actual doubtful accounts are significantly
different than what we estimated, and those changes have not
been adjusted for in the allowance, our results may be
significantly different from what we estimated.

Allocation of the Purchase Price of an Acquisition

The acquisition of new brokerages is a fundamental component of
our strategy. When we acquire a business, the cost of the
purchase is allocated to all of the tangible and intangible
assets acquired and liabilities assumed based on their fair
values, with the excess recorded as goodwill. Any additional
contingent consideration is recorded as an adjustment to
goodwill once the contingency is resolved. For significant
acquisitions, we engage qualified third party valuators to
assist us in conducting asset valuations.

The fair value of assets, including intangible assets, and
liabilities may be determined using a number of valuation
methods including net realizable values, market prices and
discounted cash flows. The use of assumptions and estimates is
inherent in each of these valuation methods. Valuation methods
and their underlying assumptions and estimates are based on
managements judgment. The use of different judgments,
estimates, or assumptions could produce different allocations of
the purchase price and, as a result, different results of
operations.

For acquisitions where part of the consideration paid has the
character of compensation rather than purchase price, primarily
for Talbot, we account for such payment as an expense. Where
such compensation is stock based, our accounting policy for
stock based compensation is followed. The fair value of such
compensation is a significant estimate. The use of different
estimates could produce results that are significantly different
than our results of operations.

Goodwill and Other Intangible Assets

Intangible assets primarily represent goodwill associated with
our acquisitions. Goodwill represents the excess of the cost of
purchase of acquired businesses over the fair market value of
their identifiable net assets.

We do not amortize goodwill and intangible assets with
indefinite useful lives. We do, however, test these assets at
least annually for impairment at the reporting unit level. We
determine impairment by comparing the fair value of a reporting
unit to its carrying value. The fair value of a reporting unit
may be determined using a number of market valuation methods. To
determine fair value we apply a market multiple to adjusted
earnings for each reporting unit. The use of assumptions and
estimates is inherent in each of these valuation techniques. The
valuation method and the underlying assumptions and estimates
are based on managements judgment. The use of different
judgments, estimates and assumptions could produce different
results in the application of the impairment tests and, as a
result, significantly different results of operations.

The cost of definite lived intangible assets is amortized over
the estimated remaining economic useful life of the assets. We
regularly evaluate whether events or changes in circumstances
indicate that the carrying amount of intangibles, other than
goodwill and intangible assets with indefinite useful lives, may
warrant revision or may not be recoverable. The estimated useful
life of customer relationships is generally ten to fifteen
years. The estimation of the useful economic lives and the
selection of estimates and assumptions used in conducting
impairment tests require





ANNUAL REPORT December 31, 2005
    HUB INTERNATIONAL LIMITED    39



---



##### Table of Contents

the exercise of judgment. The use of different judgments,
estimates and assumptions could produce different results in the
application of the impairment tests of the assets and, as a
result, significantly different results of operations.

Stock based compensation

Stock based compensation includes stock options, restricted
shares and restricted share units (RSUs). Our accounting policy
is to recognize the fair value of stock based compensation as an
expense over the period in which entitlement to the compensation
vests.

We estimate the fair value of the stock options granted using
the Black-Scholes valuation model, which requires us to make
assumptions in relation to the expected term of the stock
option, volatility in the price of the underlying common shares,
interest rates and dividend yield. The fair value model is
particularly sensitive to the changes in the price and price
volatility of our common shares. The assumptions used are based
on our managements judgment and the use of different
judgments, estimates, and assumptions could produce
significantly different results of fair value of the stock
options and, as a result, significantly different results of
operations.

We estimate the fair value of RSUs granted at the fair market
value on the date of grant.

Income Taxes

We account for income taxes in accordance with Canadian GAAP
which requires that future tax assets and liabilities be
recognized for the effect of temporary differences between the
book and tax basis of recorded assets and liabilities. Futures
taxes are recognized using tax rates expected to be in effect
for the year in which the temporary differences are expected to
reverse. Future tax assets are required to be reduced by
valuation allowances if it is more likely than not that some
portion of the future tax asset will not be realized.

We record valuation allowances to reduce future tax assets to
the amounts that we estimate are not more likely than not to be
realized. When assessing the need for valuation allowance, we
consider projected future as well as historical taxable income,
prudent and feasible tax planning strategies and the future
reversal of existing taxable temporary differences. Should a
change in circumstances lead to a change in our judgments about
the reliability of future tax assets in future years, we would
adjust the related valuation allowances in the period that the
change in circumstances occurs, along with a corresponding
charge or credit to income.

We record an estimated income tax liability based on our best
judgment of the amounts likely to be paid in the various tax
jurisdictions in which we operate. The tax liabilities
ultimately paid are dependent on a number of factors, including
the filing of tax returns and the resolution of tax audits, and
may differ from the amounts recorded. Tax liabilities are
adjusted through income when it becomes probable that the actual
liability differs from the amount recorded.

If actual results are not consistent with our estimates and
judgments, our results of operations could be significantly
different than reported. Our effective tax rate in a given
period may be materially impacted by these estimates and
judgments.

Contingent Liabilities and Self-Insured Liabilities

In the normal course of business, we are subject to various
claims and lawsuits consisting primarily of alleged errors and
omissions in connection with the placement of insurance. Based
on Canadian GAAP, which is consistent with FAS No. 5
Accounting for Contingencies, we determine whether
to disclose and/or accrue for loss contingencies based on the
assessment of whether the risk is remote, reasonably possible or
probable, and is estimatable.

Managements assessment may be developed in consultation
with the Companys professional advisors and is based on an
analysis of possible outcomes under various strategies. This
assessment requires management to make estimates and apply
judgment to estimate the cost to settle these claims and
lawsuits and to estimate the probability of loss contingencies
actually occurring.

We are self insured for certain losses related to errors or
omission claims, certain general insurance deductibles and a
portion of our group medical insurance. The amounts in excess of
self-insured levels are fully insured by third





40   HUB INTERNATIONAL LIMITED
    ANNUAL REPORT December 31, 2005



---



##### Table of Contents

parties, subject to certain limitations and exclusions. We
utilize third party actuaries to assist in the valuation of
certain of these liabilities. We accrue an estimated liability
for these self-insured losses, including an estimate for
incurred but not reported claims, based on known claims and past
claims history, as well as an estimate for known claims.
Reserves for self-insurance at December 31, 2005 were
approximately $7.1 million and are included in accounts
payable and accrued liabilities on our consolidated balance
sheet.

Periodically, management reviews its assumptions and valuations
to determine the adequacy of our self-insured reserves. We have
not made any material changes in the methodology used to
establish these reserves over the past two years. Uncertainty is
associated with our self-insured liabilities because management
must make estimates and apply judgments to estimate the ultimate
cost to settle reported claims and incurred but not reported
claims as of our balance sheet date. If actual results are not
consistent with our estimates and judgments our results of
operations could be significantly different than reported
results.

Effects of Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board
(FASB) issued revised Statement of Financial Accounting
Standards (SFAS) No. 123 (R), Share-Based
Payment, which replaces SFAS No. 123,
Accounting for Stock-Based Compensation, and
supersedes Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to
Employees. This revised statement, which requires that the
cost of all share-based payment transactions be recognized in
the financial statements, establishes fair value as the
measurement objective and requires entities to apply a
fair-value-based measurement method in accounting for
share-based payment transactions. The Company currently
recognizes the fair value of stock based compensation as an
expense over the period in which entitlement to the compensation
vests. SFAS No. 123 (R) also requires the
benefits of tax deductions in excess of compensation amounts
recognized for book purposes, to be reported as a financing cash
flow rather than as an operating cash flow as required under
prior rules. This requirement will reduce net operating cash
flows and increase net financing cash flows in periods after
adoption. The Company will adopt SFAS No. 123 (R)
on its effective date, which is January 1, 2006.





Item 7A.    Quantitative and
Qualitative Disclosures About Market Risk

See Managements Discussion and Analysis of Financial
Condition and Results of Operations  Market
Risk.





ANNUAL REPORT December 31, 2005
    HUB INTERNATIONAL LIMITED    41



---



##### Table of Contents

Item 8.    Financial Statements and
Supplementary Data

Index to consolidated financial statements

|                                                                                                                                        |  |      |    | 
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                                        |  | Page |   
|                                                                                                                                        |  |      |   
|Managements Annual Report on
    Internal Control over Financial Reporting                                                             |  |      | 43 | 
|Report of Independent Registered
    Public Accounting Firm to the Board of Directors and
    Shareholders of Hub International Limited |  |      | 44 | 
|Consolidated Balance Sheets as of
    December 31, 2005 and 2004                                                                        |  |      | 46 | 
|Consolidated Statements of Earnings
    for the years ended December 31, 2005, 2004 and 2003                                            |  |      | 47 | 
|Consolidated Statements of Retained
    Earnings for the years ended December 31, 2005, 2004 and
    2003                               |  |      | 48 | 
|Consolidated Statements of Cash
    Flows for the years ended December 31, 2005, 2004 and 2003                                          |  |      | 49 | 
|Notes to Consolidated Financial
    Statements for the years ended December 31, 2005, 2004 and
    2003                                 |  |      | 50 | 

Index to notes to consolidated financial statements


|         |    |  |             |                                                              |      |  |    | 
|-------- | -- |  | ----------- | ------------------------------------------------------------ | ---- |  | -- | 
|Footnote |    |  | Description |                                                              | Page | 
|         |    |  |             |                                                              |      | 
|         | 1  |  |             | Nature of operations and recent
    significant transactions |      |  | 50 | 
|         | 2  |  |             | Summary of significant accounting
    policies               |      |  | 50 | 
|         | 3  |  |             | Acquisitions and dispositions                                |      |  | 53 | 
|         | 4  |  |             | Commitments and contingencies                                |      |  | 56 | 
|         | 5  |  |             | Discontinued operations                                      |      |  | 58 | 
|         | 6  |  |             | Accounts and other receivables                               |      |  | 59 | 
|         | 7  |  |             | Intangible assets                                            |      |  | 60 | 
|         | 8  |  |             | Property and equipment                                       |      |  | 61 | 
|         | 9  |  |             | Accounts payable and accrued
    liabilities                 |      |  | 61 | 
|         | 10 |  |             | Debt                                                         |      |  | 62 | 
|         | 11 |  |             | Defined contribution plan                                    |      |  | 63 | 
|         | 12 |  |             | Shareholders equity                                         |      |  | 63 | 
|         | 13 |  |             | Equity incentive plan                                        |      |  | 65 | 
|         | 14 |  |             | Earnings per share                                           |      |  | 67 | 
|         | 15 |  |             | Fair value of financial instruments                          |      |  | 68 | 
|         | 16 |  |             | Income taxes                                                 |      |  | 68 | 
|         | 17 |  |             | Interest and income taxes paid                               |      |  | 70 | 
|         | 18 |  |             | Segmented information                                        |      |  | 70 | 
|         | 19 |  |             | Related party transactions                                   |      |  | 72 | 
|         | 20 |  |             | Reconciliation to U.S. GAAP                                  |      |  | 73 | 
|         | 21 |  |             | Quarterly data                                               |      |  | 76 | 
|         | 22 |  |             | Subsequent events                                            |      |  | 76 | 





|                               |                                
|------------------------------ | -------------------------------
|42   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005



---



##### Table of Contents

Managements Annual Report on Internal Control over
Financial Reporting

Management is responsible for establishing and maintaining
adequate internal control over Hubs financial reporting
(as defined in
Rules 13a-15(f)
and 15d-15(f) under the
U.S. Securities Exchange Act of 1934).

Management has used the criteria established in Internal
Control  Integrated Frameworkissued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO) to evaluate the effectiveness of Hubs internal
control over financial reporting.

Management has assessed the effectiveness of Hubs internal
control over financial reporting as at December 31, 2005,
and has concluded that such internal control over financial
reporting was effective.

In conducting managements assessment of the effectiveness
of Hubs internal controls over financial reporting,
management has excluded Personal Lines Insurance Brokerage, Inc.
(PLI) from its assessment of internal control over
financial reporting as of December 31, 2005 because it was
acquired by Hub in a purchase business combination on
October 1, 2005. PLI is a wholly-owned subsidiary of Hub
whose total assets and total revenues represent 4.7% and 1.7%,
respectively, of the related consolidated financial statement
amounts as of and for the year ended December 31, 2005.

PricewaterhouseCoopers LLP, who has audited the Companys
consolidated financial statements for the year ended
December 31, 2005, has also audited managements
assessment of the effectiveness of Hubs internal control
over financial reporting as at December 31, 2005 as stated
in their report which appears in Item 8 and is incorporated
by reference in Item 9A of this Annual Report on
Form 10-K.

|                                     |  |                                               
|------------------------------------ |  | ----------------------------------------------
|-s- Martin P. Hughes                 |  | -s- Dennis J. Pauls                           
|Martin P. Hughes                     |  | Dennis J. Pauls                               
|Chairman and Chief Executive Officer |  | Vice President and Chief Financial
    Officer
|March 13, 2006                       |  | March 13, 2006                                





|                                |                                
|------------------------------- | -------------------------------
|ANNUAL REPORT December 31, 2005 | HUB INTERNATIONAL LIMITED    43



---



##### Table of Contents

Report of Independent Registered Public Accounting Firm to
the Board of Directors and Shareholders of Hub International
Limited:

We have audited the accompanying consolidated balance sheets of
Hub International Limited (the Company) as at
December 31, 2005 and 2004 and the related consolidated
statements of earnings, retained earnings and cash flows for
each of the years in the three-year period ended
December 31, 2005. We have also audited the effectiveness
of the Companys internal control over financial reporting
as at December 31, 2005 based on the criteria established
in Internal Control  Integrated Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) and managements assessment
thereof included in the accompanying Managements Annual
Report on Internal Control over Financial Reporting appearing
under item 8. The Companys management is responsible
for these financial statements, for maintaining effective
internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial
reporting. Our responsibility is to express an opinion on the
Companys consolidated financial statements for the three
year period ended December 31, 2005, an opinion on
managements assessment as at December 31, 2005 and an
opinion on the effectiveness of the Companys internal
control over financial reporting as at December 31, 2005
based on our audits.

A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.

We conducted our audits of the Companys consolidated
financial statements in accordance with Canadian generally
accepted auditing standards and the standards of the Public
Company Accounting Oversight Board (United States). Those
standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit of financial statements
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. A financial
statement audit also includes assessing the accounting
principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We
conducted our audit of the effectiveness of the Companys
internal control over financial reporting and managements
assessment thereof in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating
managements assessment, testing and evaluating the design
and operating effectiveness of internal control and performing
such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable
basis for our opinions.

In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of the Company as at December 31, 2005 and 2004
and the results of its operations and its cash flows for each of
the years in the three-year period ended December 31, 2005
in accordance with Canadian generally accepted accounting
principles. Also, in our opinion, managements assessment
that the Company maintained effective internal control over
financial reporting as at December 31, 2005 is fairly
stated, in all material respects, based on criteria established
in Internal Control  Integrated Frameworkissued by the COSO. Furthermore, in our opinion, the Company
maintained, in all material respects, effective internal control
over financial reporting as at December 31, 2005 based on
criteria established in Internal Control 
Integrated Frameworkissued by the COSO.

Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may





44   HUB INTERNATIONAL LIMITED
    ANNUAL REPORT December 31, 2005



---



##### Table of Contents

become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.

As described in Managements Annual Report on Internal
Control over Financial Reporting, management has excluded
Personal Lines Insurance Brokerage, Inc. (PLI) from
its assessment of internal control over financial reporting as
of December 31, 2005 because it was acquired by the Company
in a purchase business combination on October 1, 2005. We
have also excluded PLI from our audit of internal control over
financial reporting. PLI is a wholly-owned subsidiary whose
total assets and total revenues represent 4.7% and 1.7%,
respectively, of the related consolidated financial statement
amounts as of and for the year ended December 31, 2005.

(-s- PricewaterhouseCoopers LLP)

Chicago, Illinois

March 1, 2006





ANNUAL REPORT December 31, 2005
    HUB INTERNATIONAL LIMITED    45



---



##### Table of Contents

Hub International Limited

Consolidated Balance Sheets

As of December 31, 2005 and 2004

(in thousands of U.S. dollars)

|                                                      |  |      |           |  |      |   |         | 
|----------------------------------------------------- |  | ---- | --------- |  | ---- | - | ------- | 
|                                                      |  | 2005 |           |  | 2004 |  
|                                                      |  |      |           |  |      |  
|ASSETS                                                |  |      |           |  |      |   |         | 
|Current assets:                                       |  |      |           |  |      |   |         | 
|Cash and cash equivalents                             |  | $    | 70,118    |  |      | $ | 98,204  | 
|Trust cash                                            |  |      | 113,349   |  |      |   | 71,718  | 
|Accounts and other receivables                        |  |      | 230,654   |  |      |   | 162,841 | 
|Income taxes receivable                               |  |      | 6,001     |  |      |   | 6,208   | 
|Future income taxes                                   |  |      | 4,971     |  |      |   | 3,901   | 
|Prepaid expenses                                      |  |      | 6,436     |  |      |   | 5,835   | 
|                                                      |  |      |           |  |      |  
|Total current assets                                  |  |      | 431,529   |  |      |   | 348,707 | 
|Goodwill                                              |  |      | 421,158   |  |      |   | 376,676 | 
|Other intangible
    assets                           |  |      | 105,007   |  |      |   | 88,842  | 
|Property and equipment                                |  |      | 28,160    |  |      |   | 27,907  | 
|Future income taxes                                   |  |      | 4,528     |  |      |   | 4,368   | 
|Other assets                                          |  |      | 10,971    |  |      |   | 11,035  | 
|                                                      |  |      |           |  |      |  
|Total assets                                          |  | $    | 1,001,353 |  |      | $ | 857,535 | 
|                                                      |  |      |           |  |      |  
|                                                     
|LIABILITIES AND
    SHAREHOLDERS EQUITY              |  |      |           |  |      |   |         | 
|Current liabilities:                                  |  |      |           |  |      |   |         | 
|Accounts payable and accrued
    liabilities          |  | $    | 384,174   |  |      | $ | 271,843 | 
|Income taxes payable                                  |  |      | 4,344     |  |      |   | 2,273   | 
|Future income taxes                                   |  |      | 359       |  |      |   | 34      | 
|Current portion long-term debt and
    capital leases |  |      | 4,910     |  |      |   | 5,195   | 
|                                                      |  |      |           |  |      |  
|Total current
    liabilities                         |  |      | 393,787   |  |      |   | 279,345 | 
|Long-term debt and capital
    leases                 |  |      | 135,363   |  |      |   | 146,602 | 
|Subordinated convertible
    debentures               |  |      | 35,000    |  |      |   | 35,000  | 
|Future income taxes                                   |  |      | 17,277    |  |      |   | 14,805  | 
|                                                      |  |      |           |  |      |  
|Total liabilities                                     |  |      | 581,427   |  |      |   | 475,752 | 
|                                                      |  |      |           |  |      |  
|Commitments and
    Contingencies                     |  |      |           |  |      |   |         | 
|Shareholders
    equity                              |  |      |           |  |      |   |         | 
|Share capital                                         |  |      | 270,199   |  |      |   | 259,617 | 
|Contributed surplus                                   |  |      | 16,989    |  |      |   | 12,681  | 
|Cumulative translation account                        |  |      | 31,893    |  |      |   | 26,983  | 
|Retained earnings                                     |  |      | 100,845   |  |      |   | 82,502  | 
|                                                      |  |      |           |  |      |  
|Total shareholders
    equity                        |  |      | 419,926   |  |      |   | 381,783 | 
|                                                      |  |      |           |  |      |  
|Total liabilities and
    shareholders equity        |  | $    | 1,001,353 |  |      | $ | 857,535 | 
|                                                      |  |      |           |  |      |  

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






|                               |                                
|------------------------------ | -------------------------------
|46   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005



