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SECURITIES AND EXCHANGE COMMISSION



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,
    2002
    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

(Exact name of Registrant as specified in its
charter)


|                                                                   |  |                                     
|------------------------------------------------------------------ |  | ------------------------------------
|Ontario, 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)                          

(877) 402-6601

Registrants telephone number, including
area code:


Securities registered pursuant to
Section 12(b) of the Act:None

Securities registered pursuant to
Section 12(g) 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

Indicate by check mark whether the Registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been
subject to such filing requirements for the past
90 days.     Yes x     No o

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein and will not be
contained, to the best of the Registrants knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to
this
Form 10-K.     x

Indicate by check mark whether registrant is an
accelerated filer (as defined in Exchange Act
Rule 12b-2).     Yes o     No x

The aggregate market value of the voting stock
held by non-affiliates of the registrant (i.e., other than
directors, officers, or holders of more than 5% of the
registrants common stock although such exclusion is not
intended, nor shall it be deemed, to be an admission that such
persons are affiliates of the registrant) computed by reference
to the closing sales price on the New York Stock Exchange on
June 28, 2002 was $278,317,309.

The number of shares of the registrants
common stock, issued and outstanding as of March 3, 2003
was 29,036,711.

Documents Incorporated by Reference

Those sections or portions of the
registrants definitive proxy statement filed or to be
filed with the Securities and Exchange Commission pursuant to
Regulation 14A involving the election of directors and
other matters at the annual and special meeting of shareholders
of the registrant to be held on May 6, 2003, are incorporated by
reference in Part III of this report.



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HUB INTERNATIONAL LIMITED

TABLE OF CONTENTS

|                                                                                                      |  |      |    | 
|----------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                      |  | Page
|                                                                                                      |  |     
|PART I                                                                                                |  |      |    | 
|Item 1. Business                                                                                      |  |      | 4  | 
|Item 2. Properties                                                                                    |  |      | 16 | 
|Item 3. Legal Proceedings                                                                             |  |      | 16 | 
|Item 4. Submission of Matters to a
    Vote of Security Holders                                       |  |      | 16 | 
|PART II                                                                                               |  |      |    | 
|Item 5. Market for Registrants
    Common Equity and Related Shareholder Matters                     |  |      | 17 | 
|Item 6. Selected Financial
    Data                                                                   |  |      | 17 | 
|Item 7. Managements Discussion
    and Analysis of Financial Condition and Results of
    Operations |  |      | 20 | 
|Item 7A. Quantitative and
    Qualitative Disclosures about Market Risk                               |  |      | 39 | 
|Item 8. Financial Statements and
    Supplementary Data                                               |  |      | 39 | 
|Item 9. Changes in and Disagreements
    with Accountants on Accounting and Financial
    Disclosure  |  |      | 69 | 
|PART III                                                                                              |  |      |    | 
|Item 10. Directors and Executive
    Officers of the Registrant                                       |  |      | 69 | 
|Item 11. Executive
    Compensation                                                                   |  |      | 69 | 
|Item 12. Security Ownership of
    Certain Beneficial Owners and Management                           |  |      | 69 | 
|Item 13. Certain Relationships and
    Related Transactions                                           |  |      | 69 | 
|Item 14. Controls and
    Procedures                                                                  |  |      | 69 | 
|PART IV                                                                                               |  |      |    | 
|Item 15. Exhibits, Financial
    Statements Schedules and Reports on Form 8-K                         |  |      | 70 | 
|SIGNATURES                                                                                            |  |      | 72 | 
|CERTIFICATIONS                                                                                        |  |      | 73 | 





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|----------------------------- | ------------------------------
|2   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



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Reference in this Annual Report on Form 10-K
to Hub, 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, financial data
contained in this Annual Report on From 10-K have been prepared
in accordance with generally accepted accounting principles in
Canada, or Canadian GAAP, which differs in certain significant
respects from generally accepted accounting principles in the
United States of America, or U.S. GAAP. Please see note 18 to
our audited consolidated financial statements for a description
of the material differences between Canadian GAAP and U.S. GAAP.

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 relate,
among other things, to our plans and objectives for future
operations. These forward-looking statements are subject to
uncertainties and other factors that could cause actual results
to differ materially from such statements. These uncertainties
and other factors include, but are not limited to risks
associated with:



|  |                                                                                                                                                              
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | implementing our business strategies;                                                                                                                        
| 
| | identifying and consummating acquisitions;                                                                                                                   
| 
| | successfully integrating acquired businesses;                                                                                                                
| 
| | attaining greater market share;                                                                                                                              
| 
| | developing and implementing effective information
    technology systems;                                                                                    
| 
| | recruiting and retaining qualified employees;                                                                                                                
| 
| | fluctuations in the demand for insurance products;                                                                                                           
| 
| | fluctuations in the premiums charged by insurance
    companies (with corresponding fluctuations in our premium-based
    revenue);                          
| 
| | any loss of services of key executive officers;                                                                                                              
| 
| | industry consolidation;                                                                                                                                      
| 
| | increased competition in the industry;                                                                                                                       
| 
| | the passage of new federal, state or provincial
    legislation subjecting our business to increased regulation in
    the jurisdictions in which we operate.

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

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.





|                               |                               
|------------------------------ | ------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    3



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PART I

Item 1. Business

Overview

We are a leading North American insurance
brokerage providing a broad array of property and casualty, life
and health, employee benefits, investment and risk management
products and services. We focus primarily on middle-market
commercial accounts in the United States and Canada, which we
serve through our approximately 2,300 employees in 122
locations, using a variety of retail and wholesale distribution
channels. We define the middle market as those clients with 20
to 499 employees, which typically generate annual commissions
and fees ranging from $2,500 to $250,000. Since our company was
formed in 1998 through the merger of 11 Canadian insurance
brokerages, we have acquired an additional 86 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. Through a
combination of acquiring quality brokerages with proven track
records and organic growth, we have grown our revenue from
$38.7 million in 1998 to $220.0 million in 2002, of
which 85% of the increase is attributable to acquisitions.

We operate through an organizational structure
comprised of our head office, larger regional brokerages that we
call hub brokerages and smaller brokerages that we
call fold-ins. Our head office oversees the
acquisition of hub brokerages, coordinates selling and marketing
efforts, identifies cross-selling opportunities among our
brokerages, negotiates significant contracts with insurers and
handles general administrative functions. We have eleven hub
brokerages, six operating in the United States and five in
Canada. Each hub brokerage has a significant market presence in
a geographic region of the United States or Canada. Each hub
provides insurance brokerage services and is responsible for
integrating the fold-in acquisitions in its region.

We operate our hub brokerages in a decentralized
manner so they may more effectively address their local market
conditions. A hub brokerage is responsible not only for the
development of its own business, but also the identification of
fold-ins that can be acquired by and integrated into the
operations of the hub brokerage. This process allows each hub
brokerage an opportunity to strengthen its regional market
presence by acquiring new or complementary products and services
and management talent and improve profit margins through the
reduction or elimination of redundant administrative functions,
premises 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.

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 will be 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 products and services

We offer commercial and specialized insurance
products and services to businesses, personal insurance products
and services to individuals and program products to affinity
groups and associations. We offer three categories of commercial
products and services: property and casualty products, employee
benefits and risk management services. We offer two categories
of personal products and services: property and casualty
products and life, health and financial products and services.
Our program products involve the 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.

Our business is compromised 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. Our product mix in the United States is
comprised of more commercial line products and services as
compared with more personal line products and services in
Canada. In the United States in 2002, 91.1% of our commission
income was generated from the sale of commercial lines and 8.9%
from personal lines. In Canada in 2002, 52.7% of our commission
income was generated from the sale of commercial lines and 47.3%
from personal lines. As we continue to expand our business in the





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|4   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



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United States, we expect a change in our product
mix and commission income associated with this increase in
revenue in the United States.


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

Commercial insurance

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

Personal insurance

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

Strategy

Our primary goals are to further develop our
position as a leading North American insurance brokerage and to
generate significant sustained shareholder value. We plan to
achieve these objectives by executing the following strategies:

Focus on middle-market commercial
accounts.We focus our sales efforts
on middle-market companies. We believe that the insurance and
risk management needs of these companies are underserved because
many of the brokers that target them have limited capital
resources and lack the breadth of products and services that we
are able to offer due to our scale and strong insurer
relationships. We primarily target commercial accounts because
they generally generate higher profit margins than personal
accounts. Commercial accounts also provide us with the
opportunity to sell personal insurance products and employee
benefits to the employees of those businesses.

Grow organically.We
intend to increase profitability per customer and attract new
clients by leveraging our existing infrastructure to sell a
broad range of products and services through the efficient use
of a variety of distribution channels, effectively and
efficiently identify and target profitable client segments by
employing technology to capitalize on our extensive customer
databases, and maximize cross-selling opportunities among our
brokerages.

Grow through selected
acquisitions.The introduction of new
brokerages through acquisitions is a fundamental component of
our strategy. We have acquired an additional 86 brokerages since
our formation in 1998. We acquire brokerages to grow our
revenue, complement and supplement our existing products and
services and add experienced management. In addition,
acquisitions of larger brokerages allow us to further expand our
hub platform and geographic reach. We believe that we are well
positioned to compete for quality brokerages and that our





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|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    5



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proven success in consolidating brokerages in the
past will make us attractive to regional brokerages seeking to
join with and share in the resources of a larger North American
brokerage.


Standardize procedures to increase operating
efficiency and reduce costs.We strive
to implement the best operating and sales practices of our
brokerages across our company. We provide centralized marketing
support to our brokers for many specialized risk programs and
group home and auto plans and we integrate promotional programs,
internet technology, procurement and risk management across our
brokerage offices. Our brokerages share certain systems, such as
accounting and payroll, which reduce redundancies and increase
operating efficiencies. In addition, we are implementing a
comprehensive quality control program and a standardized
approach to our sales and marketing efforts across our
brokerages.

Recruit, train and retain qualified
personnel.We have formalized our
recruiting and training program to continue to build and sustain
a sales and service team with a wide variety of experience and
capabilities. We recruit directly from college campuses and
other industries and provide new employees with effective
training and attractive compensation packages. In addition, we
are developing a company-wide sales culture by promoting the
techniques and results of our most successful producers through
regular newsletters, sales meetings, sales tracking, awards,
recognition programs and training. We have implemented Hub
Academy which is a formal program designed to provide
educational and training opportunities to our employees who want
to advance their professional skill sets. Programs such as the
new producer training program are designed to groom selected
candidates to be successful producers within our company.
Participants spend several weeks learning about the insurance
industry, our company, quality standards, products and services
and leading sales techniques from our leading producers, members
of management, representatives of insurance companies and other
members of the industry.

Competitive advantages

We believe the following competitive advantages
will enable us to achieve our objectives:

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 with consistent standards. Our geographic diversity
allows us to balance our revenue stream across markets and
better insulate us from regional adverse 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
not only with the flexibility to determine the most appropriate
products and services but also, distribution channels to employ
for particular market segments.

Benefits of scale.Our scale, relative to smaller brokerages, provides insurers
with greater incentives to work with us. Enhanced insurer
relationships often result in mutual cost savings, increased
volume overrides and contingent commissions, favorable
commission rates, 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. Our scale also makes us attractive to smaller
brokerages as a potential acquiror.

Committed and experienced
management.Most of the senior
managers of our brokerages have over 20 years of experience
in the industry, extensive contacts in the insurance brokerage
industry, and participate in prominent 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 some cases for up to
ten years. In addition, designated key employees in each
brokerage are rewarded for their contribution to our success
through a bonus program that recognizes brokerage and over-all
company performance in excess of specified targets. We believe
that these strategies encourage loyalty and align the interests
of management of our brokerages with our corporate goals and the
interests of our shareholders, combining to create a powerful
incentive to maximize financial results.





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|----------------------------- | ------------------------------
|6   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



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Our operations

We were created in November 1998 when 11 Canadian
brokerages merged to form Hub. Significant events that have
occurred since our formation in the last four years include:



|  |                                                                                                                                                                                                                                                                                                                                           
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | January 1999  Fairfax Financial
    Holdings Limited (Fairfax) purchased 5.4 million common shares
    of Hub for $34.2 million cash.                                                                                                                                                                                                    
| 
| | January 1999  We completed a financing
    whereby we issued a total of 2,838,080 common shares, on a
    private placement basis, at a price of $8.60 per common share or
    approximately $24.4 million in the aggregate. Fairfax
    purchased, through certain of its wholly-owned subsidiaries,
    1,185,184 of the common shares.
| 
| | February 1999  We completed a public
    offering in Canada of 865,624 common shares at a price of $8.60
    per share for total proceeds of approximately $7.4 million and
    listed our common shares on the Toronto Stock Exchange (TSX).                                                                                            
| 
| | During 1999  We acquired 44 brokerages
    in Canada and completed our first acquisition in the United
    States, Mack and Parker, Inc. (Mack and Parker).                                                                                                                                                                              
| 
| | During 2000  We acquired 18 brokerages
    in Canada and the United States including C.J. McCarthy
    Insurance Agency, Inc (McCarthy).                                                                                                                                                                                                 
| 
| | During 2001  We acquired 16 brokerages
    in Canada and the United States including J.P. Flanagan
    Corporation (Flanagan), Kaye Group Inc. (Kaye) and Burnham
    Insurance Group, Inc. (Burnham).                                                                                                                                   
| 
| | June 2002  We completed an initial
    public offering in the United States of 6,900,000 common shares,
    at a price of $14.00 per share. Total net proceeds from the
    offering after deducting total expenses were approximately $88.1
    million.                                                                                
| 
| | During 2002  we acquired 8 brokerages
    in Canada and the United States including Hooper, Hayes and
    Associates, Inc. (Hooper Hayes) and Fifth Third Insurance
    Services, Inc., which we have renamed Hub International of
    Indiana Limited (Hub Indiana).                                                                    

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

Acquisition process

Our senior management is responsible for
identifying and negotiating the acquisition of hub brokerages
that are strategically suited to our growth strategy. Typically
we are familiar with the owners and management of the
acquisition target well before we initiate discussions. Most of
the hub brokerages we acquire are owner operated. We perform
extensive 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 and
southwestern United States. There are many more brokerages in
the United States that we would consider suitable hub brokerage
acquisition candidates than in Canada due to the market size of
the United States. Each new hub will be characterized by 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.





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|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    7



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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 acquired brokerages. We have in the
past, 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 large portion of the acquisition price.
The shares the owner/management receive are, in some cases,
subject to transfer restrictions, for up to ten years. We also
utilize our equity incentive plan to grant options to acquire
our shares (in partial consideration of management bonuses) and
restricted shares and 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 a combination of different distribution channels:



|  |                                                                                                                                                                                                                                                                                                                                                               
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Retail sales and service centers that target
    middle-market companies 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. All of our brokerages
    utilize this distribution channel;
| 
| | Retail call-centers 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, Toronto, Saint John, New
    Brunswick and Chilliwack, British Columbia;                                                                    
| 
| | Wholesale life and financial services centers,
    known as managing general agents, provide life and financial
    products and expertise to independent agents on a wholesale
    basis from our locations in Vancouver, Calgary, Edmonton,
    Montreal and Toronto; and                                                                                   
| 
| | Wholesale property and casualty insurance centers
    provide products, international risk solutions, captive
    management programs and specialty lines to independent brokers
    and corporations in North America and internationally from our
    locations in New York, Toronto 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
and Canada who require insurance internationally.

Decision-making process

We have established an executive committee that
consists of our senior executive officers and the presidents of
each of our hub brokerages. The executive committee is comprised
of two subcommittees that meet independently of each other, one
comprised of U.S. representatives (chaired by Bruce Guthart, our
President, U.S. Operations), and the other comprised of Canadian
representatives (chaired by Craig Barton, our President,
Canadian Operations). The mandate of the sub-committees is to
discuss topics of common concern and opportunity for the
brokerages of the respective country, to make recommendations to
the executive committee and to implement and report to the
executive committee regarding initiatives that are undertaken.
The executive committee convenes regularly to discuss
company-wide strategies and developments.

Competition

The insurance brokerage industry is highly
competitive. We face several sources of competition including
other brokerages, insurance companies, banks and other financial
services companies. Brokerage consolidators have been active in
the market over several years. Consolidators, often publicly
traded corporations, 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 the insurance companies, new
sources of competition are emerging as banks in the United
States accelerate their efforts to diversify their financial
services to include insurance brokerage services (often through
the acquisition of established insurance brokerages) and as the
Canadian chartered banks lobby for greater flexibility to create
and market insurance products.





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|8   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



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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 broad array of products and services, diversity
of distribution channels, industry focus and expertise, and
management experience.

Like some of our competitors, we focus our sales
efforts primarily 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. We believe that our
primary competitors in Canada are local retail brokers.

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.

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

Employees

As of December 31, 2002, we employed 2,294
persons on a full-time basis, 1,889 of whom were employed in
sales and customer service and 405 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 senior 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.

Risks related to our business

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 85% 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





|                               |                               
|------------------------------ | ------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    9



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##### 



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 is likely
to suffer and we may be unable to remain competitive.


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 86 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, 2002, we had $107 million of total debt
and our two credit 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 2002, we derived approximately 91% 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





|                               |                               
|------------------------------ | ------------------------------
|10   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



---



##### 



commission rates. 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.


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 generally has accounted for
approximately 5% of our total revenue. 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, we cannot predict
the payment of these performance-based revenues 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 their payment to us could adversely
affect our results of operations.

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.

We have entered into put option
arrangements with former shareholders of our acquired brokerage
J.P. Flanagan Corporation, which may require us to pay
substantial amounts to repurchase our common shares from these
shareholders. Those payments would reduce our cash flow and the
funds available to grow our business.

In connection with our acquisition of Flanagan,
we entered into put option arrangements with the former
shareholders of that company whereby we gave them the right to
require us to repurchase their shares of Hub that were issued in
consideration of the acquisitions. The rights under the put
arrangements may be exercised between 2006 and 2011, and if
exercised, we could be required to buy back our common shares at
C$17.00 per share at specific exercise dates set out under the
heading Managements Discussion and Analysis of
Financial Condition and Results of Operations 
Contingent obligations. We may not have sufficient cash on
hand on the exercise dates to satisfy our obligations under
these put arrangements and as a consequence we may have to
obtain additional financing. However, we may not be able to
incur additional debt at such time. Our inability to satisfy our
obligations under the put options may adversely affect our
relationship with the management team at Flanagan and may result
in the loss of key management personnel from this subsidiary
and, in turn, the loss of customers, which would adversely
affect our business and financial condition. In addition, our
failure to satisfy our obligations under the put options may
cause us to breach our agreements with those shareholders.





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    11



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##### 



A substantial portion of our total assets
are represented by goodwill and other intangible assets as a
result of our acquisitions and under new 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 net identifiable assets paid by us to
acquire the brokerage.

On July 1, 2001, we adopted the Canadian
Institute of Chartered Accountants (CICA) Accounting
Standards Board Handbook Section 1581, Business
Combinations. These new rules require that all business
combinations after June 30, 2001 be accounted for in
accordance with the purchase method of accounting and expand the
definition of other identifiable intangible assets acquired in a
business combination using the purchase method.

On January 1, 2002, we adopted CICAs
Section 3062, Goodwill and Other Intangible
Assets. For all business combinations accounted for using
the purchase method prior to June 30, 2001,
Section 3062 eliminates the amortization of goodwill,
requires annual impairment testing of goodwill and introduces
the concept of definite life and indefinite life intangible
assets. Indefinite life intangible assets, similar to goodwill,
will no longer be amortized and will be tested at least annually
for impairment. The carrying value of our goodwill and other
indefinite life intangible assets may be adversely affected by
this new accounting standard.

The loss of members of our senior
management or a significant number of our brokers could
negatively affect our financial plans, 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, or
Bruce Guthart, our President, U.S. Operations, could negatively
impact our acquisition strategy in the United States due to
their 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 and insurance company markets, 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 in the
United States, 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.





|                               |                               
|------------------------------ | ------------------------------
|12   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



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##### 



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, 2002, Fairfax Financial
Holdings Limited owned or controlled 27% of our common shares,
35% if Fairfax converted our convertible subordinated debentures
it holds. We do business with certain subsidiaries of Fairfax
which represented approximately 10% of our revenue in 2002. We
expect that this percentage will increase as a result of our
sale of Old Lyme Insurance Company of Rhode Island, Inc. and Old
Lyme Insurance Company Ltd., which together we call Old Lyme, to
Fairfax, as we will continue to do a significant amount of
business with Old Lyme. The sale of Old Lyme was completed on
May 30, 2002. If a conflict of interest were to arise
between us and Fairfax or one of its subsidiaries, we cannot
assure you 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 impact our share price.

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
disaster recovery procedures in place for all our hub brokerages
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, new 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, which we are not
aware of, 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.





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    13



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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
affect 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 was
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
purchased enterprise reporting software that will enable us to
extract financial and operating data from our brokerages
electronically and on a real time basis. We anticipate that such
a system will be implemented in 2003. However, such system may
not be implemented within this time frame and it may not be
effective.

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.

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 and
provincial authorities. Although the scope of regulation and
form of supervision by state and provincial 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





|                               |                               
|------------------------------ | ------------------------------
|14   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



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with their requirements or the legal requirements
governing our activities can result in disciplinary action,
fines, reputational damage and financial harm.


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.

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 the following factors:
(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) announcements of legal proceedings or regulatory
matters and (5) 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. From the beginning of 2001 to March 3,
2003, the price of our common shares on the TSX has ranged from
a low of C$12.00 to a high of C$29.00, and on the NYSE has
ranged from a low of $11.45 to a high of $18.60 from the date we
became traded on the NYSE in the second quarter of 2002 to
March 3, 2003.

In addition, the stock market has experienced
volatility that has affected the market prices of equity
securities of many companies, and that 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 was
pursued against us, it could result in substantial costs and a
diversion of our managements attention and resources.

Our controlling shareholder may
substantially influence certain actions requiring shareholders
approval.

As of December 31, 2002, Fairfax owned or
controlled 27% of our common shares. Fairfax also owns or
controls $35 million of subordinated convertible notes,
which it can convert at any time into our common shares at
C$17.00 per share. If Fairfax converts the notes it would hold
35% of our common shares. Under our by-laws 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 you
have and therefore may make decisions that are adverse to your
interests.





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    15



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We are incorporated in Ontario, 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 Ontario,
Canada and some of our assets are located outside the United
States. As a result, it may not be possible for the holders of
our common shares to enforce against us in United States courts
judgments based on the civil liability provisions of the
securities laws of the United States. In addition, 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 2. Properties



We maintain our corporate headquarters in
Chicago, Illinois at premises that we sublet from Mack and
Parker, one of our subsidiaries. This facility, totaling
approximately 3,500 square feet, contains corporate, finance,
administration, sales and customer support functions. The lease
on the premises expires on October 1, 2011. In addition,
our brokerages lease office space in the locations in which they
operate, none of which is material. In total, our brokerages
hold 154 leases covering 725,800 square feet with a total annual
base rent for all of these locations of approximately
$9.2 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

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
    Holders

No matters were submitted to a vote of security
holders during the fourth quarter ended December 31, 2002.





|                               |                               
|------------------------------ | ------------------------------
|16   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



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##### 



PART II



|        |                                                                          
|------- | -------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity and
    Related Shareholder Matters

In connection with our initial public offering in
the United States, our common shares became listed on the New
York Stock Exchange (NYSE) on June 18, 2002 under the
symbol HBG. Our common shares are also listed and posted for
trading on 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:

|     |                                       |      |  |        |  |      |  |        |  |           |  |         |  |  |  |         |  |  |  |        | 
|---- | ------------------------------------- | ---- |  | ------ |  | ---- |  | ------ |  | --------- |  | ------- |  |  |  | ------- |  |  |  | ------ | 
|     |                                       |      |  |       
|     |                                       | NYSE |  | TSX   
|     |                                       |      |  |       
|     |                                       |      |  |        |  | Cash
|     |                                       | High |  | Low    |  | High |  | Low    |  | Dividends
|     |                                       |      |  |        |  |      |  |        |  |          
|2001 |                                       |      |  |        |  |      |  |        |  |           |  |         |  |  |  |         |  |  |  |       
|     | First Quarter                         |      |  |        |  |      |  |        |  |           |  | C$20.00 |  |  |  | C$12.00 |  |  |  | C$0.07 | 
|     | Second Quarter                        |      |  |        |  |      |  |        |  |           |  | C$18.00 |  |  |  | C$15.75 |  |  |  | C$0.07 | 
|     | Third Quarter                         |      |  |        |  |      |  |        |  |           |  | C$17.25 |  |  |  | C$13.75 |  |  |  | C$0.07 | 
|     | Fourth Quarter                        |      |  |        |  |      |  |        |  |           |  | C$15.75 |  |  |  | C$13.00 |  |  |  | C$0.07 | 
|2002 |                                       |      |  |        |  |      |  |        |  |           |  |         |  |  |  |         |  |  |  |       
|     | First Quarter                         |      |  |        |  |      |  |        |  |           |  | C$21.00 |  |  |  | C$15.50 |  |  |  | C$0.07 | 
|     | Second Quarter                        |      |  | $16.80 |  |      |  | $13.46 |  |           |  | C$25.75 |  |  |  | C$20.00 |  |  |  | C$0.07 | 
|     | Third Quarter                         |      |  | $16.60 |  |      |  | $12.90 |  |           |  | C$25.25 |  |  |  | C$20.25 |  |  |  | C$0.07 | 
|     | Fourth Quarter                        |      |  | $18.60 |  |      |  | $11.45 |  |           |  | C$29.00 |  |  |  | C$17.71 |  |  |  | C$0.07 | 
|2003 |                                       |      |  |        |  |      |  |        |  |           |  |         |  |  |  |         |  |  |  |       
|     | First Quarter (through March 3, 2003) |      |  | $15.05 |  |      |  | $12.15 |  |           |  | C$23.12 |  |  |  | C$18.82 |  |  |  | $     | 

On December 31 2002, the closing price of
our common shares on the NYSE was $12.83 and on the TSX the
closing sale price was C$20.13. The exchange rate in effect at
December 31, 2002 was C$1.00 per $0.6339. As of
March 3, 2003, there were 29,036,711 of our common shares
issued and outstanding. As of the close of business
March 3, 2003, we had approximately 330 holders of record
of our common shares.

We have paid a dividend of C$0.07 per common
share for each quarter commencing June 30, 2000. We have no
formal dividend policy other than the board of directors
considers the payment of dividends as quarterly financial
information becomes available. In the future, dividends will be
paid at the discretion of our board of directors depending on
our financial position and capital requirements, general
business conditions, contractual restrictions and other factors.
During the fourth quarter of 2002, we adopted a new policy that
dividends, if any, declared payable after December 31,
2002, will be declared in U.S. dollars instead of Canadian
dollars.



|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

We were formed in November 1998 through the
merger of 11 independent insurance brokerages into a new
company. The merger was accounted for using the
pooling-of-interests method. Accordingly, our results for the
year ended December 31, 1998 includes the assets,
liabilities, shareholders equity, revenue and expenses of
the combined companies, without adjustments.