---



##### Table of Contents

Hub International Limited

Consolidated Statements of Earnings

For the years ended December 31, 2005, 2004 and 2003

(in thousands of U.S. dollars, except per share
amounts)

|                                                                |                                                                            |      |         |         |      |   |         |         |   |   |         |         |  
|--------------------------------------------------------------- | -------------------------------------------------------------------------- | ---- | ------- | ------- | ---- | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                |                                                                            | 2005 |         |         | 2004 |   |         | 2003    |  
|                                                                |                                                                            |      |         |         |      |   |         |         |  
|Revenue                                                         |                                                                            |      |         |         |      |   |         |         |   |   |         |        
|                                                                | Commission income                                                          |      | $       | 389,907 |      |   | $       | 323,150 |   |   | $       | 258,099 |  
|                                                                | Contingent commissions and volume
    overrides                            |      |         | 40,454  |      |   |         | 21,705  |   |   |         | 18,530  |  
|                                                                | Other                                                                      |      |         | 12,195  |      |   |         | 10,226  |   |   |         | 9,730   |  
|                                                                |                                                                            |      |         |         |      |   |         |         |  
|                                                                |                                                                            |      | 442,556 |         |      |   | 355,081 |         |   |   | 286,359 |        
|                                                                |                                                                            |      |         |         |      |   |         |         |  
|Expenses                                                        |                                                                            |      |         |         |      |   |         |         |   |   |         |        
|                                                                | Employee cash compensation                                                 |      |         | 246,263 |      |   |         | 195,706 |   |   |         | 156,320 |  
|                                                                | Selling, occupancy and
    administration                                  |      |         | 82,843  |      |   |         | 71,948  |   |   |         | 56,606  |  
|                                                                | Depreciation                                                               |      |         | 8,714   |      |   |         | 7,242   |   |   |         | 6,244   |  
|                                                                | Interest expense                                                           |      |         | 10,656  |      |   |         | 7,406   |   |   |         | 5,191   |  
|                                                                | Intangible asset amortization                                              |      |         | 8,363   |      |   |         | 5,458   |   |   |         | 3,208   |  
|                                                                | Compensation for Talbot earnout                                            |      |         | 28,716  |      |   |         | 14,388  |   |   |         |        |  
|                                                                | Other non-cash stock based
    compensation                                |      |         | 7,184   |      |   |         | 6,502   |   |   |         | 4,801   |  
|                                                                | Gain on disposal of subsidiaries,
    property, equipment and other assets |      |         | (2,943  | )    |   |         | (1,923  | ) |   |         | (202    | )
|                                                                | Loss on foreign exchange forward
    contract                              |      |         | 555     |      |   |         |        |   |   |         |        |  
|                                                                | Gain on forgiveness of debt                                                |      |         | (4,500  | )    |   |         |        |   |   |         |        |  
|                                                                | Loss on write-off of trademarks                                            |      |         |        |      |   |         | 2,587   |   |   |         |        |  
|                                                                | Gain on put option liability                                               |      |         |        |      |   |         |        |   |   |         | (160    | )
|                                                                | Proceeds from life insurance                                               |      |         |        |      |   |         |        |   |   |         | (1,000  | )
|                                                                |                                                                            |      |         |         |      |   |         |         |  
|                                                                |                                                                            |      | 385,851 |         |      |   | 309,314 |         |   |   | 231,008 |        
|                                                                |                                                                            |      |         |         |      |   |         |         |  
|Net earnings from continuing
    operations before income taxes |                                                                            |      | 56,705  |         |      |   | 45,767  |         |   |   | 55,351  |        
|                                                                |                                                                            |      |         |         |      |   |         |         |  
|Provision for income tax
    expense                            |                                                                            |      |         |         |      |   |         |         |   |   |         |        
|                                                                | Current                                                                    |      |         | 29,791  |      |   |         | 19,784  |   |   |         | 16,922  |  
|                                                                | Future                                                                     |      |         | 1,167   |      |   |         | 200     |   |   |         | 1,920   |  
|                                                                |                                                                            |      |         |         |      |   |         |         |  
|                                                                |                                                                            |      | 30,958  |         |      |   | 19,984  |         |   |   | 18,842  |        
|                                                                |                                                                            |      |         |         |      |   |         |         |  
|Net earnings from continuing
    operations                     |                                                                            |      | 25,747  |         |      |   | 25,783  |         |   |   | 36,509  |        
|Net earnings (loss) from
    discontinued operations            |                                                                            |      | (29     | )       |      |   | 461     |         |   |   |        |        
|                                                                |                                                                            |      |         |         |      |   |         |         |  
|Net earnings                                                    |                                                                            | $    | 25,718  |         |      | $ | 26,244  |         |   | $ | 36,509  |        
|                                                                |                                                                            |      |         |         |      |   |         |         |  
|Basic earnings per
    share                                    |                                                                            |      |         |         |      |   |         |         |   |   |         |        
|                                                                | Continuing operations                                                      |      | $       | 0.84    |      |   | $       | 0.85    |   |   | $       | 1.22    |  
|                                                                | Discontinued operations                                                    |      |         |        |      |   |         | 0.02    |   |   |         |        |  
|                                                                |                                                                            |      |         |         |      |   |         |         |  
|                                                                | Total operations                                                           |      | $       | 0.84    |      |   | $       | 0.87    |   |   | $       | 1.22    |  
|                                                                |                                                                            |      |         |         |      |   |         |         |  
|Diluted earnings per
    share                                  |                                                                            |      |         |         |      |   |         |         |   |   |         |        
|                                                                | Continuing operations                                                      |      | $       | 0.76    |      |   | $       | 0.79    |   |   | $       | 1.14    |  
|                                                                | Discontinued operations                                                    |      |         |        |      |   |         | 0.01    |   |   |         |        |  
|                                                                |                                                                            |      |         |         |      |   |         |         |  
|                                                                | Total operations                                                           |      | $       | 0.76    |      |   | $       | 0.80    |   |   | $       | 1.14    |  
|                                                                |                                                                            |      |         |         |      |   |         |         |  
|Weighted average shares
    outstanding  Basic (000s)         |                                                                            |      | 30,561  |         |      |   | 30,246  |         |   |   | 29,967  |        
|Weighted average shares
    outstanding  Diluted (000s)       |                                                                            |      | 36,619  |         |      |   | 35,305  |         |   |   | 33,767  |        

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






|                                |                                
|------------------------------- | -------------------------------
|ANNUAL REPORT December 31, 2005 | HUB INTERNATIONAL LIMITED    47



---



##### Table of Contents

Hub International Limited

Consolidated Statements of Retained Earnings

For the years ended December 31, 2005, 2004 and 2003

(in thousands of U.S. dollars)

|                                          |  |      |         |   |      |   |        |      |  |   |        |  
|----------------------------------------- |  | ---- | ------- | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                          |  | 2005 |         |   | 2004 |   |        | 2003 | 
|                                          |  |      |         |   |      |   |        |      | 
|Retained earnings 
    Beginning of year |  | $    | 82,502  |   |      | $ | 62,356 |      |  | $ | 31,915 |  
|Net earnings                              |  |      | 25,718  |   |      |   | 26,244 |      |  |   | 36,509 |  
|Dividends                                 |  |      | (7,375  | ) |      |   | (6,098 | )    |  |   | (6,068 | )
|                                          |  |      |         |   |      |   |        |      | 
|Retained earnings 
    End of year       |  | $    | 100,845 |   |      | $ | 82,502 |      |  | $ | 62,356 |  
|                                          |  |      |         |   |      |   |        |      | 

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






|                               |                                
|------------------------------ | -------------------------------
|48   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005



---



##### Table of Contents

Hub International Limited

Consolidated Statements of Cash Flows

For the years ended December 31, 2005, 2004 and 2003

(in thousands of U.S. dollars)

|                                                                 |                                                                            |      |         |         |      |   |         |         |   |   |         |        |  
|---------------------------------------------------------------- | -------------------------------------------------------------------------- | ---- | ------- | ------- | ---- | - | ------- | ------- | - | - | ------- | ------ | -
|                                                                 |                                                                            | 2005 |         |         | 2004 |   |         | 2003    |  
|                                                                 |                                                                            |      |         |         |      |   |         |         |  
|OPERATING ACTIVITIES                                             |                                                                            |      |         |         |      |   |         |         |   |   |         |       
|Net earnings                                                     |                                                                            | $    | 25,718  |         |      | $ | 26,244  |         |   | $ | 36,509  |       
|Items not affecting cash                                         |                                                                            |      |         |         |      |   |         |         |   |   |         |       
|                                                                 | Amortization and depreciation                                              |      |         | 17,342  |      |   |         | 12,786  |   |   |         | 9,452  |  
|                                                                 | Gain on disposal of subsidiaries,
    property, equipment and other assets |      |         | (2,913  | )    |   |         | (1,880  | ) |   |         | (202   | )
|                                                                 | Compensation for Talbot earnout                                            |      |         | 28,716  |      |   |         | 14,388  |   |   |         |       |  
|                                                                 | Other non-cash stock based
    compensation                                |      |         | 7,184   |      |   |         | 6,502   |   |   |         | 4,801  |  
|                                                                 | Gain on forgiveness of debt                                                |      |         | (4,500  | )    |   |         |        |   |   |         |       |  
|                                                                 | Loss on write-off of trademarks                                            |      |         |        |      |   |         | 2,587   |   |   |         |       |  
|                                                                 | Gain on put option liability                                               |      |         |        |      |   |         |        |   |   |         | (160   | )
|                                                                 | Future income taxes                                                        |      |         | 1,271   |      |   |         | 130     |   |   |         | 1,920  |  
|Non-cash working capital items                                   |                                                                            |      |         |         |      |   |         |         |   |   |         |       
|                                                                 | Trust cash                                                                 |      |         | (34,219 | )    |   |         | (3,351  | ) |   |         | (886   | )
|                                                                 | Accounts and other receivables                                             |      |         | (33,451 | )    |   |         | 16,024  |   |   |         | (3,766 | )
|                                                                 | Prepaid expenses                                                           |      |         | (259    | )    |   |         | (1,303  | ) |   |         | (2,616 | )
|                                                                 | Accounts payable and accrued
    liabilities                               |      |         | 54,739  |      |   |         | (12,024 | ) |   |         | 13,933 |  
|                                                                 | Compensation for Talbot
    earnout  paid                                 |      |         | (16,434 | )    |   |         |        |   |   |         |       |  
|                                                                 | Other assets                                                               |      |         | 515     |      |   |         | 512     |   |   |         | (2,062 | )
|                                                                 | Income taxes                                                               |      |         | 2,304   |      |   |         | (2,646  | ) |   |         | (2,184 | )
|                                                                 |                                                                            |      |         |         |      |   |         |         |  
|Net cash flows from operating
    activities                     |                                                                            |      | 46,013  |         |      |   | 57,969  |         |   |   | 54,739  |       
|                                                                 |                                                                            |      |         |         |      |   |         |         |  
|INVESTING ACTIVITIES                                             |                                                                            |      |         |         |      |   |         |         |   |   |         |       
|Property and equipment 
    purchases                           |                                                                            |      | (7,982  | )       |      |   | (7,293  | )       |   |   | (6,125  | )     
|Property and equipment 
    proceeds on sale                    |                                                                            |      | 26      |         |      |   | 159     |         |   |   | 69      |       
|Purchase of subsidiaries, net of
    cash received               |                                                                            |      | (66,145 | )       |      |   | (94,307 | )       |   |   | (14,881 | )     
|Sale of subsidiaries                                             |                                                                            |      | 5,127   |         |      |   | 7,454   |         |   |   | 1,098   |       
|Other assets                                                     |                                                                            |      | 5,068   |         |      |   | 687     |         |   |   | (307    | )     
|                                                                 |                                                                            |      |         |         |      |   |         |         |  
|Net cash flows used for investing
    activities                 |                                                                            |      | (63,906 | )       |      |   | (93,300 | )       |   |   | (20,146 | )     
|                                                                 |                                                                            |      |         |         |      |   |         |         |  
|FINANCING ACTIVITIES                                             |                                                                            |      |         |         |      |   |         |         |   |   |         |       
|Long-term debt and capital
    leases  advances                 |                                                                            |      | 10,000  |         |      |   | 65,000  |         |   |   | 65,000  |       
|Long-term debt and capital
    leases  repayments               |                                                                            |      | (18,907 | )       |      |   | (11,326 | )       |   |   | (54,540 | )     
|Proceeds from exercise of stock
    options                      |                                                                            |      | 4,542   |         |      |   | 497     |         |   |   | 222     |       
|Dividends paid                                                   |                                                                            |      | (7,375  | )       |      |   | (6,098  | )       |   |   | (6,068  | )     
|Share capital  issued
    for cash, net of issue costs          |                                                                            |      | 15      |         |      |   |        |         |   |   | (61     | )     
|                                                                 |                                                                            |      |         |         |      |   |         |         |  
|Net cash flows (used for) from
    financing activities          |                                                                            |      | (11,725 | )       |      |   | 48,073  |         |   |   | 4,553   |       
|                                                                 |                                                                            |      |         |         |      |   |         |         |  
|Effect of exchange rate changes
    on cash and cash equivalents |                                                                            |      | 1,532   |         |      |   | 3,410   |         |   |   | 2,264   |       
|                                                                 |                                                                            |      |         |         |      |   |         |         |  
|Change in cash and cash
    equivalents                          |                                                                            |      | (28,086 | )       |      |   | 16,152  |         |   |   | 41,410  |       
|Cash and cash
    equivalents  Beginning of year                |                                                                            |      | 98,204  |         |      |   | 82,052  |         |   |   | 40,642  |       
|                                                                 |                                                                            |      |         |         |      |   |         |         |  
|Cash and cash
    equivalents  End of year                      |                                                                            | $    | 70,118  |         |      | $ | 98,204  |         |   | $ | 82,052  |       
|                                                                 |                                                                            |      |         |         |      |   |         |         |  

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






|                                |                                
|------------------------------- | -------------------------------
|ANNUAL REPORT December 31, 2005 | HUB INTERNATIONAL LIMITED    49



---



##### Table of Contents

Hub International Limited

Notes to Consolidated Financial Statements

For the years ended December 31, 2005, 2004 and 2003

(in thousands of U.S. dollars, except per share amounts
or as otherwise indicated)

1.  Nature of operations and recent significant
transactions

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 New York Stock
Exchange (NYSE: HBG) and Toronto Stock Exchange (TSX: HBG).

PLI

On October 1, 2005, the Company purchased Personal Lines
Brokerage, Inc. (PLI) from The Chubb Corporation, which was
accounted for using the purchase method of accounting.
Accordingly, the results of operations and cash flows of PLI are
included in the Companys consolidated results from the
date of acquisition.

Talbot

On July 1, 2004, the Company purchased Talbot Financial
Corporation (Talbot) as described below, which was accounted for
using the purchase method of accounting. Accordingly, the
results of operations and cash flows of Talbot are included in
the Companys consolidated results from the date of
acquisition.

The Company purchased all of the common shares of Satellite
Acquisition Corporation (Satellite), a corporation formed by
senior management at Talbot. In turn, Satellite purchased 100%
of Talbot from Safeco Corporation. The Company will purchase
special shares of Satellite owned by the management of Talbot,
using a combination of both restricted and unrestricted common
shares of the Company or cash. The first payment of
$16.4 million, was made in cash on September 1, 2005,
based upon Talbots earnings for the 12 months ending
December 31, 2004. The remaining payments will be made on
March 31, 2006 and March 31, 2007 based upon
Talbots earnings for the twelve months ending
December 31, 2005 and 2006, respectively. The contingent
payment to Talbot management is recorded by the Company as a
charge to earnings over the period in which the payments are
earned, because it is a compensation based arrangement and
specifically a performance award. The Company estimates that the
aggregate value of compensation which will be recognized under
this arrangement will be approximately $56 million, of
which $28.7 million and $14.4 million were recognized
in 2005 and 2004, respectively. At December 31, 2005,
$26.7 million of compensation relating to the Talbot
acquisition was included in accounts payable and accrued
liabilities.

Bank facility

On April 23, 2004 the Company renegotiated an existing
unsecured loan facility, increasing the funds available from
$65 million to $75 million (see note 10
Debt). $65 million of this facility was drawn
and was used for the acquisition of Talbot.

2.  Summary of significant accounting policies

These consolidated financial statements of the Company are
expressed in United States (U.S.) dollars and have been prepared
in accordance with Canadian generally accepted accounting
principles (Canadian GAAP). These principles differ in certain
respects from U.S. GAAP and to the extent that they affect
the Company, the differences are described in note 20
Reconciliation to U.S. GAAP. The more
significant of the accounting policies are as follows:

Basis of presentation

The consolidated financial statements include the accounts of
the Company and all of its subsidiaries. All material
inter-company accounts and transactions have been eliminated.
Certain reclassifications have been made to prior years
financial statements to conform to the current year presentation.





50   HUB INTERNATIONAL LIMITED
    ANNUAL REPORT December 31, 2005



---



##### Table of Contents

Estimates and assumptions

Preparation of the financial statements in conformity with
Canadian and U.S. GAAP requires management to make
estimates and assumptions that affect the reported amount of
assets and liabilities and the reported amount of revenue and
expense during the reporting period. The principal estimates
used in the preparation of these financial statements are the
determination of the provision for cancelled policies relating
to revenue recognition, allowance for doubtful accounts, the
allocation of the purchase price on acquisitions, the valuation
of reporting units when testing the recoverability of goodwill
and other intangible assets, the estimation of the useful lives
of definite life intangible assets, the measurement of non-cash
stock based compensation, the measurement of income tax
liabilities and the recoverability of future income tax assets,
and the measurement of self-insured liabilities and contingent
liabilities. Actual results could differ from those estimated.

Foreign currency translation

The operations of the Companys subsidiaries outside of the
U.S. are self-sustaining. The assets and liabilities of
these subsidiaries as at December 31, 2005 and 2004 were
translated to U.S. dollars at the year-end exchange rate.
Revenue and expenses for 2005, 2004 and 2003 were translated to
U.S. dollars at the average exchange rate for those
periods. Accordingly, the unrealized gains and losses which
result from this translation are deferred and included in
shareholders equity under the caption Cumulative
translation account.

Revenue recognition

Commission income and fees (including commission income related
to installment billing arrangements) are recognized as of the
effective date of the policy unless information is not available
relating to the determination of the clients policy
premiums, in which case commission income and fees related to
that policy are recognized when that information becomes
available and the revenue can be reasonably determined. The term
effective date means the date from which protection is afforded
under an insurance policy. At the effective date, the Company
becomes entitled to the commission because the insurance
coverage has been placed with the underwriter and the premium is
owed by the client. On the effective date the Companys
work has been substantially completed and the related costs to
produce, market and place the coverage have been incurred. The
Company generally bills in the month of the effective date. As
such, the amount of the commission related to the services
provided has been determined and the premium is receivable as of
that date. Accordingly, on the policy effective date the
earnings process is complete and the services which the Company
has been contracted to perform have been provided. This is in
accordance with the criteria set forth in SAB 101 and
SAB 104.

As an insurance brokerage the Company generally has two types of
commission income: direct billed commissions and agency billed
commissions. With direct bill, the insured is billed by the
underwriter directly. The underwriter collects directly from the
insured. The Company is then paid for brokerage services
(generally commission income) directly by the underwriter.
Accordingly, the Company does not bill or collect fees directly
from the insured. Commission income for direct billed
commissions is recognized on the effective policy date. The
other type of commission income is agency billed commission. In
these arrangements the Company bills the insured directly,
normally on or before the effective date of the policy. Premiums
collected are remitted net of commission income to the insurance
carriers.

Commission income is reported net of sub-broker commission
expense. Commission and other adjustments are recorded when they
occur and the Company maintains an allowance for estimated
policy cancellations and commission returns by applying
historical policy cancellation and commission return rates to
the current year revenue, adjusted for any known deviations. The
Company also maintains an allowance for doubtful accounts based
on the length of time receivables are past due and the financial
health of specific customers.

The Company is entitled to contingent commissions and volume
overrides from insurance companies which are recorded in the
period in which amounts can be reasonably estimated, which is
usually when the amounts are received. Other revenue primarily
includes investment income, policy service fees and income
earned related to the financing of client premiums. Investment
income is recorded when earned. Policy service fees are recorded
on the effective date of the policy, at which time the service
has been provided. Income earned related to the financing of
client premiums is recorded when known.





ANNUAL REPORT December 31, 2005
    HUB INTERNATIONAL LIMITED    51



---



##### Table of Contents

Cash and cash equivalents

Cash and cash equivalents consist of cash, and highly liquid
investments having maturities of three months or less at the
acquisition date.

Trust cash

Premiums collected (less commissions and other deductions), but
not yet remitted to insurance companies, are included in trust
cash. Trust cash is restricted as to use by contractual
obligations and by laws in certain states and provinces in which
the Company operates. Other deductions from premiums collected
include advance payments to underwriters as well as advance
claim payments and return premiums to clients. The cash held in
trust is shown separately on the Companys balance sheet
under the caption Trust Cash. On the statement of
cash flows, changes in trust cash are included as part of the
change in non-cash working capital and the determination of cash
provided from operating activities.

Property and equipment

Property and equipment are stated at cost less accumulated
depreciation and amortization Depreciation is recorded based on
the estimated economic useful lives of the related assets as
follows: for computer equipment on a straight-line basis from 3
to 5 years or on a 30% declining balance method; for
furniture, fixtures, and office equipment on a straight-line
basis from 5 to 7 years or on a 20% declining balance
method. Leasehold improvements are amortized on the
straight-line method over the term of the related lease. Upon
sale or retirement, the cost and related accumulated
depreciation or amortization are removed from the accounts and
any gain or loss is reflected in earnings. If the carrying value
of property and equipment is identified as impaired, it is
written down to its fair value.

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. Consideration which
is contingent on maintaining or achieving specified earnings
levels in future periods is recorded as goodwill when the
contingency is resolved and the additional consideration is
issued or becomes issuable. For significant acquisitions, the
Company engages qualified third party valuators to assist it in
conducting asset valuations. The fair value of assets, including
intangible assets, and liabilities may be determined using a
number of valuation methods including net realizable values,
market prices and discounted cash flows. For acquisitions where
part of the consideration paid has the character of compensation
rather than purchase price, the Company accounts for such
payment as an expense. Where such compensation is stock based,
the Companys accounting policy for stock based
compensation is followed.

Goodwill and other intangible assets

Goodwill and intangible assets with indefinite useful lives are
not 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.

The Company completed its impairment testing on the balance of
goodwill and indefinite lived intangible assets as of
January 1, 2006, 2005 and 2004. Based on the testing
performed, no impairment losses were incurred.

Intangible assets other than goodwill which do not have
indefinite lives are amortized over their economic useful lives.
The estimated economic useful life of customer relationships is
generally ten to fifteen years. These intangible assets are
regularly evaluated to see whether events or changes in
circumstances indicate that the carrying value may warrant
revision or may not be recoverable.

Interest rate swap

The Company accounts for interest rate swaps with respect to its
long-term debt using the synthetic instruments method under
which the net interest on the swap and associated debt is
reported in earnings as if it were a single synthetic financial
instrument. The fair value of the derivative is not recognized
in the balance sheet.





52   HUB INTERNATIONAL LIMITED
    ANNUAL REPORT December 31, 2005



---



##### Table of Contents

Stock based compensation

The Company recognizes the fair value of stock based
compensation as an expense over the period in which entitlement
to the compensation vests under the fair value based measurement
method.

Future income taxes

Future income taxes reflect the expected future tax consequences
of temporary differences between the carrying amounts of assets
or liabilities and their tax bases. Future income tax assets and
liabilities are determined for each temporary difference based
on the tax rates which are expected to be in effect when the
asset or liability is settled. The benefit of loss carry
forwards is recognized as an asset to the extent that it is more
likely than not to be realized.

Put options

The fair value of put options issued by the Company as
consideration for businesses acquired is classified as long-term
debt until such time as the option is exercised or expires.
Changes in the fair value of these options are recorded in
earnings. As part of the negotiations of contingent
consideration the former owners of certain companies acquired in
2001 agreed to relinquish their rights to put options on 730,000
common shares at December 31, 2003 and on 1,423,000 common
shares at December 31, 2002. Accordingly at
December 31, 2005 and 2004 no put options were outstanding
on the Companys common shares.

Discontinued operations

During the third quarter 2005, the Company adopted a formal plan
of disposition related to its U.S. financial services
operation (the Discontinued Business). Preparation
of the financial statements in conformity with Canadian and
U.S. GAAP requires management to report revenue and
expenses for the reporting period as Discontinued
Operations, and as such is shown separately from
continuing operations. See note 5 Discontinued
Operations.

3.  Acquisitions and dispositions

The Companys strategic business plan includes the regular
and systematic evaluation and acquisition of insurance
brokerages in new and existing markets. Insurance brokerages,
due to their nature, typically maintain a very low capital to
earnings ratio. As a result, the Company records a substantial
amount of goodwill and other intangible assets in connection
with acquisitions.

The Company typically pays a significant portion of the
consideration for an acquired brokerage in cash. Consideration
for the remainder of the purchase price is normally in the form
of the Companys common shares based on the fair market
value of the Companys common shares as traded on the NYSE
or TSX, and is defined and calculated pursuant to the
acquisition agreement. In addition previous owners of certain
acquired entities are entitled to contingent consideration if
certain revenue or profitability targets are met. See
note 4 Commitments and contingencies.



(a)
    During 2005, the Company purchased all of the issued and
    outstanding shares of PLI from The Chubb Corporation, and THB
    Intermediaries, Inc. (THB) as well as the assets of 13 other
    insurance brokerages, all of which were accounted for using the
    purchase method of accounting. Accordingly, the results of
    operations and cash flows of the acquired companies have been
    included in the Companys consolidated results from their
    respective acquisition dates.

The preliminary allocation of the purchase price, including
    goodwill and other identifiable intangible assets, and the cost
    of the acquired brokerages in 2005 are summarized below, as well
    as adjustments to preliminary



ANNUAL REPORT December 31, 2005
    HUB INTERNATIONAL LIMITED    53



---



##### Table of Contents

allocations and contingent consideration, relating to prior
    period acquisitions. The allocation of purchase price will be
    finalized when certain tangible net worth adjustments are made
    in the first quarter of 2006.

|                                                     |  |             |         |   |                 |   |        |         |  |   |        |   |  |   |         |  
|---------------------------------------------------- |  | ----------- | ------- | - | --------------- | - | ------ | ------- |  | - | ------ | - |  | - | ------- | -
|                                                     |  | THB         |         |   | PLI             |   |        | Other   |  |   | Total  |  
|                                                     |  |             |         |   |                 |   |        |         |  |   |        |  
|Acquisition Date                                     |  | May 2, 2005 |         |   | October 1, 2005 |   |        | Various |  |   |       
|Current assets                                       |  | $           | 33,373  |   |                 | $ | 11,794 |         |  | $ | 4,264  |   |  | $ | 49,431  |  
|Current liabilities                                  |  |             | (32,660 | ) |                 |   | (8,097 | )       |  |   | (4,846 | ) |  |   | (45,603 | )
|Property, equipment and other assets                 |  |             | 611     |   |                 |   | 411    |         |  |   | 580    |   |  |   | 1,602   |  
|                                                     |  |             |         |   |                 |   |        |         |  |   |        |  
|Net assets (liabilities) at fair
    value           |  | $           | 1,324   |   |                 | $ | 4,108  |         |  | $ | (2     | ) |  | $ | 5,430   |  
|                                                     |  |             |         |   |                 |   |        |         |  |   |        |  
|Consideration                                        |  |             |         |   |                 |   |        |         |  |   |        |   |  |   |         |  
|Cash                                                 |  | $           | 4,859   |   |                 | $ | 38,409 |         |  | $ | 25,275 |   |  | $ | 68,543  |  
|Payable                                              |  |             |        |   |                 |   | 250    |         |  |   | 2,740  |   |  |   | 2,990   |  
|Common shares (at market value)                      |  |             | 707     |   |                 |   |       |         |  |   | 1,896  |   |  |   | 2,603   |  
|                                                     |  |             |         |   |                 |   |        |         |  |   |        |  
|                                                     |  | $           | 5,566   |   |                 | $ | 38,659 |         |  | $ | 29,911 |   |  | $ | 74,136  |  
|                                                     |  |             |         |   |                 |   |        |         |  |   |        |  
|Goodwill                                             |  | $           | 2,492   |   |                 | $ | 18,000 |         |  | $ | 23,445 |   |  | $ | 43,937  |  
|Customer relationships                               |  |             | 1,750   |   |                 |   | 13,238 |         |  |   | 5,983  |   |  |   | 20,971  |  
|Non-competition covenants                            |  |             |        |   |                 |   | 3,313  |         |  |   | 485    |   |  |   | 3,798   |  
|                                                     |  |             |         |   |                 |   |        |         |  |   |        |  
|                                                     |  | $           | 4,242   |   |                 | $ | 34,551 |         |  | $ | 29,913 |   |  | $ | 68,706  |  
|                                                     |  |             |         |   |                 |   |        |         |  |   |        |  
|Number of shares issued as
    consideration (000s) |  |             | 36      |   |                 |   |       |         |  |   | 104    |   |  |   | 140     |  
|                                                     |  |             |         |   |                 |   |        |         |  |   |        |  







|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | During 2004, the Company purchased Talbot (as described above),
    all of the issued and outstanding membership interests of Bush,
    Cotton & Scott, LLC, now known as HUB
    Northwest, located in the State of Washington, as well as
    the assets of five other insurance brokerages, all of which were
    accounted for using the purchase method of accounting.
    Accordingly, the results of operations and cash flows of the
    acquired companies have been included in the Companys
    consolidated results from their respective acquisition dates.





|                               |                                
|------------------------------ | -------------------------------
|54   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005



---



##### Table of Contents

The allocation of the purchase price, including goodwill and
    other identifiable intangible assets, and the cost of the
    acquired brokerages in 2004 are summarized below:

|                                                     |  |              |         |              |               |   |        |         |  |   |        |   |  |   |         |  
|---------------------------------------------------- |  | ------------ | ------- | ------------ | ------------- | - | ------ | ------- |  | - | ------ | - |  | - | ------- | -
|                                                     |  |              |         | Bush, Cotton |               |   |        |         | 
|                                                     |  | Talbot       |         |              | & Scott       |   |        | Other   |  |   | Total  |  
|                                                     |  |              |         |              |               |   |        |         |  |   |        |  
|Acquisition Date                                     |  | July 1, 2004 |         |              | April 1, 2004 |   |        | Various |  |   |       
|Current assets                                       |  | $            | 49,639  |              |               | $ | 4,702  |         |  | $ | 358    |   |  | $ | 54,699  |  
|Current liabilities                                  |  |              | (41,261 | )            |               |   | (4,803 | )       |  |   | (146   | ) |  |   | (46,210 | )
|Property, equipment and other assets                 |  |              | 8,316   |              |               |   | 96     |         |  |   | 95     |   |  |   | 8,507   |  
|Long-term debt and capital leases                    |  |              | (16,129 | )            |               |   | (2,826 | )       |  |   |       |   |  |   | (18,955 | )
|                                                     |  |              |         |              |               |   |        |         |  |   |        |  
|Net assets (liabilities) at fair
    value           |  | $            | 565     |              |               | $ | (2,831 | )       |  | $ | 307    |   |  | $ | (1,959  | )
|                                                     |  |              |         |              |               |   |        |         |  |   |        |  
|Consideration                                        |  |              |         |              |               |   |        |         |  |   |        |   |  |   |         |  
|Cash                                                 |  | $            | 93,946  |              |               | $ | 11,966 |         |  | $ | 10,798 |   |  | $ | 116,710 |  
|Payable                                              |  |              |        |              |               |   |       |         |  |   | 1,447  |   |  |   | 1,447   |  
|Common shares (at market value)                      |  |              |        |              |               |   | 2,800  |         |  |   | 533    |   |  |   | 3,333   |  
|                                                     |  |              |         |              |               |   |        |         |  |   |        |  
|                                                     |  | $            | 93,946  |              |               | $ | 14,766 |         |  | $ | 12,778 |   |  | $ | 121,490 |  
|                                                     |  |              |         |              |               |   |        |         |  |   |        |  
|Goodwill                                             |  | $            | 48,649  |              |               | $ | 9,932  |         |  | $ | 10,722 |   |  | $ | 69,303  |  
|Customer relationships                               |  |              | 44,163  |              |               |   | 6,891  |         |  |   | 1,641  |   |  |   | 52,695  |  
|Non-competition covenants                            |  |              | 569     |              |               |   | 774    |         |  |   | 108    |   |  |   | 1,451   |  
|                                                     |  |              |         |              |               |   |        |         |  |   |        |  
|                                                     |  | $            | 93,381  |              |               | $ | 17,597 |         |  | $ | 12,471 |   |  | $ | 123,449 |  
|                                                     |  |              |         |              |               |   |        |         |  |   |        |  
|Number of shares issued as
    consideration (000s) |  |              |        |              |               |   | 152    |         |  |   | 29     |   |  |   | 181     |  
|                                                     |  |              |         |              |               |   |        |         |  |   |        |  







|    |                                                                                                                                                                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(c) | During 2003, the Company acquired nine brokerages, all of which
    were accounted for using the purchase method of accounting.
    Accordingly, the results of operations and cash flows of the
    acquired companies have been included in the Companys
    consolidated results from their respective acquisition dates.





|                                |                                
|------------------------------- | -------------------------------
|ANNUAL REPORT December 31, 2005 | HUB INTERNATIONAL LIMITED    55



---



##### Table of Contents

The allocation of the purchase price, including goodwill and
other identifiable assets, and the cost of the acquired
brokerages in 2003 are summarized below:

|                                                     |  |         |        |  
|---------------------------------------------------- |  | ------- | ------ | -
|                                                     |  | Total   |       
|                                                     |  |         |       
|Acquisition Date                                     |  | Various |       
|Current assets                                       |  | $       | 4,298  |  
|Current liabilities                                  |  |         | (3,726 | )
|Property, equipment and other assets                 |  |         | 24     |  
|                                                     |  |         |       
|Net assets at fair
    value                         |  | $       | 596    |  
|                                                     |  |         |       
|Consideration                                        |  |         |        |  
|Cash                                                 |  | $       | 8,136  |  
|Common shares (at market value)                      |  |         | 538    |  
|                                                     |  |         |       
|                                                     |  | $       | 8,674  |  
|                                                     |  |         |       
|Goodwill                                             |  | $       | 6,389  |  
|Customer relationships                               |  |         | 1,352  |  
|Non-competition covenants                            |  |         | 337    |  
|                                                     |  |         |       
|                                                     |  | $       | 8,078  |  
|                                                     |  |         |       
|Number of shares issued as
    consideration (000s) |  |         | 32     |  
|                                                     |  |         |       





4.  Commitments and contingencies


|    |                                                                                                                                                                                                                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | The insurance industry in general, and certain of the
    Companys subsidiaries, have been the subject of scrutiny
    by various regulatory bodies, including state attorneys general
    and the departments of insurance for various states, with
    respect to certain contingent commission arrangements between
    insurance companies and brokers.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As previously reported, HUB Northeast formerly known as Kaye
    Insurance Associates, Inc., a subsidiary of the Company,
    received three subpoenas from the Office of the Attorney General
    of the State of New York seeking information regarding certain
    contingent agreements and other business practices. Since August
    2004, various other subsidiaries of Hub have received and
    responded to letters of inquiry and subpoenas from authorities
    in California, Connecticut, Texas, Illinois, Delaware,
    Pennsylvania, New Hampshire and Quebec. The Company retained
    external counsel to assist in responding to the New York
    Attorney Generals and other inquiries and, among other
    things, requested that such external counsel conduct an
    investigation of HUB Northeast and of our hubs to determine
    whether any current or former employee engaged in the practice
    of falsifying or inflating insurance quotes or other illegal
    practices. Such investigation having been concluded to date,
    management is unaware of any incidents of falsifying or
    inflating insurance quotes or other illegal practices. State
    attorneys general and insurance departments continue their
    investigations of various industry practices. The Company
    continues to review its practices in light of these
    investigations and resulting charges brought against other
    brokers.





|                               |                                
|------------------------------ | -------------------------------
|56   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005



---



##### Table of Contents

The Company has fully cooperated with the attorney general and
    department of insurance inquiries. While it is not possible to
    predict the outcome of these investigations, if contingent
    compensation agreements were to be restricted or no longer
    permitted, the Companys financial condition, results of
    operation and liquidity may be materially adversely affected.The Company was first named as a defendant in a federal class
    action lawsuit in October 2004. The lawsuit alleges that the
    defendants used the contingent commission structure to deprive
    policyholders of independent and unbiased brokerage
    services, as well as free and open competition in the market for
    insurance. A number of substantially similar federal class
    actions were filed against the Company and many other
    defendants. On February 17, 2005, the Federal Judicial
    Panel on Multidistrict Litigation transferred these and other
    class actions in which the Company was not named to the District
    of New Jersey. In August 2005 and February 2006, amended
    complaints were filed in the consolidated federal court
    proceedings pending in New Jersey and styled In re Insurance
    Brokerage Antitrust Litigation. The case has now been divided
    into two cases, one for employee benefits and the other for
    commercial insurance. Certain of our subsidiaries have been
    named as additional defendants. A handful of allegations
    specifically pertaining to the Company have been added, but
    remain vague. The judge in these actions has permitted limited
    discovery to take place which is continuing. The Company
    disputes the allegations made in these lawsuits and intends to
    vigorously defend these cases.In January, 2005 the Company and its affiliates were named as
    defendants in a class action filed in the Circuit Court of Cook
    County, Illinois. The named plaintiff is a Chicago law firm that
    obtained its professional liability insurance through the
    Chicago office of what is now HUB Midwest and claims that an
    undisclosed contingent commission was received with respect to
    its policy. The Company disputes the allegations of this lawsuit
    and is vigorously defending this case.The cost of defending against the lawsuits, and diversion of
    managements attention, may be significant and could have a
    material adverse effect on the Companys results of
    operations. In addition, an adverse finding in a regulatory
    investigation or a class action or similar lawsuit could result
    in a significant judgment or imposition of liability against the
    Company that could have a material adverse effect on the
    Companys financial condition, results of operation and
    liquidity.In the normal course of business, the Company is involved in
    various claims and legal proceedings relating to insurance
    placed by the Company and other contractual matters. Management
    does not believe that any such pending or threatened proceedings
    will have a material adverse effect on the Companys
    consolidated financial position or future results of operations.The Company has not recorded a liability at December 31,
    2005 and 2004 related to these matters.

(b)
    On July 1, 2004, the Company purchased all of the common
    shares of Satellite Acquisition Corporation (Satellite) a
    corporation formed by senior management at Talbot Financial
    Corporation (Talbot). In turn, Satellite purchased 100% of
    Talbot from Safeco Corporation. The Company is to purchase
    special shares of Satellite owned by the management of Talbot
    using a combination of both restricted and unrestricted common
    shares of the Company or cash. The first payment of
    $16.4 million was made in cash on September 1, 2005,
    based upon Talbots earnings for the 12 months ending
    December 31, 2004. The remaining payments will be made on
    March 31, 2006 and March 31, 2007 based upon
    Talbots earnings for the 12 month periods ending
    December 31, 2005 and 2006, respectively. The contingent
    payment to Talbot management is recorded by the Company as a
    charge to earnings over the period in which the payments are
    earned because it is a compensation based arrangement and
    specifically a performance award. The Company estimates that the
    aggregate value of compensation which will be recognized under
    this arrangement will be approximately $56 million, of
    which $28.7 million and $14.4 million were recognized
    in 2005 and 2004, respectively. At December 31, 2005,
    $26.7 million has been included in accounts payable and
    accrued liabilities.

In connection with the 2002 acquisition of Hooper Hayes and
    Associates, Inc., now a part of HUB California, the Company
    issued 196,000 shares (the Retractable Shares)
    that were deposited in escrow subject to release over a period
    of three years upon the satisfaction of certain performance
    targets. As of December 31, 2005, 196,000 shares had
    been released from escrow.



ANNUAL REPORT December 31, 2005
    HUB INTERNATIONAL LIMITED    57



---



##### Table of Contents

In connection with other various acquisitions completed through
    December 31, 2005, the Company may be obligated to pay
    contingent consideration up to a maximum sum of approximately
    $14.3 million in cash and $8.6 million in common
    shares of the Company based upon the acquired brokerages
    achieving certain targets. The contingent payments are payable
    on various dates through July, 2009 according to the terms and
    conditions of each purchase agreement. Any additional
    consideration will be recorded as an adjustment to goodwill once
    the contingency is resolved. In connection with contingent
    consideration earned as at December 31, 2005, the financial
    statements reflect a liability to pay cash of $0.5 million.

(c)
    In connection with the Companys executive share purchase
    plan, under certain circumstances, the Company may be obligated
    to purchase loans for officers, directors and employees from a
    Canadian chartered bank totaling $3,915 and $4,287 as of
    December 31, 2005 and 2004, respectively, to assist in
    purchasing common shares of the Company. The Company no longer
    makes loans to its executive officers and directors. As
    collateral, the employees have pledged 383,000 and 431,000
    common shares as of December 31, 2005 and 2004,
    respectively, which have a market value of $9,877 and $7,885 as
    of December 31, 2005 and 2004, respectively. The loans will
    mature during 2009 and 2010 and bear interest at a rate of prime
    plus 0.5%. The interest rate at December 31, 2005 was 5.5%.
    Interest on the loans in the amount of $197, $192 and $279 for
    the years ended December 31, 2005, 2004 and 2003,
    respectively, was paid by the Company and is included in cash
    compensation expense.(d)
    The Company is committed under lease agreements for office
    premises and computer equipment. At December 31, 2005,
    aggregate minimum rental commitments (net of expected sub-lease
    receipts) under operating leases are as follows:

|                    |  |   |         | 
|------------------- |  | - | ------- | 
|2006                |  | $ | 19,329  | 
|2007                |  |   | 17,352  | 
|2008                |  |   | 15,814  | 
|2009                |  |   | 13,755  | 
|2010                |  |   | 10,698  | 
|2011 and thereafter |  |   | 24,799  | 
|                    |  |   |        
|                    |  | $ | 101,747 | 
|                    |  |   |        



| |                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Rent expense for the years ended December 31, 2005, 2004,
    and 2003 amounted to $16,653, $13,998, and $11,503,
    respectively, net of sublease rental income of $1,392, $1,479
    and $1,282, respectively.



|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|e) | 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 such 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. The Company self insures for certain
    losses related to errors or omission claims, certain general
    insurance deductibles and a portion of its group medical
    insurance. The amounts in excess of self-insured levels are
    fully insured by third parties, subject to certain limitations
    and exclusions. Reserves for all self-insurance at
    December 31, 2005 were approximately $7.1 million and
    are included in accounts payable and accrued liabilities on the
    Companys consolidated balance sheet.