Our results for the four year period ending
December 31, 2002 reflect the acquisition of brokerages
that occurred in each respective period. These acquisitions were
accounted for using the purchase method. Thus, results of
acquisitions 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 significant respects from U.S. GAAP. For a discussion of
the principal differences between Canadian GAAP





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    17



---



##### 



and U.S. GAAP as it relates to us, see
note 18 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)                 |                                                                                              | 2002                                      |         | 2001    |        | 2000 |         | 1999    |      | 1998
|                                             |                                                                                              |                                           |         |         |        |      |         |         |      |     
|Consolidated statement of earnings
    data: |                                                                                              |                                           |         |         |        |      |         |         |      |      |        |        |     |   |        |       
|Revenue:                                     |                                                                                              |                                           |         |         |        |      |         |         |      |      |        |        |     |   |        |        |     |   |        |       
|                                             | Commission income                                                                            |                                           | $       | 200,792 |        |      | $       | 143,063 |      |      | $      | 86,410 |     |   | $      | 47,964 |     |   | $      | 34,952 |    
|                                             | Contingent commissions and volume overrides                                                  |                                           |         | 11,464  |        |      |         | 5,899   |      |      |        | 4,909  |     |   |        | 2,824  |     |   |        | 2,604  |    
|                                             | Other                                                                                        |                                           |         | 7,704   |        |      |         | 5,031   |      |      |        | 3,921  |     |   |        | 3,309  |     |   |        | 1,170  |    
|                                             |                                                                                              |                                           |         |         |        |      |         |         |      |      |        |        |     |   |        |        |     |   |        |       
|                                             |                                                                                              |                                           | 219,960 |         |        |      | 153,993 |         |      |      | 95,240 |        |     |   | 54,097 |        |     |   | 38,726 |       
|                                             |                                                                                              |                                           |         |         |        |      |         |         |      |      |        |        |     |   |        |        |     |   |        |       
|Expenses:                                    |                                                                                              |                                           |         |         |        |      |         |         |      |      |        |        |     |   |        |        |     |   |        |       
|                                             | Compensation                                                                                 |                                           |         | 118,678 |        |      |         | 88,015  |      |      |        | 54,701 |     |   |        | 29,519 |     |   |        | 21,849 |    
|                                             | Selling, occupancy and administration                                                        |                                           |         | 44,932  |        |      |         | 35,276  |      |      |        | 21,778 |     |   |        | 13,235 |     |   |        | 10,635 |    
|                                             | Depreciation                                                                                 |                                           |         | 5,492   |        |      |         | 3,940   |      |      |        | 1,885  |     |   |        | 1,275  |     |   |        | 897    |    
|                                             | Interest expense                                                                             |                                           |         | 7,317   |        |      |         | 7,447   |      |      |        | 1,981  |     |   |        | 632    |     |   |        | 806    |    
|                                             | Goodwill and other intangible asset amortization                                             |                                           |         | 1,671   |        |      |         | 4,940   |      |      |        | 3,260  |     |   |        | 1,626  |     |   |        | 1,087  |    
|                                             | (Gain) loss on disposal of investment held for
    sale, property, equipment and investments |                                           |         | (2,679  | )      |      |         | (173    | )    |      |        | 127    |     |   |        | 14     |     |   |        | (84    | )  
|                                             | (Gain) on put option liability                                                               |                                           |         | (186    | )      |      |         | (719    | )    |      |        |       |     |   |        |       |     |   |        |       |    
|                                             | Non-cash stock-option compensation                                                           |                                           |         | 1,078   |        |      |         |        |      |      |        |       |     |   |        |       |     |   |        |       |    
|                                             |                                                                                              |                                           |         |         |        |      |         |         |      |      |        |        |     |   |        |        |     |   |        |       
|                                             |                                                                                              |                                           | 176,303 |         |        |      | 138,726 |         |      |      | 83,732 |        |     |   | 46,301 |        |     |   | 35,190 |       
|                                             |                                                                                              |                                           |         |         |        |      |         |         |      |      |        |        |     |   |        |        |     |   |        |       
|Net earnings before income taxes             |                                                                                              |                                           | 43,657  |         |        |      | 15,267  |         |      |      | 11,508 |        |     |   | 7,796  |        |     |   | 3,536  |       
|Provision for income tax expense             |                                                                                              |                                           | 14,256  |         |        |      | 5,262   |         |      |      | 5,370  |        |     |   | 4,052  |        |     |   | 1,848  |       
|                                             |                                                                                              |                                           |         |         |        |      |         |         |      |      |        |        |     |   |        |        |     |   |        |       
|Net earnings(2)                              |                                                                                              | $                                         | 29,401  |         |        | $    | 10,005  |         |      | $    | 6,138  |        |     | $ | 3,744  |        |     | $ | 1,688  |       
|                                             |                                                                                              |                                           |         |         |        |      |         |         |      |      |        |        |     |   |        |        |     |   |        |       
|Net earnings per share:(2)                   |                                                                                              |                                           |         |         |        |      |         |         |      |      |        |        |     |   |        |        |     |   |        |       
|                                             | Basic                                                                                        |                                           |         | $1.27   |        |      |         | $0.53   |      |      |        | $0.34  |     |   |        | $0.22  |     |   |        | $0.26  |    
|                                             | Diluted                                                                                      |                                           |         | $1.06   |        |      |         | $0.50   |      |      |        | $0.34  |     |   |        | $0.22  |     |   |        | $0.26  |    
|Weighted average shares:                     |                                                                                              |                                           |         |         |        |      |         |         |      |      |        |        |     |   |        |        |     |   |        |       
|                                             | Basic                                                                                        |                                           |         | 23,181  |        |      |         | 19,012  |      |      |        | 18,327 |     |   |        | 16,941 |     |   |        | 6,448  |    
|                                             | Diluted                                                                                      |                                           |         | 30,199  |        |      |         | 20,105  |      |      |        | 18,327 |     |   |        | 16,941 |     |   |        | 6,448  |    
|Dividends declared per share(3)              |                                                                                              |                                           | $0.18   |         |        |      | $0.18   |         |      |      | $0.13  |        |     |   |       |        |     |   |       |       
|Reconciliation to U.S. GAAP:                 |                                                                                              |                                           |         |         |        |      |         |         |      |      |        |        |     |   |        |        |     |   |        |       
|                                             | Net earnings (Canadian GAAP)                                                                 |                                           | $       | 29,401  |        |      | $       | 10,005  |      |      | $      | 6,138  |     |   | $      | 3,744  |     |   | $      | 1,688  |    
|                                             |                                                                                              | Adjustment to investment held for sale(4) |         |         | (2,236 | )    |         |         | 520  |      |        |        |    |   |        |        |    |   |        |        |    | 
|                                             |                                                                                              | Change in reporting currency(5)           |         |         |       |      |         |         | 144  |      |        |        | 405 |   |        |        | 233 |   |        |        | 109 | 
|                                             |                                                                                              | Adjustment to put option liability(6)     |         |         | (814   | )    |         |         | (811 | )    |        |        |    |   |        |        |    |   |        |        |    | 
|                                             |                                                                                              |                                           |         |         |        |      |         |         |      |      |        |        |     |   |        |        |     |   |        |       
|                                             | Net earnings (U.S. GAAP)(7)                                                                  |                                           | $       | 26,351  |        |      | $       | 9,858   |      |      | $      | 6,543  |     |   | $      | 3,977  |     |   | $      | 1,797  |    
|                                             |                                                                                              |                                           |         |         |        |      |         |         |      |      |        |        |     |   |        |        |     |   |        |       
|Net earnings per share (U.S. GAAP):(7)       |                                                                                              |                                           |         |         |        |      |         |         |      |      |        |        |     |   |        |        |     |   |        |       
|                                             | Basic                                                                                        |                                           |         | $1.14   |        |      |         | $0.52   |      |      |        | $0.36  |     |   |        | $0.23  |     |   |        | $0.28  |    
|                                             | Diluted                                                                                      |                                           |         | $0.96   |        |      |         | $0.49   |      |      |        | $0.36  |     |   |        | $0.23  |     |   |        | $0.28  |    
|                                             |                                                                                              |                                           |         |         |        |      |         |         |      |      |        |        |     |   |        |        |     |   |        |       





|                               |                               
|------------------------------ | ------------------------------
|18   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



---



##### 








|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 = $0.6338.                                                                                                                                                                                                                                                                                                
|   
|(2) | As discussed in note 2, Summary of
    significant accounting policies, of the notes to the
    audited consolidated financial statements, we adopted Canadian
    Institute of Chartered Accountants (CICA) Section 3062
    on January 1, 2002. Upon adoption of CICA
    Section 3062, goodwill is no longer amortized. The
    following table illustrates the effect that CICA
    Section 3062 would have had on net earnings and per share
    information under Canadian GAAP for the years ended
    December 31, 2002, 2001, 2000, 1999, and 1998 had goodwill
    not been amortized:

|                                      |  |                         |        |      |  |      |        |      |  |      |       |  |  |   |       |  |  |   |       | 
|------------------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ----- |  |  | - | ----- |  |  | - | ----- | 
|                                      |  |                        
|                                      |  | Year Ended December 31,
|(in thousands of U.S. dollars, except |  |                        
|per share amounts)                    |  | 2002                    |        | 2001 |  | 2000 |        | 1999 |  | 1998
|                                      |  |                         |        |      |  |      |        |      |  |     
|Reported net earnings  Canadian GAAP |  | $                       | 29,401 |      |  | $    | 10,005 |      |  | $    | 6,138 |  |  | $ | 3,744 |  |  | $ | 1,688 | 
|Add back: Goodwill amortization       |  |                         |       |      |  |      | 3,996  |      |  |      | 2,820 |  |  |   | 1,490 |  |  |   | 1,010 | 
|                                      |  |                         |        |      |  |      |        |      |  |      |       |  |  |   |       |  |  |   |       | 
|Net earnings adjusted for goodwill    |  | $                       | 29,401 |      |  | $    | 14,001 |      |  | $    | 8,958 |  |  | $ | 5,234 |  |  | $ | 2,698 | 
|                                      |  |                         |        |      |  |      |        |      |  |      |       |  |  |   |       |  |  |   |       | 
|Basic EPS  Reported                  |  | $                       | 1.27   |      |  | $    | 0.53   |      |  | $    | 0.34  |  |  | $ | 0.22  |  |  | $ | 0.26  | 
|Basic EPS  Adjusted for goodwill     |  | $                       | 1.27   |      |  | $    | 0.74   |      |  | $    | 0.49  |  |  | $ | 0.31  |  |  | $ | 0.42  | 
|Diluted EPS  Reported                |  | $                       | 1.06   |      |  | $    | 0.50   |      |  | $    | 0.34  |  |  | $ | 0.22  |  |  | $ | 0.26  | 
|Diluted EPS  Adjusted for goodwill   |  | $                       | 1.06   |      |  | $    | 0.70   |      |  | $    | 0.49  |  |  | $ | 0.31  |  |  | $ | 0.42  | 
|                                     



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | We commenced payment of dividends in the second
    quarter of 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(4) | As part of our acquisition of Kaye, we acquired
    Old Lyme, which we have sold to a subsidiary of Fairfax. Under
    U.S. GAAP, interest expense on debt we incurred to finance the
    purchase of Old Lyme is not charged to earnings. See note 18 to
    our audited consolidated financial statements for more
    information.                                                                                                                                                                                                                                                                                                                                               
|   
|(5) | We changed our reporting currency from Canadian
    dollar to U.S. dollar in 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(6) | Under U.S. GAAP, the fair value of put options is
    recorded as a debit to shareholders equity, representing
    an unearned compensation expense which is amortized to earnings
    using the straight-line method over the period from the issue
    date to the put date. See note 18 to our audited consolidated
    financial statements for more information.                                                                                                                                                                                                                                                                                                              
|   
|(7) | As discussed in the section Effects of New
    Accounting Pronouncements included in note 18,
    Reconciliation to U.S. GAAP of the notes to the
    audited consolidated financial statements, we adopted Financial
    Accounting Standards Boards Statement of Financial
    Accounting Standards No. 142 (SFAS No. 142) on
    January 1, 2002. Upon adoption of SFAS No. 142
    goodwill is no longer amortized. The following table illustrates
    the effect that SFAS No. 142 would have had on net earnings
    and per share information under US GAAP for the years ended
    December 31, 2002, 2001, 2000, 1999, and 1998, had goodwill
    not been amortized:

|                                      |  |                         |        |      |  |      |        |      |  |      |       |  |  |   |       |  |  |   |       | 
|------------------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ----- |  |  | - | ----- |  |  | - | ----- | 
|                                      |  |                        
|                                      |  | Year Ended December 31,
|(in thousands of U.S. dollars, except |  |                        
|per share amounts)                    |  | 2002                    |        | 2001 |  | 2000 |        | 1999 |  | 1998
|                                      |  |                         |        |      |  |      |        |      |  |     
|Reported net earnings  U.S. GAAP     |  | $                       | 26,351 |      |  | $    | 9,858  |      |  | $    | 6,543 |  |  | $ | 3,977 |  |  | $ | 1,797 | 
|Add back: Goodwill amortization       |  |                         |       |      |  |      | 4,065  |      |  |      | 2,988 |  |  |   | 1,583 |  |  |   | 1,076 | 
|                                      |  |                         |        |      |  |      |        |      |  |      |       |  |  |   |       |  |  |   |       | 
|Net earnings adjusted for goodwill    |  | $                       | 26,351 |      |  | $    | 13,923 |      |  | $    | 9,531 |  |  | $ | 5,560 |  |  | $ | 2,873 | 
|                                      |  |                         |        |      |  |      |        |      |  |      |       |  |  |   |       |  |  |   |       | 
|Basic EPS  Reported                  |  | $                       | 1.14   |      |  | $    | 0.52   |      |  | $    | 0.36  |  |  | $ | 0.23  |  |  | $ | 0.28  | 
|Basic EPS  Adjusted for goodwill     |  | $                       | 1.14   |      |  | $    | 0.73   |      |  | $    | 0.52  |  |  | $ | 0.33  |  |  | $ | 0.45  | 
|Diluted EPS  Reported                |  | $                       | 0.96   |      |  | $    | 0.49   |      |  | $    | 0.36  |  |  | $ | 0.23  |  |  | $ | 0.28  | 
|Diluted EPS  Adjusted for goodwill   |  | $                       | 0.96   |      |  | $    | 0.69   |      |  | $    | 0.52  |  |  | $ | 0.33  |  |  | $ | 0.45  | 
|                                     





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    19



---



##### 



|                                  |                                        |                                           |                                                                                                      |         |        |        |         |         |     |        |         |         |   |       |         |         |   |       |        |        |   |     | 
|--------------------------------- | -------------------------------------- | ----------------------------------------- | ---------------------------------------------------------------------------------------------------- | ------- | ------ | ------ | ------- | ------- | --- | ------ | ------- | ------- | - | ----- | ------- | ------- | - | ----- | ------ | ------ | - | --- | 
|                                  |                                        |                                          
|                                  |                                        | As of December 31                        
|                                  |                                        |                                          
|(in thousands of U.S. dollars)(1) |                                        | 2002                                      |                                                                                                      | 2001    |        | 2000   |         | 1999    |     | 1998  
|                                  |                                        |                                           |                                                                                                      |         |        |        |         |         |     |       
|Consolidated balance sheet data   |                                        |                                           |                                                                                                      |         |        |        |         |         |     |        |         |         |   |       |         |         |   |       |        |       
|Total assets                      |                                        | $                                         | 596,876                                                                                              |         |        | $      | 502,296 |         |     | $      | 206,157 |         |   | $     | 171,202 |         |   | $     | 49,133 |       
|Total debt(2)                     |                                        | $                                         | 107,038                                                                                              |         |        | $      | 196,952 |         |     | $      | 34,665  |         |   | $     | 20,565  |         |   | $     | 14,388 |       
|Total shareholders equity        |                                        | $                                         | 284,274                                                                                              |         |        | $      | 135,271 |         |     | $      | 112,212 |         |   | $     | 105,462 |         |   | $     | 13,463 |       
|Reconciliation to U.S. GAAP:      |                                        |                                           |                                                                                                      |         |        |        |         |         |     |        |         |         |   |       |         |         |   |       |        |       
|                                  | Total shareholders equity             |                                           |                                                                                                      |         |        |        |         |         |     |        |         |         |   |       |         |         |   |       |        |        |  
|                                  | (Canadian GAAP)                        |                                           | $                                                                                                    | 284,274 |        |        | $       | 135,271 |     |        | $       | 112,212 |   |       | $       | 105,462 |   |       | $      | 13,463 |  
|                                  |                                        | Adjustment to investment held for sale(3) |                                                                                                      |         | (1,716 | )      |         |         | 520 |        |         |         |  |       |         |         |  |       |        |        |  |    
|                                  |                                        | Accumulated other comprehensive income:   |                                                                                                      |         |        |        |         |         |     |        |         |         |   |       |         |         |   |       |        |        |   |    
|                                  |                                        |                                           | Unrealized gains (losses), net of tax of
    $51  2002, $85  2001, $(122) 
    2000, $(26)  1999 |         |        | (83    | )       |         |     | (140   | )       |         |   | 198   |         |         |   | 42    |        |        |   |    | 
|                                  |                                        |                                           | Cumulative translation account(4)                                                                    |         |        | 496    |         |         |     |       |         |         |   | 5,811 |         |         |   | 9,836 |        |        |   | 370 | 
|                                  |                                        |                                           | Adjustment to put option liability(5)                                                                |         |        | (1,702 | )       |         |     | (4,898 | )       |         |   |      |         |         |   |      |        |        |   |    | 
|                                  |                                        |                                           | Executive share purchase plan loan(6)                                                                |         |        | (1,912 | )       |         |     | (2,142 | )       |         |   |      |         |         |   |      |        |        |   |    | 
|                                  |                                        |                                           |                                                                                                      |         |        |        |         |         |     |        |         |         |   |       |         |         |   |       |        |       
|                                  | Total shareholders equity (U.S. GAAP) |                                           | $                                                                                                    | 279,357 |        |        | $       | 128,611 |     |        | $       | 118,221 |   |       | $       | 115,340 |   |       | $      | 13,833 |  
|                                  |                                        |                                           |                                                                                                      |         |        |        |         |         |     |        |         |         |   |       |         |         |   |       |        |       






|    |                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 = $0.6338.                                                                                                                      
|   
|(2) | Includes long-term debt and capital leases
    (including current portion), bank debt and subordinated
    convertible notes.                                                                                                                                                                                                                                                                                              
|   
|(3) | As part of our acquisition of Kaye, we acquired
    Old Lyme, which we have sold to a subsidiary of Fairfax. See
    note 1 to our audited consolidated financial statements for more
    information. Under U.S. GAAP, interest expense on debt we
    incurred to finance the purchase of Old Lyme is not charged to
    earnings. See note 18 to our audited consolidated financial
    statements for more information.
|   
|(4) | Under U.S. GAAP, financial statements are
    translated using a current exchange rate. See note 18 to our
    audited consolidated financial statements for more information.                                                                                                                                                                                                                                             



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(5) | Under U.S. GAAP, the fair value of put options is
    recorded as a debit to shareholders equity, representing
    an unearned compensation expense which is amortized to earnings
    using the straight-line method over the period from the issue
    date to the put date. Further, the redemption value of the
    common shares to which the put options is attached has been
    reclassified as mezzanine equity outside of shareholders
    equity. See note 18 to our audited consolidated financial
    statements for more information.
|   
|(6) | Under U.S. GAAP, loans granted to employees under
    the executive share purchase plan must be included as a
    reduction to shareholders equity. See note 18 to our
    audited consolidated financial statements for more information.                                                                                                                                                                                                                                                                                                          



|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of
    Financial Condition and Results of Operations

The 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.





|                               |                               
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|20   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



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Reference to Hub, 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 (United States GAAP) and to the extent
that they effect us are described in Note 18 to our audited
consolidated financial statements.


Overview

Hub is a leading North American insurance
brokerage providing a wide variety of property and casualty,
life and health, employee benefits, investment and risk
management products and services from 122 locations across North
America. We were formed in November 1998 through the merger of
11 independent, privately held insurance brokerages.

We have acquired 86 brokerages in Canada and the
United States, with substantially all of our large acquisitions
focused in the United States over the past four years.
Accordingly our revenue base also has shifted increasingly into
the United States. Listed in the chart below is a summary of our
major acquisitions for the past four years:

|                                                    |  |               |  |               |               | 
|--------------------------------------------------- |  | ------------- |  | ------------- | ------------- | 
|Name                                                |  | Region        |  | Date Acquired
|                                                    |  |               |  |              
|TOS Insurance Services Ltd.                         |  | Canada        |  |               | August 1999   | 
|Mack and Parker, Inc.                               |  | United States |  |               | October 1999  | 
|C.J. McCarthy (McCarthy)                            |  | United States |  |               | June 2000     | 
|J.P. Flanagan Corporation (Flanagan)                |  | United States |  |               | May 2001      | 
|Kaye Group Inc. (Kaye)                              |  | United States |  |               | June 2001     | 
|Burnham Insurance Group, Inc. (Burnham)             |  | United States |  |               | July 2001     | 
|Hooper, Hayes & Associates, Inc. (Hooper
    Hayes) |  | United States |  |               | November 2002 | 
|Hub International of Indiana Limited                |  | United States |  |               | December 2002 | 

We applied the purchase method of accounting for
these acquisitions, and as a result, the acquired
brokerages financial results are included only from the
date of acquisition.

Industry
Conditions.Insurance brokerages
derive a significant portion of their revenue from commissions.
Commissions are calculated and paid as a percentage of the total
insurance premium and therefore vary directly with changes in
premiums charged by the insurance companies.

In 2001, premium rates  the cost per
dollar of insurance coverage  began rising. The
terrorist attacks of 2001 accelerated this increase in premium
rates. In 2002, premium rates increased an average of
12%  17% over 2001. This substantial pattern of
premium rate increase follows more than a decade of low premiums
in the insurance market. Years of excess capacity and
competitive market conditions resulted in a downward pressure on
premiums and an increase in underwriting losses by insurance
companies. These losses were at least partly offset by favorable
investment portfolio returns fueled by a strong economy and
robust capital markets. A combination of a stagnant economy,
declining investment portfolio values and losses related to the
events of September 11, 2001, resulted in additional
underwriting losses, which forced insurance companies to
dramatically accelerate the rate of premium increases and limit
coverage availability.

Although the insurance industry is typically less
sensitive to economic cycles than other industries, primarily
because insurance is considered a necessity for most businesses,
reductions in a clients sales, inventories and employee
head counts during a slow economy can lead to a reduction in
total premiums for certain types of insurance. In addition,
clients often respond to higher premium rates by adjusting
coverage, increasing deductibles or making other changes to
reduce their insurance costs. As a result, our commission
revenue did not keep pace with premium rate increases.

U.S. initial public
offering.Reflecting our growing
emphasis on the U.S. market, we completed our U.S. initial
public offering on June 18, 2002, selling 6.9 million
common shares at $14 per share and generating net proceeds of
$88.1 million. Proceeds of the offering were used to pay down
both short-term and long-term debt, which greatly strengthened
our balance sheet and reduced interest costs. In connection with
our U.S. initial public offering, we





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|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    21



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##### 



listed our common shares on the NYSE under the
symbol HBG. Our common shares also are listed on the
Toronto Stock Exchange (TSX) under the symbol
HBG.


Revenue.From
1998 through 2002 our annual revenue increased from $38.7
million to $220.0 million, representing a growth rate
compounded annually (CAGR) of 54%. Growth related to
acquisitions during this period represented $153.9 million,
or 85% of the increase. Organic growth was $27.4 million or
15% of the increase. We define organic growth as an increase in
revenue for one period as compared to a prior period, including
net new business and net increases in commissions from existing
business. Revenue from a brokerage we acquire is excluded from
the calculation of organic growth for the first 12 months after
the acquisition.

Revenue growth

(BAR CHART)






|    |                                              
|--- | ---------------------------------------------
|(1) | The growth rate has been compounded annually.





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|22   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



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The chart below shows that in the last three
years acquisitions and organic growth increased the portion of
revenue generated in the United States to 61% in 2002 from 21%
in 2000. We expect that future acquisitions in the United
States, will further increase the percentage of revenue and
earnings derived from our U.S. Operations.

|                               |                     |       |   |         |         |      |  |      |       |   |   |        |         |  |  |      |       |   |   |        |        |  |  |      |       |  
|------------------------------ | ------------------- | ----- | - | ------- | ------- | ---- |  | ---- | ----- | - | - | ------ | ------- |  |  | ---- | ----- | - | - | ------ | ------ |  |  | ---- | ----- | -
|(in
thousands of U.S. dollars, |                     |       |   |         |         |     
|except
percentages)            |                     | 2002  |   | 2001    |         | 2000
|                               |                     |       |   |         |         |     
|                               |                     |       |   |         |         |      |  |      |       |  
|Revenue                        |                     |       |   |         |         |      |  |      |       |   |   |        |         |  |  |      |       |   |   |        |        |  |  |     
|                               | U.S. Operations     |       | $ | 134,149 |         |      |  | 61.0 | %     |   | $ | 75,429 |         |  |  | 49.0 | %     |   | $ | 20,004 |        |  |  | 21.0 | %    
|                               | Canadian Operations |       |   | 85,811  |         |      |  | 39.0 | %     |   |   | 78,564 |         |  |  | 51.0 | %     |   |   | 75,236 |        |  |  | 79.0 | %    
|                               |                     |       |   |         |         |      |  |      |       |   |   |        |         |  |  |      |       |   |   |        |        |  |  |     
|                               |                     | Total |   | $       | 219,960 |      |  |      | 100.0 | % |   | $      | 153,993 |  |  |      | 100.0 | % |   | $      | 95,240 |  |  |      | 100.0 | %
|                               |                     |       |   |         |         |      |  |      |       |   |   |        |         |  |  |      |       |   |   |        |        |  |  |     

The chart below summarizes our revenue by
category:

Revenue

(PIE CHART)





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|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    23



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##### 



We generate commission income from the sale of
both personal and commercial insurance. As the charts (below)
show, U.S. operations generate nearly 91% of commissions from
commercial insurance, while commercial business is approximately
53% of commissions in Canada. Primary factors attributing to
this difference include:



|  |                                                                                                                                                                                                                                                                                                      
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In Canada we operate three personal insurance
    call centers and we are also the largest broker of government
    underwritten auto insurance in the province of British Columbia.
    This causes the weighting of personal lines insurance to be
    heavier in Canada.                          
| 
| | U.S. Operations have a heavier concentration of
    commissions from group benefits, usually purchased through
    businesses and therefore classified as commercial insurance,
    while Canadas public health care system reduces the
    insurance premiums from this type of coverage in Canada.

U.S.

(PIE CHART)

Canada

(PIE CHART)





|                               |                               
|------------------------------ | ------------------------------
|24   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



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##### 



In addition to commissions, we also earn revenue
on volume overrides and contingent commissions related to the
total of all insurance accounts placed by a brokerage with an
insurance company, otherwise known as a book of business.



|  |                                                                                                                                                                                             
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Volume overrides are additional compensation paid
    by insurance companies to brokerages on the basis of the overall
    volume of business a brokerage places with the insurance company.
| 
| | Contingent commissions are based on the profit an
    insurance company makes on the book of business a brokerage
    places with the insurance company.                                    

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. In 2002, $11.5 million, or 5.2% of our total
revenue, was derived from contingent commissions and volume
overrides.

Other income consists of fees and interest
income, including income earned while we hold client premiums on
behalf of insurance companies. In 2002, $7.7 million, or
3.5% of our total revenue, was derived from other income.

We are not dependent on any single client or on a
few clients for our revenue, nor are we dependent on a single
industry or client type for a substantial amount of our
business. We place insurance policies with more than 150
different insurance companies in the United States and Canada
and do not depend on any single insurance company or group of
related insurance companies for the products we market to our
clients or for any substantial amount of our revenue.

As of December 31, 2002, we had placed
insurance polices with seven insurance companies owned by
Fairfax Financial Holdings Limited (Fairfax), which owns
approximately 27% of our common shares, each of which offers
competitively-priced products. All of our transactions with the
Fairfax companies are conducted in the normal course of
business, at fair market value and in the aggregate our
brokerage subsidiaries generated approximately 10% of our total
revenue in 2002 from these related parties.

Expenses.The
majority of expenses we incur are compensation expenses related
to salaries, management profitability bonuses and employee
benefits, which accounted for approximately 67% of our total
operating expenses in 2002. The next largest category of
expenses are, selling, occupancy and administrative expenses.
Selling includes marketing and advertising, but not commissions
paid to our sales producers, occupancy includes rent and related
operating costs and administration includes, among other
expenses, office supplies, postage, telephone, training,
technology, insurance and bad debts. The graph below shows that
compensation expenses, and selling, occupancy and administrative
expenses as a percentage of revenue both decreased by 300 basis
points in 2002. These decreases were the result of changes to
our management profitability bonus plan discussed below and
maintaining fixed costs as our revenue grew.





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|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    25



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##### 



Expenses as a percentage of total
revenue

(BAR CHART)

During 2002, we changed our management bonus plan
to require that half of certain earned bonuses be paid in the
form of stock options. These options must be earned through
achievement of specific earnings goals. We also began expensing
stock options in 2002. This non-cash expense reduced our 2002
pre-tax income by $1,078, and diluted net earnings per share of
$0.02.

Net Earnings.We
increased net earnings at a growth rate compounded annually of
104% from $1.7 million in 1998 to $29.4 million in
2002. Net margin, which represents net earnings as a percentage
of revenue, increased to 13% in 2002 from 4% in 1998, reflecting
increases in revenue as well as operating efficiencies and
economies of scale. On a diluted per share basis, net earnings
increased at a growth rate compounded annually of 42% to $1.06
in 2002 from $0.26 in 1998. The growth rate of diluted earnings
per share did not keep pace with the growth rate of net earnings
due to a substantial increase in the number of shares
outstanding over that time period as a result of shares issued
in connection with acquisitions and our initial public offering
in Canada in 1999, and most recently, our common shares
outstanding grew by 6.9 million, due to the U.S. initial
public offering in June of 2002.