5.  Discontinued operations








|                               |                                
|------------------------------ | -------------------------------
|58   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005



---



##### Table of Contents

Summarized statement of earnings disclosure for the Discontinued
Business is as follows:

|                                                     |  |      |       |   |      |   |       | 
|---------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | 
|Year Ended December 31,                              |  | 2005 |       |   | 2004 |  
|                                                     |  |      |       |   |      |  
|Revenue                                              |  | $    | 6,900 |   |      | $ | 5,769 | 
|Net earnings before taxes                            |  | $    | 53    |   |      | $ | 511   | 
|Provision for income tax expense                     |  | $    | 82    |   |      | $ | 50    | 
|Net earnings (loss) from
    discontinued operations |  | $    | (29   | ) |      | $ | 461   | 



|                                         |  |      |        |   |      |   |       | 
|---------------------------------------- |  | ---- | ------ | - | ---- | - | ----- | 
|Year Ended December 31,                  |  | 2005 |        |   | 2004 |  
|                                         |  |      |        |   |      |  
|Total current assets                     |  | $    | 2,265  |   |      | $ | 3,720 | 
|Total assets                             |  | $    | 5,054  |   |      | $ | 6,498 | 
|Total current liabilities                |  | $    | 5,173  |   |      | $ | 5,122 | 
|Total liabilities                        |  | $    | 6,057  |   |      | $ | 6,180 | 
|Total shareholders equity
    (deficit) |  | $    | (1,003 | ) |      | $ | 318   | 



|                                                                |  |      |        |   |      |   |       |      |  |   |   | 
|--------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ----- | ---- |  | - | - | 
|Year Ended December 31,                                         |  | 2005 |        |   | 2004 |   |       | 2003
|                                                                |  |      |        |   |      |   |       |     
|Net cash flows provided by
    operating activities             |  | $    | 873    |   |      | $ | 1,548 |      |  | $ |  | 
|Net cash flows provided by (used
    in) investing activities   |  |      | 115    |   |      |   | (19   | )    |  |   |  | 
|Net cash flows used in financing
    activities                 |  |      | (1,359 | ) |      |   | (810  | )    |  |   |  | 
|                                                                |  |      |        |   |      |   |       |      | 
|Net cash flow provided by (used in)
    discontinued operations |  | $    | (371   | ) |      | $ | 719   |      |  | $ |  | 
|                                                                |  |      |        |   |      |   |       |      | 

6.  Accounts and other receivables




|                                             |  |              |         |   |      |   |         |  
|-------------------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | -
|                                             |  | December 31, |        
|                                             |  |              |        
|                                             |  | 2005         |         |   | 2004 |  
|                                             |  |              |         |   |      |  
|Client premiums receivable                   |  | $            | 153,883 |   |      | $ | 128,345 |  
|Commissions receivable                       |  |              | 69,736  |   |      |   | 31,565  |  
|Less: Allowance for doubtful
    accounts    |  |              | (1,931  | ) |      |   | (1,436  | )
|Less: Allowance for policy
    cancellations |  |              | (1,964  | ) |      |   | (1,876  | )
|                                             |  |              |         |   |      |  
|                                             |  |              | 219,724 |   |      |   | 156,598 |  
|Other receivables                            |  |              | 10,930  |   |      |   | 6,243   |  
|                                             |  |              |         |   |      |  
|                                             |  | $            | 230,654 |   |      | $ | 162,841 |  
|                                             |  |              |         |   |      |  



|                                                              |  |      |       |   |      |   |        |      |  |   |       |  
|------------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ------ | ---- |  | - | ----- | -
|                                                              |  | 2005 |       |   | 2004 |   |        | 2003 | 
|                                                              |  |      |       |   |      |   |        |      | 
|Balance, January 1                                            |  | $    | 1,436 |   |      | $ | 1,086  |      |  | $ | 714   |  
|Charged to net earnings before
    income taxes               |  |      | 750   |   |      |   | 664    |      |  |   | 1,057 |  
|Deductions of amounts previously
    charged to the provision |  |      | (533  | ) |      |   | (1,251 | )    |  |   | (810  | )
|Acquired through acquisitions                                 |  |      | 278   |   |      |   | 937    |      |  |   | 125   |  
|                                                              |  |      |       |   |      |   |        |      | 
|Balance, December 31                                          |  | $    | 1,931 |   |      | $ | 1,436  |      |  | $ | 1,086 |  
|                                                              |  |      |       |   |      |   |        |      | 







|                                |                                
|------------------------------- | -------------------------------
|ANNUAL REPORT December 31, 2005 | HUB INTERNATIONAL LIMITED    59



---



##### Table of Contents

7.  Intangible assets

As of December 31, 2005 and 2004 the gross carrying amount
and accumulated amortization of intangible assets other than
goodwill were as follows:

|                                   |                           |                         |         |         |                         |   |        |        |  |          |         |        |             |              |         |        |       |   |        |        |  |   |        |        | 
|---------------------------------- | ------------------------- | ----------------------- | ------- | ------- | ----------------------- | - | ------ | ------ |  | -------- | ------- | ------ | ----------- | ------------ | ------- | ------ | ----- | - | ------ | ------ |  | - | ------ | ------ | 
|                                   |                           | As of December 31, 2005 |         |         | As of December 31, 2004 |  
|                                   |                           |                         |         |         |                         |  
|                                   |                           | Gross                   |         |         |                         |   | Gross  |        |  |         
|                                   |                           | Carrying                |         |         | Accumulated             |   |        |        |  | Carrying |         |        | Accumulated |              |         |       
|                                   |                           | Amount                  |         |         | Amortization            |   |        | Total  |  |          | Amount  |        |             | Amortization |         |        | Total |  
|                                   |                           |                         |         |         |                         |   |        |        |  |          |         |        |             |              |         |        |       |  
|Definite life intangible assets:   |                           |                         |         |         |                         |   |        |        |  |          |         |        |             |              |         |        |       |   |        |        |  |   |        |       
|                                   | Customer relationships    |                         | $       | 116,878 |                         |   | $      | 19,109 |  |          | $       | 97,769 |             |              | $       | 95,982 |       |   | $      | 10,802 |  |   | $      | 85,180 | 
|                                   | Non-competition covenants |                         |         | 1,397   |                         |   |        | 679    |  |          |         | 718    |             |              |         | 791    |       |   |        | 448    |  |   |        | 343    | 
|                                   |                           |                         |         |         |                         |   |        |        |  |          |         |        |             |              |         |        |       |  
|                                   |                           |                         | 118,275 |         |                         |   | 19,788 |        |  |          | 98,487  |        |             |              | 96,773  |        |       |   | 11,250 |        |  |   | 85,523 |       
|                                   |                           |                         |         |         |                         |   |        |        |  |          |         |        |             |              |         |        |       |  
|Indefinite life intangible assets: |                           |                         |         |         |                         |   |        |        |  |          |         |        |             |              |         |        |       |   |        |        |  |   |        |       
|                                   | Non-competition covenants |                         |         | 6,520   |                         |   |        |       |  |          |         | 6,520  |             |              |         | 3,319  |       |   |        |       |  |   |        | 3,319  | 
|                                   |                           |                         |         |         |                         |   |        |        |  |          |         |        |             |              |         |        |       |  
|Total                              |                           | $                       | 124,795 |         |                         | $ | 19,788 |        |  | $        | 105,007 |        |             | $            | 100,092 |        |       | $ | 11,250 |        |  | $ | 88,842 |       
|                                   |                           |                         |         |         |                         |   |        |        |  |          |         |        |             |              |         |        |       |  





|                                   |                           |      |        |        |      |   |        |        | 
|---------------------------------- | ------------------------- | ---- | ------ | ------ | ---- | - | ------ | ------ | 
|                                   |                           | 2005 |        |        | 2004 |  
|                                   |                           |      |        |        |      |  
|Definite life intangible assets:   |                           |      |        |        |      |   |        |       
|                                   | Customer relationships    |      | $      | 20,971 |      |   | $      | 52,695 | 
|                                   | Non-competition covenants |      |        | 385    |      |   |        |       | 
|                                   |                           |      |        |        |      |  
|                                   |                           |      | 21,356 |        |      |   | 52,695 |       
|Indefinite life intangible assets: |                           |      |        |        |      |   |        |       
|                                   | Non-competition covenants |      |        | 3,413  |      |   |        | 1,451  | 
|                                   |                           |      |        |        |      |  
|Total                              |                           | $    | 24,769 |        |      | $ | 54,146 |       
|                                   |                           |      |        |        |      |  



|                                  |  |            |        |   |            |   |         |       |  |   |         |  
|--------------------------------- |  | ---------- | ------ | - | ---------- | - | ------- | ----- |  | - | ------- | -
|                                  |  | Operations |        |   | Operations |   |         |      
|                                  |  | in Canada  |        |   | in U.S.    |   |         | Total | 
|                                  |  |            |        |   |            |   |         |       | 
|Balance as of December 31, 2003   |  | $          | 92,079 |   |            | $ | 213,783 |       |  | $ | 305,862 |  
|Goodwill acquired during 2004     |  |            | 1,005  |   |            |   | 68,298  |       |  |   | 69,303  |  
|Goodwill disposed during 2004     |  |            | (4,604 | ) |            |   | (727    | )     |  |   | (5,331  | )
|Cumulative translation adjustment |  |            | 6,842  |   |            |   |        |       |  |   | 6,842   |  
|                                  |  |            |        |   |            |   |         |       | 
|Balance as of December 31, 2004   |  |            | 95,322 |   |            |   | 281,354 |       |  |   | 376,676 |  
|Goodwill acquired during 2005     |  |            | 2,681  |   |            |   | 41,256  |       |  |   | 43,937  |  
|Goodwill disposed during 2005     |  |            | (2,041 | ) |            |   | (497    | )     |  |   | (2,538  | )
|Cumulative translation adjustment |  |            | 3,083  |   |            |   |        |       |  |   | 3,083   |  
|                                  |  |            |        |   |            |   |         |       | 
|Balance as of December 31, 2005   |  | $          | 99,045 |   |            | $ | 322,113 |       |  | $ | 421,158 |  
|                                  |  |            |        |   |            |   |         |       | 





|                               |                                
|------------------------------ | -------------------------------
|60   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005



---



##### Table of Contents

For the years ended December 31, 2005, 2004 and 2003,
amortization has been comprised of the following:

|                          |  |      |       |  |      |   |       |      |  |   |       | 
|------------------------- |  | ---- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                          |  | 2005 |       |  | 2004 |   |       | 2003 | 
|                          |  |      |       |  |      |   |       |      | 
|Customer relationships    |  | $    | 8,147 |  |      | $ | 5,290 |      |  |   | 3,040 | 
|Non-competition covenants |  |      | 216   |  |      |   | 168   |      |  |   | 168   | 
|                          |  |      |       |  |      |   |       |      | 
|Total                     |  | $    | 8,363 |  |      | $ | 5,458 |      |  | $ | 3,208 | 
|                          |  |      |       |  |      |   |       |      | 



|                          |  |      |        |  |      |   |        |      |  |   |       |  |  |      |       |  |  |   |       | 
|------------------------- |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ----- |  |  | ---- | ----- |  |  | - | ----- | 
|Year Ended December 31,   |  | 2006 |        |  | 2007 |   |        | 2008 |  |   | 2009  |  |  | 2010 |      
|                          |  |      |        |  |      |   |        |      |  |   |       |  |  |      |      
|Customer relationships    |  | $    | 10,882 |  |      | $ | 10,091 |      |  | $ | 9,664 |  |  | $    | 9,414 |  |  | $ | 8,992 | 
|Non-competition covenants |  |      | 194    |  |      |   | 156    |      |  |   | 161   |  |  |      | 122   |  |  |   | 80    | 
|                          |  |      |        |  |      |   |        |      |  |   |       |  |  |      |      
|Total                     |  | $    | 11,076 |  |      | $ | 10,247 |      |  | $ | 9,825 |  |  | $    | 9,536 |  |  | $ | 9,072 | 
|                          |  |      |        |  |      |   |        |      |  |   |       |  |  |      |      

8.  Property and equipment


|                       |  |      |        |             |              |   |          |       |  |   |        |             |  |              |          |  |       |   |        |  |  |   |        | 
|---------------------- |  | ---- | ------ | ----------- | ------------ | - | -------- | ----- |  | - | ------ | ----------- |  | ------------ | -------- |  | ----- | - | ------ |  |  | - | ------ | 
|                       |  | 2005 |        |             | 2004         |  
|                       |  |      |        |             |              |  
|                       |  |      |        | Accumulated |              |   | Net Book |       |  |   |        | Accumulated |  |              | Net Book | 
|                       |  | Cost |        |             | Depreciation |   |          | Value |  |   | Cost   |             |  | Depreciation |          |  | Value |  
|                       |  |      |        |             |              |   |          |       |  |   |        |             |  |              |          |  |       |  
|Leasehold improvements |  | $    | 13,636 |             |              | $ | 6,663    |       |  | $ | 6,973  |             |  | $            | 12,496   |  |       | $ | 4,937  |  |  | $ | 7,559  | 
|Office equipment       |  |      | 22,103 |             |              |   | 12,395   |       |  |   | 9,708  |             |  |              | 18,959   |  |       |   | 10,268 |  |  |   | 8,691  | 
|Computer equipment     |  |      | 34,300 |             |              |   | 22,821   |       |  |   | 11,479 |             |  |              | 29,250   |  |       |   | 17,593 |  |  |   | 11,657 | 
|                       |  |      |        |             |              |   |          |       |  |   |        |             |  |              |          |  |       |  
|                       |  | $    | 70,039 |             |              | $ | 41,879   |       |  | $ | 28,160 |             |  | $            | 60,705   |  |       | $ | 32,798 |  |  | $ | 27,907 | 
|                       |  |      |        |             |              |   |          |       |  |   |        |             |  |              |          |  |       |  







9.  Accounts payable and accrued liabilities




|                                                   |  |              |         |  |      |   |         | 
|-------------------------------------------------- |  | ------------ | ------- |  | ---- | - | ------- | 
|                                                   |  | December 31, |        
|                                                   |  |              |        
|                                                   |  | 2005         |         |  | 2004 |  
|                                                   |  |              |         |  |      |  
|Insurance premiums payable                         |  | $            | 230,178 |  |      | $ | 198,901 | 
|Other accounts payable and accrued
    liabilities |  |              | 127,326 |  |      |   | 58,554  | 
|Compensation related to Talbot
    acquisition     |  |              | 26,670  |  |      |   | 14,388  | 
|                                                   |  |              |         |  |      |  
|                                                   |  | $            | 384,174 |  |      | $ | 271,843 | 
|                                                   |  |              |         |  |      |  





|                                |                                
|------------------------------- | -------------------------------
|ANNUAL REPORT December 31, 2005 | HUB INTERNATIONAL LIMITED    61



---



##### Table of Contents

10.  Debt

|                                                          |  |              |         |   |      |   |         |  
|--------------------------------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | -
|                                                          |  | December 31, |        
|                                                          |  |              |        
|Long-term Debt and Capital Leases                         |  | 2005         |         |   | 2004 |  
|                                                          |  |              |         |   |      |  
|Series A Senior Notes, with
    interest at 5.71%(1)(5)   |  | $            | 10,000  |   |      | $ | 10,000  |  
|Series B Senior Notes, with
    interest at 6.16%(1)(5)   |  |              | 55,000  |   |      |   | 55,000  |  
|Revolving U.S. Dollar LIBOR
    loan(2)(5)                |  |              | 65,000  |   |      |   | 65,000  |  
|Term loan, interest only at 10%,
    due February 2007(3) |  |              |        |   |      |   | 7,500   |  
|Term loan, variable interest, due
    December 2007       |  |              | 2,300   |   |      |   | 3,500   |  
|Various other unsecured notes
    payable and debt(4)     |  |              | 7,788   |   |      |   | 10,329  |  
|Capital leases(4)                                         |  |              | 185     |   |      |   | 468     |  
|                                                          |  |              |         |   |      |  
|Long-term debt and capital leases                         |  |              | 140,273 |   |      |   | 151,797 |  
|Less current portion                                      |  |              | (4,910  | ) |      |   | (5,195  | )
|                                                          |  |              |         |   |      |  
|                                                          |  | $            | 135,363 |   |      | $ | 146,602 |  
|                                                          |  |              |         |   |      |  



|                                    |  |   |         | 
|----------------------------------- |  | - | ------- | 
|For the Year Ended
    December 31, |  |   |         | 
|2006                                |  | $ | 4,910   | 
|2007                                |  |   | 3,415   | 
|2008                                |  |   | 4,779   | 
|2009                                |  |   | 79,836  | 
|2010                                |  |   | 14,333  | 
|2011 and thereafter                 |  |   | 33,000  | 
|                                    |  |   |        
|                                    |  | $ | 140,273 | 
|                                    |  |   |        






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Senior Notes  As at December 31, 2005 the
    Company had outstanding $65 million aggregate principal
    amount of unsecured senior notes issued June 10, 2002. The
    senior notes were issued in two series. Series A represents
    $10 million aggregate principal amount of 5.71% senior
    notes with interest due semi-annually, and principal of $3,333
    due annually, June 15, 2008 through June 15, 2010.
    Series B represents $55 million aggregate principal
    amount of 6.16% senior notes with interest due
    semi-annually, and principal of $11,000 due annually
    June 15, 2009 through June 15, 2013. The senior notes
    were sold on a private basis in the United States to
    institutional accredited investors. Net proceeds of the sale of
    the senior notes were used to pay down $50 million of the
    Companys revolving U.S. Dollar LIBOR Loan with the
    balance used for general corporate purposes and acquisitions.
    The Company incurred approximately $0.7 million in fees and
    expenses related to the offering of these notes, which were
    capitalized and are being amortized to expense over the term of
    the notes. At December 31, 2005, $65 million was
    outstanding under these senior notes, and the Company was in
    compliance with all financial covenants governing the senior
    notes.
|   
|    | On July 15, 2003, the Company entered into an interest rate
    swap agreement. The effect of the swap is to convert the fixed
    rate interest payments on the 5.71% senior notes and
    6.16% senior notes in amounts of $10 million and
    $55 million, respectively, to a floating rate resulting in
    a savings of approximately $0.2 million and
    $1.3 million for the years ended December 31, 2005 and
    2004, respectively. The Company accounts for the swap
    transaction using the synthetic instruments method under which
    the net interest expense on the swap and associated debt is
    reported in earnings as if it were a single synthetic financial
    instrument. As at December 31, 2005, the Company estimated
    the fair value of the swap to be $4.0 million, which is not
    recognized in these financial statements. Accordingly,
    $4.0 million is the estimated amount that the Company would
    need to pay to terminate the swap as of December 31, 2005.                                                                                                                                                                                                                                                                                                                                                                   
|   
|(2) | Revolving U.S. dollar LIBOR loan  This unsecured
    facility totals $75 million and bears interest at a
    floating rate of prime plus 1% or 112.5 basis points above
    LIBOR. LIBOR was 4.39% and 2.40% at December 31, 2005 and
    2004, respectively. The facility is available on a revolving
    basis for one year. The loan expires on April 19, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                





|                               |                                
|------------------------------ | -------------------------------
|62   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005



---



##### Table of Contents

However, if the revolving period is
    not extended, the Company may convert the outstanding balance
    under the facility to a three year non-revolving term loan
    repayable at the end of three years with an interest rate of
    137.5 basis points above the Canadian dollar interest swap
    rate which was 4.14% and 3.45% at December 31, 2005 and
    2004, respectively. An annual commitment fee of 20 basis
    points is assessed on the unused balance. Borrowings under this
    facility totaled $65 million at December 31, 2005 and
    2004, respectively. As of December 31, 2005, the Company
    was in compliance with all financial covenants governing this
    facility.(3)
    During the first quarter 2005, an
    early payment settlement was negotiated in respect of the
    Companys $7.5 million loan from an insurance carrier.
    The loan agreement provided for an incentive agreement whereby a
    credit could be earned to reduce interest payments (based on
    target premiums placed with the carrier) and principal amounts
    (based on target premiums placed with the carrier as well as
    loss ratios on those premiums). The early settlement
    negotiations resulted in the $7.5 million principal amount
    of the term loan being reduced to $3.0 million and interest
    payments for the first quarter 2005 being reduced to zero. The
    Company paid $3.0 million in March 2005 and recorded a gain
    on forgiveness of debt of $4.5 million for the first
    quarter 2005. Interest expense on this loan totalled
    $0.1 million and $0.8 million in 2005 and 2004 (which
    was subsequently reduced to zero).(4)
    Certain property and equipment have
    been pledged as collateral in amounts not less than the
    outstanding balance of these loans at December 31, 2005 and
    2004, respectively.(5)
    Certain U.S. denominated debt,
    including subordinated convertible debentures, has been
    designated as a hedge against the Companys investment in
    its U.S. operations. Therefore, translation gains or losses
    on the U.S. denominated debt are recorded in the cumulative
    translation account.Demand U.S. dollar base rate loan

The Company has an undrawn $10.3 million facility which
bears interest at the banks U.S. rate which was 7.75%
and 5.75% at December 31, 2005 and 2004, respectively, plus
50 basis points. Borrowings on the facility are repayable
on demand.

Subordinated convertible debentures

The Company has outstanding 8.5% subordinated convertible
debentures (the Fairfax notes) in the amount of
$35 million due June 28, 2007 held by certain
subsidiaries of Fairfax Financial Holdings Limited (Fairfax).
The Fairfax notes are convertible by the holders at any time
into the Companys common shares at Canadian
(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 have
owned approximately 31% of the Companys total outstanding
common shares as of December 31, 2005.

11.  Defined contribution plan

Substantially all officers and employees of the Company are
entitled to participate in a qualified retirement savings plan
(defined contribution plan). The cost to the Company was $3,581,
$2,662 and $1,781 for 2005, 2004 and 2003, respectively.

12.  Shareholders equity

Share capital

At December 31, 2005, 2004 and 2003 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 December 31,
2005, 2004 and 2003 there were an unlimited number of common
shares authorized, of which 30,952,000, 30,411,000 and
30,143,000 were issued and outstanding as at December 31,
2005, 2004 and 2003, respectively.