Results of Operations

Year ended December 31, 2002 compared to
year ended December 31, 2001

Revenue.We
increased total revenue by $66.0 million, or 43%, to $220.0
million in 2002 from $154.0 million in 2001. Of this
increase, $46.2 million or 70% was attributable to
acquisitions, primarily from the acquisitions of Kaye, Burnham
and Flanagan in 2001, and $19.8 million or 30% was
attributable to organic growth. Commission income increased by
$57.7 million, or 40%, to $200.8 million in 2002, from
$143.1 million in 2001. Excluding the effect of
acquisitions, commission income increased by $18.4 million,
or 13%, due to organic growth, including the continued firming
of insurance premium rates. In 2002, revenue from contingent
commissions and volume overrides increased by $5.6 million,
or 94%, to $11.5 million from $5.9 million in 2001.
Excluding the effects of acquisitions of $4.2 million,
contingent commissions and volume overrides increased by
$1.4 million or 23% as compared with the prior year. This
increase resulted primarily from contingent commissions earned
in the third and fourth quarters of 2002 from Fairfax related to
premium volume placed with Old Lyme. In 2002, other income,
which includes fees and interest income, increased by
$2.7 million, or 53%, to $7.7 million from
$5.0 million in 2001. Excluding the effects of acquisitions
of $2.7 million, other income remained unchanged.





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|26   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



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##### 



The table below shows a breakdown of our revenue
by segment and type for 2002 including organic growth:

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

|                                            |  |         |         |           |  |           |         |                |  |               |        |           |  |           |     |   |  |   |         |   |  |   |        |   |  |  |     |  
|------------------------------------------- |  | ------- | ------- | --------- |  | --------- | ------- | -------------- |  | ------------- | ------ | --------- |  | --------- | --- | - |  | - | ------- | - |  | - | ------ | - |  |  | --- | -
|                                            |  |         |         |           |  |           |         | Adjustment     |  |               |        |          
|                                            |  | Revenue |         |           |  |           |         | for            |  |               |        |          
|                                            |  |         |         | Total Net |  | Total Net |         | (Acquisitions) |  | Organic       |        | Organic  
|                                            |  | 2002    |         | 2001      |  | Change($) |         | Growth(%)      |  | and Disposals |        | Growth($) |  | Growth(%)
|                                            |  |         |         |           |  |           |         |                |  |               |        |           |  |          
|Total                                       |  |         |         |           |  |           |         |                |  |               |        |           |  |           |     |   |  |   |         |   |  |   |        |   |  |  |     |  
|Commission Income                           |  | $       | 200,792 |           |  | $         | 143,063 |                |  | $             | 57,729 |           |  |           | 40  | % |  | $ | (39,213 | ) |  | $ | 18,516 |   |  |  | 13  | %
|Contingent Commissions and Volume Overrides |  |         | 11,464  |           |  |           | 5,899   |                |  |               | 5,565  |           |  |           | 94  | % |  |   | (4,194  | ) |  |   | 1,371  |   |  |  | 23  | %
|Other Income                                |  |         | 7,704   |           |  |           | 5,031   |                |  |               | 2,673  |           |  |           | 53  | % |  |   | (2,702  | ) |  |   | (29    | ) |  |  | -1  | %
|                                            |  |         |         |           |  |           |         |                |  |               |        |           |  |           |     |   |  |   |         |   |  |   |        |   |  |  |     |  
|Total                                       |  | $       | 219,960 |           |  | $         | 153,993 |                |  | $             | 65,967 |           |  |           | 43  | % |  | $ | (46,109 | ) |  | $ | 19,858 |   |  |  | 13  | %
|                                            |  |         |         |           |  |           |         |                |  |               |        |           |  |           |     |   |  |   |         |   |  |   |        |   |  |  |     |  
|U.S.                                        |  |         |         |           |  |           |         |                |  |               |        |           |  |           |     |   |  |   |         |   |  |   |        |   |  |  |     |  
|Commission Income                           |  | $       | 120,557 |           |  | $         | 71,202  |                |  | $             | 49,355 |           |  |           | 69  | % |  | $ | (39,906 | ) |  | $ | 9,449  |   |  |  | 13  | %
|Contingent Commissions and Volume Overrides |  |         | 7,780   |           |  |           | 1,693   |                |  |               | 6,087  |           |  |           | 360 | % |  |   | (4,214  | ) |  |   | 1,873  |   |  |  | 111 | %
|Other Income                                |  |         | 5,812   |           |  |           | 2,534   |                |  |               | 3,278  |           |  |           | 129 | % |  |   | (2,729  | ) |  |   | 549    |   |  |  | 22  | %
|                                            |  |         |         |           |  |           |         |                |  |               |        |           |  |           |     |   |  |   |         |   |  |   |        |   |  |  |     |  
|Total                                       |  | $       | 134,149 |           |  | $         | 75,429  |                |  | $             | 58,720 |           |  |           | 78  | % |  | $ | (46,849 | ) |  | $ | 11,871 |   |  |  | 16  | %
|                                            |  |         |         |           |  |           |         |                |  |               |        |           |  |           |     |   |  |   |         |   |  |   |        |   |  |  |     |  
|Canada                                      |  |         |         |           |  |           |         |                |  |               |        |           |  |           |     |   |  |   |         |   |  |   |        |   |  |  |     |  
|Commission Income                           |  | $       | 80,235  |           |  | $         | 71,861  |                |  | $             | 8,374  |           |  |           | 12  | % |  | $ | 693     |   |  | $ | 9,067  |   |  |  | 13  | %
|Contingent Commissions and Volume Overrides |  |         | 3,684   |           |  |           | 4,206   |                |  |               | (522   | )         |  |           | -12 | % |  |   | 20      |   |  |   | (502   | ) |  |  | -12 | %
|Other Income                                |  |         | 1,892   |           |  |           | 2,497   |                |  |               | (605   | )         |  |           | -24 | % |  |   | 27      |   |  |   | (578   | ) |  |  | -23 | %
|                                            |  |         |         |           |  |           |         |                |  |               |        |           |  |           |     |   |  |   |         |   |  |   |        |   |  |  |     |  
|Total                                       |  | $       | 85,811  |           |  | $         | 78,564  |                |  | $             | 7,247  |           |  |           | 9   | % |  | $ | 740     |   |  | $ | 7,987  |   |  |  | 10  | %
|                                            |  |         |         |           |  |           |         |                |  |               |        |           |  |           |     |   |  |   |         |   |  |   |        |   |  |  |     |  

U.S. Operations

Total revenue from U.S. Operations increased by
$58.8 million, or 78%, to $134.2 million in 2002 from
$75.4 million in 2001. Excluding the effect of
acquisitions, total revenue increased $11.9 million, or
16%, primarily due to increases in commission income. Commission
income increased by $49.4 million, or 69%, to
$120.6 million in 2002 from $71.2 million in 2001.
Excluding the effect of acquisitions, commission income
increased $9.4 million, or 13% due to organic growth and
higher premium rates. Revenue from contingent commissions and
volume overrides increased by $6.1 million, or 360%, to
$7.8 million in 2002 from $1.7 million in 2001.
Excluding the effect of acquisitions of $4.2 million, contingent
commissions and volume overrides increased by $1.9 million,
or 111%, as compared with the prior year. Of this increase,
$1.2 million was attributable to contingent commissions
earned in the third and fourth quarters of 2002 from Fairfax, as
previously discussed, and the remainder was the result of
enhanced relationships established with other insurance
companies. Other income, which includes fees and interest
income, increased by $3.3 million, or 129%, to
$5.8 million in 2002 from $2.5 million in 2001.
Excluding the effect of acquisitions of $2.7 million, other
income increased $0.6 million, or 22% from 2001. This
increase is due to an increase in income earned related to the
financing of client premiums partially offset by lower interest
income as a result of a decrease in interest rates compared with
the prior year.

Canadian Operations

Total revenue from Canadian Operations increased
by $7.2 million, or 9%, to $85.8 million in 2002 from
$78.6 million in 2001. Excluding the effect of net
dispositions of $0.7 million, total revenue increased by
$7.9 million or 10%. This increase was due to increases in
commission income. Commission income increased by
$8.3 million, or 12%, to $80.2 million in 2002 from
$71.9 million in 2001. Excluding the effect of net
dispositions of $0.7 million, commission income increased
by $9.0 million, or 13%, the result of organic growth and
higher premium rates. Contingent commissions and volume
overrides decreased by $0.5 million, or 12%, to
$3.7 million in 2002 from $4.2 million in 2001. This
decrease was primarily attributable to deteriorating loss ratios
on business placed with insurance companies during 2001. Other
income, which includes fees and interest income, decreased by
$0.6 million,





|                               |                                
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|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    27



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##### 



or 24%, to $1.9 million in 2002 from
$2.5 million in 2001. This decrease was attributable
primarily to lower interest rates in 2002 compared with 2001.


Compensation.Compensation costs in 2002 increased by $30.7 million, or
35%, to $118.7 million from $88.0 million in 2001.
Compensation costs as a percentage of total revenue decreased 3%
to 54% from 57% in 2001. This proportional decrease resulted
largely from revenue growth as certain fixed compensation costs
remained constant, and from a decrease in the accrual of
executive management profitability bonuses (approximately
$4.7 million or 2.1% of revenue) associated with the
granting of stock options. In 2002 we changed our executive
management bonus plan to require that 50% of earned bonuses be
paid with stock option awards.

Selling, occupancy and
administration.Selling, occupancy
and administration expenses increased by $9.6 million, or
27%, to $44.9 million in 2002 from $35.3 million in 2001.
As a percentage of total revenue, selling, occupancy and
administration expenses decreased to 20% in 2002 from 23% in
2001. This decrease was due to efforts to ensure that certain
fixed costs remained constant while revenue grew.

Depreciation.Depreciation expenses increased by $1.6 million, or 39%, to
$5.5 million in 2002 from $3.9 million in 2001.
Depreciation expenses remained unchanged as a percentage of
total revenue at 3% in both 2002 and 2001.

Interest
expense.Interest expense
decreased by $0.1 million, or 2%, to $7.3 million in 2002
from $7.4 million in 2001. In June 2002, we repaid $122.5
million of our total outstanding long-term debt and subordinated
convertible debentures with proceeds from the sale of Old Lyme
and our U.S. initial public offering. This reduction in debt
decreased interest expense in the third and fourth quarter of
2002 by approximately $1.5 million per quarter compared to
2001.

Goodwill and other intangible asset
amortization.Intangible asset
amortization decreased by $3.2 million, or 66%, to
$1.7 million in 2002 from $4.9 million in 2001. This
decrease is attributable to the elimination of goodwill
amortization, effective January 1, 2002, in accordance with
The Canadian Institute of Chartered Accountants Accounting
Standards Board Handbook Section 3062, Goodwill and
Other Intangible Assets.

Gain on disposal of investment held for
sale, property, equipment and
investments.These gains have
increased by $2.5 million, or 1449%, to $2.7 million in
2002 from $0.2 million in 2001. Included in 2002 is a
$2.6 million, non-taxable gain on the sale of Old Lyme.
This gain increased basic and diluted earnings per share by
$0.11 and $0.09, respectively. As part of our acquisition of
Kaye in 2001, we acquired Old Lyme, with the intent to sell the
operation and have since sold it to a subsidiary of Fairfax at a
purchase price equivalent to its U.S. GAAP book value as of
December 31, 2001 of approximately $43.5 million. The
sale of Old Lyme was completed on May 30, 2002. As of
December 31, 2002, Fairfax owned 27% of our common shares.
Prior to the sale, we recorded Old Lyme as an investment
available for sale, and accordingly, its results of operations
are not included in our consolidated earnings.

Gain on put option
liability.The gain on put option
liability of $0.2 million in 2002, as compared to
$0.7 million in 2001, reflect changes in the fair value of
put options granted by us. We issued put options as
consideration for certain businesses acquired in the second and
third quarters of 2001. The related put option liability is
classified as long-term debt at fair value until such time as
the options are exercised or expire. Factors affecting the fair
market value of the put option are the stock price, stock
volatility, and interest rates.

Non-cash stock option
compensation.Non-cash stock
option compensation of $1.1 million in 2002 reflects the impact
of approximately 1.3 million stock options granted in June
of 2002. The options were granted with an exercise price of
$15.67 per share (fair market value at date of grant) and vest
evenly over three years. The options expire in seven years. Our
policy is to expense the fair value of stock options granted to
employees over the period in which entitlement to the
compensation vests. Non-cash stock option compensation was 0.5%
of total revenue for 2002.

Provision for income tax
expense.Income taxes in 2002 and
2001 amounted to $14.3 million and $5.3 million,
respectively, resulting in an effective tax rate of 33% and 34%
in 2002 and 2001, respectively. This decrease in effective tax
rate was primarily the result of the non-taxable gain of
$2.6 million on the sale of Old Lyme.





|                               |                               
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|28   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



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##### 



Net earnings.Net earnings in 2002 increased by $19.4 million, or 194%,
to $29.4 million in 2002 compared with $10.0 million
in 2001. Basic earnings per share increased 140% to $1.27 in
2002 compared with $0.53 per share in 2001. Diluted earnings per
share increased 112% to $1.06 in 2002 from $0.50 in 2001.

Year ended December 31, 2001 compared to
year ended December 31, 2000

Revenue.We
increased total revenue by $58.8 million, or 62%, to $154.0
million in 2001 from $95.2 million in 2000. Of this
increase, $55.6 million or 95% was attributable to
acquisitions and reflects the inclusion of the results of each
brokerage we acquired during the year from the respective date
of each acquisition. Commission income increased by
$56.7 million or 66%, to $143.1 million in 2001 from
$86.4 million in 2000. Excluding the effect of
acquisitions, commission income increased $4.5 million or
5%, primarily due to organic growth, including premium rate
increases. Revenue from contingent commissions and volume
overrides increased by $1.0 million or 20% to $5.9 million
in 2001 from $4.9 million in 2000. This increase resulted
primarily from acquisitions. For 2001, other income, which
includes fees and interest income, increased by
$1.1 million or 28% to $5.0 million from
$3.9 million in 2000. This increase resulted primarily from
acquisitions.

U.S. Operations

Total revenue from U.S. Operations increased by
$55.4 million, or 277%, to $75.4 million in 2001 from
$20.0 million in 2000. This increase was primarily due to
acquisitions. Excluding the effect of acquisitions, total
revenue increased $2.1 million or 10% primarily due to
organic growth.

Canadian Operations

Total revenue from Canadian Operations increased
by $3.4 million, or 5%, to $78.6 million in 2001 from
$75.2 million in 2000. Excluding the effect of
acquisitions, total revenue increased $1.1 million or 1%.

Compensation.Compensation costs increased by $33.3 million, or 61%, to
$88.0 million in 2001 from $54.7 million in 2000.
Compensation costs as a percentage of total revenue remained
unchanged at 57% for 2001 as compared to 2000.

Selling, occupancy and
administration.Selling, occupancy
and administration expenses increased by $13.5 million, or
62%, to $35.3 million in 2001 from $21.8 million in
2000. Selling, occupancy and administration expenses as a
percentage of total revenue of 23% remained unchanged in both
2001 and 2000.

Depreciation.Depreciation expenses increased by
$2.0 million, or 105%, to $3.9 million in 2001 from
$1.9 million in 2000. Depreciation expenses as a percentage
of total revenue increased to 3% in 2001 from 2% in 2000. This
increase was primarily due to property and equipment that we
acquired with our brokerage acquisitions.

Interest expense.Interest expense increased by
$5.4 million, or 270%, to $7.4 million in 2001 from
$2.0 million in 2000. This increase was largely
attributable to our issuance of 8.5% convertible subordinated
notes and new short-term bank loans incurred to fund the
acquisitions of Kaye and other brokerages we acquired in 2001.

Goodwill and other intangible asset
amortization.Goodwill and other
intangible asset amortization increased by $1.6 million, or
48%, to $4.9 million in 2001 from $3.3 million in 2000.
This increase is attributable to acquisitions in 2001 and 2000.

Provision for income tax expense.Income taxes for 2001 and 2000
amounted to $5.3 million and $5.4 million,
respectively, resulting in an effective tax rate of 34% and 47%
for 2001 and 2000, respectively. The decrease in our effective
income tax rate was the result of a greater proportion of our
revenue earned outside of Canada, where income is taxed at lower
rates.

Net earnings.Net earnings increased by
$3.9 million or 63% to $10.0 million in 2001 compared
to $6.1 million in 2000. Basic earnings per share increased
to $0.53 per share in 2001 from $0.34 per share in 2000. Diluted
earnings per share increased to $0.50 per share in 2001 from
$0.34 per share in 2000.





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    29



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##### 



Cash Flow, Liquidity and Capital
Resources

We act as an intermediary between insurance
companies and their insured clients. As such, we collect and
hold premiums paid by clients on behalf of the insurers. We
deduct commissions and other expenses from these payments and
hold the remainder in trust for the insurers. We earn interest
on those funds during the time between receipt of the cash and
the time the cash is paid out to the insurers. However, we may
not use the funds for any purpose and we must remit the funds
within a specified period after the effective date of the
respective policy. The cash we hold in trust is shown separately
on our balance sheet. 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.

As of December 31, 2002, we had cash and
cash equivalents of $40.6 million, an increase of
$13.6 million from $27.0 million as of
December 31, 2001. During 2002, $19.1 million of cash
was provided by operating activities primarily as a result of
net earnings adjusted for items not affecting working capital
partially offset by an increase in trust cash of
$3.2 million and the payment of the following other
payables and accrued liabilities that existed at
December 31, 2001: $2.4 million of deferred
compensation related to the Kaye acquisition; $4.5 million
of amounts owed by Kaye to Old Lyme; $1.5 million of tax
liabilities related to the Flanagan acquisition; and
$1.4 million related to the relocation of Kayes New
York City office.

In 2002, $2.9 million of cash was provided
by financing activities. $80.7 million was used to repay
short-term and long-term debt, $4.5 million was used for
the payment of dividends, and $88.1 million of net proceeds
was provided from our U.S. initial public offering.

In 2002, $8.4 million of cash was used by
investing activities. The sale of Old Lyme, other brokerages and
investments generated $46.8 million, the purchase of
property and equipment used $4.5 million, and the purchase
of brokerages used $50.7 million.

As of December 31, 2001, we had cash and
cash equivalents of $27.0 million an increase of
$7.1 million from $19.9 million as of
December 31, 2000. During 2001, $8.8 million of cash
was provided by operating activities, primarily as a result of
increased net earnings. Long-term debt financing and bank debt
financing generated $137.8 million of cash and share
capital issued, net of repurchases, also generated cash of
$3.3 million. From these amounts and existing cash
balances, $123.4 million (net of $25.4 million cash
received) was used to acquire brokerages, $5.2 million was
used to repay long-term debt and capital leases,
$3.6 million was used to pay dividends, and
$10.9 million was used for additions to property and
equipment and other assets.

As of December 31, 2000, we had cash and
cash equivalents of $19.9 million, a decrease of
$1.5 million from $21.4 million as of
December 31, 1999. During 2000, $10.9 million of cash
was provided from operating activities primarily as a result of
increased net earnings adjusted for non-cash income and
expenses. Long-term debt financing generated $29.8 million
of cash and the sale of other assets generated $2.8 million
of cash. From these amounts and existing cash balances,
$18.9 million was used to acquire brokerages,
$2.8 million was used to repurchase our common shares,
$18.9 million was used to repay long-term debt, capital
leases, and bank debt, $2.5 million was used to pay
dividends, and $2.1 million was used for additions to
property and equipment.

As of December 31, 2002, we had client
premiums receivable outstanding of $110.7 million, of which
2.2% were over 90 days old. We monitor these receivables on
a regular and timely basis and have controls in place to manage
aging accounts. In addition, we can mitigate the risk of loss
related to client premiums receivable by requesting that the
insurance company cancel the contract for insurance where
payment is overdue, thereby reducing the related premiums
payable to insurance companies and the related amounts to be
collected from the client. Therefore, we do not believe that the
aging of our accounts receivable presents a material liquidity
risk.

We maintain two separate credit facilities:



|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | $50 million facility. Borrowings under this
    facility are accessed at a floating rate of 112.5 basis points
    above LIBOR, which was 1.42% as of December 31, 2002. This
    facility expires on June 20, 2003 and requires us to
    maintain certain financial ratios. We intend to extend this
    facility for a further period of one year, but if the revolving
    period is not extended, any amounts outstanding will
    automatically convert into a three-year term





|                               |                               
|------------------------------ | ------------------------------
|30   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



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##### 



| |                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | loan at a fixed interest rate equal to the
    Canadian dollar interest swap rate quoted by the lender plus
    1.375%. As of December 31, 2002, $50 million had been
    drawn on this facility.



|  |                                                                                                                                                                                                                          
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | $7.6 million facility. Borrowings under this
    facility are at the banks U.S. Base rate which is
    currently 4.75%. Payment is due on demand. As of
    December 31, 2002 no amount had been drawn on this facility.

As of December 31, 2002, we had
$8.3 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 2003 through 2010. Of the
outstanding subsidiary debt, $2.7 million is secured by
liens on certain assets of our subsidiaries.

As of December 31, 2002, we had outstanding
$35 million aggregate principal amount of 8.5% convertible
subordinated notes 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. If
Fairfax converted all of the Fairfax notes, Fairfax would own
approximately 35% of our total outstanding common shares as of
December 31, 2002. Net debt, defined as long-term debt,
including the current portion of long-term debt, bank debt and
subordinated convertible debentures less non-trust cash and the
investment held for sale as of December 31, 2002, was
$66.4 million compared with $129.2 million as of
December 31, 2001. The decrease in net debt is due to the
repayment of bank debt and a subordinated convertible debenture
from the proceeds of the sale of Old Lyme and the U.S. initial
public offering in the second quarter of 2002 partially offset
by new borrowings for financing of acquisitions in 2002 and the
release of the Burnham put option liability at December 31,
2002. Our net debt-to-equity ratio decreased to 0.23:1 at
December 31, 2002 from 0.96:1 at December 31, 2001. As
of December 31, 2002, we were in compliance with the
financial covenants under our credit facilities.

We believe that our existing cash, funds
generated from operations and borrowings available under our
credit facilities, will be sufficient to satisfy our financial
requirements, including some strategic 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. If we are unable to obtain additional financing on
acceptable terms, the extent to which we can increase our market
share or expand our business through acquisitions may be limited.

Contingent obligations

The table below summarizes our contractual
obligations and commercial commitments as of December 31,
2002:

|                                             |  |       |         |        |  |           |   |       |  |       |        |         |  |   |        |  |  |   |        |  |  |   |        | 
|-------------------------------------------- |  | ----- | ------- | ------ |  | --------- | - | ----- |  | ----- | ------ | ------- |  | - | ------ |  |  | - | ------ |  |  | - | ------ | 
|Payments due by period                       |  |       |         | On     |  | Less than |   | 1 - 3 |  | 4 - 5 |        | After  
|(in thousands)                               |  | Total |         | demand |  | 1 year    |   | years |  | years |        | 5 years
|                                             |  |       |         |        |  |           |   |       |  |       |        |        
|Long-term debt and capital lease obligations |  | $     | 72,038  |        |  | $         |  |       |  | $     | 3,029  |         |  | $ | 57,205 |  |  | $ | 4,042  |  |  | $ | 7,762  | 
|Operating lease obligations                  |  |       | 55,169  |        |  |           |  |       |  |       | 9,876  |         |  |   | 24,386 |  |  |   | 11,163 |  |  |   | 9,744  | 
|Executive share purchase plan loans          |  |       | 1,006   |        |  |           |  |       |  |       |       |         |  |   |       |  |  |   | 351    |  |  |   | 655    | 
|                                             |  |       |         |        |  |           |   |       |  |       |        |         |  |   |        |  |  |   |        |  |  |   |        | 
|Total                                        |  | $     | 128,213 |        |  | $         |  |       |  | $     | 12,905 |         |  | $ | 81,591 |  |  | $ | 15,556 |  |  | $ | 18,161 | 
|                                             |  |       |         |        |  |           |   |       |  |       |        |         |  |   |        |  |  |   |        |  |  |   |        | 

As of December 31, 2002, we have an
obligation to issue approximately $1.2 million of
additional stock options related to our executive management
bonuses.





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    31



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##### 



Acquisitions

Contingent consideration may be payable in
connection with the acquisition of Flanagan as follows:

|     |  |               |           |               |  |  |               | 
|---- |  | ------------- | --------- | ------------- |  |  | ------------- | 
|     |  |               |           | Contingent   
|     |  | Contingent    |           | consideration
|     |  | Consideration |           | Target       
|Year |  | (000s)       |           | criteria     
|     |  |               |           |              
|2002 |  |               | 38 shares |               |  |  | Revenue       | 
|2002 |  |               | 38 shares |               |  |  | Profitability | 
|2003 |  |               | 88 shares |               |  |  | Revenue       | 
|2003 |  |               | 37 shares |               |  |  | Profitability | 

The 2002 contingent consideration has not been
earned, however the former owners of Flanagan will still be
entitled to receive the 2002 shares if the 2003 contingent
consideration targets are met or exceeded.

In connection with our acquisition of C.S. Nenner
Insurance Agency, Inc. (Nenner) the former owners of this
company are entitled to contingent consideration based upon the
acquired operations achieving profitability targets over a
period of three years from the date of acquisition. As of
December 31, 2002, we estimate the total contingent payment
for Nenner to be approximately $4,500 of which 90% is payable in
cash and 10% is payable in common shares.

As of December 31, 2002, we had not recorded
any liabilities or the related adjustment to goodwill as it
related to unpaid contingent consideration for acquisitions. In
addition, diluted shares outstanding have not been increased for
any contingent consideration that is payable in common shares.

Other

In connection with our executive share purchase
plan, under certain circumstances, we may be obligated to
purchase loans previously received by certain of our officers,
directors and employees from a Canadian chartered bank totaling
$5,077 and $5,542 as of December 31, 2002 and
December 31, 2001, respectively, to assist in purchasing
common shares. As collateral, the employees have pledged 602 and
669 common shares as of December 31, 2002 and
December 31, 2001, respectively, which have a market value
of $7,677 and $6,389 as of December 31, 2002 and
December 31, 2001, respectively. Interest on the loans in
the amount of $264, $377, and $397 for the years ended
December 31, 2002, 2001 and 2000, respectively, was paid by
us and is included in compensation expense.

We have committed to award, under our equity
incentive plan, an aggregate of 266 restricted shares that will
be paid for by the participants with loans either from the
Company or from a bank (guaranteed by us). In addition, we have
committed to award an aggregate of 471 restricted share units
that are exercisable for common shares, without payment of cash
consideration. As of December 31, 2002 no restricted shares
or restricted share units had been awarded or issued. See
note 12 to our audited consolidated financial statements.

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

Shareholders equity

Share repurchases.For the year ended December 31, 2002, no common shares were
repurchased by us.

Shares reserved for
issuance.As of December 31,
2002, 2.1 million common shares were reserved for issuance
under our equity incentive plan.

Shareholders equity increased by
$149.0 million, or 110%, to $284.3 million as of
December 31, 2002 from $135.3 million as of
December 31, 2001. This increase resulted from net earnings
of $29.4 million, an increase in





|                               |                               
|------------------------------ | ------------------------------
|32   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



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##### 



share capital of $90.6 million related to
the U.S. initial public offering, an increase in contributed
surplus of $1.2 million related primarily to non-cash stock
option expense, an increase in share capital of
$7.4 million related to shares issued in acquisitions, an
increase in share capital of $11.8 million related to the
release of the Burnham put option liability and an increase in
contingently issuable shares of $13.7 million related to
the Burnham contingent consideration earned as at
December 31, 2002. The increase in shareholders
equity was offset by the payment of dividends of
$4.5 million and a decrease in the cumulative translation
account of $0.6 million.


Shareholders equity increased by
$23.1 million or 21% to $135.3 million as of
December 31, 2001 from $112.2 million as of
December 31, 2000. This increase resulted from net earnings
of $10.0 million, an increase in the cumulative translation
account of $2.6 million and an increase in share capital of
$14.1 million primarily related to issuance of our common shares
in connection with acquisitions. The increase in
shareholders equity was offset by the payment of dividends
of $3.6 million.

Market risk

Interest rate risk

We are exposed to interest rate risk in
connection with our credit facilities. We had approximately
$50.0 million of floating rate bank debt outstanding at
December 31, 2002. Each 100 basis point increase in the
interest rates charged on the balance of our outstanding
floating rate debt as of December 31, 2002 will result in a
$0.3 million decrease in our net 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.

The Canadian dollar is subject to volatility and
has experienced a significant decline in its value compared to
the U.S. dollar in recent years. The table below summarizes the
effect that a $0.01 decline or increase in the value of the
Canadian dollar would have had on our revenue, cumulative
translation account and net earnings for the years ended
December 31, 2002, 2001 and 2000.

|                                                   |  |      |       |      |  |      |       |  |  |      |       | 
|-------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- |  |  | ---- | ----- | 
|(in thousands of U.S. dollars, except percentages) |  | 2002 |       | 2001 |  | 2000
|                                                   |  |      |       |      |  |     
|Revenue                                            |  | +/-$ | 1,354 |      |  | +/-$ | 1,254 |  |  | +/-$ | 1,187 | 
|Net earnings                                       |  | +- $ | 233   |      |  | +/-$ | 146   |  |  | +/-$ | 102   | 
|Cumulative translation account                     |  | +/-$ | 120   |      |  | +/-$ | 729   |  |  | +/-$ | 33    | 

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





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    33



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##### 



Goodwill and other intangible assets

Intangible assets arising from acquisitions
consist of the following:

|                               |       |      |         |         |  |   |         |         | 
|------------------------------ | ----- | ---- | ------- | ------- |  | - | ------- | ------- | 
|(in thousands of U.S. dollars) |       | 2002 |         | 2001   
|                               |       |      |         |        
|Customer relationships         |       | $    | 41,762  |         |  | $ | 21,720  |        
|Non-competition covenants      |       |      | 2,298   |         |  |   | 1,839   |        
|Trademarks                     |       |      | 2,587   |         |  |   | 2,587   |        
|Goodwill                       |       |      | 296,716 |         |  |   | 235,670 |        
|Accumulated amortization       |       |      | (17,472 | )       |  |   | (15,637 | )      
|                               |       |      |         |         |  |   |         |        
|                               | Total |      | $       | 325,891 |  |   | $       | 246,179 | 
|                               |       |      |         |         |  |   |         |        

The amounts allocated to client relationships
were determined by a discounting of the expected future net cash
flows from commissions with consideration given to remaining
economic lives, renewals, and associated expenses.
Non-competition covenants value were determined using an income
approach with consideration given to economic benefits
associated with having the covenants in place versus damages
that would ensue absent the agreements; and in the case of
trademarks, a cash flow royalty savings approach addressing the
economic benefits of the trademarks to the Company was used. The
balance of the excess purchase price is allocated to goodwill.

Customer relationships are amortized on a
straight-line basis over their periods of duration, normally
fifteen years. Many factors outside our control determine the
persistency of our customer relationships and we cannot be sure
that the value we have allocated will ultimately be realized.
Non-competition covenants and trademarks are intangible assets
that have an indefinite life and accordingly, are not amortized
but are evaluated for impairment under the new accounting
standards as discussed under  Effects of new
accounting pronouncements. When an employee leaves the Company,
the non-competition covenant becomes effective and the value
assigned is then amortized over the life of covenant. We
have historically amortized goodwill primarily over a period of
forty years. Under the new accounting standards, goodwill is not
amortized and is evaluated annually for impairment. For the past
three years ended December 31, 2002, our amortization has
been comprised of the following:

|                               |       |      |       |       |  |      |       |       |  |   |       |       | 
|------------------------------ | ----- | ---- | ----- | ----- |  | ---- | ----- | ----- |  | - | ----- | ----- | 
|(in thousands of U.S. dollars) |       | 2002 |       | 2001  |  | 2000
|                               |       |      |       |       |  |     
|Customer relationships         |       | $    | 1,627 |       |  | $    | 759   |       |  | $ |      |      
|Non-competition covenants      |       |      | 44    |       |  |      | 56    |       |  |   |      |      
|Goodwill                       |       |      |      |       |  |      | 4,125 |       |  |   | 3,260 |      
|                               |       |      |       |       |  |      |       |       |  |   |       |      
|                               | Total |      | $     | 1,671 |  |      | $     | 4,940 |  |   | $     | 3,260 | 
|                               |       |      |       |       |  |      |       |       |  |   |       |      

We estimate that our amortization charges for
intangible assets from 2003 through 2007 for all acquisitions
consummated to date will be:

|                               |       |      |       |       |  |      |       |       |  |      |       |       |  |   |       |       |  |   |       |       | 
|------------------------------ | ----- | ---- | ----- | ----- |  | ---- | ----- | ----- |  | ---- | ----- | ----- |  | - | ----- | ----- |  | - | ----- | ----- | 
|Year ended December 31,        |       |      |       |       |  |      |       |       |  |     
|(in thousands of U.S. dollars) |       | 2003 |       | 2004  |  | 2005 |       | 2006  |  | 2007
|                               |       |      |       |       |  |      |       |       |  |     
|Customer relationships         |       | $    | 2,966 |       |  | $    | 2,966 |       |  | $    | 2,966 |       |  | $ | 2,966 |       |  | $ | 2,966 |      
|Non-competition covenants      |       |      | 56    |       |  |      | 2     |       |  |      |      |       |  |   |      |       |  |   |      |      
|                               |       |      |       |       |  |      |       |       |  |      |       |       |  |   |       |       |  |   |       |      
|                               | Total |      | $     | 3,022 |  |      | $     | 2,968 |  |      | $     | 2,966 |  |   | $     | 2,966 |  |   | $     | 2,966 | 
|                               |       |      |       |       |  |      |       |       |  |      |       |       |  |   |       |       |  |   |       |      





|                               |                               
|------------------------------ | ------------------------------
|34   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



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##### 



Related party transactions

The Company had transactions with and recorded
revenue from the following related parties:

|                                            |  |      |        |      |  |      |        |  |  |   |       | 
|------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ----- | 
|                                            |  | 2002 |        | 2001 |  | 2000
|                                            |  |      |        |      |  |     
|Lombard General Insurance Company of Canada |  | $    | 11,854 |      |  | $    | 9,261  |  |  | $ | 7,543 | 
|Commonwealth Insurance Company              |  |      | 577    |      |  |      | 374    |  |  |   | 319   | 
|Federated Insurance Company of Canada       |  |      | 56     |      |  |      | 38     |  |  |   | 10    | 
|Markel Insurance Company of Canada          |  |      | 320    |      |  |      | 88     |  |  |   | 74    | 
|Crum & Forster Insurance                    |  |      | 911    |      |  |      | 804    |  |  |   | 314   | 
|TIG Specialty Insurance                     |  |      | 590    |      |  |      | 235    |  |  |   | 5     | 
|Fairfax Inc.                                |  |      | 7,708  |      |  |      |       |  |  |   |      | 
|                                            |  |      |        |      |  |      |        |  |  |   |       | 
|                                            |  | $    | 22,016 |      |  | $    | 10,800 |  |  | $ | 8,265 | 
|                                            |  |      |        |      |  |      |        |  |  |   |       | 

As of December 31, 2002 and 2001, the
Company had accounts receivable and accounts payable balances
with the above related parties in the amounts of $2,104 and
$12,180, for 2002, respectively, and $666 and $7,494 for 2001,
respectively. All revenue and related accounts receivable and
accounts payable are the result of transactions in the normal
course of business. The companies above are related through
common ownership by Fairfax, which owns approximately 27% of the
Companys common shares as of December 31, 2002.

As of December 31, 2002 and 2001, long-term
debt related to put options of $5,940 and $17,274, respectively,
and subordinated convertible debentures of $35,000 at the end of
both years, are due to related parties.

During 2002, 2001 and 2000, the Company incurred
expenses related to rental of premises from related parties in
the amount of $1,691, $1,373 and $993, respectively. At
December 31, 2002 and 2001, the Company also had accounts
receivable due from related parties in the amount of $3,256 and
$4,586, respectively, of which the majority were loans to
employees to enable them to purchase shares of the Company.

Off-Balance Sheet Transactions

We have no material off-balance sheet
arrangements.

Critical Accounting Policies

Our significant accounting polices are more fully
described in Note 2 to our consolidated financial statements.
Certain of our accounting policies are particularly important to
the portrayal of our financial position and results of
operations and require the application of significant judgment
by our management; 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. 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, the valuation of put options
granted on our common shares and the valuation of stock-based
compensation. 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. 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 deviations. 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





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    35



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##### 



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.


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
assets acquired and liabilities assumed based on their fair
values. Any excess of the cost of purchase over the net of the
allocated amounts is recognized as goodwill. For significant
acquisitions, we engage qualified independent 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.

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. The fair value of
our subsidiary brokerages has been increasing primarily due to
recent increases in premium rates and organic growth as
previously discussed which has generally increased the
commission earned by us.

Effective January 1, 2002, we adopted
Canadian Institute of Chartered Accountants
(CICA) Accounting Standards Board Handbook
Section 3062 and the U.S. Financial Accounting Standards
Board SFAS No. 142, which change and conform the
recognition, measurement and disclosure of Goodwill and
Other Intangible Assets under Canadian and
U.S. GAAP.

These new accounting standards require that we no
longer amortize goodwill and intangible assets with indefinite
useful lives. We test 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 including quoted market prices,
discounted cash flows and net realizable values. 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 useful life of the
assets. We regularly evaluate whether events or changes in
circumstances indicate the carrying amount of intangibles, other
than goodwill, may warrant revision or may not be recoverable.
The estimation of the useful economic lives and the selection of
estimates and assumptions used in conducting impairment tests
require 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.

Put Options

As described in note 8 to our audited
consolidated financial statements, we have granted put options
on certain of our common shares which were issued to the former
owners of brokerages we acquired in 2001. In preparing our
financial statements in accordance with Canadian GAAP, the fair
value of the put options has been classified as long-term debt
until such time as the options are exercised or expire. Changes
in the fair value of these options are recorded in earnings. The
fair value of the put options is determined using the
Black-Scholes valuation model, which requires underlying
assumptions and estimates. In particular, management uses its
judgment to determine the volatility of the underlying common
shares 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
managements





|                               |                               
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|36   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



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##### 



judgment and the use of different judgments,
estimates, and assumptions may produce significantly different
results of fair value of the options and, as a result,
significantly different results of operations.


Stock-based compensation

During 2002, our shareholders approved an equity
incentive plan and we granted stock options for
1.27 million common shares to employees. As of
December 31, 2002, we have an obligation to issue
approximately $1.2 million of additional stock options for
2002 executive management bonuses. We measure the fair value of
stock options at the date of grant of the award and recognize
this amount as compensation expense over the vesting period of
the options. An alternative accounting treatment would be to
follow the intrinsic value method for accounting for stock
options.

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 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.

Effects of recent accounting
pronouncements

Goodwill and other intangible assets

Effective January 1, 2002, we concurrently
adopted the Canadian Institute of Chartered Accountants
(CICA) Accounting Standards Board Handbook
Section 3062, Goodwill and Other Intangible
Assets for reporting under Canadian GAAP and the
Financial Accounting Standards Boards SFAS No. 142,
Goodwill and Other Intangible Assets for
reporting under U.S. GAAP. Section 3062 was applicable for
fiscal years commencing on or after January 1, 2002 and
SFAS No. 142 was applicable for fiscal years beginning on
or after December 31, 2001.

Both Section 3062 and SFAS No. 142
eliminate the amortization of goodwill, require annual
impairment testing of goodwill and introduce the concept of
definite and indefinite life intangible assets. Indefinite life
intangible assets, similar to goodwill, will no longer be
amortized and will be tested at least annually for impairment.
Definite life intangible assets will be amortized over the
estimated useful life of the asset.

In accordance with Section 3062 and SFAS
No. 142, we completed our impairment testing on the balance
of goodwill and intangible assets as of January 1, 2002 and
January 1, 2003. Based on the testing performed, no
impairment losses were incurred.

As required under Section 3062 and SFAS
No. 142, no goodwill amortization expense was incurred for
the year ended December 31, 2002. The following tables
illustrate the effect that Section 3062 and SFAS
No. 142 would have had on net earnings and per share
information under Canadian and U.S. GAAP respectively for the
years ended December 31, 2001 and 2000 if goodwill had not
been amortized:

|                                      |  |              |        |      |  |      |        |  |  |   |       | 
|------------------------------------- |  | ------------ | ------ | ---- |  | ---- | ------ |  |  | - | ----- | 
|                                      |  |             
|                                      |  | December 31,
|                                      |  |             
|                                      |  | 2002         |        | 2001 |  | 2000
|                                      |  |              |        |      |  |     
|Reported net earnings  Canadian GAAP |  | $            | 29,401 |      |  | $    | 10,005 |  |  | $ | 6,138 | 
|Add back: Goodwill amortization       |  |              |       |      |  |      | 3,996  |  |  |   | 2,820 | 
|                                      |  |              |        |      |  |      |        |  |  |   |       | 
|Net earnings adjusted for goodwill    |  | $            | 29,401 |      |  | $    | 14,001 |  |  | $ | 8,958 | 
|                                      |  |              |        |      |  |      |        |  |  |   |       | 
|Basic EPS  Reported                  |  | $            | 1.27   |      |  | $    | 0.53   |  |  | $ | 0.34  | 
|Basic EPS  Adjusted for goodwill     |  | $            | 1.27   |      |  | $    | 0.74   |  |  | $ | 0.49  | 
|Diluted EPS  Reported                |  | $            | 1.06   |      |  | $    | 0.50   |  |  | $ | 0.34  | 
|Diluted EPS  Adjusted for goodwill   |  | $            | 1.06   |      |  | $    | 0.70   |  |  | $ | 0.49  | 





|                               |                                
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|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    37



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|                                    |  |              |        |      |  |      |        |  |  |   |       | 
|----------------------------------- |  | ------------ | ------ | ---- |  | ---- | ------ |  |  | - | ----- | 
|                                    |  |             
|                                    |  | December 31,
|                                    |  |             
|                                    |  | 2002         |        | 2001 |  | 2000
|                                    |  |              |        |      |  |     
|Reported net earnings  U.S. GAAP   |  | $            | 26,351 |      |  | $    | 9,858  |  |  | $ | 6,543 | 
|Add back: Goodwill amortization     |  |              |       |      |  |      | 4,065  |  |  |   | 2,988 | 
|                                    |  |              |        |      |  |      |        |  |  |   |       | 
|Net earnings adjusted for goodwill  |  | $            | 26,351 |      |  | $    | 13,923 |  |  | $ | 9,531 | 
|                                    |  |              |        |      |  |      |        |  |  |   |       | 
|Basic EPS  Reported                |  | $            | 1.14   |      |  | $    | 0.52   |  |  | $ | 0.36  | 
|Basic EPS  Adjusted for goodwill   |  | $            | 1.14   |      |  | $    | 0.73   |  |  | $ | 0.52  | 
|Diluted EPS  Reported              |  | $            | 0.96   |      |  | $    | 0.49   |  |  | $ | 0.36  | 
|Diluted EPS  Adjusted for goodwill |  | $            | 0.96   |      |  | $    | 0.69   |  |  | $ | 0.52  | 

Accounting for the impairment or disposal of
long-lived assets

In August 2001, the Financial Accounting
Standards Board issued SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, effective
for fiscal years beginning after December 15, 2001. This
Statement supersedes SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of, and the accounting and reporting provisions
of Accounting Principles Board Opinion No. 30
Reporting the Results of Operations  Reporting the
Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and
Transactions (APB No. 30).

SFAS No. 144 generally retains the basic
accounting model for the identification and measurement of
impairments to long-lived assets to be held, and long-lived
assets to be disposed. SFAS No. 144 broadens the definition
of discontinued operations, as previously defined by
APB No. 30, but does not allow for the accrual of future
operating losses, as was previously permitted under that
standard. SFAS No. 144 also addresses several
implementation and financial statement presentation issues not
previously addressed under U.S. GAAP. SFAS No. 144 excludes
from its scope financial accounting and reporting for the
impairment of goodwill and other intangible assets.

Canadian GAAP has been harmonized with U.S. GAAP
related to the provisions of SFAS No. 144, with the
issuance of the CICA Accounting Standards Board Handbook
Section 3063, Impairment of Long-Lived
Assets in September 2002 and Section 3475,
Disposal of Long-Lived assets and Discontinued
Operations in January 2003.

We adopted SFAS No. 144 effective
January 1, 2002 for our U.S. GAAP reporting. The
transitional guidance of SFAS No. 144 generally permits
long-lived assets classified as held for disposal as a result of
disposal activities that were initiated prior to SFAS
No. 144s initial application to continue to be
accounted for in accordance with the prior pronouncement
applicable for that disposal. As such, our investment in Old
Lyme, which was classified as held for disposal at
December 31, 2001, continued to be accounted for in
accordance with Canadian and U.S. generally accepted accounting
principles applicable at the date that the disposal activities
were initiated until the sale on May 30, 2002. We do not
anticipate that the provisions of Sections 3063 and 3475
will have a material impact on our financial position or results
of operations as reported under Canadian GAAP.

Stock-Based Compensation and other Stock-based
Payments

In November 2001, the CICA Accounting Standards
Board issued Handbook Section 3870, Stock-based
Compensation and Other Stock-based Payments, effective
for fiscal years beginning on or after January 1, 2002 for
public enterprises. We issued stock-based compensation for the
first time in 2002 and adopted Section 3870.

Section 3870 requires that stock-based
payments to non-employees and direct awards of stock to
employees and non-employees be accounted for using a fair
value-based method of accounting and recommends that all other
stock-based transactions with employees, including the granting
of stock options, be accounted for in the same way. In
accordance with this Section, we have incurred an expense of
$1,078 in 2002 in relation to the stock options issued.





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|38   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



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##### 



Concurrent with the adoption of Section 3870
for its Canadian GAAP reporting, we adopted SFAS No. 123,
Accounting for Stock-based Compensationfor
our reporting under U.S. GAAP. Accounting under SFAS
No. 123 under U.S. GAAP is the same as Section 3870
under Canadian GAAP.

Item 7A. Quantitative and Qualitative
Disclosures About Market Risk

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

Item 8.    Financial
Statements and Supplementary Data

Index to consolidated financial
statements

|                                                                                                                    |  |      |    | 
|------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                    |  | Page
|                                                                                                                    |  |     
|Report of Independent Accountants to the Board of
    Directors and Shareholders of Hub International Limited       |  |      | 40 | 
|Consolidated Balance Sheets as of
    December 31, 2002 and 2001                                                    |  |      | 41 | 
|Consolidated Statements of Earnings for the Years
    Ended December 31, 2002, 2001 and 2000                        |  |      | 42 | 
|Consolidated Statements of Retained Earnings
    (Deficit) for the Years Ended December 31, 2002, 2001 and
    2000 |  |      | 43 | 
|Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2002, 2001 and 2000                      |  |      | 44 | 
|Notes to Consolidated Financial Statements                                                                          |  |      | 45 | 

Index to notes to consolidated financial
statements

|         |    |             |  |                                                              |  |  |    | 
|-------- | -- | ----------- |  | ------------------------------------------------------------ |  |  | -- | 
|Footnote |    | Description |  | Page                                                        
|         |    |             |  |                                                             
|         | 1  |             |  | Nature of operations and recent significant
    transactions |  |  | 45 | 
|         | 2  |             |  | Summary of significant accounting policies                   |  |  | 46 | 
|         | 3  |             |  | Acquisitions                                                 |  |  | 49 | 
|         | 4  |             |  | Accounts and other receivables                               |  |  | 51 | 
|         | 5  |             |  | Property and equipment                                       |  |  | 52 | 
|         | 6  |             |  | Intangible assets                                            |  |  | 52 | 
|         | 7  |             |  | Accounts payable and accrued liabilities                     |  |  | 54 | 
|         | 8  |             |  | Debt                                                         |  |  | 54 | 
|         | 9  |             |  | Defined Contribution Plan                                    |  |  | 56 | 
|         | 10 |             |  | Commitments and contingencies                                |  |  | 56 | 
|         | 11 |             |  | Shareholders equity                                         |  |  | 57 | 
|         | 12 |             |  | Equity Incentive Plan                                        |  |  | 57 | 
|         | 13 |             |  | Fair value of financial instruments                          |  |  | 58 | 
|         | 14 |             |  | Income taxes                                                 |  |  | 59 | 
|         | 15 |             |  | Interest and income taxes paid                               |  |  | 59 | 
|         | 16 |             |  | Segmented information                                        |  |  | 60 | 
|         | 17 |             |  | Related party transactions                                   |  |  | 61 | 
|         | 18 |             |  | Reconciliation to U.S. GAAP                                  |  |  | 62 | 
|         | 19 |             |  | Quarterly data                                               |  |  | 68 | 
|         | 20 |             |  | Subsequent events                                            |  |  | 68 | 





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    39



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##### 



Report of the Independent Accountants to the
Board of Directors and Shareholders of Hub International
Limited:

We have audited the accompanying consolidated
balance sheets of Hub International Limited and its subsidiaries
as of December 31, 2002 and 2001 and the related
consolidated statements of earnings, retained earnings (deficit)
and cash flows for each of the years in the three year period
ended December 31, 2002, all expressed in United States of
America dollars. These financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements schedules based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in Canada and in the
United States of America. Those standards require that we plan
and perform an audit to obtain reasonable assurance whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the financial position of Hub International Limited
and its subsidiaries as of December 31, 2002 and 2001, and
the results of their operations and their cash flows for each of
the years in the three year period ended December 31, 2002,
in accordance with accounting principles generally accepted in
Canada.

As discussed in Note 2 to the financial
statements, the Company changed the method of accounting for
goodwill and other intangible assets in 2002.

(PricewaterhouseCoopers Logo)

Chicago, Illinois

February 28, 2003






|                               |                               
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|40   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



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Hub International Limited

Consolidated Balance Sheets


As of December 31, 2002 and
2001

(in thousands of U.S. dollars)


|                                                  |  |      |         |      |  |   |         | 
|------------------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | 
|                                                  |  | 2002 |         | 2001
|                                                  |  |      |         |     
|ASSETS                                            |  |      |         |      |  |   |         | 
|Current assets:                                   |  |      |         |      |  |   |         | 
|Cash and cash equivalents                         |  | $    | 40,642  |      |  | $ | 26,979  | 
|Trust cash                                        |  |      | 53,648  |      |  |   | 50,426  | 
|Accounts and other receivables                    |  |      | 136,567 |      |  |   | 101,313 | 
|Investment held for sale                          |  |      |        |      |  |   | 40,772  | 
|Income taxes receivable                           |  |      | 2,153   |      |  |   | 1,460   | 
|Future income taxes                               |  |      | 3,324   |      |  |   | 1,999   | 
|Prepaid expenses                                  |  |      | 1,587   |      |  |   | 2,471   | 
|                                                  |  |      |         |      |  |   |         | 
|Total current assets                              |  |      | 237,921 |      |  |   | 225,420 | 
|Goodwill                                          |  |      | 281,727 |      |  |   | 220,848 | 
|Other intangible assets                           |  |      | 44,164  |      |  |   | 25,331  | 
|Property and equipment                            |  |      | 21,298  |      |  |   | 20,935  | 
|Future income taxes                               |  |      | 3,715   |      |  |   | 2,671   | 
|Other assets                                      |  |      | 8,051   |      |  |   | 7,091   | 
|                                                  |  |      |         |      |  |   |         | 
|Total assets                                      |  | $    | 596,876 |      |  | $ | 502,296 | 
|                                                  |  |      |         |      |  |   |         | 
|LIABILITIES AND SHAREHOLDERS
    EQUITY          |  |      |         |      |  |   |         | 
|Current liabilities:                              |  |      |         |      |  |   |         | 
|Bank debt                                         |  | $    |        |      |  | $ | 55,000  | 
|Accounts payable and accrued liabilities          |  |      | 187,034 |      |  |   | 164,094 | 
|Contingent consideration payable                  |  |      | 8,423   |      |  |   |        | 
|Income taxes payable                              |  |      | 1,198   |      |  |   |        | 
|Future income taxes                               |  |      | 1,164   |      |  |   | 1,387   | 
|Current portion long-term debt and capital leases |  |      | 3,029   |      |  |   | 4,169   | 
|                                                  |  |      |         |      |  |   |         | 
|Total current liabilities                         |  |      | 200,848 |      |  |   | 224,650 | 
|Long-term debt and capital leases                 |  |      | 69,009  |      |  |   | 76,159  | 
|Subordinated convertible debentures               |  |      | 35,000  |      |  |   | 61,624  | 
|Future income taxes                               |  |      | 7,745   |      |  |   | 4,592   | 
|                                                  |  |      |         |      |  |   |         | 
|Total liabilities                                 |  |      | 312,602 |      |  |   | 367,025 | 
|                                                  |  |      |         |      |  |   |         | 
|Commitments and Contingencies                     |  |      |         |      |  |   |         | 
|Shareholders equity                              |  |      |         |      |  |   |         | 
|Share capital                                     |  |      | 235,197 |      |  |   | 125,506 | 
|Contingently issuable shares                      |  |      | 13,743  |      |  |   |        | 
|Contributed surplus                               |  |      | 1,234   |      |  |   |        | 
|Cumulative translation account                    |  |      | 2,185   |      |  |   | 2,770   | 
|Retained earnings                                 |  |      | 31,915  |      |  |   | 6,995   | 
|                                                  |  |      |         |      |  |   |         | 
|Total shareholders equity                        |  |      | 284,274 |      |  |   | 135,271 | 
|                                                  |  |      |         |      |  |   |         | 
|Total liabilities and shareholders
    equity    |  | $    | 596,876 |      |  | $ | 502,296 | 
|                                                  |  |      |         |      |  |   |         | 

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





|                               |                                
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|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    41



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##### 



Hub International Limited

Consolidated Statements of Earnings


For the years ended December 31, 2002,
2001 and 2000

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


|                                                          |                                                                                               |      |         |         |   |      |         |         |   |   |        |        | 
|--------------------------------------------------------- | --------------------------------------------------------------------------------------------- | ---- | ------- | ------- | - | ---- | ------- | ------- | - | - | ------ | ------ | 
|                                                          |                                                                                               | 2002 |         | 2001    |   | 2000
|                                                          |                                                                                               |      |         |         |   |     
|Revenue                                                   |                                                                                               |      |         |         |   |      |         |         |   |   |        |       
|                                                          | Commission income                                                                             |      | $       | 200,792 |   |      | $       | 143,063 |   |   | $      | 86,410 | 
|                                                          | Contingent commissions and volume overrides                                                   |      |         | 11,464  |   |      |         | 5,899   |   |   |        | 4,909  | 
|                                                          | Other                                                                                         |      |         | 7,704   |   |      |         | 5,031   |   |   |        | 3,921  | 
|                                                          |                                                                                               |      |         |         |   |      |         |         |   |   |        |       
|                                                          |                                                                                               |      | 219,960 |         |   |      | 153,993 |         |   |   | 95,240 |       
|                                                          |                                                                                               |      |         |         |   |      |         |         |   |   |        |       
|Expenses                                                  |                                                                                               |      |         |         |   |      |         |         |   |   |        |       
|                                                          | Compensation                                                                                  |      |         | 118,678 |   |      |         | 88,015  |   |   |        | 54,701 | 
|                                                          | Selling, occupancy and administration                                                         |      |         | 44,932  |   |      |         | 35,276  |   |   |        | 21,778 | 
|                                                          | Depreciation                                                                                  |      |         | 5,492   |   |      |         | 3,940   |   |   |        | 1,885  | 
|                                                          | Interest expense                                                                              |      |         | 7,317   |   |      |         | 7,447   |   |   |        | 1,981  | 
|                                                          | Goodwill and other intangible asset amortization                                              |      |         | 1,671   |   |      |         | 4,940   |   |   |        | 3,260  | 
|                                                          | (Gain) loss on disposal of investment held for
    sale, property, equipment and other assets |      |         | (2,679  | ) |      |         | (173    | ) |   |        | 127    | 
|                                                          | (Gain) on put option liability                                                                |      |         | (186    | ) |      |         | (719    | ) |   |        |       | 
|                                                          | Non-cash stock option compensation                                                            |      |         | 1,078   |   |      |         |        |   |   |        |       | 
|                                                          |                                                                                               |      |         |         |   |      |         |         |   |   |        |       
|                                                          |                                                                                               |      | 176,303 |         |   |      | 138,726 |         |   |   | 83,732 |       
|                                                          |                                                                                               |      |         |         |   |      |         |         |   |   |        |       
|Net earnings before income taxes                          |                                                                                               |      | 43,657  |         |   |      | 15,267  |         |   |   | 11,508 |       
|                                                          |                                                                                               |      |         |         |   |      |         |         |   |   |        |       
|Provision for income tax expense                          |                                                                                               |      |         |         |   |      |         |         |   |   |        |       
|                                                          | Current                                                                                       |      |         | 12,851  |   |      |         | 4,967   |   |   |        | 4,907  | 
|                                                          | Future                                                                                        |      |         | 1,405   |   |      |         | 295     |   |   |        | 463    | 
|                                                          |                                                                                               |      |         |         |   |      |         |         |   |   |        |       
|                                                          |                                                                                               |      | 14,256  |         |   |      | 5,262   |         |   |   | 5,370  |       
|                                                          |                                                                                               |      |         |         |   |      |         |         |   |   |        |       
|Net earnings                                              |                                                                                               | $    | 29,401  |         |   | $    | 10,005  |         |   | $ | 6,138  |       
|                                                          |                                                                                               |      |         |         |   |      |         |         |   |   |        |       
|Earnings per share                                        |                                                                                               |      |         |         |   |      |         |         |   |   |        |       
|                                                          | Basic                                                                                         |      |         | $1.27   |   |      |         | $0.53   |   |   |        | $0.34  | 
|                                                          | Diluted                                                                                       |      |         | $1.06   |   |      |         | $0.50   |   |   |        | $0.34  | 
|Weighted average shares outstanding
     Basic (000s)   |                                                                                               |      | 23,181  |         |   |      | 19,012  |         |   |   | 18,327 |       
|Weighted average shares outstanding
     Diluted (000s) |                                                                                               |      | 30,199  |         |   |      | 20,105  |         |   |   | 18,327 |       