ANNUAL REPORT December 31, 2005
    HUB INTERNATIONAL LIMITED    63



---



##### Table of Contents



|                                                                               |  |               |        |   |        |   |         |  
|------------------------------------------------------------------------------ |  | ------------- | ------ | - | ------ | - | ------- | -
|                                                                               |  | Common Shares |       
|                                                                               |  | Outstanding   |       
|                                                                               |  |               |       
|                                                                               |  | (000s)       |        |   | Amount |  
|                                                                               |  |               |        |   |        |  
|Balance, December 31, 2002                                                     |  |               | 29,025 |   |        | $ | 235,197 |  
|Purchase of subsidiaries                                                       |  |               | 32     |   |        |   | 538     |  
|Repurchases of executive share
    purchase plan shares                        |  |               | (7     | ) |        |   | (66     | )
|Share issue costs, net of future
    tax asset                                 |  |               |       |   |        |   | (61     | )
|Shares issued for contingent
    consideration                                 |  |               | 1,246  |   |        |   | 14,041  |  
|Cancellation of shares                                                         |  |               | (8     | ) |        |   | (91     | )
|Restricted share units released                                                |  |               | 7      |   |        |   | 112     |  
|Stock options exercised                                                        |  |               | 1      |   |        |   | 14      |  
|Reclassification of executive share
    purchase plan loans                    |  |               | (153   | ) |        |   | (1,918  | )
|Release of put option liability                                                |  |               |       |   |        |   | 7,079   |  
|                                                                               |  |               |        |   |        |  
|Balance, December 31, 2003                                                     |  |               | 30,143 |   |        |   | 254,845 |  
|Shares issued                                                                  |  |               | 181    |   |        |   | 3,337   |  
|Executive share purchase plan share
    loan cancellations, net of repurchases |  |               | 1      |   |        |   | 33      |  
|Shares issued for contingent
    consideration                                 |  |               | 53     |   |        |   | 904     |  
|Cancellation of shares                                                         |  |               | (2     | ) |        |   | (26     | )
|Stock options exercised                                                        |  |               | 33     |   |        |   | 497     |  
|Restricted share units released                                                |  |               | 2      |   |        |   | 27      |  
|                                                                               |  |               |        |   |        |  
|Balance, December 31, 2004                                                     |  |               | 30,411 |   |        |   | 259,617 |  
|Shares issued, net of cancellation                                             |  |               | 41     |   |        |   | 2,358   |  
|Shares issued for contingent
    consideration                                 |  |               | 104    |   |        |   | 1,895   |  
|Stock options exercised                                                        |  |               | 318    |   |        |   | 4,810   |  
|Restricted share units released                                                |  |               | 61     |   |        |   | 1,274   |  
|Executive share purchase plan
    shares, net of cancellation                  |  |               | 17     |   |        |   | 245     |  
|                                                                               |  |               |        |   |        |  
|Balance, December 31, 2005                                                     |  |               | 30,952 |   |        | $ | 270,199 |  
|                                                                               |  |               |        |   |        |  

Issuable shares


|                                          |  |               |        |   |        |   |         |  
|----------------------------------------- |  | ------------- | ------ | - | ------ | - | ------- | -
|                                          |  | Common Shares |       
|                                          |  |               |       
|                                          |  | (000s)       |        |   | Amount |  
|                                          |  |               |        |   |        |  
|Balance, December 31, 2002                |  |               | 1,228  |   |        | $ | 13,743  |  
|Issued                                    |  |               | (1,228 | ) |        |   | (13,743 | )
|Issuable for contingent
    consideration |  |               | 43     |   |        |   | 721     |  
|                                          |  |               |        |   |        |  
|Balance, December 31, 2003                |  |               | 43     |   |        |   | 721     |  
|Issued                                    |  |               | (43    | ) |        |   | (721    | )
|                                          |  |               |        |   |        |  
|Balance, December 31, 2004                |  |               |       |   |        |   |        |  
|Issued                                    |  |               |       |   |        |   |        |  
|                                          |  |               |        |   |        |  
|Balance, December 31, 2005                |  |               |       |   |        | $ |        |  
|                                          |  |               |        |   |        |  





|                               |                                
|------------------------------ | -------------------------------
|64   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005



---



##### Table of Contents

Contributed surplus

|                                  |  |      |        |   |      |   |        |      |  |   |       | 
|--------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ----- | 
|                                  |  | 2005 |        |   | 2004 |   |        | 2003 | 
|                                  |  |      |        |   |      |   |        |      | 
|Balance at December 31            |  | $    | 12,681 |   |      | $ | 4,806  |      |  | $ | 1,234 | 
|Non-cash stock based compensation |  |      | 6,763  |   |      |   | 7,755  |      |  |   | 3,284 | 
|Shares cancelled                  |  |      | (1,523 | ) |      |   |       |      |  |   |      | 
|Other                             |  |      | (932   | ) |      |   | 120    |      |  |   | 288   | 
|                                  |  |      |        |   |      |   |        |      | 
|Balance at December 31            |  | $    | 16,989 |   |      | $ | 12,681 |      |  | $ | 4,806 | 
|                                  |  |      |        |   |      |   |        |      | 

Cumulative translation account


|                                                                        |  |      |        |   |      |   |        |      |  |   |        |  
|----------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                        |  | 2005 |        |   | 2004 |   |        | 2003 | 
|                                                                        |  |      |        |   |      |   |        |      | 
|Balance at December 31                                                  |  | $    | 26,983 |   |      | $ | 20,062 |      |  | $ | 2,185  |  
|Translation of self-sustaining
    foreign operations                   |  |      | 4,921  |   |      |   | 6,981  |      |  |   | 19,553 |  
|Translation of debt financing of
    self-sustaining foreign operations |  |      | (11    | ) |      |   | (60    | )    |  |   | (1,676 | )
|                                                                        |  |      |        |   |      |   |        |      | 
|Balance at December 31                                                  |  | $    | 31,893 |   |      | $ | 26,983 |      |  | $ | 20,062 |  
|                                                                        |  |      |        |   |      |   |        |      | 

13. Equity Incentive Plan




|                           |  |         |       |   |                  |   |       | 
|-------------------------- |  | ------- | ----- | - | ---------------- | - | ----- | 
|                           |  | Number  |       |   | Weighted-Average |  
|                           |  | (000s) |       |   | Exercise Price   |  
|                           |  |         |       |   |                  |  
|Balance, December 31, 2002 |  |         | 1,270 |   |                  | $ | 15.67 | 
|Granted                    |  |         | 268   |   |                  | $ | 13.79 | 
|Exercised                  |  |         | (1    | ) |                  | $ | 15.67 | 
|Forfeited                  |  |         | (39   | ) |                  | $ | 15.67 | 
|                           |  |         |       |   |                  |  
|Balance, December 31, 2003 |  |         | 1,498 |   |                  | $ | 15.64 | 
|Exercised                  |  |         | (33   | ) |                  | $ | 15.06 | 
|Forfeited                  |  |         | (9    | ) |                  | $ | 15.29 | 
|                           |  |         |       |   |                  |  
|Balance, December 31, 2004 |  |         | 1,456 |   |                  | $ | 15.34 | 
|Exercised                  |  |         | (317  | ) |                  | $ | 15.15 | 
|Forfeited                  |  |         | (2    | ) |                  | $ | 15.67 | 
|Expired                    |  |         | (1    | ) |                  | $ | 15.67 | 
|                           |  |         |       |   |                  |  
|Balance, December 31, 2005 |  |         | 1,136 |   |                  | $ | 15.39 | 
|                           |  |         |       |   |                  |  



|               |  |             |       |  |                  |  |            |             |  |  |             |  |  |                  |       |  |             |  |            |  |  |  |     | 
|-------------- |  | ----------- | ----- |  | ---------------- |  | ---------- | ----------- |  |  | ----------- |  |  | ---------------- | ----- |  | ----------- |  | ---------- |  |  |  | --- | 
|               |  | 2005        |       |  | 2004             | 
|               |  |             |       |  |                  | 
|               |  | Number      |       |  | Weighted-Average |  |            | Number      |  |  | Number      |  |  | Weighted-Average |       |  | Number      | 
|               |  | Outstanding |       |  | Remaining        |  |            | Exercisable |  |  | Outstanding |  |  | Remaining        |       |  | Exercisable | 
|Exercise Price |  | (000s)     |       |  | Contractual Life |  |            | (000s)     |  |  | (000s)     |  |  | Contractual Life |       |  | (000s)     | 
|               |  |             |       |  |                  |  |            |             |  |  |             |  |  |                  |       |  |             | 
|$15.67         |  |             | 969   |  |                  |  | 3.43 years |             |  |  | 969         |  |  |                  | 1,201 |  |             |  | 4.42 years |  |  |  | 812 | 
|$13.79         |  |             | 167   |  |                  |  | 4.00 years |             |  |  | 102         |  |  |                  | 255   |  |             |  | 5.16 years |  |  |  | 96  | 
|               |  |             |       |  |                  |  |            |             |  |  |             |  |  |                  |       |  |             | 
|               |  |             | 1,136 |  |                  |  | 3.52 years |             |  |  | 1,071       |  |  |                  | 1,456 |  |             |  | 4.55 years |  |  |  | 908 | 
|               |  |             |       |  |                  |  |            |             |  |  |             |  |  |                  |       |  |             | 





|                                |                                
|------------------------------- | -------------------------------
|ANNUAL REPORT December 31, 2005 | HUB INTERNATIONAL LIMITED    65



---



##### Table of Contents



|               |  |             |       |  |                  |  |            |             |  |  |     | 
|-------------- |  | ----------- | ----- |  | ---------------- |  | ---------- | ----------- |  |  | --- | 
|               |  | 2003        |      
|               |  |             |      
|               |  | Number      |       |  | Weighted-Average |  |            | Number      | 
|               |  | Outstanding |       |  | Remaining        |  |            | Exercisable | 
|Exercise price |  | (000s)     |       |  | Contractual Life |  |            | (000s)     | 
|               |  |             |       |  |                  |  |            |             | 
|$15.67         |  |             | 1,230 |  |                  |  | 5.43 years |             |  |  | 417 | 
|$13.79         |  |             | 268   |  |                  |  | 6.08 years |             |  |  | 6   | 
|               |  |             |       |  |                  |  |            |             | 
|               |  |             | 1,498 |  |                  |  | 5.55 years |             |  |  | 423 | 
|               |  |             |       |  |                  |  |            |             | 



|                        |  |      |          | 
|----------------------- |  | ---- | -------- | 
|                        |  | 2003 |         
|                        |  |      |         
|Dividend yield          |  |      | 2.0%     | 
|Expected volatility     |  |      | 40.1%    | 
|Risk free interest rate |  |      | 2.9%     | 
|Expected life           |  |      | 5  years | 

















|                               |                                
|------------------------------ | -------------------------------
|66   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005



---



##### Table of Contents

Other non-cash stock based compensation for the years ended
December 31, 2005, 2004 and 2003 is comprised of the
following:

|                                                      |  |      |       |  |      |   |       |      |  |   |       | 
|----------------------------------------------------- |  | ---- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                                                      |  | 2005 |       |  | 2004 |   |       | 2003 | 
|                                                      |  |      |       |  |      |   |       |      | 
|Stock options granted June 2002                       |  | $    | 843   |  |      | $ | 1,955 |      |  | $ | 1,899 | 
|Stock options granted February 2003                   |  |      | 366   |  |      |   | 445   |      |  |   | 410   | 
|Stock based compensation granted
    for 2003 bonuses |  |      | 3,264 |  |      |   | 2,368 |      |  |   | 1,405 | 
|Restricted share units                                |  |      | 2,545 |  |      |   | 1,609 |      |  |   | 1,087 | 
|Common shares for acquisition                         |  |      | 166   |  |      |   | 125   |      |  |   |      | 
|                                                      |  |      |       |  |      |   |       |      | 
|Total other non-cash stock based
    compensation     |  | $    | 7,184 |  |      | $ | 6,502 |      |  | $ | 4,801 | 
|                                                      |  |      |       |  |      |   |       |      | 



|                                              |  |      |        |  |      |   |        |      |  |   |   | 
|--------------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | - | 
|                                              |  | 2005 |        |  | 2004 |   |        | 2003
|                                              |  |      |        |  |      |   |        |     
|Cash compensation                             |  | $    | 9,800  |  |      | $ | 6,634  |      |  | $ |  | 
|Non-cash stock based compensation             |  |      | 18,916 |  |      |   | 7,754  |      |  |   |  | 
|                                              |  |      |        |  |      |   |        |      | 
|Total compensation for the Talbot
    earnout |  | $    | 28,716 |  |      | $ | 14,388 |      |  | $ |  | 
|                                              |  |      |        |  |      |   |        |      | 



|                                                      |  |      |       |  |      |   |       |      |  |   |       |  |  |      |       |  |      |   |       |  |  |   |     | 
|----------------------------------------------------- |  | ---- | ----- |  | ---- | - | ----- | ---- |  | - | ----- |  |  | ---- | ----- |  | ---- | - | ----- |  |  | - | --- | 
|Year ended December 31,                               |  | 2006 |       |  | 2007 |   |       | 2008 |  |   | 2009  |  |  | 2010 |       |  | 2011 |  
|                                                      |  |      |       |  |      |   |       |      |  |   |       |  |  |      |       |  |      |  
|Stock based compensation granted
    for 2003 bonuses |  | $    | 2,137 |  |      | $ | 2,046 |      |  | $ | 2,046 |  |  | $    | 2,046 |  |      | $ | 1,990 |  |  | $ |    | 
|Restricted share units                                |  |      | 2,911 |  |      |   | 2,945 |      |  |   | 2,944 |  |  |      | 1,048 |  |      |   | 423   |  |  |   | 106 | 
|Common shares for acquisitions                        |  |      | 18    |  |      |   | 5     |      |  |   |      |  |  |      |      |  |      |   |      |  |  |   |    | 
|                                                      |  |      |       |  |      |   |       |      |  |   |       |  |  |      |       |  |      |  
|Total other non-cash stock based
    compensation     |  | $    | 5,066 |  |      | $ | 4,996 |      |  | $ | 4,990 |  |  | $    | 3,094 |  |      | $ | 2,413 |  |  | $ | 106 | 
|                                                      |  |      |       |  |      |   |       |      |  |   |       |  |  |      |       |  |      |  



|                                              |  |      |        |  |      |   |       |      |  |      |   |      |  |      |   |  |  |   |   |  |  |   |   | 
|--------------------------------------------- |  | ---- | ------ |  | ---- | - | ----- | ---- |  | ---- | - | ---- |  | ---- | - |  |  | - | - |  |  | - | - | 
|Year ended December 31,                       |  | 2006 |        |  | 2007 |   |       | 2008 |  | 2009 |   | 2010 |  | 2011
|                                              |  |      |        |  |      |   |       |      |  |      |   |      |  |     
|Cash compensation                             |  | $    |       |  |      | $ |      |      |  | $    |  |      |  | $    |  |  |  | $ |  |  |  | $ |  | 
|Non-cash stock based compensation             |  |      | 10,888 |  |      |   | 1,854 |      |  |      |  |      |  |      |  |  |  |   |  |  |  |   |  | 
|                                              |  |      |        |  |      |   |       |      |  |      |   |      |  |      |   |  |  |  
|Total compensation for the Talbot
    earnout |  | $    | 10,888 |  |      | $ | 1,854 |      |  | $    |  |      |  | $    |  |  |  | $ |  |  |  | $ |  | 
|                                              |  |      |        |  |      |   |       |      |  |      |   |      |  |      |   |  |  |  



|    |                   
|--- | ------------------
|14. | Earnings per share







|                                |                                
|------------------------------- | -------------------------------
|ANNUAL REPORT December 31, 2005 | HUB INTERNATIONAL LIMITED    67



---



##### Table of Contents

method for options, restricted share units and the Talbot
contingently issuable shares. Earnings per common share are
calculated as follows:

|                                                                |                                                                                |      |        |       |      |   |        |       |  |   |        |       | 
|--------------------------------------------------------------- | ------------------------------------------------------------------------------ | ---- | ------ | ----- | ---- | - | ------ | ----- |  | - | ------ | ----- | 
|                                                                |                                                                                | 2005 |        |       | 2004 |   |        | 2003  | 
|                                                                |                                                                                |      |        |       |      |   |        |       | 
|Net earnings from continuing
    operations                     |                                                                                | $    | 25,747 |       |      | $ | 25,783 |       |  | $ | 36,509 |      
|Net earnings (loss) from
    discontinued operations            |                                                                                |      | (29    | )     |      |   | 461    |       |  |   |       |      
|                                                                |                                                                                |      |        |       |      |   |        |       | 
|Net earnings (numerator)                                        |                                                                                |      | 25,718 |       |      |   | 26,244 |       |  |   | 36,509 |      
|Effect of dilutive securities:                                  |                                                                                |      |        |       |      |   |        |       |  |   |        |      
|                                                                | Interest on 8.5% subordinated
    convertible debentures (net of income tax)   |      |        | 1,900 |      |   |        | 1,900 |  |   |        | 1,886 | 
|                                                                | Payment in lieu of dividends on
    restricted share units (net of income tax) |      |        | 102   |      |   |        | 95    |  |   |        | 111   | 
|                                                                |                                                                                |      |        |       |      |   |        |       | 
|Net earnings plus assumed
    conversions (numerator)           |                                                                                | $    | 27,720 |       |      | $ | 28,239 |       |  | $ | 38,506 |      
|                                                                |                                                                                |      |        |       |      |   |        |       | 
|Weighted average shares
    outstanding  Basic (denominator)   |                                                                                |      | 30,561 |       |      |   | 30,246 |       |  |   | 29,967 |      
|Effect of dilutive securities:                                  |                                                                                |      |        |       |      |   |        |       |  |   |        |      
|                                                                | 8.5% subordinated convertible
    debentures                                   |      |        | 2,517 |      |   |        | 2,705 |  |   |        | 3,210 | 
|                                                                | Stock options                                                                  |      |        | 1,136 |      |   |        | 1,294 |  |   |        | 147   | 
|                                                                | Restricted share units                                                         |      |        | 1,068 |      |   |        | 687   |  |   |        | 299   | 
|                                                                | Talbot earnout shares                                                          |      |        | 1,285 |      |   |        | 303   |  |   |        |      | 
|                                                                | Retractable shares                                                             |      |        | 52    |      |   |        | 70    |  |   |        | 133   | 
|                                                                | Issuable shares                                                                |      |        |      |      |   |        |      |  |   |        | 11    | 
|                                                                |                                                                                |      |        |       |      |   |        |       | 
|Weighted average shares
    outstanding  Diluted (denominator) |                                                                                |      | 36,619 |       |      |   | 35,305 |       |  |   | 33,767 |      
|                                                                |                                                                                |      |        |       |      |   |        |       | 
|Basic earnings per share                                        |                                                                                |      |        |       |      |   |        |       |  |   |        |      
|                                                                | Continuing operations                                                          |      | $      | 0.84  |      |   | $      | 0.85  |  |   | $      | 1.22  | 
|                                                                | Discontinued operations                                                        |      |        |      |      |   |        | 0.02  |  |   |        |      | 
|                                                                |                                                                                |      |        |       |      |   |        |       | 
|                                                                | Total operations                                                               |      | $      | 0.84  |      |   | $      | 0.87  |  |   | $      | 1.22  | 
|                                                                |                                                                                |      |        |       |      |   |        |       | 
|Diluted earnings per share                                      |                                                                                |      |        |       |      |   |        |       |  |   |        |      
|                                                                | Continuing operations                                                          |      | $      | 0.76  |      |   | $      | 0.79  |  |   | $      | 1.14  | 
|                                                                | Discontinued operations                                                        |      |        |      |      |   |        | 0.01  |  |   |        |      | 
|                                                                |                                                                                |      |        |       |      |   |        |       | 
|                                                                | Total operations                                                               |      | $      | 0.76  |      |   | $      | 0.80  |  |   | $      | 1.14  | 
|                                                                |                                                                                |      |        |       |      |   |        |       | 

15. Fair value of financial instruments






16. Income taxes








|                               |                                
|------------------------------ | -------------------------------
|68   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005



---



##### Table of Contents

The provision for income tax expense differs from the result
that would have been obtained by applying the combined Canadian
statutory federal and provincial income tax rate of 36.12%,
36.12% and 36.62% in 2005, 2004 and 2003, respectively, as
follows:

|                                                    |  |      |        |   |      |   |        |      |  |   |        |  
|--------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                    |  | 2005 |        |   | 2004 |   |        | 2003 | 
|                                                    |  |      |        |   |      |   |        |      | 
|Provision for tax at statutory rates                |  | $    | 20,482 |   |      | $ | 16,531 |      |  | $ | 20,270 |  
|Non-deductible stock based
    compensation expense |  |      | 11,012 |   |      |   | 6,044  |      |  |   |       |  
|Income earned outside of Canada                     |  |      | (1,215 | ) |      |   | (1,536 | )    |  |   | (1,688 | )
|Non-taxable life insurance proceeds                 |  |      |       |   |      |   |       |      |  |   | (366   | )
|Other                                               |  |      | 679    |   |      |   | (1,055 | )    |  |   | 626    |  
|                                                    |  |      |        |   |      |   |        |      | 
|Provision for tax                                   |  | $    | 30,958 |   |      | $ | 19,984 |      |  | $ | 18,842 |  
|                                                    |  |      |        |   |      |   |        |      | 



|                                    |                                     |      |   |         |      |  |   |         |  
|----------------------------------- | ----------------------------------- | ---- | - | ------- | ---- |  | - | ------- | -
|                                    |                                     | 2005 |   |         | 2004 | 
|                                    |                                     |      |   |         |      | 
|Future income tax assets            |                                     |      |   |         |      |  |   |        
|                                    | Current                             |      | $ | 4,971   |      |  | $ | 3,901   |  
|                                    | Long-term                           |      |   | 4,528   |      |  |   | 4,368   |  
|                                    |                                     |      |   |         |      | 
|                                    | Total future income tax assets      |      |   | 9,499   |      |  |   | 8,269   |  
|                                    |                                     |      |   |         |      | 
|Future income tax
    (liabilities) |                                     |      |   |         |      |  |   |        
|                                    | Current                             |      |   | (359    | )    |  |   | (34     | )
|                                    | Long-term                           |      |   | (17,277 | )    |  |   | (14,805 | )
|                                    |                                     |      |   |         |      | 
|                                    | Total future income tax liabilities |      |   | (17,636 | )    |  |   | (14,839 | )
|                                    |                                     |      |   |         |      | 
|                                    | Net future income tax liabilities   |      | $ | (8,137  | )    |  | $ | (6,570  | )
|                                    |                                     |      |   |         |      | 

|                                                        |  |      |         |   |      |   |         |  
|------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                        |  | 2005 |         |   | 2004 |  
|                                                        |  |      |         |   |      |  
|Non-deductible book reserves                            |  | $    | 5,136   |   |      | $ | 3,768   |  
|Non-cash stock based compensation                       |  |      | 5,193   |   |      |   | 3,268   |  
|Net operating loss carryforwards                        |  |      | 2,253   |   |      |   | 3,217   |  
|IPO costs                                               |  |      | 737     |   |      |   | 1,434   |  
|Goodwill and other intangible asset
    amortization    |  |      | (14,726 | ) |      |   | (10,876 | )
|Unrealized foreign currency gains
    on long-term debt |  |      | (4,739  | ) |      |   | (3,895  | )
|Other accrual adjustments                               |  |      | (743    | ) |      |   | (1,517  | )
|Property and equipment depreciation                     |  |      | (1,266  | ) |      |   | (1,379  | )
|Other                                                   |  |      | 620     |   |      |   | 376     |  
|Valuation allowance for future tax
    assets           |  |      | (602    | ) |      |   | (966    | )
|                                                        |  |      |         |   |      |  
|Net future income tax liabilities                       |  | $    | (8,137  | ) |      | $ | (6,570  | )
|                                                        |  |      |         |   |      |  









|                                |                                
|------------------------------- | -------------------------------
|ANNUAL REPORT December 31, 2005 | HUB INTERNATIONAL LIMITED    69



---



##### Table of Contents

17. Interest and income taxes paid

Interest and income taxes paid for the years ended
December 31, 2005, 2004 and 2003 were:

|                  |  |      |        |  |      |   |        |      |  |   |        | 
|----------------- |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                  |  | 2005 |        |  | 2004 |   |        | 2003 | 
|                  |  |      |        |  |      |   |        |      | 
|Interest paid     |  | $    | 10,094 |  |      | $ | 6,936  |      |  | $ | 5,731  | 
|Income taxes paid |  | $    | 30,015 |  |      | $ | 21,806 |      |  | $ | 21,007 | 

18. Segmented information






|                                                                       |  |        |         |   |      |   |         |              |  |   |         |   |  |      |         |   |              |   |         |   |  |   |         |  
|---------------------------------------------------------------------- |  | ------ | ------- | - | ---- | - | ------- | ------------ |  | - | ------- | - |  | ---- | ------- | - | ------------ | - | ------- | - |  | - | ------- | -
|                                                                       |  | 2005   |         |   | 2004 |  
|                                                                       |  |        |         |   |      |  
|                                                                       |  | Canada |         |   | U.S. |   |         | Consolidated |  |   | Canada  |   |  | U.S. |         |   | Consolidated |  
|                                                                       |  |        |         |   |      |   |         |              |  |   |         |   |  |      |         |   |              |  
|Revenue                                                                |  |        |         |   |      |   |         |              |  |   |         |   |  |      |         |   |              |   |         |   |  |   |         |  
|Brokerage                                                              |  | $      | 132,252 |   |      | $ | 310,700 |              |  | $ | 442,952 |   |  | $    | 121,753 |   |              | $ | 233,474 |   |  | $ | 355,227 |  
|Corporate                                                              |  |        | 21,066  |   |      |   | 15,278  |              |  |   | 36,344  |   |  |      | 14,037  |   |              |   | 10,711  |   |  |   | 24,748  |  
|Elimination of intra-segment revenue                                   |  |        | (21,032 | ) |      |   | (15,708 | )            |  | $ | (36,740 | ) |  |      | (14,011 | ) |              |   | (10,883 | ) |  |   | (24,894 | )
|                                                                       |  |        |         |   |      |   |         |              |  |   |         |   |  |      |         |   |              |  
|                                                                       |  | $      | 132,286 |   |      | $ | 310,270 |              |  | $ | 442,556 |   |  | $    | 121,779 |   |              | $ | 233,302 |   |  | $ | 355,081 |  
|                                                                       |  |        |         |   |      |   |         |              |  |   |         |   |  |      |         |   |              |  
|Net earnings (loss) from
    continuing operations before income taxes |  |        |         |   |      |   |         |              |  |   |         |   |  |      |         |   |              |   |         |   |  |   |         |  
|Brokerage                                                              |  | $      | 25,168  |   |      | $ | 60,484  |              |  | $ | 85,652  |   |  | $    | 24,705  |   |              | $ | 39,585  |   |  | $ | 64,290  |  
|Corporate                                                              |  |        | (13,720 | ) |      |   | (15,227 | )            |  |   | (28,947 | ) |  |      | (18,563 | ) |              |   | 40      |   |  |   | (18,523 | )
|                                                                       |  |        |         |   |      |   |         |              |  |   |         |   |  |      |         |   |              |  
|                                                                       |  | $      | 11,448  |   |      | $ | 45,257  |              |  | $ | 56,705  |   |  | $    | 6,142   |   |              | $ | 39,625  |   |  | $ | 45,767  |  
|                                                                       |  |        |         |   |      |   |         |              |  |   |         |   |  |      |         |   |              |  
|Income tax expense
    (benefit)  current                             |  |        |         |   |      |   |         |              |  |   |         |   |  |      |         |   |              |   |         |   |  |   |         |  
|Brokerage                                                              |  | $      | 9,104   |   |      | $ | 23,172  |              |  | $ | 32,276  |   |  | $    | 8,772   |   |              | $ | 15,578  |   |  | $ | 24,350  |  
|Corporate                                                              |  |        | 1,266   |   |      |   | (3,751  | )            |  |   | (2,485  | ) |  |      | (720    | ) |              |   | (3,846  | ) |  |   | (4,566  | )
|                                                                       |  |        |         |   |      |   |         |              |  |   |         |   |  |      |         |   |              |  
|                                                                       |  | $      | 10,370  |   |      | $ | 19,421  |              |  | $ | 29,791  |   |  | $    | 8,052   |   |              | $ | 11,732  |   |  | $ | 19,784  |  
|                                                                       |  |        |         |   |      |   |         |              |  |   |         |   |  |      |         |   |              |  
|Income tax expense
    (benefit)  future                              |  |        |         |   |      |   |         |              |  |   |         |   |  |      |         |   |              |   |         |   |  |   |         |  
|Brokerage                                                              |  | $      | 2       |   |      | $ | 1,601   |              |  | $ | 1,603   |   |  | $    | (252    | ) |              | $ | 1,174   |   |  | $ | 922     |  
|Corporate                                                              |  |        | (688    | ) |      |   | 252     |              |  |   | (436    | ) |  |      | (572    | ) |              |   | (150    | ) |  |   | (722    | )
|                                                                       |  |        |         |   |      |   |         |              |  |   |         |   |  |      |         |   |              |  
|                                                                       |  | $      | (686    | ) |      | $ | 1,853   |              |  | $ | 1,167   |   |  | $    | (824    | ) |              | $ | 1,024   |   |  | $ | 200     |  
|                                                                       |  |        |         |   |      |   |         |              |  |   |         |   |  |      |         |   |              |  
|Net earnings (loss) from
    continuing operations                     |  |        |         |   |      |   |         |              |  |   |         |   |  |      |         |   |              |   |         |   |  |   |         |  
|Brokerage                                                              |  | $      | 16,062  |   |      | $ | 35,711  |              |  | $ | 51,773  |   |  | $    | 16,185  |   |              | $ | 22,833  |   |  | $ | 39,018  |  
|Corporate                                                              |  |        | (14,298 | ) |      |   | (11,728 | )            |  |   | (26,026 | ) |  |      | (17,271 | ) |              |   | 4,036   |   |  |   | (13,235 | )
|                                                                       |  |        |         |   |      |   |         |              |  |   |         |   |  |      |         |   |              |  
|                                                                       |  | $      | 1,764   |   |      | $ | 23,983  |              |  | $ | 25,747  |   |  | $    | (1,086  | ) |              | $ | 26,869  |   |  | $ | 25,783  |  
|                                                                       |  |        |         |   |      |   |         |              |  |   |         |   |  |      |         |   |              |  





|                               |                                
|------------------------------ | -------------------------------
|70   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005



---



##### Table of Contents



|                                                     |  |        |         |   |      |   |         |              |  |   |           |   |  |      |         |   |              |   |         |  |  |   |         |  
|---------------------------------------------------- |  | ------ | ------- | - | ---- | - | ------- | ------------ |  | - | --------- | - |  | ---- | ------- | - | ------------ | - | ------- |  |  | - | ------- | -
|                                                     |  | 2005   |         |   | 2004 |  
|                                                     |  |        |         |   |      |  
|                                                     |  | Canada |         |   | U.S. |   |         | Consolidated |  |   | Canada    |   |  | U.S. |         |   | Consolidated |  
|                                                     |  |        |         |   |      |   |         |              |  |   |           |   |  |      |         |   |              |  
|Net earnings (loss) from
    discontinued operations |  |        |         |   |      |   |         |              |  |   |           |   |  |      |         |   |              |   |         |  |  |   |         |  
|Brokerage                                            |  | $      |        |   |      | $ | (29     | )            |  | $ | (29       | ) |  | $    |        |   |              | $ | 461     |  |  | $ | 461     |  
|Corporate                                            |  |        |        |   |      |   |        |              |  |   |          |   |  |      |        |   |              |   |        |  |  |   |        |  
|                                                     |  |        |         |   |      |   |         |              |  |   |           |   |  |      |         |   |              |  
|                                                     |  | $      |        |   |      | $ | (29     | )            |  | $ | (29       | ) |  | $    |        |   |              | $ | 461     |  |  | $ | 461     |  
|                                                     |  |        |         |   |      |   |         |              |  |   |           |   |  |      |         |   |              |  
|Net earnings (loss)                                  |  |        |         |   |      |   |         |              |  |   |           |   |  |      |         |   |              |   |         |  |  |   |         |  
|Brokerage                                            |  | $      | 16,062  |   |      | $ | 35,682  |              |  | $ | 51,744    |   |  | $    | 16,185  |   |              | $ | 23,294  |  |  | $ | 39,479  |  
|Corporate                                            |  |        | (14,298 | ) |      |   | (11,728 | )            |  |   | (26,026   | ) |  |      | (17,271 | ) |              |   | 4,036   |  |  |   | (13,235 | )
|                                                     |  |        |         |   |      |   |         |              |  |   |           |   |  |      |         |   |              |  
|                                                     |  | $      | 1,764   |   |      | $ | 23,954  |              |  | $ | 25,718    |   |  | $    | (1,086  | ) |              | $ | 27,330  |  |  | $ | 26,244  |  
|                                                     |  |        |         |   |      |   |         |              |  |   |           |   |  |      |         |   |              |  
|Identifiable assets                                  |  |        |         |   |      |   |         |              |  |   |           |   |  |      |         |   |              |   |         |  |  |   |         |  
|Brokerage                                            |  | $      | 177,900 |   |      | $ | 773,094 |              |  | $ | 950,994   |   |  | $    | 172,445 |   |              | $ | 624,171 |  |  | $ | 796,616 |  
|Corporate                                            |  |        | 41,095  |   |      |   | 9,264   |              |  |   | 50,359    |   |  |      | 43,769  |   |              |   | 17,150  |  |  |   | 60,919  |  
|                                                     |  |        |         |   |      |   |         |              |  |   |           |   |  |      |         |   |              |  
|                                                     |  | $      | 218,995 |   |      | $ | 782,358 |              |  | $ | 1,001,353 |   |  | $    | 216,214 |   |              | $ | 641,321 |  |  | $ | 857,535 |  
|                                                     |  |        |         |   |      |   |         |              |  |   |           |   |  |      |         |   |              |  
|Amortization of intangible
    assets                |  | $      | 149     |   |      | $ | 8,214   |              |  | $ | 8,363     |   |  | $    | 110     |   |              | $ | 5,348   |  |  | $ | 5,458   |  
|Additions to property and
    equipment              |  | $      | 3,175   |   |      | $ | 6,406   |              |  | $ | 9,581     |   |  | $    | 2,802   |   |              | $ | 8,373   |  |  | $ | 11,175  |  
|Depreciation                                         |  | $      | 2,903   |   |      | $ | 5,811   |              |  | $ | 8,714     |   |  | $    | 2,542   |   |              | $ | 4,700   |  |  | $ | 7,242   |  
|Interest income                                      |  | $      | 1,345   |   |      | $ | 2,266   |              |  | $ | 3,611     |   |  | $    | 931     |   |              | $ | 1,014   |  |  | $ | 1,945   |  
|Interest expense                                     |  | $      | 9,778   |   |      | $ | 878     |              |  | $ | 10,656    |   |  | $    | 6,680   |   |              | $ | 726     |  |  | $ | 7,406   |  





|                                |                                
|------------------------------- | -------------------------------
|ANNUAL REPORT December 31, 2005 | HUB INTERNATIONAL LIMITED    71



---



##### Table of Contents



|                                                   |  |        |         |   |      |   |         |              |  |   |         |  
|-------------------------------------------------- |  | ------ | ------- | - | ---- | - | ------- | ------------ |  | - | ------- | -
|                                                   |  | 2003   |        
|                                                   |  |        |        
|                                                   |  | Canada |         |   | U.S. |   |         | Consolidated | 
|                                                   |  |        |         |   |      |   |         |              | 
|Revenue                                            |  |        |         |   |      |   |         |              |  |   |         |  
|Brokerage                                          |  | $      | 109,238 |   |      | $ | 177,487 |              |  | $ | 286,725 |  
|Corporate                                          |  |        | 12,264  |   |      |   | 2,177   |              |  |   | 14,441  |  
|Elimination of intra-segment revenue               |  |        | (12,430 | ) |      |   | (2,377  | )            |  |   | (14,807 | )
|                                                   |  |        |         |   |      |   |         |              | 
|                                                   |  | $      | 109,072 |   |      | $ | 177,287 |              |  | $ | 286,359 |  
|                                                   |  |        |         |   |      |   |         |              | 
|Net earnings (loss) before
    income taxes        |  |        |         |   |      |   |         |              |  |   |         |  
|Brokerage                                          |  | $      | 17,601  |   |      | $ | 43,105  |              |  | $ | 60,706  |  
|Corporate                                          |  |        | (1,262  | ) |      |   | (4,093  | )            |  |   | (5,355  | )
|                                                   |  |        |         |   |      |   |         |              | 
|                                                   |  | $      | 16,339  |   |      | $ | 39,012  |              |  | $ | 55,351  |  
|                                                   |  |        |         |   |      |   |         |              | 
|Income tax expense
    (benefit)  current         |  |        |         |   |      |   |         |              |  |   |         |  
|Brokerage                                          |  | $      | 7,020   |   |      | $ | 14,302  |              |  | $ | 21,322  |  
|Corporate                                          |  |        | 224     |   |      |   | (4,624  | )            |  |   | (4,400  | )
|                                                   |  |        |         |   |      |   |         |              | 
|                                                   |  | $      | 7,244   |   |      | $ | 9,678   |              |  | $ | 16,922  |  
|                                                   |  |        |         |   |      |   |         |              | 
|Income tax expense
    (benefit)  future          |  |        |         |   |      |   |         |              |  |   |         |  
|Brokerage                                          |  | $      | (354    | ) |      | $ | 2,875   |              |  | $ | 2,521   |  
|Corporate                                          |  |        | (600    | ) |      |   | (1      | )            |  |   | (601    | )
|                                                   |  |        |         |   |      |   |         |              | 
|                                                   |  | $      | (954    | ) |      | $ | 2,874   |              |  | $ | 1,920   |  
|                                                   |  |        |         |   |      |   |         |              | 
|Net earnings (loss)                                |  |        |         |   |      |   |         |              |  |   |         |  
|Brokerage                                          |  | $      | 10,935  |   |      | $ | 25,928  |              |  | $ | 36,863  |  
|Corporate                                          |  |        | (886    | ) |      |   | 532     |              |  |   | (354    | )
|                                                   |  |        |         |   |      |   |         |              | 
|                                                   |  | $      | 10,049  |   |      | $ | 26,460  |              |  | $ | 36,509  |  
|                                                   |  |        |         |   |      |   |         |              | 
|Amortization of goodwill and
    intangible assets |  | $      | 75      |   |      | $ | 3,133   |              |  | $ | 3,208   |  
|Additions to property and
    equipment            |  | $      | 2,942   |   |      | $ | 5,145   |              |  | $ | 8,087   |  
|Depreciation                                       |  | $      | 2,350   |   |      | $ | 3,894   |              |  | $ | 6,244   |  
|Interest income                                    |  | $      | 914     |   |      | $ | 735     |              |  | $ | 1,649   |  
|Interest expense                                   |  | $      | 4,752   |   |      | $ | 439     |              |  | $ | 5,191   |  

19. Related party transactions




|                                            |  |      |        |  |      |   |        |      |  |   |        | 
|------------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                            |  | 2005 |        |  | 2004 |   |        | 2003 | 
|                                            |  |      |        |  |      |   |        |      | 
|Northbridge Financial Corporation           |  | $    | 29,415 |  |      | $ | 23,378 |      |  | $ | 18,504 | 
|Crum & Forster Holdings,
    Inc.           |  |      | 941    |  |      |   | 682    |      |  |   | 1,259  | 
|Fairfax Inc.                                |  |      | 585    |  |      |   | 3,638  |      |  |   | 8,411  | 
|                                            |  |      |        |  |      |   |        |      | 
|                                            |  |      | 30,941 |  |      |   | 27,698 |      |  |   | 28,174 | 
|Old Lyme Insurance Company, Ltd.
    (OLIC) |  |      | 6,017  |  |      |   | 2,113  |      |  |   |       | 
|                                            |  |      |        |  |      |   |        |      | 
|                                            |  | $    | 36,958 |  |      | $ | 29,811 |      |  | $ | 28,174 | 
|                                            |  |      |        |  |      |   |        |      | 







|                               |                                
|------------------------------ | -------------------------------
|72   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005



---



##### Table of Contents

continues to place insurance with OLIC. The compensation that
Hub earns from the business placed with OLIC and the fees it
earns from managing OLIC are substantially the same as if
Fairfax continued to own the company.

As of December 31, 2005 and 2004, subsidiaries of Fairfax
held the Fairfax notes, in the amount of $35,000.

During 2005, 2004 and 2003, the Company incurred expenses
related to rental of premises from related parties in the amount
of $2,831, $2,306 and $2,102, respectively. At December 31,
2005 and 2004, the Company also had accounts receivable due from
related parties in the amount of $2,191 and $2,613,
respectively, of which the majority were loans to employees to
enable them to purchase shares of the Company. Of these accounts
receivable, as of December 31, 2005 and 2004, $1,495 and
$1,793, respectively, were related to Company loans to employees
to purchase shares under the executive share purchase plan. The
loans will mature in June, 2011 and bear interest at a rate of
prime plus 0.5%. The interest rate at December 31, 2005 was
5.5%. As collateral, the employees have pledged 122,000 and
143,000 common shares as of December 31, 2005 and 2004,
respectively, which have a market value of $3,156 and $2,619 as
of December 31, 2005 and 2004, respectively.