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





|                               |                               
|------------------------------ | ------------------------------
|42   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



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##### 



Hub International Limited

Consolidated Statements of Retained Earnings
(Deficit)


For the years ended December 31, 2002,
2001 and 2000

(in thousands of U.S. dollars)


|                                                    |  |      |        |      |  |      |        |   |  |   |        |  
|--------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                                    |  | 2002 |        | 2001 |  | 2000
|                                                    |  |      |        |      |  |     
|Retained earnings (deficit) 
    Beginning of year |  | $    | 6,995  |      |  | $    | 587    |   |  | $ | (2,049 | )
|Net earnings                                        |  |      | 29,401 |      |  |      | 10,005 |   |  |   | 6,138  |  
|Excess over stated value of shares purchased        |  |      |       |      |  |      |       |   |  |   | (1,046 | )
|Dividends                                           |  |      | (4,481 | )    |  |      | (3,597 | ) |  |   | (2,456 | )
|                                                    |  |      |        |      |  |      |        |   |  |   |        |  
|Retained earnings  End of
    year                 |  | $    | 31,915 |      |  | $    | 6,995  |   |  | $ | 587    |  
|                                                    |  |      |        |      |  |      |        |   |  |   |        |  

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





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    43



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##### 



Hub International Limited

Consolidated Statements of Cash
Flows


For the years ended December 31, 2002,
2001 and 2000

(in thousands of U.S. dollars)


|                                                        |                                                                                               |      |         |         |   |      |          |         |   |   |         |        |  
|------------------------------------------------------- | --------------------------------------------------------------------------------------------- | ---- | ------- | ------- | - | ---- | -------- | ------- | - | - | ------- | ------ | -
|                                                        |                                                                                               | 2002 |         | 2001    |   | 2000
|                                                        |                                                                                               |      |         |         |   |     
|OPERATING ACTIVITIES                                    |                                                                                               |      |         |         |   |      |          |         |   |   |         |       
|Net earnings                                            |                                                                                               | $    | 29,401  |         |   | $    | 10,005   |         |   | $ | 6,138   |       
|Items not affecting working capital                     |                                                                                               |      |         |         |   |      |          |         |   |   |         |       
|                                                        | Amortization and depreciation                                                                 |      |         | 7,163   |   |      |          | 8,880   |   |   |         | 5,145  |  
|                                                        | (Gain) loss on disposal of investment held for
    sale, property, equipment and other assets |      |         | (2,679  | ) |      |          | (173    | ) |   |         | 127    |  
|                                                        | (Gain) on put option liability                                                                |      |         | (186    | ) |      |          | (719    | ) |   |         |       |  
|                                                        | Non-cash stock option compensation                                                            |      |         | 1,078   |   |      |          |        |   |   |         |       |  
|                                                        | Future income taxes                                                                           |      |         | 1,405   |   |      |          | 295     |   |   |         | 463    |  
|Non-cash working capital items                          |                                                                                               |      |         |         |   |      |          |         |   |   |         |       
|                                                        | Trust cash                                                                                    |      |         | (3,222  | ) |      |          | (38,070 | ) |   |         | (1,889 | )
|                                                        | Accounts and other receivables                                                                |      |         | (26,665 | ) |      |          | (5,511  | ) |   |         | (2,330 | )
|                                                        | Prepaid expenses                                                                              |      |         | 1,287   |   |      |          | (299    | ) |   |         | (283   | )
|                                                        | Accounts payable and accrued liabilities                                                      |      |         | 11,684  |   |      |          | 32,571  |   |   |         | 6,122  |  
|                                                        | Income taxes                                                                                  |      |         | (202    | ) |      |          | 1,863   |   |   |         | (2,575 | )
|                                                        |                                                                                               |      |         |         |   |      |          |         |   |   |         |       
|Net cash flows from operating activities                |                                                                                               |      | 19,064  |         |   |      | 8,842    |         |   |   | 10,918  |       
|                                                        |                                                                                               |      |         |         |   |      |          |         |   |   |         |       
|INVESTING ACTIVITIES                                    |                                                                                               |      |         |         |   |      |          |         |   |   |         |       
|Property and equipment  purchases                      |                                                                                               |      | (4,469  | )       |   |      | (10,298  | )       |   |   | (2,050  | )     
|Property and equipment  proceeds on
    sale           |                                                                                               |      | 6       |         |   |      | 96       |         |   |   | 222     |       
|Proceeds from investment held for sale                  |                                                                                               |      | 43,521  |         |   |      |         |         |   |   |        |       
|Purchase of subsidiaries, net of cash received          |                                                                                               |      | (50,713 | )       |   |      | (123,365 | )       |   |   | (18,932 | )     
|Sale of subsidiaries                                    |                                                                                               |      | 2,623   |         |   |      |         |         |   |   |        |       
|Other assets                                            |                                                                                               |      | 684     |         |   |      | (646     | )       |   |   | 2,777   |       
|                                                        |                                                                                               |      |         |         |   |      |          |         |   |   |         |       
|Net cash flows used for investing activities            |                                                                                               |      | (8,348  | )       |   |      | (134,213 | )       |   |   | (17,983 | )     
|                                                        |                                                                                               |      |         |         |   |      |          |         |   |   |         |       
|FINANCING ACTIVITIES                                    |                                                                                               |      |         |         |   |      |          |         |   |   |         |       
|Bank debt                                               |                                                                                               |      | (55,000 | )       |   |      | 55,122   |         |   |   | (16,425 | )     
|Long-term debt  advances                               |                                                                                               |      | 51,175  |         |   |      | 21,096   |         |   |   | 29,835  |       
|Subordinated convertible debentures 
    advances      |                                                                                               |      |        |         |   |      | 61,624   |         |   |   |        |       
|Long-term debt and capital leases 
    repayments      |                                                                                               |      | (50,094 | )       |   |      | (5,154   | )       |   |   | (2,501  | )     
|Subordinated convertible debenture 
    repayment      |                                                                                               |      | (26,800 | )       |   |      |         |         |   |   |        |       
|Share capital  issued for cash, net of
    issue costs |                                                                                               |      | 88,147  |         |   |      | 3,621    |         |   |   |        |       
|Share capital  repurchases                             |                                                                                               |      |        |         |   |      | (281     | )       |   |   | (2,840  | )     
|Dividends                                               |                                                                                               |      | (4,481  | )       |   |      | (3,597   | )       |   |   | (2,456  | )     
|                                                        |                                                                                               |      |         |         |   |      |          |         |   |   |         |       
|Net cash flows from financing activities                |                                                                                               |      | 2,947   |         |   |      | 132,431  |         |   |   | 5,613   |       
|                                                        |                                                                                               |      |         |         |   |      |          |         |   |   |         |       
|Change in cash and cash equivalents                     |                                                                                               |      | 13,663  |         |   |      | 7,060    |         |   |   | (1,452  | )     
|Cash and cash equivalents 
    Beginning of year       |                                                                                               |      | 26,979  |         |   |      | 19,919   |         |   |   | 21,371  |       
|                                                        |                                                                                               |      |         |         |   |      |          |         |   |   |         |       
|Cash and cash equivalents  End of
    year             |                                                                                               | $    | 40,642  |         |   | $    | 26,979   |         |   | $ | 19,919  |       
|                                                        |                                                                                               |      |         |         |   |      |          |         |   |   |         |       

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





|                               |                               
|------------------------------ | ------------------------------
|44   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



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##### 



HUB International Limited

Notes to Consolidated Financial
Statements


For the years ended December 31, 2002,
2001 and 2000

(in thousands, 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 Toronto Stock Exchange (TSX: HBG) and the New York
Stock Exchange (NYSE: HBG).


Initial U.S. Public Offering

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


Change in reporting currency

The Companys consolidated financial
statements historically have been expressed in Canadian dollars.
Effective October 1, 2001, the Company adopted the U.S.
dollar as its reporting currency. Comparative financial
information has been restated in United States (U.S.) dollars
using the translation of convenience method. Accordingly the
financial results for the first nine months of the year ended
December 31, 2001 and the entire year ended 2000, were
converted from Canadian to U.S. dollars at the exchange rate in
effect at September 30, 2001 of one Canadian dollar (C$) to
0.6338 U.S. dollar.


Sale of Old Lyme

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


From the date of acquisition, the net assets and
liabilities of Old Lyme were recorded at their original cost in
the Companys consolidated balance sheet as an investment
held for sale. The net earnings of the Old Lyme operations from
the date of acquisition in June 2001 were excluded from the
Companys consolidated statements of earnings. On
December 31, 2001, the Company entered into a stock
purchase agreement with Fairfax Inc. to sell all of the issued
and outstanding shares of Old Lyme, pending regulatory approval.
Fairfax Inc. is a subsidiary of Fairfax Financial Holdings
Limited (Fairfax), which owns approximately 27% of the
Companys outstanding shares as of December 31, 2002.
The sale of Old Lyme to Fairfax Inc. was completed on
May 30, 2002. The agreed upon purchase price (which was
considered to be fair market value) was Old Lymes
December 31, 2001 shareholders equity of
approximately $42.8 million determined in accordance with
accounting principles generally accepted in the United States of
America (U.S. GAAP), plus interest at four percent per annum
from January 1, 2002 until May 30, 2002, resulting in
total sale proceeds of approximately $43.5 million. The
difference between the actual purchase price and the carrying
amount of the investment held for sale was recorded as a gain on
the sale of investment during the second quarter of 2002 in the
amount of approximately $2.6 million. This gain increased
annual basic earnings per share and diluted earnings per share
by $0.11 and $0.09, respectively. This gain was not taxable.
Approximately $36.5 million of the sale proceeds were used
to repay bank debt. As a result of agreements entered into with
Fairfax Inc. on the closing of the sale of Old Lyme, the Company
is eligible to earn contingent commissions from Fairfax Inc.
related to loss ratios on premium volume placed with Old Lyme.





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    45



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##### 



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 18
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.


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, 2002
were translated to U.S. dollars at the year end exchange rate.
Revenue and expenses for 2002, were translated to U.S. dollars
at the average exchange rate for the period. 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. 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 based
upon applying historical policy cancellation and commission
return rates to the current year revenue, adjusted for any known
deviations. The Company is entitled to contingent commissions
and volume overrides from insurance companies which are recorded
in the earlier of the period in which amounts can be reasonably
estimated or the period in which the amounts are received.
Amounts related to contingent commissions and volume overrides
can be reasonably estimated when information pertaining to the
calculation, such as premium volumes, loss ratios and expenses,
can be obtained from the insurance companies. 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.


Cash and cash equivalents

Cash and cash equivalents consist of cash, and
highly-liquid investments having maturities of three months or
less.


Concentration of credit risk

The Companys financial instruments that are
exposed to concentration of credit risk consist primarily of
cash and cash equivalents and accounts receivable. The Company
maintains cash with banks in excess of federally insured limits
and is exposed to the credit risk from this concentration of
cash. The Company performs ongoing credit evaluations of its
customers financial condition and generally requires no
collateral. No single client accounted for more than ten percent
of total client premiums nor more than ten percent of revenue
for the years ended December 31, 2002, 2001 and 2000,
respectively.


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.






|                               |                               
|------------------------------ | ------------------------------
|46   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



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##### 



Property and equipment

Property and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation is
recorded based on useful economic lives of the related assets
which range from three to ten years, on a declining balance
method or on a straight line basis. 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.


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.


Goodwill and other intangible assets

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


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

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

In accordance with Section 3062, the Company
completed its impairment testing on the balance of goodwill and
intangible assets as of January 1, 2002 and January 1,
2003. Based on the testing performed, no impairment losses were
incurred.

In accordance with Section 3062, no goodwill
amortization expense was incurred for the year ended
December 31, 2002. For the year ended December 31,
2001 and 2000, the Company incurred goodwill amortization
expense of $4,125 and $3,260 before tax and approximately $3,996
and $2,820 after tax ($0.20 and $0.15 per diluted share),
respectively.

The effect of the adoption of Section 3062
on net earnings and earnings per share for the years ended
December 31, 2002, 2001 and 2000 was as follows:

|                                    |  |      |        |      |  |      |        |  |  |   |       | 
|----------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ----- | 
|                                    |  | 2002 |        | 2001 |  | 2000
|                                    |  |      |        |      |  |     
|Reported net earnings               |  | $    | 29,401 |      |  | $    | 10,005 |  |  | $ | 6,138 | 
|Add back: Goodwill amortization     |  |      |       |      |  |      | 3,996  |  |  |   | 2,820 | 
|                                    |  |      |        |      |  |      |        |  |  |   |       | 
|Net earnings adjusted for goodwill  |  | $    | 29,401 |      |  | $    | 14,001 |  |  | $ | 8,958 | 
|                                    |  |      |        |      |  |      |        |  |  |   |       | 
|Basic EPS  Reported                |  | $    | 1.27   |      |  | $    | 0.53   |  |  | $ | 0.34  | 
|Basic EPS  Adjusted for goodwill   |  | $    | 1.27   |      |  | $    | 0.74   |  |  | $ | 0.49  | 
|Diluted EPS  Reported              |  | $    | 1.06   |      |  | $    | 0.50   |  |  | $ | 0.34  | 
|Diluted EPS  Adjusted for goodwill |  | $    | 1.06   |      |  | $    | 0.70   |  |  | $ | 0.49  | 

Stock based compensation

The Company issued stock options for the first
time in the second quarter of 2002. The Companys
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.


Future income taxes

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






|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    47



---



##### 



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. The
principal temporary differences are related to loss carry
forwards, goodwill and other intangible asset amortization, IPO
costs and reserves.


Estimates and assumptions

Preparation of the financial statements in
conformity with Canadian 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. Actual results could differ
from those estimated.


Earnings per share

Basic earnings per share, excluding the dilutive
effect of common share equivalents, is calculated by dividing
net earnings by the weighted average number of common shares
outstanding for the period. Diluted earnings per share is
calculated using the treasury stock method and includes the
effects of all potentially dilutive securities. Stock options
under the equity incentive plan were not dilutive for the year
ended December 31, 2002 and were not included in the
calculation of diluted earnings per share as the exercise price
of the options exceeds the average market price of the
Companys common shares for the period that the options
were outstanding during the year. Earnings per common share have
been calculated as follows:


|                                                              |                                                                              |      |         |       |  |      |         |       |  |  |        |       | 
|------------------------------------------------------------- | ---------------------------------------------------------------------------- | ---- | ------- | ----- |  | ---- | ------- | ----- |  |  | ------ | ----- | 
|                                                              |                                                                              | 2002 |         | 2001  |  | 2000
|                                                              |                                                                              |      |         |       |  |     
|Net earnings (numerator)                                      |                                                                              |      | $29,401 |       |  |      | $10,005 |       |  |  | $6,138 |      
|Plus income effect of assumed conversions:                    |                                                                              |      |         |       |  |      |         |       |  |  |        |      
|                                                              | Interest on 8.5% subordinated convertible
    debentures (net of income tax) |      |         | 2,520 |  |      |         |      |  |  |        |      | 
|                                                              |                                                                              |      |         |       |  |      |         |       |  |  |        |      
|Net earnings plus assumed conversions (numerator)             |                                                                              |      | $31,921 |       |  |      | $10,005 |       |  |  | $6,138 |      
|                                                              |                                                                              |      |         |       |  |      |         |       |  |  |        |      
|Weighted average shares outstanding  basic
    (denominator) |                                                                              |      | 23,181  |       |  |      | 19,012  |       |  |  | 18,327 |      
|Contingently issuable shares                                  |                                                                              |      | 307     |       |  |      |        |       |  |  |       |      
|Plus incremental shares from assumed conversions:             |                                                                              |      |         |       |  |      |         |       |  |  |        |      
|                                                              | Put options                                                                  |      |         | 2,149 |  |      |         | 1,093 |  |  |        |      | 
|                                                              | Retractable shares                                                           |      |         | 49    |  |      |         |      |  |  |        |      | 
|                                                              | 8.5% subordinated convertible debentures                                     |      |         | 4,513 |  |      |         |      |  |  |        |      | 
|                                                              |                                                                              |      |         |       |  |      |         |       |  |  |        |      
|Weighted average shares outstanding                          |                                                                              |      |         |       |  |      |         |       |  |  |        |      
|Diluted (denominator)                                         |                                                                              |      | 30,199  |       |  |      | 20,105  |       |  |  | 18,327 |      
|                                                              |                                                                              |      |         |       |  |      |         |       |  |  |        |      
|Earnings per common share:                                    |                                                                              |      |         |       |  |      |         |       |  |  |        |      
|                                                              | Basic                                                                        |      |         | $1.27 |  |      |         | $0.53 |  |  |        | $0.34 | 
|                                                              | Diluted                                                                      |      |         | $1.06 |  |      |         | $0.50 |  |  |        | $0.34 | 

Cash flow statement

During the fourth quarter 2002, the Company
changed the presentation of its cash flow statement. Previously,
the cash flow statement reported changes in cash and cash
equivalents and trust cash. The new presentation reports changes
in cash and cash equivalents only. The new basis of presentation
conforms the Companys cash flow statement presentation in
its financial statements prepared in accordance with Canadian
GAAP to the requirement of U.S. GAAP.


Written 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.






|                               |                               
|------------------------------ | ------------------------------
|48   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



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##### 



3.  Acquisitions

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 recorded a
substantial amount of goodwill and other intangible assets in
connection with these acquisitions.

The Company typically pays a 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.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | During 2002, the Company purchased all of the
    issued and outstanding shares of Hooper Hayes & Associates,
    Inc. (Hooper Hayes), and Fifth Third Insurance Services, Inc.
    renamed Hub International of Indiana Limited (Hub Indiana), as
    well as outstanding shares or net assets of 6 other brokerages,
    all of which were acquired 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.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In accordance with the purchase agreement, the
    former owners of Burnham, are entitled to additional
    consideration based upon certain acquired operations of Burnham
    achieving 2002 profitability targets. The additional
    consideration to be issued is a multiple of the final adjusted
    profitability as of December 31, 2002 for those operations.
    The total additional consideration is $22,166 of which $8,423 is
    cash and the remainder of $13,743 will be repaid by issuing
    1,228 common shares of the Company. As of December 31,
    2002, the Company has accrued the cash portion of the contingent
    consideration and the share portion of the contingent
    consideration has been recorded as contingently issuable
    shares and included in shareholders equity. As part
    of the negotiations of the contingent consideration, the former
    owners of Burnham have agreed to relinquish their rights to put
    options on all of the 1,423 common shares previously issued as
    part of the 2001 acquisition, as well as on shares issued as
    contingent consideration in exchange for release from escrow
    provisions on those same shares. The total additional
    consideration of $22,794 is shown as an addition to goodwill and
    customer relationships in the table below. The Company expects
    to issue the common shares in March 2003.





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    49



---



##### 



|                                                                           |  |              |        |               |  |               |        |         |  |       |        |   |  |   |        |  |  |   |        |  
|-------------------------------------------------------------------------- |  | ------------ | ------ | ------------- |  | ------------- | ------ | ------- |  | ----- | ------ | - |  | - | ------ |  |  | - | ------ | -
|                                                                           |  |              |        |               |  | Burnham       |        |         |  |      
|                                                                           |  | Hooper       |        |               |  | Contingent    |        |         |  |      
|                                                                           |  | Hayes        |        | Hub Indiana   |  | Consideration |        | Other   |  | Total
|                                                                           |  |              |        |               |  |               |        |         |  |      
|Acquisition Date                                                           |  | Nov. 1, 2002 |        | Dec. 31, 2002 |  | Dec. 31, 2002 |        | Various |  |      
|Working capital                                                            |  | $            | (1,141 | )             |  | $             | (289   | )       |  | $     | (628   | ) |  | $ | 1,180  |  |  | $ | (878   | )
|Capital and other assets                                                   |  |              | 69     |               |  |               | 1,312  |         |  |       |       |   |  |   | 108    |  |  |   | 1,489  |  
|                                                                           |  |              |        |               |  |               |        |         |  |       |        |   |  |   |        |  |  |   |        |  
|Net assets (liabilities) at fair value                                     |  | $            | (1,072 | )             |  | $             | 1,023  |         |  | $     | (628   | ) |  | $ | 1,288  |  |  | $ | 611    |  
|                                                                           |  |              |        |               |  |               |        |         |  |       |        |   |  |   |        |  |  |   |        |  
|Consideration                                                              |  |              |        |               |  |               |        |         |  |       |        |   |  |   |        |  |  |   |        |  
|Cash                                                                       |  | $            | 1,514  |               |  | $             | 37,250 |         |  | $     |       |   |  | $ | 12,899 |  |  |   | 51,663 |  
|Debt                                                                       |  |              |       |               |  |               | 122    |         |  |       | 8,423  |   |  |   | 2,365  |  |  |   | 10,910 |  
|Contingently issuable shares                                               |  |              |       |               |  |               |       |         |  |       | 13,743 |   |  |   |       |  |  |   | 13,743 |  
|Shares                                                                     |  |              | 7,115  |               |  |               |       |         |  |       |       |   |  |   | 344    |  |  |   | 7,459  |  
|                                                                           |  |              |        |               |  |               |        |         |  |       |        |   |  |   |        |  |  |   |        |  
|                                                                           |  | $            | 8,629  |               |  | $             | 37,372 |         |  | $     | 22,166 |   |  | $ | 15,608 |  |  | $ | 83,775 |  
|                                                                           |  |              |        |               |  |               |        |         |  |       |        |   |  |   |        |  |  |   |        |  
|Goodwill                                                                   |  | $            | 6,209  |               |  | $             | 24,622 |         |  | $     | 21,096 |   |  | $ | 10,704 |  |  | $ | 62,631 |  
|Customer relationships                                                     |  |              | 3,265  |               |  |               | 11,727 |         |  |       | 1,698  |   |  |   | 3,384  |  |  |   | 20,074 |  
|Non-competition covenants                                                  |  |              | 227    |               |  |               |       |         |  |       |       |   |  |   | 232    |  |  |   | 459    |  
|                                                                           |  |              |        |               |  |               |        |         |  |       |        |   |  |   |        |  |  |   |        |  
|                                                                           |  | $            | 9,701  |               |  | $             | 36,349 |         |  | $     | 22,794 |   |  | $ | 14,320 |  |  | $ | 83,164 |  
|                                                                           |  |              |        |               |  |               |        |         |  |       |        |   |  |   |        |  |  |   |        |  
|Number of shares issued as consideration
    (000s)                       |  |              | 449    |               |  |               |       |         |  |       |       |   |  |   | 24     |  |  |   | 473    |  
|                                                                           |  |              |        |               |  |               |        |         |  |       |        |   |  |   |        |  |  |   |        |  
|Number of shares issued as contingently issuable
    consideration (000s) |  |              |       |               |  |               |       |         |  |       | 1,228  |   |  |   |       |  |  |   | 1,228  |  
|                                                                           |  |              |        |               |  |               |        |         |  |       |        |   |  |   |        |  |  |   |        |  

Of the goodwill acquired, $30,522 is deductible
for tax purposes.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | During 2001, the Company purchased all of the
    issued and outstanding shares of Kaye, Burnham Stewart Group,
    Inc. (Burnham) and J.P. Flanagan Corporation (Flanagan), as well
    as the outstanding shares or net assets of 13 other brokerages,
    all of which were acquired 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.





|                               |                               
|------------------------------ | ------------------------------
|50   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



---



##### 



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

|                                                     |        |      |               |         |  |          |              |        |  |       |              |       |  |   |         |       |  |   |         |         | 
|---------------------------------------------------- | ------ | ---- | ------------- | ------- |  | -------- | ------------ | ------ |  | ----- | ------------ | ----- |  | - | ------- | ----- |  | - | ------- | ------- | 
|                                                     |        | Kaye |               | Burnham |  | Flanagan |              | Others |  | Total
|                                                     |        |      |               |         |  |          |              |        |  |      
|Acquisition Date                                     |        |      | June 28, 2001 |         |  |          | July 1, 2001 |        |  |       | May 31, 2001 |       |  |   | Various |       |  |   |         |        
|Working capital                                      |        | $    | 43,141        |         |  | $        | 3,002        |        |  | $     | (703         | )     |  | $ | (216    | )     |  | $ | 45,224  |        
|Capital and other assets                             |        |      | 7,413         |         |  |          | 1,580        |        |  |       | 79           |       |  |   | (244    | )     |  |   | 8,828   |        
|Long-term debt and capital leases assumed            |        |      | (1,449        | )       |  |          | (8,200       | )      |  |       | (1,339       | )     |  |   | (70     | )     |  |   | (11,058 | )      
|                                                     |        |      |               |         |  |          |              |        |  |       |              |       |  |   |         |       |  |   |         |        
|Net assets (liabilities), at fair value              |        | $    | 49,105        |         |  | $        | (3,618       | )      |  | $     | (1,963       | )     |  | $ | (530    | )     |  | $ | 42,994  |        
|                                                     |        |      |               |         |  |          |              |        |  |       |              |       |  |   |         |       |  |   |         |        
|Consideration                                        |        |      |               |         |  |          |              |        |  |       |              |       |  |   |         |       |  |   |         |        
|                                                     | Cash   |      | $             | 125,131 |  |          | $            | 11,533 |  |       | $            | 776   |  |   | $       | 3,950 |  |   | $       | 141,390 | 
|                                                     | Debt   |      |               |        |  |          |              | 12,435 |  |       |              | 7,210 |  |   |         | 1,760 |  |   |         | 21,405  | 
|                                                     | Shares |      |               |        |  |          |              | 6,191  |  |       |              | 1,821 |  |   |         | 557   |  |   |         | 8,569   | 
|                                                     |        |      |               |         |  |          |              |        |  |       |              |       |  |   |         |       |  |   |         |        
|                                                     |        | $    | 125,131       |         |  | $        | 30,159       |        |  | $     | 9,807        |       |  | $ | 6,267   |       |  | $ | 171,364 |        
|                                                     |        |      |               |         |  |          |              |        |  |       |              |       |  |   |         |       |  |   |         |        
|Goodwill                                             |        | $    | 59,816        |         |  | $        | 27,269       |        |  | $     | 8,838        |       |  | $ | 6,001   |       |  | $ | 101,924 |        
|Customer relationships                               |        |      | 12,992        |         |  |          | 5,690        |        |  |       | 2,242        |       |  |   | 796     |       |  |   | 21,720  |        
|Trademarks                                           |        |      | 1,714         |         |  |          | 623          |        |  |       | 250          |       |  |   |        |       |  |   | 2,587   |        
|Non-competition covenants                            |        |      | 1,204         |         |  |          | 195          |        |  |       | 440          |       |  |   |        |       |  |   | 1,839   |        
|                                                     |        |      |               |         |  |          |              |        |  |       |              |       |  |   |         |       |  |   |         |        
|                                                     |        | $    | 75,726        |         |  | $        | 33,777       |        |  | $     | 11,770       |       |  | $ | 6,797   |       |  | $ | 128,070 |        
|                                                     |        |      |               |         |  |          |              |        |  |       |              |       |  |   |         |       |  |   |         |        
|Number of shares issued as consideration
    (000s) |        |      |              |         |  |          | 1,743        |        |  |       | 730          |       |  |   | 51      |       |  |   | 2,524   |        
|                                                     |        |      |               |         |  |          |              |        |  |       |              |       |  |   |         |       |  |   |         |        

The consideration shown in the table immediately
above, does not reflect the Burnham contingent consideration
which has been accrued at December 31, 2002.

Contingent Consideration

In addition to the consideration shown above, the
previous owners of Flanagan and Nenner are entitled to
contingent consideration if certain revenue and profitability
targets are met. Purchase price allocations for Flanagan are
subject to adjustment for future consideration issued. See note
10 Commitments and contingencies.