20. Reconciliation to U.S. GAAP

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

Net earnings and comprehensive income

There were no differences between Canadian and U.S. GAAP
affecting net earnings, basic earnings per share and diluted
earnings per share for the years ended December 31, 2005
and 2004. The table below presents comprehensive income for the
years ended December 31, 2005, 2004 and 2003 and presents
the GAAP differences affecting net earnings, basic earnings per
share and diluted earnings per share for the year ended
December 31, 2003.

|                                                                                  |                                                                                        |      |        |       |      |   |        |       |  |   |        |        |  
|--------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------- | ---- | ------ | ----- | ---- | - | ------ | ----- |  | - | ------ | ------ | -
|                                                                                  |                                                                                        | 2005 |        |       | 2004 |   |        | 2003  | 
|                                                                                  |                                                                                        |      |        |       |      |   |        |       | 
|Net earnings from continuing
    operations for the year based on Canadian GAAP   |                                                                                        | $    | 25,747 |       |      | $ | 25,783 |       |  | $ | 36,509 |       
|Net earnings from discontinued
    operations for the year based on Canadian GAAP |                                                                                        |      | (29    | )     |      |   | 461    |       |  |   |       |       
|                                                                                  |                                                                                        |      |        |       |      |   |        |       | 
|Net earnings for the year based on
    Canadian GAAP                              |                                                                                        |      | 25,718 |       |      |   | 26,244 |       |  |   | 36,509 |       
|Cumulative effect of change in
    accounting policy for put options(1)           |                                                                                        |      |       |       |      |   |       |       |  |   | 335    |       
|Adjustment to put option
    liability(1)                                         |                                                                                        |      |       |       |      |   |       |       |  |   | (409   | )     
|                                                                                  |                                                                                        |      |        |       |      |   |        |       | 
|Net earnings for the year based on
    U.S. GAAP(2)                               |                                                                                        |      | 25,718 |       |      |   | 26,244 |       |  |   | 36,435 |       
|Other comprehensive income:(3)                                                    |                                                                                        |      |        |       |      |   |        |       |  |   |        |       
|                                                                                  | Unrealized gain (loss) net of tax
    of $68  2005, $(35)  2004,
    $(38)  2003    |      |        | (134  | )    |   |        | 55    |  |   |        | 62     |  
|                                                                                  | Reclassification adjustment, net of
    tax of $11  2005, $(2)  2004,
    $48  2003 |      |        | (19   | )    |   |        | 4     |  |   |        | (78    | )
|                                                                                  | Foreign currency translation
    adjustment                                            |      |        | 4,910 |      |   |        | 6,921 |  |   |        | 17,877 |  
|                                                                                  |                                                                                        |      |        |       |      |   |        |       | 
|Comprehensive income based on
    U.S. GAAP(3)                                    |                                                                                        | $    | 30,475 |       |      | $ | 33,224 |       |  | $ | 54,296 |       
|                                                                                  |                                                                                        |      |        |       |      |   |        |       | 
|Basic earnings per share based on
    U.S. GAAP                                   |                                                                                        | $    | 0.84   |       |      | $ | 0.87   |       |  | $ | 1.22   |       
|Diluted earnings per share based on
    U.S. GAAP                                 |                                                                                        | $    | 0.76   |       |      | $ | 0.80   |       |  | $ | 1.14   |       





|                                |                                
|------------------------------- | -------------------------------
|ANNUAL REPORT December 31, 2005 | HUB INTERNATIONAL LIMITED    73



---



##### Table of Contents

Shareholders equity

The table below sets out the differences between Canadian GAAP
and U.S. GAAP that affect shareholders equity at
December 31, 2005, 2004 and 2003:

|                                                |                                                                                 |      |         |   |      |   |         |      |  |   |         |    | 
|----------------------------------------------- | ------------------------------------------------------------------------------- | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -- | 
|                                                |                                                                                 | 2005 |         |   | 2004 |   |         | 2003 | 
|                                                |                                                                                 |      |         |   |      |   |         |      | 
|Shareholders equity based on
    Canadian GAAP |                                                                                 | $    | 419,926 |   |      | $ | 381,783 |      |  | $ | 342,790 |   
|Adjustment to investment held for
    sale(4)   |                                                                                 |      | (1,716  | ) |      |   | (1,716  | )    |  |   | (1,716  | ) 
|Accumulated other comprehensive
    income:     |                                                                                 |      |         |   |      |   |         |      |  |   |         |   
|                                                | Unrealized gains, net of tax of
    $(2)  2005, $(99)  2004, $(56) 
    2003 |      |         | 4 |      |   |         | 157  |  |   |         | 90 | 
|                                                |                                                                                 |      |         |   |      |   |         |      | 
|Shareholders equity based on
    U.S. GAAP(3)  |                                                                                 | $    | 418,214 |   |      | $ | 380,224 |      |  | $ | 341,164 |   
|                                                |                                                                                 |      |         |   |      |   |         |      | 








|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Under Canadian GAAP, the fair value of the put options
    (determined using the Black-Scholes model) issued in connection
    with certain 2001 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 date are
    included in earnings. Under U.S. GAAP prior to July 1,
    2003, the fair value of the share consideration and the attached
    put options was initially recorded in equity and the redemption
    value of the shares to which the put options are attached was
    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. On July 1, 2003, the
    Company adopted Statement of Financial Accounting Standards
    (SFAS) No. 150, Accounting for Certain Financial
    Instruments with Characteristics of both Liabilities and Equity.
    This Statement requires that an issuer classify financial
    instruments meeting certain criteria as liabilities (or assets
    in some circumstances) rather than equity. As a result of the
    adoption of this new standard, the Company changed its
    accounting policy with respect to the financial instruments
    issued in connection with certain 2001 acquisitions. Effective
    July 1, 2003, the Company remeasured the fair value of the
    put options (using the Black-Scholes model) and classified this
    amount as liability. Amounts previously classified as mezzanine
    equity were reclassified as shareholders equity. The
    difference between the estimated fair value of the put options
    as at July 1, 2003 and May 31, 2001 was reported as a
    cumulative adjustment to net earnings under U.S. GAAP.
    Comparative financial statements were not restated.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Under U.S. GAAP, changes in the estimated fair value of the
    put options are included in earnings.                                                                                                                                                                                                                                                                                                                                                                                          
|
| | Also under U.S. GAAP, the fair value of the put options at
    the date of issuance was also recorded as a debit and credit 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 was recognized using the
    straight-line method over the period from the issue date to the
    exercise date.
|
| | As part of the negotiations of contingent consideration the
    former owners of certain 2001 acquisitions agreed to relinquish
    their rights to put options on 730,000 common shares at
    December 31, 2003 and on 1,423,000 common shares at
    December 31, 2002. Accordingly at December 31, 2005
    and 2004 no put options were outstanding on the Companys
    common shares.                                                                                                   



|    |                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The condensed consolidated statements of earnings and cash flows
    for the years ended December 31, 2005 and 2004 were the
    same under Canadian and U.S. GAAP but differ for the year
    ended December 31, 2003.





|                               |                                
|------------------------------ | -------------------------------
|74   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005



---



##### Table of Contents

The condensed consolidated balance
    sheets as at December 31, 2005 and 2004, under
    U.S. GAAP are as follows:

|                                                                 |  |      |         |   |      |   |         |      |  |   |         |  
|---------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                 |  | 2005 |         |   | 2004 |   |         | 2003 | 
|                                                                 |  |      |         |   |      |   |         |      | 
|Condensed consolidated
    statements of earnings:               |  |      |         |   |      |   |         |      |  |   |         |  
|Revenue                                                          |  | $    | 442,556 |   |      | $ | 355,081 |      |  | $ | 286,359 |  
|Net earnings from continuing
    operations before income taxes  |  |      | 56,705  |   |      |   | 45,767  |      |  |   | 55,376  |  
|Net earnings from continuing
    operations                      |  |      | 25,747  |   |      |   | 25,783  |      |  |   | 36,435  |  
|Net earnings from discontinued
    operations                    |  |      | (29     | ) |      |   | 461     |      |  |   |        |  
|                                                                 |  |      |         |   |      |   |         |      | 
|Net earnings                                                     |  | $    | 25,718  |   |      | $ | 26,244  |      |  | $ | 36,435  |  
|                                                                 |  |      |         |   |      |   |         |      | 
|Condensed consolidated
    statements of cash flows:             |  |      |         |   |      |   |         |      |  |   |         |  
|Cash provided by operating
    activities                        |  | $    | 46,013  |   |      | $ | 57,969  |      |  | $ | 54,739  |  
|Cash (used in) investing activities                              |  | $    | (63,906 | ) |      | $ | (93,300 | )    |  | $ | (20,146 | )
|Cash provided by financing
    activities                        |  | $    | (11,725 | ) |      | $ | 48,073  |      |  | $ | 4,553   |  
|Effect of exchange rate changes in
    cash and cash equivalents |  | $    | 1,532   |   |      | $ | 3,410   |      |  | $ | 2,264   |  
|Condensed consolidated balance
    sheets:                       |  |      |         |   |      |   |         |      |  |   |         |  
|Total current assets                                             |  | $    | 431,529 |   |      | $ | 348,707 |      |  |   |         |  
|Total assets(5)                                                  |  | $    | 995,753 |   |      | $ | 853,753 |      |  |   |         |  
|Total current liabilities                                        |  | $    | 393,787 |   |      | $ | 279,345 |      |  |   |         |  
|Total liabilities(5)                                             |  | $    | 577,539 |   |      | $ | 473,529 |      |  |   |         |  
|Total shareholders equity                                       |  | $    | 418,214 |   |      | $ | 380,224 |      |  |   |         |  



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Under U.S. GAAP, comprehensive income is measured in
    accordance with SFAS No. 130, Reporting Comprehensive
    Income. 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 (arising from a temporary decline in
    value) on 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.
|   
|(4) | Under Canadian GAAP, investments held for sale are recorded at
    cost. No further adjustments are made to the carrying value of
    the investment until it is sold. Under U.S. GAAP
    investments held for sale are recorded at cost and adjusted to
    fair value until sold. The adjustment of $1,716 reflects the
    difference in accounting for investments held for sale and
    subsequently sold by the company under Canadian vs.
    U.S. GAAP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(5) | Under Canadian GAAP, the Company accounts for the interest rate
    swap transaction which converted fixed rate interest payments of
    5.71% and 6.16% on the Senior Notes of $10 million and
    $55 million, respectively, using the synthetic instruments
    method. Under this method, the Company reports in earnings the
    net interest expense on the swap and associated debt as if it
    were a single synthetic financial instrument. The fair value of
    the swap, estimated at $4.0 million, is not recognized in
    the Companys Canadian GAAP financial statements. Under
    U.S. GAAP, the Company has designated the swap transaction
    of a hedge of changes in the fair value of its fixed rate debt
    caused by changes in interest rates. Under SFAS 133,
    Accounting for Derivative Instruments and Hedging Activities,
    the Company records the swap at its fair value. Changes in fair
    value of the settlement of the swap are reported in earnings.            

Effects of New Accounting Pronouncements








|                                |                                
|------------------------------- | -------------------------------
|ANNUAL REPORT December 31, 2005 | HUB INTERNATIONAL LIMITED    75



---



##### Table of Contents

transactions be recognized in the financial statements,
establishes fair value as the measurement objective and requires
entities to apply a fair-value-based measurement method in
accounting for share-based payment transactions. The Company
currently recognizes the fair value of stock based compensation
as an expense over the period in which entitlement to the
compensation vests. SFAS No. 123 (R) also
requires the benefits of tax deductions in excess of
compensation amounts recognized for book purposes, to be
reported as a financing cash flow rather than as an operating
cash flow as required under current rules. This requirement will
reduce net operating cash flows and increase net financing cash
flows in periods after adoption. The Company will adopt
SFAS No. 123 (R) on its effective date, which is
January 1, 2006.



21.
    Quarterly Data (unaudited)

|                                              |                             |         |         |      |         |   |         |         |  |   |         |       |   |      |         |      |  |   |         |      | 
|--------------------------------------------- | --------------------------- | ------- | ------- | ---- | ------- | - | ------- | ------- |  | - | ------- | ----- | - | ---- | ------- | ---- |  | - | ------- | ---- | 
|                                              |                             | First   |         |      | Second  |   |         | Third   |  |   | Fourth  |       |   | Full |        
|                                              |                             | Quarter |         |      | Quarter |   |         | Quarter |  |   | Quarter |       |   | Year |        
|                                              |                             |         |         |      |         |   |         |         |  |   |         |       |   |      |        
|Year Ended December 31,
    2005              |                             |         |         |      |         |   |         |         |  |   |         |       |   |      |         |      |  |   |         |     
|Revenue                                       |                             | $       | 119,181 |      |         | $ | 111,014 |         |  | $ | 98,283  |       |   | $    | 114,078 |      |  | $ | 442,556 |     
|Net earnings from continuing
    operations   |                             |         | 16,108  |      |         |   | 4,164   |         |  |   | (396    | )     |   |      | 5,871   |      |  |   | 25,747  |     
|Net earnings from discontinued
    operations |                             |         | 372     |      |         |   | 104     |         |  |   | (345    | )     |   |      | (160    | )    |  |   | (29     | )   
|                                              |                             |         |         |      |         |   |         |         |  |   |         |       |   |      |        
|Net earnings                                  |                             | $       | 16,480  |      |         | $ | 4,268   |         |  | $ | (741    | )     |   | $    | 5,711   |      |  | $ | 25,718  |     
|                                              |                             |         |         |      |         |   |         |         |  |   |         |       |   |      |        
|Basic earnings per
    share                  |                             |         |         |      |         |   |         |         |  |   |         |       |   |      |         |      |  |   |         |     
|                                              | Continuing operations       |         | $       | 0.53 |         |   | $       | 0.14    |  |   | $       | (0.01 | ) |      | $       | 0.19 |  |   | $       | 0.84 | 
|                                              | Discontinued
    operations |         |         | 0.01 |         |   |         |        |  |   |         | (0.01 | ) |      |         |     |  |   |         |     | 
|                                              |                             |         |         |      |         |   |         |         |  |   |         |       |   |      |        
|Total operations                              |                             | $       | 0.54    |      |         | $ | 0.14    |         |  | $ | (0.02   | )     |   | $    | 0.19    |      |  | $ | 0.84    |     
|                                              |                             |         |         |      |         |   |         |         |  |   |         |       |   |      |        
|Diluted earnings per
    share                |                             |         |         |      |         |   |         |         |  |   |         |       |   |      |         |      |  |   |         |     
|                                              | Continuing operations       |         | $       | 0.46 |         |   | $       | 0.12    |  |   | $       | (0.01 | ) |      | $       | 0.17 |  |   | $       | 0.76 | 
|                                              | Discontinued
    operations |         |         | 0.01 |         |   |         |        |  |   |         | (0.01 | ) |      |         |     |  |   |         |     | 
|                                              |                             |         |         |      |         |   |         |         |  |   |         |       |   |      |        
|Total operations                              |                             | $       | 0.47    |      |         | $ | 0.12    |         |  | $ | (0.02   | )     |   | $    | 0.17    |      |  | $ | 0.76    |     
|                                              |                             |         |         |      |         |   |         |         |  |   |         |       |   |      |        
|Year Ended December 31, 2004                  |                             |         |         |      |         |   |         |         |  |   |         |       |   |      |         |      |  |   |         |     
|Revenue                                       |                             | $       | 79,349  |      |         | $ | 82,231  |         |  | $ | 92,026  |       |   | $    | 101,475 |      |  | $ | 355,081 |     
|Net earnings from continuing
    operations   |                             |         | 9,623   |      |         |   | 11,591  |         |  |   | 1,205   |       |   |      | 3,364   |      |  |   | 25,783  |     
|Net earnings from discontinued
    operations |                             |         |        |      |         |   |        |         |  |   | (59     | )     |   |      | 520     |      |  |   | 461     |     
|                                              |                             |         |         |      |         |   |         |         |  |   |         |       |   |      |        
|Net earnings                                  |                             | $       | 9,623   |      |         | $ | 11,591  |         |  | $ | 1,146   |       |   | $    | 3,884   |      |  | $ | 26,244  |     
|                                              |                             |         |         |      |         |   |         |         |  |   |         |       |   |      |        
|Basic earnings per share                      |                             |         |         |      |         |   |         |         |  |   |         |       |   |      |         |      |  |   |         |     
|                                              | Continuing operations       |         | $       | 0.32 |         |   | $       | 0.38    |  |   | $       | 0.04  |   |      | $       | 0.11 |  |   | $       | 0.85 | 
|                                              | Discontinued operations     |         |         |     |         |   |         |        |  |   |         |      |   |      |         | 0.02 |  |   |         | 0.02 | 
|                                              |                             |         |         |      |         |   |         |         |  |   |         |       |   |      |        
|Total operations                              |                             | $       | 0.32    |      |         | $ | 0.38    |         |  | $ | 0.04    |       |   | $    | 0.13    |      |  | $ | 0.87    |     
|                                              |                             |         |         |      |         |   |         |         |  |   |         |       |   |      |        
|Diluted earnings per share                    |                             |         |         |      |         |   |         |         |  |   |         |       |   |      |         |      |  |   |         |     
|                                              | Continuing operations       |         | $       | 0.29 |         |   | $       | 0.35    |  |   | $       | 0.04  |   |      | $       | 0.10 |  |   | $       | 0.79 | 
|                                              | Discontinued operations     |         |         |     |         |   |         |        |  |   |         |      |   |      |         | 0.02 |  |   |         | 0.01 | 
|                                              |                             |         |         |      |         |   |         |         |  |   |         |       |   |      |        
|Total operations                              |                             | $       | 0.29    |      |         | $ | 0.35    |         |  | $ | 0.04    |       |   | $    | 0.12    |      |  | $ | 0.80    |     
|                                              |                             |         |         |      |         |   |         |         |  |   |         |       |   |      |        



|    |                  
|--- | -----------------
|22. | Subsequent events

|    |                                                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | On March 1, 2006 the Company announced that it has signed a
    definitive agreement to purchase three large insurance
    brokerages, based in Massachusetts and Pennsylvania, from
    subsidiaries of Citizens Financial Group, Inc. (CFG). The
    transaction is expected to close in April, 2006. The purchase
    price is expected to be





|                               |                                
|------------------------------ | -------------------------------
|76   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005



---



##### Table of Contents

approximately $80 million in
    cash as well as an earnout in cash and common shares of the
    Company based on future performance. The earnout will be at
    least $3 million.(b)
    Subsequent to December 31,
    2005, the Company secured a commitment for a new
    $75 million non-revolving credit facility to have terms
    similar to our current $75 million revolving
    U.S. dollar Libor loan. These funds will be available for
    the acquisition of CFGs insurance brokerage subsidiaries.



ANNUAL REPORT December 31, 2005
    HUB INTERNATIONAL LIMITED    77



---



##### Table of Contents

Item 9.
    Changes in and Disagreements with Accountants on Accounting
    and Financial DisclosureNone.







Item 9A.
    Controls and ProceduresEvaluation of Disclosure Controls and Procedures

Under SEC rules, we are required to maintain disclosure controls
and procedures designed to ensure that information required to
be disclosed in the reports that we file or submit under the
Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the
SECs rules and forms.

Our Chief Executive Officer and Chief Financial Officer
conducted an evaluation of our disclosure controls and
procedures, as such term is defined under
Rule 13a-15(e) and
15d-15(e) promulgated
under the Securities Exchange Act of 1934, as amended (the
Exchange Act) as of December 31, 2005 (the Evaluation Date)
based on the evaluation of these controls and procedures
required by
Rule 13a-15-6 of
the Exchange Act. Based on that evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that as of the
Evaluation Date, our disclosure controls and procedures were
effective in timely alerting them to material information
relating to us required to be disclosed in our reports filed or
submitted under the Exchange Act. Notwithstanding the foregoing,
there can be no assurance that our disclosure controls and
procedures will detect or uncover all failures within our
company to disclose all material information otherwise required
to be set forth in our periodic reports.

Managements Annual Report on Internal Control Over
Financial Reporting

Managements Annual Report on Internal Control over
Financial Reporting and the Report of Independent Public
Accounting Firm thereon are set forth in Part II,
Item 8 of this Annual Report on
Form 10-K and are
included herein by reference.

Changes in Internal Control over Financial Reporting

There have been no changes in the Hubs internal control
over financial reporting during the fourth quarter of 2005 that
have materially affected, or are reasonably likely to materially
affect, Hubs internal control over financial reporting.





Item 9B.  Other Information

Not applicable.





PART III







Item 10.
    Directors and Executive Officers of the RegistrantInformation regarding directors, nominees for directors and
executive officers is included under the caption entitled
Election of Directors and Management in
the 2006 Proxy Statement and is incorporated herein by reference.





Item 11.  Executive Compensation

Information regarding executive compensation of directors and
executive officers is included in the 2006 Proxy Statement under
the caption entitled Executive Compensation and Related
Information and is incorporated herein by reference.





Item 12.  Securities Ownership of Certain
Beneficial Owners and Management, and Related Stockholder
Matters

Information regarding beneficial ownership of the common shares
by certain beneficial owners and by management is included under
the caption entitled Securities Ownership of Management
and Certain Beneficial Owners in the 2006 Proxy Statement
and is incorporated herein by reference.





78   HUB INTERNATIONAL LIMITED
    ANNUAL REPORT December 31, 2005



---



##### Table of Contents

Item 13.  Certain Relationships and Related
Transactions

Information regarding certain relationships and related
transactions is included under the caption entitled
Certain Relationships and Related Transactions in
the 2006 Proxy Statement and is incorporated herein by reference.





Item 14. Principal Accountant Fees and Services

Information regarding principal accountant fees and services is
included under the caption entitled Principal Accountant
Fees and Services in the 2006 Proxy Statement and is
incorporated herein by reference.





PART IV





Item 15. Exhibits and Financial Statements
Schedules

(a)(1) Financial Statements

Reference is made to the information set forth in Part II,
Item 8 of this report, which information is incorporated
herein by reference.

(a)(2) Financial Statement Schedules

Not applicable

(a)(3) Exhibits

The exhibits to this report are listed in (b) below. Each
exhibit listed therein which constitutes a management contract
or compensatory plan or arrangement is identified with the
symbol (*).