4.  Accounts and other
receivables

Accounts and other receivables consist of the
following:


|                                         |  |              |         |      |  |   |         |  
|---------------------------------------- |  | ------------ | ------- | ---- |  | - | ------- | -
|                                         |  |             
|                                         |  | December 31,
|                                         |  |             
|                                         |  | 2002         |         | 2001
|                                         |  |              |         |     
|Client premiums receivable               |  | $            | 110,688 |      |  | $ | 80,488  |  
|Commissions receivable                   |  |              | 22,265  |      |  |   | 18,214  |  
|Less: Allowance for doubtful accounts    |  |              | (714    | )    |  |   | (815    | )
|Less: Allowance for policy cancellations |  |              | (875    | )    |  |   | (612    | )
|                                         |  |              |         |      |  |   |         |  
|                                         |  |              | 131,364 |      |  |   | 97,275  |  
|Other receivables                        |  |              | 5,203   |      |  |   | 4,038   |  
|                                         |  |              |         |      |  |   |         |  
|                                         |  | $            | 136,567 |      |  | $ | 101,313 |  
|                                         |  |              |         |      |  |   |         |  





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    51



---



##### 



Allowance for doubtful accounts:

|                                                              |  |      |      |      |  |      |      |   |  |   |     |  
|------------------------------------------------------------- |  | ---- | ---- | ---- |  | ---- | ---- | - |  | - | --- | -
|                                                              |  | 2002 |      | 2001 |  | 2000
|                                                              |  |      |      |      |  |     
|Balance, January 1                                            |  | $    | 815  |      |  | $    | 502  |   |  | $ | 309 |  
|Charged to net earnings before income taxes                   |  |      | 233  |      |  |      | 305  |   |  |   | 120 |  
|Deductions of amounts previously charged to the
    provision |  |      | (335 | )    |  |      | (247 | ) |  |   | (94 | )
|Acquired through acquisitions                                 |  |      | 1    |      |  |      | 255  |   |  |   | 167 |  
|                                                              |  |      |      |      |  |      |      |   |  |   |     |  
|Balance, December 31                                          |  | $    | 714  |      |  | $    | 815  |   |  | $ | 502 |  
|                                                              |  |      |      |      |  |      |      |   |  |   |     |  

Losses relating to the non-collection of client
premium receivables, may be mitigated by cancellation of the
underlying insurance policy.

5.  Property and equipment

|                       |  |      |        |              |  |          |         |          |  |   |        |  |  |   |        | 
|---------------------- |  | ---- | ------ | ------------ |  | -------- | ------- | -------- |  | - | ------ |  |  | - | ------ | 
|                       |  |      |        |             
|                       |  | 2002 |        | 2001        
|                       |  |      |        |             
|                       |  |      |        | Accumulated  |  | Net Book |         | Net Book
|                       |  | Cost |        | Depreciation |  | Value    |         | Value   
|                       |  |      |        |              |  |          |         |         
|Leasehold improvements |  | $    | 9,749  |              |  | $        | (2,015  | )        |  | $ | 7,734  |  |  | $ | 8,417  | 
|Office equipment       |  |      | 12,190 |              |  |          | (5,939  | )        |  |   | 6,251  |  |  |   | 6,487  | 
|Computer equipment     |  |      | 17,530 |              |  |          | (10,217 | )        |  |   | 7,313  |  |  |   | 6,031  | 
|                       |  |      |        |              |  |          |         |          |  |   |        |  |  |   |        | 
|                       |  | $    | 39,469 |              |  | $        | (18,171 | )        |  | $ | 21,298 |  |  | $ | 20,935 | 
|                       |  |      |        |              |  |          |         |          |  |   |        |  |  |   |        | 

Aggregate accumulated depreciation as at
December 31, 2001 was $13,868.

Included in computer equipment is computer
software with a net book value of $2,641 and $1,939 at
December 31, 2002 and 2001, respectively. Depreciation
expense of $1,087, $621 and $182 was charged against these
assets for the year ended December 31, 2002, 2001 and 2000.

During 2002 and 2001, property and equipment were
acquired at an aggregate cost of $4,494 and $11,534
respectively, of which $25 and $1,236, respectively, were
acquired by means of capital leases.

The cost above reflects certain property and
equipment held under capital leases of which the remaining
liability at December 31, 2002 and 2001 was $993 and
$1,470, respectively.

6. Intangible assets

As of December 31, 2002 and 2001 the gross
carrying amount and accumulated amortization of intangible
assets other than goodwill were as follows:

|                                   |                           |                         |        |                         |  |       |       |          |  |              |        |        |  |   |        |        |  |   |     |     |  |   |        |        | 
|---------------------------------- | ------------------------- | ----------------------- | ------ | ----------------------- |  | ----- | ----- | -------- |  | ------------ | ------ | ------ |  | - | ------ | ------ |  | - | --- | --- |  | - | ------ | ------ | 
|                                   |                           |                         |        |                        
|                                   |                           | As of December 31, 2002 |        | As of December 31, 2001
|                                   |                           |                         |        |                        
|                                   |                           | Gross                   |        |                         |  | Gross |       |         
|                                   |                           | Carrying                |        | Accumulated             |  |       |       | Carrying |  | Accumulated  |        |       
|                                   |                           | Amount                  |        | amortization            |  | Total |       | Amount   |  | amortization |        | Total 
|                                   |                           |                         |        |                         |  |       |       |          |  |              |        |       
|Definite life intangible assets:   |                           |                         |        |                         |  |       |       |          |  |              |        |        |  |   |        |        |  |   |     |     |  |   |        |       
|                                   | Customer relationships    |                         | $      | 41,762                  |  |       | $     | 2,383    |  |              | $      | 39,379 |  |   | $      | 21,720 |  |   | $   | 759 |  |   | $      | 20,961 | 
|Indefinite life intangible assets: |                           |                         |        |                         |  |       |       |          |  |              |        |        |  |   |        |        |  |   |     |     |  |   |        |       
|                                   | Non-competition covenants |                         |        | 2,298                   |  |       |       | 100      |  |              |        | 2,198  |  |   |        | 1,839  |  |   |     | 56  |  |   |        | 1,783  | 
|                                   | Trademarks                |                         |        | 2,587                   |  |       |       |         |  |              |        | 2,587  |  |   |        | 2,587  |  |   |     |    |  |   |        | 2,587  | 
|                                   |                           |                         |        |                         |  |       |       |          |  |              |        |        |  |   |        |        |  |   |     |     |  |   |        |       
|Total                              |                           | $                       | 46,647 |                         |  | $     | 2,483 |          |  | $            | 44,164 |        |  | $ | 26,146 |        |  | $ | 815 |     |  | $ | 25,331 |       
|                                   |                           |                         |        |                         |  |       |       |          |  |              |        |        |  |   |        |        |  |   |     |     |  |   |        |       





|                               |                               
|------------------------------ | ------------------------------
|52   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



---



##### 



Additions during 2002 and 2001 were as follows:

|                                   |                           |      |        |        |  |   |        |        | 
|---------------------------------- | ------------------------- | ---- | ------ | ------ |  | - | ------ | ------ | 
|                                   |                           | 2002 |        | 2001  
|                                   |                           |      |        |       
|Definite life intangible assets:   |                           |      |        |        |  |   |        |       
|                                   | Customer relationships    |      | $      | 20,074 |  |   | $      | 21,720 | 
|Indefinite life intangible assets: |                           |      |        |        |  |   |        |       
|                                   | Non-competition covenants |      |        | 459    |  |   |        | 1,839  | 
|                                   | Trademarks                |      |        |       |  |   |        | 2,587  | 
|                                   |                           |      |        |        |  |   |        |       
|Total                              |                           | $    | 20,533 |        |  | $ | 26,146 |       
|                                   |                           |      |        |        |  |   |        |       

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

The changes in the carrying amount of goodwill
for the years ended December 31, 2002 and 2001, are as
follows:

|                                                |  |            |        |            |  |       |         |   |  |   |         |  
|----------------------------------------------- |  | ---------- | ------ | ---------- |  | ----- | ------- | - |  | - | ------- | -
|                                                |  | Operations |        | Operations |  |      
|                                                |  | in Canada  |        | in U.S.    |  | Total
|                                                |  |            |        |            |  |      
|Balance as of December 31, 2000                 |  | $          | 75,647 |            |  | $     | 42,097  |   |  | $ | 117,744 |  
|Goodwill acquired during 2001                   |  |            | 1,811  |            |  |       | 100,113 |   |  |   | 101,924 |  
|Amortization of goodwill during 2001            |  |            | (2,292 | )          |  |       | (1,833  | ) |  |   | (4,125  | )
|Cumulative translation adjustment               |  |            | (884   | )          |  |       | 6,189   |   |  |   | 5,305   |  
|                                                |  |            |        |            |  |       |         |   |  |   |         |  
|Balance as of December 31, 2001                 |  |            | 74,282 |            |  |       | 146,566 |   |  |   | 220,848 |  
|Goodwill acquired during 2002, net of disposals |  |            | 287    |            |  |       | 59,760  |   |  |   | 60,047  |  
|Cumulative translation adjustment               |  |            | 832    |            |  |       |        |   |  |   | 832     |  
|                                                |  |            |        |            |  |       |         |   |  |   |         |  
|Balance as of December 31, 2002.                |  | $          | 75,401 |            |  | $     | 206,326 |   |  | $ | 281,727 |  
|                                                |  |            |        |            |  |       |         |   |  |   |         |  

For the years ended December 31, 2002, 2001
and 2000, amortization has been comprised of the following:

|                          |  |      |       |      |  |      |       |  |  |   |       | 
|------------------------- |  | ---- | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|                          |  | 2002 |       | 2001 |  | 2000
|                          |  |      |       |      |  |     
|Customer relationships    |  | $    | 1,627 |      |  | $    | 759   |  |  | $ |      | 
|Non-competition covenants |  |      | 44    |      |  |      | 56    |  |  |   |      | 
|Goodwill                  |  |      |      |      |  |      | 4,125 |  |  |   | 3,260 | 
|                          |  |      |       |      |  |      |       |  |  |   |       | 
|Total                     |  | $    | 1,671 |      |  | $    | 4,940 |  |  | $ | 3,260 | 
|                          |  |      |       |      |  |      |       |  |  |   |       | 

We estimate that our amortization charges for
2003 through 2007 for all acquisitions consummated to date will
be:

|                          |  |      |       |      |  |      |       |      |  |      |       |  |  |   |       |  |  |   |       | 
|------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ----- |  |  | - | ----- |  |  | - | ----- | 
|                          |  | 2003 |       | 2004 |  | 2005 |       | 2006 |  | 2007
|                          |  |      |       |      |  |      |       |      |  |     
|Year ended December 31,   |  |      |       |      |  |      |       |      |  |      |       |  |  |   |       |  |  |   |       | 
|Customer relationships    |  | $    | 2,966 |      |  | $    | 2,966 |      |  | $    | 2,966 |  |  | $ | 2,966 |  |  | $ | 2,966 | 
|Non-competition covenants |  |      | 56    |      |  |      | 2     |      |  |      |      |  |  |   |      |  |  |   |      | 
|                          |  |      |       |      |  |      |       |      |  |      |       |  |  |   |       |  |  |   |       | 
|Total                     |  | $    | 3,022 |      |  | $    | 2,968 |      |  | $    | 2,966 |  |  | $ | 2,966 |  |  | $ | 2,966 | 
|                          |  |      |       |      |  |      |       |      |  |      |       |  |  |   |       |  |  |   |       | 





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    53



---



##### 



7.  Accounts payable and accrued
liabilities

Accounts payable and accrued liabilities consist
of the following:

|                           |  |              |         |              |  |   |         | 
|-------------------------- |  | ------------ | ------- | ------------ |  | - | ------- | 
|                           |  | December 31, |         | December 31,
|                           |  | 2002         |         | 2001        
|                           |  |              |         |             
|Insurance premiums payable |  | $            | 150,641 |              |  | $ | 122,668 | 
|Accrued liabilities        |  |              | 36,393  |              |  |   | 41,426  | 
|                           |  |              |         |              |  |   |         | 
|                           |  | $            | 187,034 |              |  | $ | 164,094 | 
|                           |  |              |         |              |  |   |         | 

8.  Debt

Long-term debt and capital leases

|                                                                                           |  |              |        |              |  |   |        |  
|------------------------------------------------------------------------------------------ |  | ------------ | ------ | ------------ |  | - | ------ | -
|                                                                                           |  | December 31, |        | December 31,
|                                                                                           |  | 2002         |        | 2001        
|                                                                                           |  |              |        |             
|Revolving U.S. Dollar LIBOR loans                                                          |  | $            | 50,000 |              |  | $ | 49,454 |  
|Put options                                                                                |  |              | 5,940  |              |  |   | 17,274 |  
|Term loan, interest only at 10%, due February
    2007(1)                                  |  |              | 7,500  |              |  |   |       |  
|Term loan with interest at prime plus 3/4%,
    repayable at $23 monthly, due August 2005* |  |              | 587    |              |  |   | 849    |  
|Term loan with interest at 9%, repayable at
    $46 monthly, due October 2005*             |  |              | 1,133  |              |  |   | 1,533  |  
|Note payable with interest at 5.92%, repayable at
    $272 annually, due November 2005     |  |              | 735    |              |  |   | 953    |  
|Term loan with interest at 8%, repayable at
    $18 monthly, due July 2010                 |  |              | 1,238  |              |  |   | 1,353  |  
|Other term loans                                                                           |  |              |       |              |  |   | 4,773  |  
|Various other unsecured notes payable and debt                                             |  |              | 3,912  |              |  |   | 2,669  |  
|Capital leases*                                                                            |  |              | 993    |              |  |   | 1,470  |  
|                                                                                           |  |              |        |              |  |   |        |  
|Long-term debt and capital leases                                                          |  |              | 72,038 |              |  |   | 80,328 |  
|Less current portion                                                                       |  |              | (3,029 | )            |  |   | (4,169 | )
|                                                                                           |  |              |        |              |  |   |        |  
|                                                                                           |  | $            | 69,009 |              |  | $ | 76,159 |  
|                                                                                           |  |              |        |              |  |   |        |  

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

|                                              |  |   |        | 
|--------------------------------------------- |  | - | ------ | 
|For the twelve months ending
    December 31, |  |   |        | 
|2003                                          |  | $ | 3,029  | 
|2004                                          |  |   | 2,123  | 
|2005                                          |  |   | 1,514  | 
|2006                                          |  |   | 53,568 | 
|2007                                          |  |   | 3,872  | 
|2008 and thereafter                           |  |   | 7,932  | 
|                                              |  |   |        | 
|                                              |  | $ | 72,038 | 
|                                              |  |   |        | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | This term loan is from an insurance carrier. The
    terms of the loan provide for an incentive arrangement whereby a
    credit can be earned that will reduce annual interest payments
    under the loan (based on target premiums placed with the
    carrier) and reduce the principal repayment due in February 2007
    (based on both target premiums placed with the carrier as well
    as the loss ratio on premiums placed with the carrier). Under
    this incentive arrangement both the annual interest payments as
    well as the principal payment can be reduced to zero. Credits
    were earned for 2002 which reduced interest payments to zero
    from $229.
|   
|*   | Certain property and equipment have been pledged
    as collateral in amounts not less than the outstanding balance
    at December 31, 2002 and December 31, 2001, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    





|                               |                               
|------------------------------ | ------------------------------
|54   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



---



##### 



Revolving U.S. dollar LIBOR loans

Borrowings under this $50 million facility
totaled $50.0 million and $49.5 million at
December 31, 2002 and December 31, 2001, respectively,
and are accessed at a floating rate of 112.5 basis points above
LIBOR, which was 1.42% and 2.09% at December 31, 2002 and
2001, respectively. This facility expires on June 20, 2003
and requires the Company to maintain certain financial ratios.
The Company intends to extend the facility for a further period
of one year; however, if the revolving period is not extended,
any amounts outstanding will automatically convert into a
three-year term loan at a fixed interest rate equal to the
Canadian dollar interest swap rate quoted by the lender plus
1.375%. At December 31, 2002, no amounts under this
facility remained available to be drawn by the Company. The
Company was in compliance with all financial covenants governing
this facility as of December 31, 2002 and 2001.

Demand U.S. dollar base rate loan

Borrowings under this $7.6 million facility
totaled $NIL and $7.0 million at December 31, 2002 and
2001 respectively, and are accessed at the banks U.S. base
rate which was 4.75% and 6.25% at December 31, 2002 and
2001 respectively. Payment is due on demand.

Put Options

As discussed in note 3(a), the former owners of
Burnham have relinquished their right to put options on 1,423
common shares of the Company. Accordingly, an amount of $11,768
previously classified as long-term debt has been reclassed as
share capital (see note 11).

Long-term debt at December 31, 2002,
includes the estimated value of the financial liability of
$5,940 relating to put options on 730 common shares, exercisable
at a price of C$17.00 per share, issued to former owners of
Flanagan who are officers and employees of the Company. The put
options are exercisable as follows:

|              |  |         |     | 
|------------- |  | ------- | --- | 
|              |  | Shares 
|Exercise Date |  | (000s)
|              |  |        
|May 31, 2006  |  |         | 365 | 
|May 31, 2007  |  |         | 73  | 
|May 31, 2011  |  |         | 292 | 
|              |  |         |     | 
|              |  |         | 730 | 
|              |  |         |     | 

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

Subordinated convertible debentures

In connection with the acquisition of Kaye on
June 28, 2001, the Company issued (1) a
$28.2 million aggregate principal amount, 8.5% convertible
subordinated debenture due June 28, 2006 to a third party
(the third-party note); and (2) a $35 million
aggregate principal amount, 8.5% convertible subordinated
debentures due June 28, 2007 to certain subsidiaries of
Fairfax (the Fairfax notes).

The third-party note was fully repaid with the
proceeds of the U.S. IPO on June 28, 2002. As of
December 31, 2002, the $35 million Fairfax notes
remain outstanding.

The Fairfax notes are convertible by the holders
at any time into the Companys common shares at C$17.00 per
share. Beginning June 28, 2006, the Company may require
conversion of the Fairfax notes into common shares at C$17.00
per share if, at any time, the weighted average closing price of
the Companys common shares on the TSX for twenty
consecutive trading days equals or exceeds C$19.00 per share. If
converted, Fairfax would have owned approximately 35% of the
total outstanding common shares as of December 31, 2002.





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    55



---



##### 



9.  Defined Contribution
Plan

Substantially all officers and employees of the
Company in the United States are entitled to participate in a
qualified retirement savings plan (defined contribution plan).
The cost to the Company was $1,425, $648 and $135 for 2002, 2001
and 2000 respectively.

10. Commitments and
contingencies



|    |                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | The Company is committed under lease agreements
    for office premises and computer equipment. At December 31,
    2002, aggregate minimum rental commitments (net of expected
    sub-lease receipts) under operating leases of $55,169 are
    summarized as follows:

|                    |  |   |        | 
|------------------- |  | - | ------ | 
|2003                |  | $ | 9,876  | 
|2004                |  | $ | 9,310  | 
|2005                |  | $ | 8,041  | 
|2006                |  | $ | 7,035  | 
|2007                |  | $ | 6,129  | 
|2008 and thereafter |  | $ | 14,778 | 



| |                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Rent expense for the year ended December 31,
    2002, 2001, and 2000 amounted to $9,684, $7,665 and $5,756,
    respectively, net of sublease rental income of $737, $620 and
    $240, respectively.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | 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 $5,077 and
    $5,542 as of December 31, 2002 and 2001 respectively, to
    assist in purchasing common shares of the Company. As
    collateral, the employees have pledged 602 and 669 common shares
    as of December 31, 2002 and 2001, respectively, which have
    a market value of $7,677 and $6,389 as of December 31, 2002
    and 2001, respectively. Interest on the loans in the amount of
    $264, $377 and $397 for the years ended December 31, 2002,
    2001 and 2000, respectively, was paid by the Company and is
    included in compensation expense.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(c) | The Company has committed to award, under the
    Companys equity incentive plan, an aggregate of 266
    restricted shares that will be paid for by the participants with
    loans either from the Company or from a bank (guaranteed by the
    Company). In addition, the Company has committed to award an
    aggregate of 471 restricted share units that are exercisable for
    common shares, without payment of cash consideration. As of
    December 31, 2002, no restricted shares or restricted share
    units had been awarded or issued.



|    |                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------
|(d) | Contingent consideration may be payable in
    connection with the acquisition of Flanagan as follows:

|     |  |               |           |               |  |  |               | 
|---- |  | ------------- | --------- | ------------- |  |  | ------------- | 
|     |  |               |           | Contingent   
|     |  | Contingent    |           | Consideration
|     |  | Consideration |           | Target       
|Year |  | (000s)       |           | criteria     
|     |  |               |           |              
|2002 |  |               | 38 shares |               |  |  | Revenue       | 
|2002 |  |               | 38 shares |               |  |  | Profitability | 
|2003 |  |               | 88 shares |               |  |  | Revenue       | 
|2003 |  |               | 37 shares |               |  |  | Profitability | 



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The 2002 contingent consideration has not been
    earned, however the former owners of Flanagan will still be
    entitled to receive the 2002 shares if the 2003 contingent
    consideration targets are met or exceeded.                                                                                                                                                                                                                                                                       
|
| | In connection with our acquisition of C.S. Nenner
    Insurance Agency, Inc. (Nenner) the former owners of this
    company are entitled to contingent consideration based upon the
    acquired operations achieving profitability targets over a
    period of three years from the date of acquisition. As of
    December 31, 2002, we estimate the total contingent payment
    for Nenner to be approximately $4,500 of which 90% is payable in
    cash and 10% is payable in common shares.





|                               |                               
|------------------------------ | ------------------------------
|56   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



---



##### 





|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 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.

11. Shareholders equity

Share capital

At December 31, 2002 and 2001, there were an
unlimited number of non-voting, preferred shares authorized,
issuable in series on such terms and conditions as set by the
Board of Directors, of which no shares were issued. At
December 31, 2002 and 2001, there were an unlimited number
of common shares authorized, of which 29,025 and 21,656 were
issued and outstanding as at December 31, 2002 and
December 31, 2001 respectively.


|                                                                  |  |               |        |        |  |   |         |  
|----------------------------------------------------------------- |  | ------------- | ------ | ------ |  | - | ------- | -
|                                                                  |  |              
|                                                                  |  | Common shares
|                                                                  |  | Outstanding  
|                                                                  |  |              
|                                                                  |  | (000s)       |        | Amount
|                                                                  |  |               |        |       
|Balance, December 31, 1999                                        |  |               | 18,308 |        |  | $ | 108,342 |  
|Repurchase                                                        |  |               | (288   | )      |  |   | (1,794  | )
|Purchase of subsidiaries                                          |  |               | 508    |        |  |   | 4,882   |  
|                                                                  |  |               |        |        |  |   |         |  
|Balance, December 31, 2000                                        |  |               | 18,528 |        |  |   | 111,430 |  
|Issued for cash                                                   |  |               | 440    |        |  |   | 3,621   |  
|Issued for executive stock purchase plan (net of
    repurchases) |  |               | 164    |        |  |   | 1,886   |  
|Purchase of subsidiaries                                          |  |               | 2,474  |        |  |   | 8,091   |  
|Issuable for contingent consideration                             |  |               | 50     |        |  |   | 478     |  
|                                                                  |  |               |        |        |  |   |         |  
|Balance, December 31, 2001                                        |  |               | 21,656 |        |  |   | 125,506 |  
|Issued  U.S. IPO                                                 |  |               | 6,900  |        |  |   | 90,616  |  
|Issued for executive stock purchase plan (net of
    repurchases) |  |               | (4     | )      |  |   | (152    | )
|Release of put option liability                                   |  |               |       |        |  |   | 11,768  |  
|Purchase of subsidiaries                                          |  |               | 473    |        |  |   | 7,459   |  
|                                                                  |  |               |        |        |  |   |         |  
|Balance, December 31, 2002                                        |  |               | 29,025 |        |  | $ | 235,197 |  
|                                                                  |  |               |        |        |  |   |         |  

Cumulative translation account

|                                                                        |  |      |        |      |  |      |        |   |  |  |       |  
|----------------------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  |  | ----- | -
|                                                                        |  | 2002 |        | 2001 |  | 2000
|                                                                        |  |      |        |      |  |     
|Balance at January 1                                                    |  |      | $2,770 |      |  |      | $195   |   |  |  | $(831 | )
|Translation of self-sustaining foreign operations                       |  |      | (269   | )    |  |      | 9,479  |   |  |  | 1,335 |  
|Translation of debt financing of self-sustaining
    foreign operations |  |      | (316   | )    |  |      | (6,904 | ) |  |  | (309  | )
|                                                                        |  |      |        |      |  |      |        |   |  |  |       |  
|Balance at December 31                                                  |  |      | $2,185 |      |  |      | $2,770 |   |  |  | $195  |  
|                                                                        |  |      |        |      |  |      |        |   |  |  |       |  

Contributed surplus

Contributed surplus at December 31, 2002 of
$1,234 is primarily comprised of $1,078 related to non-cash
stock option compensation, incurred for the first time in 2002.

12. Equity Incentive Plan

On May 10, 2002, the shareholders of the
Company approved an equity incentive plan under which up to
2,100 awards of common shares may be issued to employees and
directors of the Company. Awards under the plan may be in the
form of restricted shares, restricted share units or stock
options. Currently, the maximum number of awards under the
equity incentive plan that may be newly issued common shares is
limited to 500 and the maximum number of common shares that may
be subject to an award granted to participants in any calendar
year may not





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    57



---



##### 



exceed 1,000 common shares. However, subject to
shareholder ratification, the Companys Board of Directors
has approved removing the 500 and 1,000 share limitations
currently in the plan.


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

Restricted share units are exercisable for common
shares, without payment of cash consideration. Common shares
derived from restricted share units will be subject to transfer
restrictions that will cease to apply with respect to 50% of the
shares after five years and the balance of the shares after ten
years of continuous employment. As of December 31, 2002, no
restricted shares or restricted share units have been awarded or
issued.

On June 17, 2002 the Company granted options
exercisable for 1,270 common shares at an exercise price of
$15.67 per share, the U.S. dollar equivalent of the closing
price of the Companys common shares on the TSX on that
date. The maximum option term is seven years, and the options
vest as to one-third per year over three years of continuous
employment. No options were exercised or forfeited and none
expired from the date of grant through December 31, 2002.
Accordingly, at December 31, 2002, 1,270 options were
outstanding at a weighted average exercise price of $15.67. The
remaining average contract life of the options at
December 31, 2002 was 6.45 years. None of the options
are exercisable at December 31, 2002.

The aggregate fair value of options granted of
$5,995 was estimated on the date of grant using the
Black-Scholes option pricing model with the following
assumptions: (i) dividend yield of 1.15%,
(ii) expected volatility range of 30%, (iii) risk-free
interest rate of 4.14% and (iv) expected life of five
years. The fair value of the options granted is being recognized
as an expense over the vesting period. For the year ended
December 31, 2002, non-cash stock option compensation of
$1,078 was expensed with an offsetting credit to contributed
surplus.

13. Fair value of financial
instruments

The carrying amounts of the Companys
financial assets and liabilities, including cash and cash
equivalents, accounts and other receivables, accounts payable
and accrued liabilities at December 31, 2002 and 2001,
approximate fair value because of the short maturity of these
instruments. The carrying value of the Companys variable
rate debt at December 31, 2002, of $50,587 approximates
fair market value.

In connection with the acquisition of Kaye, the
Company issued the following subordinated convertible debentures:



|  |                                                                                                                                                                                                                           
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 8.5% subordinated convertible debenture due
    June 28, 2006 with a carrying amount and aggregate
    principal of $28.2 million. This debenture was fully repaid
    with the proceeds of the U.S. IPO on June 28, 2002.
| 
| | 8.5% subordinated convertible debentures due
    June 28, 2007 with a carrying amount and aggregate
    principal of $35.0 million. These debentures remain
    outstanding at December 31, 2002.                         

The Company believes it is not practicable to
estimate the fair value of its subordinated convertible
debentures due to the conversion features.

The carrying values of put options and other
long-term debt approximate fair values.





|                               |                               
|------------------------------ | ------------------------------
|58   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



---



##### 



14. Income taxes

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 38.6% for 2002, 41.7% for 2001 and 44.0% for 2000, as
follows:

|                                        |  |      |        |      |  |      |        |   |  |   |        |  
|--------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                        |  | 2002 |        | 2001 |  | 2000
|                                        |  |      |        |      |  |     
|Provision for tax at statutory rates    |  | $    | 16,852 |      |  | $    | 6,366  |   |  | $ | 5,058  |  
|Non-taxable gain on sale of Old Lyme    |  |      | (1,009 | )    |  |      |       |   |  |   |       |  
|Income earned outside Canada            |  |      | (2,036 | )    |  |      | (3,170 | ) |  |   | (1,148 | )
|Non-deductible amortization of goodwill |  |      |       |      |  |      | 1,579  |   |  |   | 994    |  
|Other                                   |  |      | 449    |      |  |      | 487    |   |  |   | 466    |  
|                                        |  |      |        |      |  |      |        |   |  |   |        |  
|Provision for tax                       |  | $    | 14,256 |      |  | $    | 5,262  |   |  | $ | 5,370  |  
|                                        |  |      |        |      |  |      |        |   |  |   |        |  

The components of the future tax assets and
liabilities at December 31, 2002 and 2001, were as follows:

|                                                        |                                                  |      |        |       |  |   |        |       | 
|------------------------------------------------------- | ------------------------------------------------ | ---- | ------ | ----- |  | - | ------ | ----- | 
|                                                        |                                                  | 2002 |        | 2001 
|                                                        |                                                  |      |        |      
|Future income tax assets                                |                                                  |      |        |       |  |   |        |      
|                                                        | Loss carryforwards                               |      | $      | 2,235 |  |   | $      | 1,886 | 
|                                                        | IPO Costs                                        |      |        | 2,182 |  |   |        |      | 
|                                                        | Non-deductible book reserves                     |      |        | 1,767 |  |   |        | 1,602 | 
|                                                        | Stock options and deferred compensation          |      |        | 285   |  |   |        | 879   | 
|                                                        | Other                                            |      |        | 570   |  |   |        | 303   | 
|                                                        |                                                  |      |        |       |  |   |        |      
|Total future income tax assets                          |                                                  |      | 7,039  |       |  |   | 4,670  |      
|Less: current portion future income tax assets          |                                                  |      | (3,324 | )     |  |   | (1,999 | )    
|                                                        |                                                  |      |        |       |  |   |        |      
|Future income tax assets                                |                                                  | $    | 3,715  |       |  | $ | 2,671  |      
|                                                        |                                                  |      |        |       |  |   |        |      
|Future income tax liabilities                           |                                                  |      |        |       |  |   |        |      
|                                                        | Goodwill and other intangible asset amortization |      | $      | 6,261 |  |   | $      | 3,663 | 
|                                                        | Other accrual adjustments                        |      |        | 1,012 |  |   |        | 1,309 | 
|                                                        | Property and equipment depreciation              |      |        | 391   |  |   |        | 169   | 
|                                                        | Other                                            |      |        | 1,245 |  |   |        | 838   | 
|                                                        |                                                  |      |        |       |  |   |        |      
|Total future income tax liabilities                     |                                                  |      | 8,909  |       |  |   | 5,979  |      
|Less: current portion future income tax
    liabilities |                                                  |      | (1,164 | )     |  |   | (1,387 | )    
|                                                        |                                                  |      |        |       |  |   |        |      
|Future income tax liabilities                           |                                                  | $    | 7,745  |       |  | $ | 4,592  |      
|                                                        |                                                  |      |        |       |  |   |        |      

The Company has Canadian net operating loss
carryforwards of $4,737 at December 31, 2002 that expire
2007 through 2009 resulting in a future tax asset of $1,714. In
addition, the Company has various state and local net operating
loss carryforwards in the U.S. of approximately $9,792 relating
primarily to acquisitions, which expire 2004 through 2022
resulting in a future tax asset of $749 before valuation
allowance. Such net operating losses are currently available to
offset certain future state and local taxable income. As a
result of an ownership change, there are annual limitations
imposed upon the utilization of some of these losses and,
accordingly, a valuation allowance in the amount of
approximately $228 has been established where we do not believe
the net operating losses will be realized.

15. Interest and income taxes
paid

Interest and income taxes paid for the years
ending December 31 were:

|                  |  |      |        |      |  |      |       |  |  |   |       | 
|----------------- |  | ---- | ------ | ---- |  | ---- | ----- |  |  | - | ----- | 
|                  |  | 2002 |        | 2001 |  | 2000
|                  |  |      |        |      |  |     
|Interest paid     |  | $    | 7,714  |      |  | $    | 6,818 |  |  | $ | 2,606 | 
|Income taxes paid |  | $    | 13,141 |      |  | $    | 3,444 |  |  | $ | 7,528 | 





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    59



---



##### 



16. Segmented information

The Company is an international insurance
brokerage, which provides a variety of property, casualty, life
and health, employee benefits, investment and risk management
products and services. In addition to its Corporate Operations,
the Company has identified two operating segments within its
insurance brokerage business; Canadian Operations and U.S.
Operations. Corporate Operations consist primarily of investment
income, unallocated administrative costs, interest expense and
the income tax expense or benefit which is not allocated to the
Companys operating segments. The elimination of
intra-segment revenue relates to intra-company interest charges,
management fees and dividends. Geographic revenue is determined
based upon the functional currency of the various subsidiaries.
Financial information by operating and geographic segment for
2002, 2001 and 2000 is as follows:

|                                                   |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|-------------------------------------------------- |  | ------ | ------- | ---- |  | ------------ | ------- | ------ |  | ---- | ------- | ------------ |  | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                                   |  |        |         |     
|                                                   |  | 2002   |         | 2001
|                                                   |  |        |         |     
|                                                   |  | Canada |         | U.S. |  | Consolidated |         | Canada |  | U.S. |         | Consolidated
|                                                   |  |        |         |      |  |              |         |        |  |      |         |             
|Revenue                                            |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|Brokerage                                          |  | $      | 85,761  |      |  | $            | 134,249 |        |  | $    | 220,010 |              |  | $ | 78,488  |   |  | $ | 75,458  |   |  | $ | 153,946 |  
|Corporate                                          |  |        | 19,758  |      |  |              | 54,183  |        |  |      | 73,941  |              |  |   | 16,960  |   |  |   | 237     |   |  |   | 17,197  |  
|Elimination of intra-segment revenue               |  |        | (19,708 | )    |  |              | (54,283 | )      |  |      | (73,991 | )            |  |   | (16,884 | ) |  |   | (266    | ) |  |   | (17,150 | )
|                                                   |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|                                                   |  | $      | 85,811  |      |  | $            | 134,149 |        |  | $    | 219,960 |              |  | $ | 78,564  |   |  | $ | 75,429  |   |  | $ | 153,993 |  
|                                                   |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|Net earnings before income taxes                   |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|Brokerage                                          |  | $      | 10,688  |      |  | $            | 38,229  |        |  | $    | 48,917  |              |  | $ | 6,625   |   |  | $ | 13,200  |   |  | $ | 19,825  |  
|Corporate                                          |  |        | 8,879   |      |  |              | (14,139 | )      |  |      | (5,260  | )            |  |   | 6,126   |   |  |   | (10,684 | ) |  |   | (4,558  | )
|                                                   |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|                                                   |  | $      | 19,567  |      |  | $            | 24,090  |        |  | $    | 43,657  |              |  | $ | 12,751  |   |  | $ | 2,516   |   |  | $ | 15,267  |  
|                                                   |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|Income taxes  current                             |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|Brokerage                                          |  | $      | 4,472   |      |  | $            | 11,871  |        |  | $    | 16,343  |              |  | $ | 4,044   |   |  | $ | 4,929   |   |  | $ | 8,973   |  
|Corporate                                          |  |        | 778     |      |  |              | (4,270  | )      |  |      | (3,492  | )            |  |   | 320     |   |  |   | (4,326  | ) |  |   | (4,006  | )
|                                                   |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|                                                   |  | $      | 5,250   |      |  | $            | 7,601   |        |  | $    | 12,851  |              |  | $ | 4,364   |   |  | $ | 603     |   |  | $ | 4,967   |  
|                                                   |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|Income taxes  future                              |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|Brokerage                                          |  | $      | (408    | )    |  | $            | 2,280   |        |  | $    | 1,872   |              |  | $ | (134    | ) |  | $ | 864     |   |  | $ | 730     |  
|Corporate                                          |  |        | (18     | )    |  |              | (449    | )      |  |      | (467    | )            |  |   | (642    | ) |  |   | 207     |   |  |   | (435    | )
|                                                   |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|                                                   |  | $      | (426    | )    |  | $            | 1,831   |        |  | $    | 1,405   |              |  | $ | (776    | ) |  | $ | 1,071   |   |  | $ | 295     |  
|                                                   |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|Net earnings                                       |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|Brokerage                                          |  | $      | 6,624   |      |  | $            | 24,078  |        |  | $    | 30,702  |              |  | $ | 2,715   |   |  | $ | 7,407   |   |  | $ | 10,122  |  
|Corporate                                          |  |        | 8,119   |      |  |              | (9,420  | )      |  |      | (1,301  | )            |  |   | 6,448   |   |  |   | (6,565  | ) |  |   | (117    | )
|                                                   |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|                                                   |  | $      | 14,743  |      |  | $            | 14,658  |        |  | $    | 29,401  |              |  | $ | 9,163   |   |  | $ | 842     |   |  | $ | 10,005  |  
|                                                   |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|Identifiable assets                                |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|Brokerage                                          |  | $      | 132,142 |      |  | $            | 412,379 |        |  | $    | 544,521 |              |  | $ | 109,896 |   |  | $ | 319,989 |   |  | $ | 429,885 |  
|Investment held for sale                           |  |        |        |      |  |              |        |        |  |      |        |              |  |   |        |   |  |   | 40,772  |   |  |   | 40,772  |  
|Corporate                                          |  |        | 28,920  |      |  |              | 23,435  |        |  |      | 52,355  |              |  |   | 28,212  |   |  |   | 3,427   |   |  |   | 31,639  |  
|                                                   |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|                                                   |  | $      | 161,062 |      |  | $            | 435,814 |        |  | $    | 596,876 |              |  | $ | 138,108 |   |  | $ | 364,188 |   |  | $ | 502,296 |  
|                                                   |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|Amortization of goodwill and intangible
    assets |  | $      | 36      |      |  | $            | 1,635   |        |  | $    | 1,671   |              |  | $ | 2,316   |   |  | $ | 2,624   |   |  | $ | 4,940   |  
|Additions to property and equipment                |  | $      | 2,370   |      |  | $            | 2,124   |        |  | $    | 4,494   |              |  | $ | 1,624   |   |  | $ | 9,910   |   |  | $ | 11,534  |  
|Depreciation                                       |  | $      | 1,823   |      |  | $            | 3,669   |        |  | $    | 5,492   |              |  | $ | 1,755   |   |  | $ | 2,185   |   |  | $ | 3,940   |  
|Interest income                                    |  | $      | 683     |      |  | $            | 1,070   |        |  | $    | 1,753   |              |  | $ | 805     |   |  | $ | 1,188   |   |  | $ | 1,993   |  
|Interest expense                                   |  | $      | 6,416   |      |  | $            | 901     |        |  | $    | 7,317   |              |  | $ | 6,337   |   |  | $ | 1,110   |   |  | $ | 7,447   |  





|                               |                               
|------------------------------ | ------------------------------
|60   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



---



##### 



|                                            |  |        |         |      |  |              |        |   |  |   |         |  
|------------------------------------------- |  | ------ | ------- | ---- |  | ------------ | ------ | - |  | - | ------- | -
|                                            |  |       
|                                            |  | 2000  
|                                            |  |       
|                                            |  | Canada |         | U.S. |  | Consolidated
|                                            |  |        |         |      |  |             
|Revenue                                     |  |        |         |      |  |              |        |   |  |   |         |  
|Brokerage                                   |  | $      | 74,710  |      |  | $            | 19,864 |   |  | $ | 94,574  |  
|Corporate                                   |  |        | 7,953   |      |  |              | 5,142  |   |  |   | 13,095  |  
|Elimination of intra-segment revenue        |  |        | (7,427  | )    |  |              | (5,002 | ) |  |   | (12,429 | )
|                                            |  |        |         |      |  |              |        |   |  |   |         |  
|                                            |  | $      | 75,236  |      |  | $            | 20,004 |   |  | $ | 95,240  |  
|                                            |  |        |         |      |  |              |        |   |  |   |         |  
|Net earnings (loss) before income
    taxes |  |        |         |      |  |              |        |   |  |   |         |  
|Brokerage                                   |  | $      | 8,017   |      |  | $            | 3,242  |   |  | $ | 11,259  |  
|Corporate                                   |  |        | 3,771   |      |  |              | (3,522 | ) |  |   | 249     |  
|                                            |  |        |         |      |  |              |        |   |  |   |         |  
|                                            |  | $      | 11,788  |      |  | $            | (280   | ) |  | $ | 11,508  |  
|                                            |  |        |         |      |  |              |        |   |  |   |         |  
|Income taxes  current                      |  |        |         |      |  |              |        |   |  |   |         |  
|Brokerage                                   |  | $      | 5,009   |      |  | $            | (444   | ) |  | $ | 4,565   |  
|Corporate                                   |  |        | 342     |      |  |              |       |   |  |   | 342     |  
|                                            |  |        |         |      |  |              |        |   |  |   |         |  
|                                            |  | $      | 5,351   |      |  | $            | (444   | ) |  | $ | 4,907   |  
|                                            |  |        |         |      |  |              |        |   |  |   |         |  
|Income taxes  future                       |  |        |         |      |  |              |        |   |  |   |         |  
|Brokerage                                   |  | $      | (79     | )    |  | $            | 1,783  |   |  | $ | 1,704   |  
|Corporate                                   |  |        | 70      |      |  |              | (1,311 | ) |  |   | (1,241  | )
|                                            |  |        |         |      |  |              |        |   |  |   |         |  
|                                            |  | $      | (9      | )    |  | $            | 472    |   |  | $ | 463     |  
|                                            |  |        |         |      |  |              |        |   |  |   |         |  
|Net earnings (loss)                         |  |        |         |      |  |              |        |   |  |   |         |  
|Brokerage                                   |  | $      | 3,087   |      |  | $            | 1,903  |   |  | $ | 4,990   |  
|Corporate                                   |  |        | 3,359   |      |  |              | (2,211 | ) |  |   | 1,148   |  
|                                            |  |        |         |      |  |              |        |   |  |   |         |  
|                                            |  | $      | 6,446   |      |  | $            | (308   | ) |  | $ | 6,138   |  
|                                            |  |        |         |      |  |              |        |   |  |   |         |  
|Identifiable assets                         |  |        |         |      |  |              |        |   |  |   |         |  
|Brokerage                                   |  | $      | 129,899 |      |  | $            | 63,116 |   |  | $ | 193,015 |  
|Investment held for sale                    |  |        |        |      |  |              |       |   |  |   |        |  
|Corporate and other                         |  |        | 8,309   |      |  |              | 4,833  |   |  |   | 13,142  |  
|                                            |  |        |         |      |  |              |        |   |  |   |         |  
|                                            |  | $      | 138,208 |      |  | $            | 67,949 |   |  | $ | 206,157 |  
|                                            |  |        |         |      |  |              |        |   |  |   |         |  
|Amortization                                |  | $      | 2,482   |      |  | $            | 778    |   |  | $ | 3,260   |  
|Additions to property and equipment         |  | $      | 2,190   |      |  | $            | 205    |   |  | $ | 2,395   |  
|Depreciation                                |  | $      | 1,619   |      |  | $            | 266    |   |  | $ | 1,885   |  
|Interest income                             |  | $      | 977     |      |  | $            | 704    |   |  | $ | 1,681   |  
|Interest expense                            |  | $      | 1,920   |      |  | $            | 61     |   |  | $ | 1,981   |  

17. Related party transactions

The Company had transactions with and recorded
revenue from the following related parties:

|                                            |  |      |        |      |  |      |        |  |  |   |       | 
|------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ----- | 
|                                            |  | 2002 |        | 2001 |  | 2000
|                                            |  |      |        |      |  |     
|Lombard General Insurance Company of Canada |  | $    | 11,854 |      |  | $    | 9,261  |  |  | $ | 7,543 | 
|Commonwealth Insurance Company              |  |      | 577    |      |  |      | 374    |  |  |   | 319   | 
|Federated Insurance Company of Canada       |  |      | 56     |      |  |      | 38     |  |  |   | 10    | 
|Markel Insurance Company of Canada          |  |      | 320    |      |  |      | 88     |  |  |   | 74    | 
|Crum & Forster Insurance                    |  |      | 911    |      |  |      | 804    |  |  |   | 314   | 
|TIG Specialty Insurance                     |  |      | 590    |      |  |      | 235    |  |  |   | 5     | 
|Fairfax Inc.                                |  |      | 7,708  |      |  |      |       |  |  |   |      | 
|                                            |  |      |        |      |  |      |        |  |  |   |       | 
|                                            |  | $    | 22,016 |      |  | $    | 10,800 |  |  | $ | 8,265 | 
|                                            |  |      |        |      |  |      |        |  |  |   |       | 





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    61



---



##### 



As of December 31, 2002 and 2001, the
Company had accounts receivable and accounts payable balances
with the above related parties in the amounts of $2,104 and
$12,180, for 2002, respectively, and $666 and $7,494 for 2001,
respectively. All revenue and related accounts receivable and
accounts payable are the result of transactions in the normal
course of business. The companies above are related through
common ownership by Fairfax, which owns approximately 27% of the
Companys common shares as of December 31, 2002.

As of December 31, 2002 and 2001, long-term
debt related to put options of $5,940 and $17,274, respectively,
and subordinated convertible debentures of $35,000 at the end of
both years, are due to related parties.

During 2002, 2001 and 2000, the Company incurred
expenses related to rental of premises from related parties in
the amount of $1,691, $1,373 and $993, respectively. At
December 31, 2002 and 2001, the Company also had accounts
receivable due from related parties in the amount of $3,256 and
$4,586, respectively, of which the majority were loans to
employees to enable them to purchase shares of the Company.

18. 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

The table below presents the differences between
Canadian and U.S. GAAP affecting net earnings and comprehensive
income for the years ending December 31, 2002, 2001 and 2000.


|                                                                                                             |  |      |        |      |  |      |        |   |  |   |        |  
|------------------------------------------------------------------------------------------------------------ |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                                                                                             |  | 2002 |        | 2001 |  | 2000
|                                                                                                             |  |      |        |      |  |     
|Net earnings for the year based on Canadian GAAP                                                             |  | $    | 29,401 |      |  | $    | 10,005 |   |  | $ | 6,138  |  
|Adjustment to investment held for sale(1)                                                                    |  |      | (2,236 | )    |  |      | 520    |   |  |   |       |  
|Change in reporting currency(2)                                                                              |  |      |       |      |  |      | 144    |   |  |   | 405    |  
|Adjustment to put option liability(3)                                                                        |  |      | (814   | )    |  |      | (811   | ) |  |   |       |  
|                                                                                                             |  |      |        |      |  |      |        |   |  |   |        |  
|Net earnings for the year based on U.S. GAAP(4)                                                              |  |      | 26,351 |      |  |      | 9,858  |   |  |   | 6,543  |  
|Other comprehensive income:(5)                                                                               |  |      |        |      |  |      |        |   |  |   |        |  
|Unrealized gains (losses), net of tax of
    $50  2002, $120  2001, ($102) 
    2000                      |  |      | (81    | )    |  |      | (195   | ) |  |   | 166    |  
|Reclassification adjustment, net of tax of
    $(85)  2002, $88  2001, $6  2000                           |  |      | 138    |      |  |      | (143   | ) |  |   | (10    | )
|Foreign currency translation adjustment, net of
    tax of $359  2002, $2,324  2001,
    $2,498  2000 (2) |  |      | (585   | )    |  |      | (3,792 | ) |  |   | (4,076 | )
|                                                                                                             |  |      |        |      |  |      |        |   |  |   |        |  
|Comprehensive income based on U.S. GAAP(5)                                                                   |  | $    | 25,823 |      |  | $    | 5,728  |   |  | $ | 2,623  |  
|                                                                                                             |  |      |        |      |  |      |        |   |  |   |        |  
|Basic earnings per share based on U.S. GAAP                                                                  |  | $    | 1.14   |      |  | $    | 0.52   |   |  | $ | 0.36   |  
|Diluted earnings per share based on U.S. GAAP                                                                |  | $    | 0.96   |      |  | $    | 0.49   |   |  | $ | 0.36   |  





|                               |                               
|------------------------------ | ------------------------------
|62   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



---



##### 



Shareholders equity

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


|                                                              |  |      |         |      |  |   |         |  
|------------------------------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | -
|                                                              |  | 2002 |         | 2001
|                                                              |  |      |         |     
|Shareholders equity based on Canadian GAAP                   |  | $    | 284,274 |      |  | $ | 135,271 |  
|Adjustment to investment held for sale(1)                     |  |      | (1,716  | )    |  |   | 520     |  
|Accumulated other comprehensive income:                       |  |      |         |      |  |   |         |  
|Unrealized (losses), net of tax of
    $51  2002, $85  2001 |  |      | (83     | )    |  |   | (140    | )
|Cumulative translation account(2)                             |  |      | 496     |      |  |   |        |  
|Adjustment to put option liability(3)                         |  |      | (1,702  | )    |  |   | (4,898  | )
|Executive share purchase plan loans(6)                        |  |      | (1,912  | )    |  |   | (2,142  | )
|                                                              |  |      |         |      |  |   |         |  
|Shareholders equity based on U.S. GAAP(4)                    |  | $    | 279,357 |      |  | $ | 128,611 |  
|                                                              |  |      |         |      |  |   |         |  




Notes:



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



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

|                                                                                             |  |      |        |      |  |   |     | 
|-------------------------------------------------------------------------------------------- |  | ---- | ------ | ---- |  | - | --- | 
|                                                                                             |  | 2002 |        | 2001
|                                                                                             |  |      |        |     
|Gain recognized under Canadian GAAP not recorded
    under U.S. GAAP                         |  | $    | (2,613 | )    |  | $ |    | 
|Interest charged to earnings under Canadian GAAP
    not charged to earnings under U.S. GAAP |  |      | 377    |      |  |   | 520 | 
|                                                                                             |  |      |        |      |  |   |     | 
|                                                                                             |  | $    | (2,236 | )    |  | $ | 520 | 
|                                                                                             |  |      |        |      |  |   |     | 



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The Companys consolidated financial
    statements were historically expressed in Canadian dollars.
    Effective October 1, 2001, the Company adopted the U.S.
    dollar as its reporting currency. Under Canadian GAAP,
    comparative financial information was restated in U.S. dollars
    using the translation of convenience method. At
    September 30, 2001 all historical financial statements,
    were converted from Canadian to U.S. dollars at the exchange
    rate in effect at September 30, 2001 of one Canadian dollar
    to 0.6338 U.S. dollar. Revenue and expenses subsequent to
    September 30, 2001 were translated to U.S. dollars at the
    average exchange rate for the period.



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





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    63



---



##### 





| |                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The aggregate impact of these differences has
    been presented in the reconciliation of shareholders
    equity for Canadian to U.S. GAAP under the caption
    cumulative translation account.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Under Canadian GAAP, the fair value of the put
    options (determined using the Black-Scholes model) issued in
    connection with the Burnham and Flanagan acquisitions was
    allocated to equity instruments on the balance sheet. The
    balance of the purchase price was allocated to debt. Changes in
    the value of the put options in periods subsequent to the
    acquisition dates are included in earnings. Under U.S. GAAP, the
    fair value of the share consideration and the attached put
    options is initially recorded in equity. The redemption value of
    the shares to which the put options are attached has been
    reclassified as mezzanine equity outside of shareholders
    equity as a result of the put options granted on those shares to
    certain of the selling shareholders. The fair value of the put
    options at the date of issuance is also recorded as a debit to
    shareholders equity, representing an unearned compensation
    expense, as the put options require the selling shareholders to
    remain employed by the Company in order to be able to exercise
    the put options. Compensation expense is being recognized using
    the straight-line method over the period from the issue date to
    the exercise date.
|   
|(4) | The Condensed consolidated statements of earnings
    and cash flows for the years ended December 31, 2002, 2001
    and 2000 and the condensed consolidated balance sheets as at
    December 31, 2002 and 2001, under U.S. GAAP are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

|                                                 |  |      |         |      |  |      |          |   |  |   |         |  
|------------------------------------------------ |  | ---- | ------- | ---- |  | ---- | -------- | - |  | - | ------- | -
|                                                 |  | 2002 |         | 2001 |  | 2000
|                                                 |  |      |         |      |  |     
|Condensed consolidated statements of earnings:   |  |      |         |      |  |      |          |   |  |   |         |  
|Revenue                                          |  | $    | 219,960 |      |  | $    | 156,079  |   |  | $ | 100,917 |  
|Net earnings before income taxes                 |  | $    | 40,781  |      |  | $    | 15,213   |   |  | $ | 12,269  |  
|Net earnings                                     |  | $    | 26,351  |      |  | $    | 9,858    |   |  | $ | 6,543   |  
|                                                
|Condensed consolidated statements of cash flows: |  |      |         |      |  |      |          |   |  |   |         |  
|Cash provided by operating activities            |  | $    | 19,456  |      |  | $    | 29,060   |   |  | $ | 12,004  |  
|Cash (used in) investing activities              |  | $    | (8,970  | )    |  | $    | (130,687 | ) |  | $ | (18,914 | )
|Cash provided by financing activities            |  | $    | 3,176   |      |  | $    | 130,881  |   |  | $ | 5,904   |  
|                                                
|Condensed consolidated balance sheets:           |  |      |         |      |  |      |          |   |  |   |         |  
|Total current assets                             |  | $    | 235,416 |      |  | $    | 226,191  |   |  |   |         |  
|Total assets                                     |  | $    | 593,337 |      |  | $    | 500,852  |   |  |   |         |  
|Total current liabilities                        |  | $    | 200,848 |      |  | $    | 224,968  |   |  |   |         |  
|Total liabilities                                |  | $    | 306,268 |      |  | $    | 350,070  |   |  |   |         |  
|Mezzanine equity                                 |  | $    | 7,712   |      |  | $    | 22,171   |   |  |   |         |  
|Total shareholders equity                       |  | $    | 279,357 |      |  | $    | 128,611  |   |  |   |         |  



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(5) | Under U.S. GAAP, comprehensive income is measured
    in accordance with Statement of Financial Accounting Standards
    (SFAS) No. 130, Reporting Comprehensive
    Income (SFAS 130). This standard defines comprehensive
    income as all changes in equity other than those resulting from
    investments by owners and distributions to owners and includes
    the change in unrealized gains (losses) on debt and equity
    securities and foreign currency translation adjustments. Under
    Canadian GAAP unrealized gains and losses (arising from a
    temporary decline in value) equity securities are not recorded
    and foreign currency translation adjustments are presented as
    movements in the cumulative translation account. Certain
    disclosures required by SFAS 115, Accounting for Certain
    Investments in Debt and Equity Securities, have not been
    included as such disclosures related to the Companys
    investments in debt and equity securities are immaterial to the
    overall financial statement presentation.
|   
|(6) | Under Canadian GAAP, loans granted by the Company
    to employees under the executive share purchase plan are treated
    as receivables and included in the balance sheet caption
    Accounts and other receivables. Under U.S. GAAP,
    these loans are included as a reduction to shareholders
    equity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         





|                               |                               
|------------------------------ | ------------------------------
|64   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



---



##### 



Effects of New Accounting
Pronouncements

Section 3062 and SFAS
No. 142  Goodwill and Other Intangible
Assets

Effective January 1, 2002, the Company
concurrently adopted the Canadian Institute of Chartered
Accountants (CICA) Accounting Standards Board Handbook
Section 3062, Goodwill and Other Intangible
Assets for reporting under Canadian GAAP and the
Financial Accounting Standards Boards SFAS No. 142,
Goodwill and Other Intangible Assets for
reporting under U.S. GAAP. Section 3062 was applicable for
fiscal years commencing on or after January 1, 2002 and
SFAS No. 142 was applicable for fiscal years beginning on
or after December 31, 2001. Both Section 3062 and SFAS
No. 142 eliminate the amortization of goodwill, require
annual impairment testing of goodwill and introduce the concept
of definite and indefinite life intangible assets. Indefinite
life intangible assets are no longer amortized and are tested at
least annually for impairment. Definite life intangible assets
are amortized over the estimated useful life of the asset.

In accordance with Section 3062 and SFAS
No. 142, the Company completed its impairment testing on
the balance of goodwill and intangible assets as of
January 1, 2002 and January 1, 2003. Based on the
testing performed, no impairment losses were incurred.