(b) Exhibits

|        |       |                        |  |                                                                                                                                                                                                                                                                                                                                                                           
|------- | ----- | ---------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                       
|No.     |       | Description of Exhibit
|        |       |                       
|        | 2.1   |                        |  | Stock Purchase Agreement by and
    among Hub U.S. Holdings, Inc. and Fifth Third Financial
    Corp., dated December 29, 2002 (incorporated by reference
    to the registrants Current Report on Form 8-K filed
    January 7, 2003).                                                                                                                                  
|        | 2.2   |                        |  | Stock Purchase Agreement by and
    among Satellite Acquisition Corporation, Safeco Corporations and
    General America Corporation as the Sole shareholder of Talbot
    Financial Corporation, dated March 15, 2004 (incorporated
    by reference to the registrants Current Report on
    Form 8-K filed July 7, 2004).                                             
|        | 2.3   |                        |  | Subscription Agreement by and among
    Hub U.S. Holdings, Inc., Satellite Acquisition Corporation,
    Randall Talbot, David Weymouth, Roy Taylor and TalMan, LLC,
    dated March 15, 2004 (incorporated by reference to the
    registrants Current Report on Form 8-K filed
    July 7, 2004).                                                                       
|        | 2.4   |                        |  | Shareholder Agreement by and among
    Hub U.S. Holdings, Inc., Hub International Limited, TalMan,
    LLC, and Satellite Acquisition Corporation, dated July 1,
    2004 (incorporated by reference to the registrants Current
    Report on Form 8-K filed July 7, 2004).                                                                                              
|        | 2.5   |                        |  | Purchase and Sale Agreement by and
    among Hub U.S. Holdings, Inc., Hub International Limited,
    and Citizens Bank of Massachusetts, Citizens Bank of
    Pennsylvania, Court Street Holdings, Inc. and Citizens Financial
    Group, Inc. dated March 1, 2006 (incorporated by reference
    to the registrants Current Report on Form 8-K filed
    March 2, 2006).
|        | 3.1  |                        |  | Articles of Incorporation of the
    registrant.                                                                                                                                                                                                                                                                                                                          
|        | 3.2  |                        |  | By-laws of the Registrant.                                                                                                                                                                                                                                                                                                                                                
|        | 3.3   |                        |  | Certificate of Continuance
    (incorporated by reference to the registrants Annual
    Report on Form 10-K, for the period ended December 31,
    2004).                                                                                                                                                                                                                
|        | 4.1  |                        |  | Specimen Certificate representing
    Common Shares.                                                                                                                                                                                                                                                                                                                      
|        | 10.1 |                        |  | Agreement and Plan of Merger
    between HUB International Limited, 416 Acquisition Inc. and Kaye
    Group Inc. dated January 19, 2001.                                                                                                                                                                                                                                  





|                                |                                
|------------------------------- | -------------------------------
|ANNUAL REPORT December 31, 2005 | HUB INTERNATIONAL LIMITED    79



---



##### Table of Contents



|        |        |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- | ------ | ---------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |                       
|No.     |        | Description of Exhibit
|        |        |                       
|        | 10.2* |                        |  | Executive Share Purchase Plan.                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 10.3* |                        |  | Employee Share Purchase Plan.                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | 10.4*  |                        |  | Amended and Restated Executive
    Employment Agreement dated as of March 22, 2005 between HUB
    International Limited and Martin P. Hughes. (incorporated by
    reference to the registrants Current Report on
    Form 8-K filed March 24, 2005 the March 24,
    2005 8-K).                                                                                                                                                               
|        | 10.5*  |                        |  | Amended and Restated Executive
    Employment Agreement dated as of March 22, 2005 between HUB
    International Limited and Richard A. Gulliver (incorporated by
    reference to the March 24, 2005 8-K).                                                                                                                                                                                                                                        
|        | 10.6*  |                        |  | Amended and Restated Executive
    Employment Agreement dated as of March 22, 2005 between HUB
    International Limited and Dennis J. Pauls (incorporated by
    reference to the March 24, 2005 8-K).                                                                                                                                                                                                                                            
|        | 10.7*  |                        |  | Amended and Restated Executive
    Employment Agreement dated as of March 22, 2005 between HUB
    International Limited and W. Kirk James (incorporated by
    reference to the March 24, 2005 8-K).                                                                                                                                                                                                                                              
|        | 10.8*  |                        |  | Amended and Restated Executive
    Employment Agreement dated as of March 22, 2005 between HUB
    International Limited and Bruce D. Guthart (incorporated by
    reference to the March 24, 2005 8-K).                                                                                                                                                                                                                                           
|        | 10.9*  |                        |  | HUB International Limited 2005
    Equity Incentive Plan, (incorporated by reference to the
    registrants Definitive Proxy Statement and Management
    Information Circular on Schedule 14A as filed on March 30,
    2005).                                                                                                                                                                                                                   
|        | 10.10  |                        |  | Amended and Restated Credit
    Agreement dated as of April 23, 2004 between Hub
    International Limited and Bank of Montreal (incorporated by
    reference to the registrants Quarterly Report on
    Form 10-Q, for the period ended June 30, 2004).                                                                                                                                                                                         
|        | 10.11 |                        |  | Debenture dated as of June 28,
    2001 between HUB International Limited and Odyssey Reinsurance
    Corporation.                                                                                                                                                                                                                                                                                                                                 
|        | 10.12 |                        |  | Debenture dated as of June 28,
    2001 between HUB International Limited and United States Fire
    Insurance Company.                                                                                                                                                                                                                                                                                                                            
|        | 10.13 |                        |  | Claims Services Agreement dated as
    of May 30, 2002 between Old Lyme Insurance Company of Rhode
    Island, Inc. and Claims Administration Corporation.                                                                                                                                                                                                                                                                                         
|        | 10.14  |                        |  | Administrative Services and Cost
    Allocation Agreement dated as of January 1, 2002 between
    Old Lyme Insurance Company of Rhode Island, Inc. and HUB
    International Northeast Limited, as amended (incorporated by
    reference to the Form S-1 and as amended as filed as an
    exhibit to the registrants Form 10-K, for the period
    ended December 31, 2004 the 2004 10-K).                                                    
|        | 10.15 |                        |  | Underwriting Services Agreement
    dated as of January 1, 2002 between Old Lyme Insurance
    Company of Rhode Island, Inc. and Program Brokerage Corporation.                                                                                                                                                                                                                                                                                    
|        | 10.16  |                        |  | ISDA Master Agreement and Schedule
    to the Master Agreement dated as of July 15, 2003 by and
    between Hub International Limited and Bank of Montreal
    (incorporated by reference to the registrants Quarterly
    Report on Form 10-Q, for the period ended June 30,
    2004).                                                                                                                                                          
|        | 10.17  |                        |  | Note Purchase Agreement between Hub
    International Limited and each of the purchasers regarding the
    U.S. $10,000,000 5.71% Series A Senior Notes due
    June 15, 2010 and U.S. $55,000,000 6.16% Series B
    Senior Notes due June 15, 2013 (excluding any appendices
    and exhibits thereto) (incorporated by reference to the
    registrants Annual Report on Form 10-K, for the year
    ended December 31, 2003 (the 2003 10-K).
|        | 10.18* |                        |  | Management Bonus Modification
    Agreement effective as of December 31, 2003 between Hub
    International Limited, each Operating Subsidiary and each of the
    Eligible Managers, as applicable (excluding any appendices and
    exhibits thereto) (incorporated by reference to the 2003 10K).                                                                                                                                               
|        | 10.19* |                        |  | Employment Agreement dated as of
    March 14, 2005 with an effect as at January 1, 2004
    between HUB International Limited and Lawrence J. Lineker
    (incorporated by reference to the 2004 10-K).                                                                                                                                                                                                                                           
|        | 10.20* |                        |  | Employment Agreement dated as of
    March 14, 2005 with an effect as at April 1, 2004
    between HUB International Limited and Marianne D. Paine
    (incorporated by reference to the 2004 10-K).                                                                                                                                                                                                                                               





|                               |                                
|------------------------------ | -------------------------------
|80   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005



---



##### Table of Contents



|        |       |                        |  |                                                                                                                                                                                                                                          
|------- | ----- | ---------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                       
|No.     |       | Description of Exhibit
|        |       |                       
|        | 10.21 |                        |  | Contingent Compensation Agreement
    dated effective as of April 1, 2004 between Old Lyme
    Insurance Company Ltd. and Program Brokerage Corporation
    (incorporated by reference to the 2004 10-K).                                
|        | 10.22 |                        |  | Amending Agreement dated
    April 20, 2005 by and between Hub International Limited and
    Bank of Montreal (incorporated by reference to the
    registrants Quarterly Report on From 10-Q, for the
    period ended March 31, 2005).
|        | 21.1  |                        |  | List of Registrants
    subsidiaries.                                                                                                                                                                                                   
|        | 23.1  |                        |  | Consent of PricewaterhouseCoopers
    LLP.                                                                                                                                                                                               
|        | 31.1  |                        |  | Certification of the Chief
    Executive Officer, Martin P. Hughes, pursuant to
    Rule 13a  14(a) or 15d  14(a), as
    enacted pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002.                                       
|        | 31.2  |                        |  | Certification of the Chief
    Financial Officer, Dennis J. Pauls, pursuant to
    Rule 13a  14(a) or 15d  14(a), as
    enacted pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002.                                        
|        | 32.1  |                        |  | Certification of the Chief
    Executive Officer, Martin P. Hughes, pursuant to 18 U.S.C.
    Section 1350, as enacted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.                                                    
|        | 32.2  |                        |  | Certification of the Chief
    Financial Officer, Dennis J. Pauls, pursuant to 18 U.S.C.
    Section 1350, as enacted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.                                                     






|  |                                                                                                                                                                                                                        
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Incorporated herein by reference to the registrants
    Registration Statement on
    Form S-1
    (No. 333-84734),
    as filed with the Securities and Exchange Commission (the
    Commission) on March 22, 2002.
| 
|* | Management contract or compensatory plan or arrangement.                                                                                                                                                               





|                                |                                
|------------------------------- | -------------------------------
|ANNUAL REPORT December 31, 2005 | HUB INTERNATIONAL LIMITED    81



---



##### Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on March 13, 2006.



Hub International Limited/s/ Martin P. HughesMartin P. HughesChief Executive OfficerPursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on
behalf of the Registrant and in the capacities and on
March 13, 2006.

|                                                         |  |                                                                                            
|-------------------------------------------------------- |  | -------------------------------------------------------------------------------------------
|SIGNATURE                                                |  | TITLE                                                                                      
|                                                         |  |                                                                                            
|                                                        
|/s/
    Martin P. HughesMartin
    P. Hughes             |  | Chairman of the Board and Chief
    Executive Officer (Principal Executive Officer)        
|                                                        
|/s/
    Dennis J. PaulsDennis
    J. Pauls               |  | Vice President and Chief Financial
    Officer (Principal Financial and Accounting Officer)
|                                                        
|/s/
    Richard A. GulliverRichard
    A. Gulliver       |  | President, Director                                                                        
|                                                        
|/s/
    Bruce D. GuthartBruce
    D. Guthart             |  | Chief Operating Officer, Director                                                          
|                                                        
|/s/
    Stuart RossStuart
    Ross                       |  | Director                                                                                   
|                                                        
|/s/
    Edward W.
    Lyman, Jr.Edward
    W. Lyman, Jr. |  | Director                                                                                   
|                                                        
|/s/
    Anthony F. GriffithsAnthony
    F. Griffiths     |  | Director                                                                                   
|                                                        
|/s/
    Bradley P. MartinBradley
    P. Martin           |  | Director                                                                                   
|                                                        
|/s/
    Paul MurrayPaul
    Murray                       |  | Director                                                                                   
|                                                        
|/s/
    Frank S. WilkinsonFrank
    S. Wilkinson         |  | Director                                                                                   
|                                                        
|/s/
    James W. McElvanyJames
    W. McElvany           |  | Director                                                                                   





|                               |                                
|------------------------------ | -------------------------------
|82   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005



---



##### Table of Contents

EXHIBIT INDEX

|        |        |                        |  |                                                                                                                                                                                                                                                                                                                                                                           
|------- | ------ | ---------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |                       
|No.     |        | Description of Exhibit
|        |        |                       
|        | 2.1    |                        |  | Stock Purchase Agreement by and
    among Hub U.S. Holdings, Inc. and Fifth Third Financial
    Corp., dated December 29, 2002 (incorporated by reference
    to the registrants Current Report on Form 8-K filed
    January 7, 2003).                                                                                                                                  
|        | 2.2    |                        |  | Stock Purchase Agreement by and
    among Satellite Acquisition Corporation, Safeco Corporations and
    General America Corporation as the Sole shareholder of Talbot
    Financial Corporation, dated March 15, 2004 (incorporated
    by reference to the registrants Current Report on
    Form 8-K filed July 7, 2004).                                             
|        | 2.3    |                        |  | Subscription Agreement by and among
    Hub U.S. Holdings, Inc., Satellite Acquisition Corporation,
    Randall Talbot, David Weymouth, Roy Taylor and TalMan, LLC,
    dated March 15, 2004 (incorporated by reference to the
    registrants Current Report on Form 8-K filed
    July 7, 2004).                                                                       
|        | 2.4    |                        |  | Shareholder Agreement by and among
    Hub U.S. Holdings, Inc., Hub International Limited, TalMan,
    LLC, and Satellite Acquisition Corporation, dated July 1,
    2004 (incorporated by reference to the registrants Current
    Report on Form 8-K filed July 7, 2004).                                                                                              
|        | 2.5    |                        |  | Purchase and Sale Agreement by and
    among Hub U.S. Holdings, Inc., Hub International Limited,
    and Citizens Bank of Massachusetts, Citizens Bank of
    Pennsylvania, Court Street Holdings, Inc. and Citizens Financial
    Group, Inc. dated March 1, 2006 (incorporated by reference
    to the registrants Current Report on Form 8-K filed
    March 2, 2006).
|        | 3.1   |                        |  | Articles of Incorporation of the
    registrant.                                                                                                                                                                                                                                                                                                                          
|        | 3.2   |                        |  | By-laws of the Registrant.                                                                                                                                                                                                                                                                                                                                                
|        | 3.3    |                        |  | Certificate of Continuance
    (incorporated by reference to the registrants Annual
    Report on Form 10-K, for the period ended December 31,
    2004).                                                                                                                                                                                                                
|        | 4.1   |                        |  | Specimen Certificate representing
    Common Shares.                                                                                                                                                                                                                                                                                                                      
|        | 10.1  |                        |  | Agreement and Plan of Merger
    between HUB International Limited, 416 Acquisition Inc. and Kaye
    Group Inc. dated January 19, 2001.                                                                                                                                                                                                                                  
|        | 10.2* |                        |  | Executive Share Purchase Plan.                                                                                                                                                                                                                                                                                                                                            
|        | 10.3* |                        |  | Employee Share Purchase Plan.                                                                                                                                                                                                                                                                                                                                             
|        | 10.4*  |                        |  | Amended and Restated Executive
    Employment Agreement dated as of March 22, 2005 between HUB
    International Limited and Martin P. Hughes. (incorporated by
    reference to the registrants Current Report on
    Form 8-K filed March 24, 2005 the March 24,
    2005 8-K).                                                                                      
|        | 10.5*  |                        |  | Amended and Restated Executive
    Employment Agreement dated as of March 22, 2005 between HUB
    International Limited and Richard A. Gulliver (incorporated by
    reference to the March 24, 2005 8-K).                                                                                                                                                               
|        | 10.6*  |                        |  | Amended and Restated Executive
    Employment Agreement dated as of March 22, 2005 between HUB
    International Limited and Dennis J. Pauls (incorporated by
    reference to the March 24, 2005 8-K).                                                                                                                                                                   
|        | 10.7*  |                        |  | Amended and Restated Executive
    Employment Agreement dated as of March 22, 2005 between HUB
    International Limited and W. Kirk James (incorporated by
    reference to the March 24, 2005 8-K).                                                                                                                                                                     
|        | 10.8*  |                        |  | Amended and Restated Executive
    Employment Agreement dated as of March 22, 2005 between HUB
    International Limited and Bruce D. Guthart (incorporated by
    reference to the March 24, 2005 8-K).                                                                                                                                                                  
|        | 10.9*  |                        |  | HUB International Limited 2005
    Equity Incentive Plan, (incorporated by reference to the
    registrants Definitive Proxy Statement and Management
    Information Circular on Schedule 14A as filed on March 30,
    2005).                                                                                                                                          
|        | 10.10  |                        |  | Amended and Restated Credit
    Agreement dated as of April 23, 2004 between Hub
    International Limited and Bank of Montreal (incorporated by
    reference to the registrants Quarterly Report on
    Form 10-Q, for the period ended June 30, 2004).                                                                                                                
|        | 10.11 |                        |  | Debenture dated as of June 28,
    2001 between HUB International Limited and Odyssey Reinsurance
    Corporation.                                                                                                                                                                                                                                                        





|                                |                                
|------------------------------- | -------------------------------
|ANNUAL REPORT December 31, 2005 | HUB INTERNATIONAL LIMITED    83



---



##### Table of Contents



|        |        |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- | ------ | ---------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |                       
|No.     |        | Description of Exhibit
|        |        |                       
|        | 10.12 |                        |  | Debenture dated as of June 28,
    2001 between HUB International Limited and United States Fire
    Insurance Company.                                                                                                                                                                                                                                                                                                                            
|        | 10.13 |                        |  | Claims Services Agreement dated as
    of May 30, 2002 between Old Lyme Insurance Company of Rhode
    Island, Inc. and Claims Administration Corporation.                                                                                                                                                                                                                                                                                         
|        | 10.14  |                        |  | Administrative Services and Cost
    Allocation Agreement dated as of January 1, 2002 between
    Old Lyme Insurance Company of Rhode Island, Inc. and HUB
    International Northeast Limited, as amended (incorporated by
    reference to the Form S-1 and as amended as filed as an
    exhibit to the registrants Form 10-K, for the period
    ended December 31, 2004 the 2004 10-K).                                                    
|        | 10.15 |                        |  | Underwriting Services Agreement
    dated as of January 1, 2002 between Old Lyme Insurance
    Company of Rhode Island, Inc. and Program Brokerage Corporation.                                                                                                                                                                                                                                                                                    
|        | 10.16  |                        |  | ISDA Master Agreement and Schedule
    to the Master Agreement dated as of July 15, 2003 by and
    between Hub International Limited and Bank of Montreal
    (incorporated by reference to the registrants Quarterly
    Report on Form 10-Q, for the period ended June 30,
    2004).                                                                                                                                                          
|        | 10.17  |                        |  | Note Purchase Agreement between Hub
    International Limited and each of the purchasers regarding the
    U.S. $10,000,000 5.71% Series A Senior Notes due
    June 15, 2010 and U.S. $55,000,000 6.16% Series B
    Senior Notes due June 15, 2013 (excluding any appendices
    and exhibits thereto) (incorporated by reference to the
    registrants Annual Report on Form 10-K, for the year
    ended December 31, 2003 (the 2003 10-K).
|        | 10.18* |                        |  | Management Bonus Modification
    Agreement effective as of December 31, 2003 between Hub
    International Limited, each Operating Subsidiary and each of the
    Eligible Managers, as applicable (excluding any appendices and
    exhibits thereto) (incorporated by reference to the 2003 10K).                                                                                                                                               
|        | 10.19* |                        |  | Employment Agreement dated as of
    March 14, 2005 with an effect as at January 1, 2004
    between HUB International Limited and Lawrence J. Lineker
    (incorporated by reference to the 2004 10-K).                                                                                                                                                                                                                                           
|        | 10.20* |                        |  | Employment Agreement dated as of
    March 14, 2005 with an effect as at April 1, 2004
    between HUB International Limited and Marianne D. Paine
    (incorporated by reference to the 2004 10-K).                                                                                                                                                                                                                                               
|        | 10.21  |                        |  | Contingent Compensation Agreement
    dated effective as of April 1, 2004 between Old Lyme
    Insurance Company Ltd. and Program Brokerage Corporation
    (incorporated by reference to the 2004 10-K).                                                                                                                                                                                                                                          
|        | 10.22  |                        |  | Amending Agreement dated
    April 20, 2005 by and between Hub International Limited and
    Bank of Montreal (incorporated by reference to the
    registrants Quarterly Report on From 10-Q, for the
    period ended March 31, 2005).                                                                                                                                                                                                          
|        | 21.1   |                        |  | List of Registrants
    subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 23.1   |                        |  | Consent of PricewaterhouseCoopers
    LLP.                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 31.1   |                        |  | Certification of the Chief
    Executive Officer, Martin P. Hughes, pursuant to
    Rule 13a  14(a) or 15d  14(a), as
    enacted pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002.                                                                                                                                                                                                                                                 
|        | 31.2   |                        |  | Certification of the Chief
    Financial Officer, Dennis J. Pauls, pursuant to
    Rule 13a  14(a) or 15d  14(a), as
    enacted pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002.                                                                                                                                                                                                                                                  
|        | 32.1   |                        |  | Certification of the Chief
    Executive Officer, Martin P. Hughes, pursuant to 18 U.S.C.
    Section 1350, as enacted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                              
|        | 32.2   |                        |  | Certification of the Chief
    Financial Officer, Dennis J. Pauls, pursuant to 18 U.S.C.
    Section 1350, as enacted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                               






|  |                                                                                                                                                                                                                        
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Incorporated herein by reference to the registrants
    Registration Statement on
    Form S-1
    (No. 333-84734),
    as filed with the Securities and Exchange Commission (the
    Commission) on March 22, 2002.
| 
|* | Management contract or compensatory plan or arrangement.                                                                                                                                                               





|                               |                                
|------------------------------ | -------------------------------
|84   HUB INTERNATIONAL LIMITED | ANNUAL REPORT December 31, 2005