As required under Section 3062 and SFAS
No. 142, no goodwill amortization expense was incurred for
the year ended December 31, 2002. The following tables
illustrate the effect that Section 3062 and SFAS
No. 142 would have had on net earnings and per share
information under Canadian and U.S. GAAP respectively for
the years ended December 31, 2001 and 1999 if goodwill had
not been amortized:

|                                      |  |              |        |      |  |      |        |  |  |   |       | 
|------------------------------------- |  | ------------ | ------ | ---- |  | ---- | ------ |  |  | - | ----- | 
|                                      |  |             
|                                      |  | December 31,
|                                      |  |             
|                                      |  | 2002         |        | 2001 |  | 2000
|                                      |  |              |        |      |  |     
|Reported net earnings  Canadian GAAP |  | $            | 29,401 |      |  | $    | 10,005 |  |  | $ | 6,138 | 
|Add back: Goodwill amortization       |  |              |       |      |  |      | 3,996  |  |  |   | 2,820 | 
|                                      |  |              |        |      |  |      |        |  |  |   |       | 
|Net earnings adjusted for goodwill    |  | $            | 29,401 |      |  | $    | 14,001 |  |  | $ | 8,958 | 
|                                      |  |              |        |      |  |      |        |  |  |   |       | 
|Basic EPS  Reported                  |  | $            | 1.27   |      |  | $    | 0.53   |  |  | $ | 0.34  | 
|Basic EPS  Adjusted for goodwill     |  | $            | 1.27   |      |  | $    | 0.74   |  |  | $ | 0.49  | 
|Diluted EPS  Reported                |  | $            | 1.06   |      |  | $    | 0.50   |  |  | $ | 0.34  | 
|Diluted EPS  Adjusted for goodwill   |  | $            | 1.06   |      |  | $    | 0.70   |  |  | $ | 0.49  | 

|                                    |  |              |        |      |  |      |        |  |  |   |       | 
|----------------------------------- |  | ------------ | ------ | ---- |  | ---- | ------ |  |  | - | ----- | 
|                                    |  |             
|                                    |  | December 31,
|                                    |  |             
|                                    |  | 2002         |        | 2001 |  | 2000
|                                    |  |              |        |      |  |     
|Reported net earnings  U.S. GAAP   |  | $            | 26,351 |      |  | $    | 9,858  |  |  | $ | 6,543 | 
|Add back: Goodwill amortization     |  |              |       |      |  |      | 4,065  |  |  |   | 2,988 | 
|                                    |  |              |        |      |  |      |        |  |  |   |       | 
|Net earnings adjusted for goodwill  |  | $            | 26,351 |      |  | $    | 13,923 |  |  | $ | 9,531 | 
|                                    |  |              |        |      |  |      |        |  |  |   |       | 
|Basic EPS  Reported                |  | $            | 1.14   |      |  | $    | 0.52   |  |  | $ | 0.36  | 
|Basic EPS  Adjusted for goodwill   |  | $            | 1.14   |      |  | $    | 0.73   |  |  | $ | 0.52  | 
|Diluted EPS  Reported              |  | $            | 0.96   |      |  | $    | 0.49   |  |  | $ | 0.36  | 
|Diluted EPS  Adjusted for goodwill |  | $            | 0.96   |      |  | $    | 0.69   |  |  | $ | 0.52  | 

SFAS No. 144, Section 3063 and
Section 3475  Accounting for the impairment or
disposal of long-lived assets

In August 2001, the Financial Accounting
Standards Board issued SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, effective
for fiscal years beginning after December 15, 2001. This
Statement supersedes SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of, and the accounting and reporting provisions
of Accounting Principles Board Opinion No. 30
Reporting the Results of Operations  Reporting
the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and
Transactions (APB No. 30).





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    65



---



##### 



SFAS No. 144 generally retains the basic
accounting model for the identification and measurement of
impairments to long-lived assets to be held, and long-lived
assets to be disposed. SFAS No. 144 broadens the definition
of discontinued operations, as previously defined by
APB No. 30, but does not allow for the accrual of future
operating losses, as was previously permitted under that
standard. SFAS No. 144 also addresses several
implementation and financial statement presentation issues not
previously addressed under U.S. GAAP. SFAS No. 144 excludes
from its scope financial accounting and reporting for the
impairment of goodwill and other intangible assets.

The Company adopted SFAS No. 144 effective
January 1, 2002 for its U.S. GAAP reporting. The
transitional guidance of SFAS No. 144 generally permits
long-lived assets classified as held for disposal as a result of
disposal activities that were initiated prior to SFAS
No. 144s initial application to continue to be
accounted for in accordance with the prior pronouncement
applicable for that disposal. As such, the Companys
investment in Old Lyme, which was classified as held for
disposal at December 31, 2001, continued to be accounted
for in accordance with Canadian and U.S. generally accepted
accounting principles applicable at the date that the disposal
activities were initiated until its sale on May 30, 2002.

Canadian GAAP requirements have been harmonized
with U.S. GAAP related to the provisions of SFAS No. 144,
with the issuance of the CICA Accounting Standards Board
Handbook Section 3063, Impairment of Long-Lived
Assets in September 2002 and Section 3475,
Disposal of Long-Lived assets and Discontinued
Operations in January 2003.

Section 3063 is effective for fiscal years
beginning on or after April 1, 2003 (although earlier
adoption is encouraged) and establishes standards for the
recognition, measurement and disclosure of the impairment of
long-lived assets and replaces the write-down provisions of
Section 3061, Property, Plant and Equipment.The Company will adopt Section 3063 prospectively
effective January 1, 2003 and does not anticipate that the
provisions of Sections 3063 will have a material impact on
its financial position or results of operations.

Section 3475 is effective for disposal
activities initiated by an enterprises commitment to a
plan on or after May 1, 2003 (although earlier adoption is
encouraged) and replaces the disposal provisions of
Section 3061, Property, Plant and Equipment,and the previous Section 3475, Discontinued
Operations.The Company will adopt prospectively
Section 3475 effective January 1, 2003 and does not
anticipate that the provisions of the section will have a
material impact on its financial position or results of
operations.

Section 3870 and SFAS
No. 148  Stock-based Compensation and other
Stock-based Payments

In November 2001, the CICA Accounting Standards
Board issued Handbook Section 3870, Stock-based
Compensation and Other Stock-based Payments,effective
for fiscal years beginning on or after January 1, 2002 for
public enterprises. The Company issued stock-based compensation
for the first time and adopted Section 3870 in 2002.

Section 3870 requires that stock-based
payments to non-employees and direct awards of stock to
employees and non-employees be accounted for using a fair
value-based method of accounting and recommends that all other
stock-based transactions with employees, including the granting
of stock options, be accounted for in the same way. In
accordance with this Section, the Company has incurred an
expense of $1,078 in 2002 in relation to the stock options
issued.

Concurrent with the adoption of Section 3870
for reporting under Canadian GAAP, the Company adopted SFAS
No. 123, Accounting for Stock-based
Compensationfor its reporting under U.S. GAAP.
Accounting under SFAS No. 123 under U.S. GAAP is the same
as Section 3870 under Canadian GAAP.

In December 2002, the Financial Accounting
Standards Board issued SFAS No. 148, Accounting
for Stock-Based Compensation  Transition and
Disclosure,effective for financial statements for
fiscal years ending after December 15, 2002.

SFAS No. 148 did not have an impact on the
Companys financial position or results of operations as
reported under U.S. GAAP as the Company issued stock-based
compensation for the first time in 2002.





|                               |                               
|------------------------------ | ------------------------------
|66   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



---



##### 



SFAS No. 145  Recission of FAS
Nos. 4, 44 and 64, Amendment of FAS 13 and Technical
Corrections In April 2002, the Financial Accounting Standards
Board issued SFAS No. 145, Recission of FAS Nos.
4, 44 and 64, Amendment of FAS 13 and Technical
Corrections, effective for fiscal years beginning
after May 15, 2002.

This Statement rescinds FASB Statement
No. 4, Reporting Gains and Losses from Extinguishment of
Debt,and an amendment of that Statement, FASB Statement No.
64, Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirementsto remove the inconsistency between Statement
No. 4 and APB Opinion No. 30, Reporting the Results
of Operations  Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactionsregarding the
treatment of gains and losses on extinguishment of debt.
Statement No. 4 required such gains and losses, where
material, to be disclosed as extraordinary which was an
exception to Opinion No. 30.

This Statement also rescinds FASB Statement
No. 44, Accounting for Intangible Assets of Motor
Carriers,which was introduced to provide accounting
guidance on the effects of the transition to the provisions of
the Motor Carrier Act of 1980 and is no longer required as the
transition is completed.

This Statement amends FASB Statement No. 13,
Accounting for Leases,to eliminate an inconsistency
between the required accounting for sale-leaseback transactions
and the required accounting for certain lease modifications that
have economic effects that are similar to sale-leaseback
transactions.

This Statement also amends other existing
authoritative pronouncements to make various technical
corrections, clarify meanings, or describe their applicability
under changed conditions.

The Company will adopt SFAS No. 145
effective January 1, 2003 and does not anticipate that the
provisions of SFAS No. 145 will have a material impact on
its financial position or results of operations as reported
under US GAAP.

SFAS No. 146  Accounting for
costs associated with exit or disposal activities

In June 2002, the Financial Accounting Standards
Board issued SFAS No. 146, Accounting for costs
associated with exit or disposal activities,effective
for exit or disposal activities that are initiated after
December 31, 2002.

SFAS No. 146 requires that a liability for a
cost associated with an exit or disposal activity be recognized
when the liability is incurred and establishes that fair value
is the objective for initial measurement of the liability. This
Statement rescinds Emerging Issues Task Force (EITF) Issue
No. 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a
Restructuring) which required that a liability for a
cost associated with an exit was recognized at the date of an
entitys commitment to an exit plan.

The Company will adopt SFAS No. 146
prospectively effective January 1, 2003 and does not
anticipate that the provisions of SFAS No. 146 will have a
material impact on its financial position or results of
operations as reported under U.S. GAAP.

AcG 13  Hedging
Relationships

In December 2001, the CICA Accounting Standards
Board issued Accounting Guideline 13, Hedging
Relationships (AcG 13), which is applicable to
fiscal years beginning on or after July 1, 2003.

AcG 13 specifies the circumstances in which hedge
accounting is appropriate, including the identification,
documentation, designation and effectiveness of hedges and the
discontinuance of hedge accounting.

The Company will adopt AcG 13 prospectively
effective January 1, 2004. However, since the Company does
not engage in hedging transactions, it does not anticipate that
the guidance of AcG 13 will have an impact on its financial
position or results of operations.





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    67



---



##### 



FIN No. 45  Guarantors
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others

In November 25, 2002, the Financial
Accounting Standards Board issued FIN No. 45
Guarantors Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of
Others, an interpretation of FASB Statements No. 5, 57, and
107 and Rescission of FASB, with disclosure
requirements effective for years ending after December 15,
2002 and recognition and measurement requirements effective on a
prospective basis for guarantees that are issued or modified
after December 31, 2002.

FIN No. 45 provides a definition and
examples of a guarantee and requires disclosure of the nature of
the guarantee, the maximum potential amount of future payments,
the carrying amount of the related liability, if any, the
recourse provisions and assets held as collateral under the
terms of the guarantee and the extent to which the proceeds of
collateral would cover the maximum potential liability.

FIN No. 45 clarifies the requirements of
SFAS No. 6, Accounting for Contingencies,
relating to the guarantors accounting for, and disclosure
of, the issuance of certain types of guarantees. It requires
that the guarantor recognize a liability for the guarantee at
its inception equal to its fair value at that time and that the
liability is reduced as the risk under the guarantee reduces.
The liability may be reduced at the end of the guarantee period,
on a systematic amortization basis or as the fair value changes
as appropriate.

The Company has adopted the disclosure
requirements of FIN No. 45 for the year ended
December 31, 2002 and the required disclosures are included
in Note 10 of these financial statements. The Company will adopt
prospectively the recognition and measurement requirements of
FIN No. 45 effective January 1, 2003. The Company does
not anticipate making material future guarantees and
accordingly, does not anticipate that the provisions of Fin
No. 45 will have a material impact on its financial
position or results of operations reported under U.S. GAAP.

19. Quarterly Data (unaudited)

|                                     |  |         |        |         |  |         |        |         |  |      |        |  |  |   |        |  |  |   |         | 
|------------------------------------ |  | ------- | ------ | ------- |  | ------- | ------ | ------- |  | ---- | ------ |  |  | - | ------ |  |  | - | ------- | 
|                                     |  | First   |        | Second  |  | Third   |        | Fourth  |  | Full
|                                     |  | quarter |        | quarter |  | quarter |        | quarter |  | year
|                                     |  |         |        |         |  |         |        |         |  |     
|Year ended December 31, 2002         |  |         |        |         |  |         |        |         |  |      |        |  |  |   |        |  |  |   |         | 
|Revenue                              |  | $       | 49,484 |         |  | $       | 57,296 |         |  | $    | 49,552 |  |  | $ | 63,628 |  |  | $ | 219,960 | 
|Net earnings                         |  | $       | 4,939  |         |  | $       | 10,712 |         |  | $    | 5,422  |  |  | $ | 8,328  |  |  | $ | 29,401  | 
|Net earnings per share 
    Basic   |  | $       | 0.25   |         |  | $       | 0.53   |         |  | $    | 0.21   |  |  | $ | 0.31   |  |  | $ | 1.27    | 
|Net earnings per share 
    Diluted |  | $       | 0.21   |         |  | $       | 0.41   |         |  | $    | 0.19   |  |  | $ | 0.26   |  |  | $ | 1.06    | 
|Year ended December 31, 2001         |  |         |        |         |  |         |        |         |  |      |        |  |  |   |        |  |  |   |         | 
|Revenue                              |  | $       | 28,097 |         |  | $       | 29,342 |         |  | $    | 43,601 |  |  | $ | 52,953 |  |  | $ | 153,993 | 
|Net earnings                         |  | $       | 2,466  |         |  | $       | 2,558  |         |  | $    | 2,031  |  |  | $ | 2,950  |  |  | $ | 10,005  | 
|Net earnings per share  Basic       |  | $       | 0.13   |         |  | $       | 0.14   |         |  | $    | 0.10   |  |  | $ | 0.15   |  |  | $ | 0.53    | 
|Net earnings per share  Diluted     |  | $       | 0.13   |         |  | $       | 0.14   |         |  | $    | 0.09   |  |  | $ | 0.14   |  |  | $ | 0.50    | 

20. Subsequent event

On February 28, 2003 the Company issued
$1,230 of stock options to settle the obligation of the 2002
executive management bonuses. The fair value of the options will
be recognized as an expense over the three year vesting period.






|                               |                               
|------------------------------ | ------------------------------
|68   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



---



##### 





|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants
    on Accounting and Financial Disclosure

None.

PART III



|         |                                                       
|-------- | ------------------------------------------------------
|Item 10. | Directors and Executive Officers of the
    Registrant

Information regarding directors, nominees for
directors and executive officers is included under the caption
entitled Election of Directors and
Management in the 2003 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 2003 Proxy
Statement under the caption entitled Executive
Compensation and Related Information and is incorporated
herein by reference.



|         |                                                                   
|-------- | ------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial
    Owners and Management

Information regarding beneficial ownership of the
common shares by certain beneficial owners and by management is
included under the caption entitled Security Ownership of
Management and Certain Beneficial Holders in the 2003
Proxy Statement and is incorporated herein by reference.



|         |                                                   
|-------- | --------------------------------------------------
|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 2003 Proxy Statement and is incorporated herein by reference.



|         |                        
|-------- | -----------------------
|Item 14. | Controls and Procedures

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-14(c)
and 15(d)-14(c) promulgated under the Securities Exchange Act of
1934, as amended (the Exchange Act) within 90 days of the
filing date of this annual report (the Evaluation Date). 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.

There have been no significant changes (including
corrective actions with regard to significant deficiencies or
material weaknesses) in our internal controls or in other
factors that could significantly affect those controls
subsequent to the Evaluation Date.





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    69



---



##### 



PART IV



Item 15. Exhibits, Financial
Statements Schedules and Reports on Form 8-K

(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) Exhibits

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

(b) Reports on Form 8-K

We filed a Current Report on Form 8-K on
December 11, 2002 to furnish a press release under
Item 9 announcing the Companys additional earnings
guidance.

(c) Exhibits

|        |         |                        |  |                                                                                                                                                                                                            
|------- | ------- | ---------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |                       
|No.     |         | Description of Exhibit
|        |         |                       
|        | 3.1    |                        |  | Articles of Incorporation of the registrant.                                                                                                                                                               
|        | 3.2    |                        |  | By-laws of the Registrant.                                                                                                                                                                                 
|        | 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*  |                        |  | Employment Agreement dated as of March 19,
    2002 between HUB International Limited and Martin P. Hughes.                                                                                                
|        | 10.5*  |                        |  | Executive confidentiality, non-solicitation and
    insider agreement dated as of March 19, 2001 between HUB
    International Limited and its subsidiaries and Martin P. Hughes.                          
|        | 10.6*  |                        |  | Employment Agreement dated as of March 19,
    2002 between HUB International Limited and Richard A.
    Gulliver.                                                                                         
|        | 10.7*  |                        |  | Executive confidentiality, non-solicitation and
    insider agreement dated as of March 19, 2001 between HUB
    International Limited and its subsidiaries and Richard A.
    Gulliver.                   
|        | 10.8*  |                        |  | Employment Agreement dated as of March 19,
    2002 between HUB International Limited and Dennis J. Pauls.                                                                                                 
|        | 10.9*  |                        |  | Executive confidentiality, non-solicitation and
    insider agreement dated as of March 19, 2001 between HUB
    International Limited and its subsidiaries and Dennis J. Pauls.                           
|        | 10.10* |                        |  | Employment Agreement dated as of March 19,
    2002 between HUB International Limited and
    W. Kirk James.                                                                                               
|        | 10.11* |                        |  | Executive confidentiality, non-solicitation and
    insider agreement dated as of March 19, 2001 between HUB
    International Limited and its subsidiaries and W. Kirk James.                             
|        | 10.12* |                        |  | Employment Agreement dated as of June 28,
    2001 among Kaye Group Inc., HUB International Limited and Bruce
    D. Guthart.                                                                              
|        | 10.13* |                        |  | Employment Agreement dated as of January 1,
    2002 among Barton Insurance Brokers Ltd., HUB International
    Limited and R. Craig Barton.                                                               
|        | 10.14*  |                        |  | HUB International Limited Equity Incentive Plan
    (incorporated by reference to the registrants Registration
    Statement on Form S-1 (No. 333-84732) as filed with
    the Commission on May 3, 2002).
|        | 10.15*  |                        |  | Amendment to Amended and Restated Credit
    Agreement dated as of August 22, 2002 between Hub
    International Limited and Bank of Montreal.                                                             





|                               |                               
|------------------------------ | ------------------------------
|70   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



---



##### 



|        |        |                        |  |                                                                                                                                                                                      
|------- | ------ | ---------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |                       
|No.     |        | Description of Exhibit
|        |        |                       
|        | 10.16 |                        |  | Debenture dated as of June 28, 2001 between
    HUB International Limited and Odyssey Reinsurance Corporation.                                                                       
|        | 10.17 |                        |  | Debenture dated as of June 28, 2001 between
    HUB International Limited and United States Fire Insurance
    Company.                                                              
|        | 10.18 |                        |  | Contingent Compensation Agreement dated as of
    May 30, 2002 between Fairfax, Inc. and Program Brokerage
    Corporation.                                                          
|        | 10.19 |                        |  | Underwriting Services Agreement dated as of
    January 1, 2002 between Old Lyme Insurance Company of Rhode
    Island, Inc. and Program Brokerage Corporation.                      
|        | 10.20 |                        |  | Claims Services Agreement dated as of
    May 30, 2002 between Old Lyme Insurance Company of Rhode
    Island, Inc. and Claims Administration Corporation.                           
|        | 10.21 |                        |  | Administrative Services and Cost Allocation
    Agreement dated as of January 1, 2002 between Old Lyme
    Insurance Company of Rhode Island, Inc. and Kaye Group Inc.               
|        | 10.22* |                        |  | Employment Agreement dated as of May 15,
    1996, between Kaye Group, Inc. and Michael Sabanos, as amended.                                                                         
|        | 21.1   |                        |  | List of Registrants subsidiaries.                                                                                                                                                   
|        | 99.1   |                        |  | 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.
|        | 99.2   |                        |  | 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 REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    71



---



##### 



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 14, 2003.



| |                          
| | -------------------------
| | Hub International Limited
|
| | -s- Martin P. Hughes     
| | Martin P. Hughes         
| | Chief Executive Officer  

Pursuant 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 14, 2003.

|                                           |  |                                                                                            
|------------------------------------------ |  | -------------------------------------------------------------------------------------------
|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 and Chief Operating Officer, Director                                            
|                                          
|/s/ R. CRAIG BARTONR. Craig Barton         |  | President, Canadian Operations, Director                                                   
|                                          
|/s/ BRUCE GUTHARTBruce Guthart             |  | President, U.S. Operations, Director                                                       
|                                          
|/s/ JEAN MARTINJean Martin                 |  | Director, Vice President                                                                   
|                                          
|/s/ ANTHONY GRIFFITHSAnthony Griffiths     |  | Director                                                                                   
|                                          
|/s/ BRADLEY MARTINBradley Martin           |  | Director                                                                                   
|                                          
|/s/ PAUL MURRAYPaul Murray                 |  | Director                                                                                   





|                               |                               
|------------------------------ | ------------------------------
|72   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



---



##### 



CERTIFICATIONS

I, Martin P. Hughes, Chairman of the Board and
Chief Executive Officer, of Hub International Limited, certify
that:



|   |                                                                                                                                                                                                                                                                                                                                                         
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | I have reviewed this annual report on
    Form 10-K of Hub International Limited;                                                                                                                                                                                                                                                                       
|  
|2. | Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary in order to make the statements
    made, in light of the circumstances under which such statements
    were made, not misleading with respect to the period covered by
    this quarterly report;
|  
|3. | Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the registrant as of,
    and for, the periods presented in this annual report;                                   
|  
|4. | The registrants other certifying officers
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                                   



|   |                                                                                                                                                                                                                                                                                                             
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a. | Designed such disclosure controls and procedures
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this annual report is being prepared;



|   |                                                                                                                                                                                                       
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|b. | Evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and



|   |                                                                                                                                                                             
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|c. | Presented in this annual report our conclusions
    about the effectiveness of the disclosure controls and
    procedures based on our evaluation as of the Evaluation Date;



|   |                                                                                                                                                                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|5. | The registrants other certifying officers
    and I have disclosed, based on our most recent evaluation, to
    the registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent function):



|   |                                                                                                                                                                                                                                                                                                                   
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a. | All significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and



|   |                                                                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|b. | Any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrants internal controls; and



|   |                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|6. | The registrants other certifying officers
    and I have indicated in this annual report whether or not there
    were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.



| |                                                  
| | -------------------------------------------------
| | -s- Martin P. Hughes                             
| |                                                  
| | Martin P. Hughes                                 
| | Chairman of the Board and Chief Executive Officer

DATE: March 14, 2003





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    73



---



##### 



I, Dennis J. Pauls, Vice President and Chief
Financial Officer, of Hub International Limited, certify that:



|   |                                                                                                                                                                                                                                                                                                                                                      
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | I have reviewed this annual report on
    Form 10-K of Hub International Limited;                                                                                                                                                                                                                                                                    
|  
|2. | Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary in order to make the statements
    made, in light of the circumstances under which such statements
    were made, not misleading with respect to the period covered by
    this annual report;
|  
|3. | Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the registrant as of,
    and for, the periods presented in this annual report;                                
|  
|4. | The registrants other certifying officers
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                                



|   |                                                                                                                                                                                                                                                                                                             
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a. | Designed such disclosure controls and procedures
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this annual report is being prepared;



|   |                                                                                                                                                                                                       
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|b. | Evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and



|   |                                                                                                                                                                             
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|c. | Presented in this annual report our conclusions
    about the effectiveness of the disclosure controls and
    procedures based on our evaluation as of the Evaluation Date;



|   |                                                                                                                                                                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|5. | The registrants other certifying officers
    and I have disclosed, based on our most recent evaluation, to
    the registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent function):



|   |                                                                                                                                                                                                                                                                                                                   
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a. | All significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and



|   |                                                                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|b. | Any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrants internal controls; and



|   |                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|6. | The registrants other certifying officers
    and I have indicated in this annual report whether or not there
    were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.



| |                                           
| | ------------------------------------------
| | -s- Dennis J. Pauls                       
| |                                           
| | Dennis J. Pauls                           
| | Vice President and Chief Financial Officer

DATE: March 14, 2003





|                               |                               
|------------------------------ | ------------------------------
|74   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002



---



##### 



EXHIBIT INDEX



|        |         |                        |  |                                                                                                                                                                                                            
|------- | ------- | ---------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |                       
|No.     |         | Description of Exhibit
|        |         |                       
|        | 3.1    |                        |  | Articles of Incorporation of the registrant.                                                                                                                                                               
|        | 3.2    |                        |  | By-laws of the Registrant.                                                                                                                                                                                 
|        | 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*  |                        |  | Employment Agreement dated as of March 19,
    2002 between HUB International Limited and Martin P. Hughes.                                                                                                
|        | 10.5*  |                        |  | Executive confidentiality, non-solicitation and
    insider agreement dated as of March 19, 2001 between HUB
    International Limited and its subsidiaries and Martin P. Hughes.                          
|        | 10.6*  |                        |  | Employment Agreement dated as of March 19,
    2002 between HUB International Limited and Richard A. Gulliver.                                                                                             
|        | 10.7*  |                        |  | Executive confidentiality, non-solicitation and
    insider agreement dated as of March 19, 2001 between HUB
    International Limited and its subsidiaries and Richard A.
    Gulliver.                   
|        | 10.8*  |                        |  | Employment Agreement dated as of March 19,
    2002 between HUB International Limited and Dennis J. Pauls.                                                                                                 
|        | 10.9*  |                        |  | Executive confidentiality, non-solicitation and
    insider agreement dated as of March 19, 2001 between HUB
    International Limited and its subsidiaries and Dennis J. Pauls.                           
|        | 10.10* |                        |  | Employment Agreement dated as of March 19,
    2002 between HUB International Limited and W. Kirk James.                                                                                                   
|        | 10.11* |                        |  | Executive confidentiality, non-solicitation and
    insider agreement dated as of March 19, 2001 between HUB
    International Limited and its subsidiaries and W. Kirk James.                             
|        | 10.12* |                        |  | Employment Agreement dated as of June 28,
    2001 among Kaye Group Inc., HUB International Limited and Bruce
    D. Guthart.                                                                              
|        | 10.13* |                        |  | Employment Agreement dated as of January 1,
    2002 among Barton Insurance Brokers Ltd., HUB International
    Limited and R. Craig Barton.                                                               
|        | 10.14*  |                        |  | HUB International Limited Equity Incentive Plan
    (incorporated by reference to the registrants Registration
    Statement on Form S-1 (No. 333-84732) as filed with
    the Commission on May 3, 2002).
|        | 10.15*  |                        |  | Amendment to Amended and Restated Credit
    Agreement dated as of August 22, 2002 between Hub
    International Limited and Bank of Montreal.                                                             
|        | 10.16  |                        |  | Debenture dated as of June 28, 2001 between
    HUB International Limited and Odyssey Reinsurance Corporation.                                                                                             
|        | 10.17  |                        |  | Debenture dated as of June 28, 2001 between
    HUB International Limited and United States Fire Insurance
    Company.                                                                                    
|        | 10.18  |                        |  | Contingent Compensation Agreement dated as of
    May 30, 2002 between Fairfax, Inc. and Program Brokerage
    Corporation.                                                                                
|        | 10.19  |                        |  | Underwriting Services Agreement dated as of
    January 1, 2002 between Old Lyme Insurance Company of Rhode
    Island, Inc. and Program Brokerage Corporation.                                            
|        | 10.20  |                        |  | Claims Services Agreement dated as of
    May 30, 2002 between Old Lyme Insurance Company of Rhode
    Island, Inc. and Claims Administration Corporation.                                                 
|        | 10.21  |                        |  | Administrative Services and Cost Allocation
    Agreement dated as of January 1, 2002 between Old Lyme
    Insurance Company of Rhode Island, Inc. and Kaye Group Inc.                                     





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2002 | HUB INTERNATIONAL LIMITED    75



---



##### 



|        |        |                        |  |                                                                                                                                                                                      
|------- | ------ | ---------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |                       
|No.     |        | Description of Exhibit
|        |        |                       
|        | 10.22* |                        |  | Employment Agreement dated as of May 15,
    1996, between Kaye Group, Inc. and Michael Sabanos, as amended.                                                                         
|        | 21.1   |                        |  | List of Registrants subsidiaries.                                                                                                                                                   
|        | 99.1   |                        |  | 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.
|        | 99.2   |                        |  | 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.





|                               |                               
|------------------------------ | ------------------------------
|76   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2002