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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,
    2003
    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)                          

Registrants telephone number, including
area code:

(877) 402-6601


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 x          No o

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 30, 2003 was $299,261,012.

The number of shares of the registrants
common stock, issued and outstanding as of March 3, 2004
was 30,299,170.

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 (the 2004 Proxy Statement)
involving the election of directors and other matters at the
annual and special meeting of shareholders of the registrant to
be held on May 11, 2004, are incorporated by reference in
Part III of this report.



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HUB INTERNATIONAL LIMITED

TABLE OF CONTENTS

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|----------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                      |  | 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                               |  |      | 38 | 
|Item 8. Financial Statements and
    Supplementary Data                                               |  |      | 39 | 
|Item 9. Changes in and Disagreements
    with Accountants on Accounting and
    Financial Disclosure  |  |      | 69 | 
|Item 9A. Controls and
    Procedures                                                                  |  |      | 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. Principal Accountant Fees
    and Services                                                   |  |      | 69 | 
|PART IV                                                                                               |  |      |    | 
|Item 15. Exhibits, Financial
    Statements Schedules and Reports on Form 8-K                         |  |      | 70 | 
|SIGNATURES                                                                                            |  |      | 72 | 





|                              |                               
|----------------------------- | ------------------------------
|2   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



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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
and 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 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, 2003 | 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 2,500 employees in more than 150
locations, using a variety of retail and wholesale distribution
channels. We define the middle market as those clients with 20
to 1,500 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 95 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 $286.4 million in 2003, of
which 78% 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 certain general administrative functions. We have 10 hub
brokerages, five 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 have traditionally operated 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. As we continue to grow, however, it is likely
that added investment will be made to coordinate more functions
from our head office to enhance the potential for cross-selling,
international coordination, marketing efficiency, total expense
management and financial controls.

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





|                              |                               
|----------------------------- | ------------------------------
|4   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



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services in Canada. In the United States in 2003,
89% of our commission income was generated from the sale of
commercial lines and 11% from personal lines. In Canada in 2003,
58% of our commission income was generated from the sale of
commercial lines and 42% from personal lines.


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

Personal insurance

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

Strategy

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 95 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 footprint. We believe that we are well positioned to
compete for quality brokerages and that our 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.





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|------------------------------ | ------------------------------
|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    5



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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 processing, which reduce redundancies and
increase operating efficiencies. In addition, we continue to
implement 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.





|                              |                               
|----------------------------- | ------------------------------
|6   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



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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 five 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.                                                                                                                                                                                                            
| 
| | 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.                                                                                                                                              
| 
| | 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 the United States and Canada 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).                                                                    
| 
| | During 2003  we acquired 9 brokerages
    in the United States and in Canada with total annualized revenue
    of $8.0 million.                                                                                                                                                                                                          

Our operations are currently conducted from
principal offices located in Chicago, New York, Los
Angeles, Boston, Battle Creek, MI, 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             





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|------------------------------ | ------------------------------
|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    7



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|  |                                                                                                                                                                  
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a demonstrated record of organic growth and
    profitability, operating at, or capable of achieving in the near
    term, minimum financial performance targets.

We expect that future acquisitions will be
financed with available cash, the issuance of common shares, the
proceeds of other financings, or a combination of the foregoing.

The retention of existing management at the hub
brokerages we acquire is important to the successful integration
and subsequent operation of acquired brokerages. We have in the
past encouraged, and may continue in the future to encourage,
existing management to stay with the acquired hub brokerage by
using our common shares to pay a 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, 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 one of, or a combination of the following
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.              
| 
| | 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, 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, 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, Montreal and Vancouver.

In addition, we are a member of the Worldwide
Broker Network, a consortium of international brokerages which
we can access to service clients resident in the United States
and Canada who require insurance internationally.

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.

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.





|                              |                               
|----------------------------- | ------------------------------
|8   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



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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, 2003, we employed 2,472
persons on a full-time basis, 2,022 of whom were employed in
sales and customer service and 450 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 78% of our revenue growth has been attributable to
acquisitions. However, we may not successfully identify suitable
acquisition candidates. Prospective acquisition candidates may
not become available or we may not be able to complete an
acquisition once negotiations have commenced. We compete for
acquisition and expansion opportunities with entities that have
substantially greater resources than we do and these entities
may be able to outbid us for these acquisition targets. If we
fail to execute our acquisition strategy, our revenue growth is
likely to suffer and we may be unable to remain competitive.





|                               |                               
|------------------------------ | ------------------------------
|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    9



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##### 



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 95 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, 2003, we had $113.8 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 2003, 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 commission
rates. The years 2001 through 2003 saw premium rates increase.
Although we cannot predict changes in premium pricing, we did
begin to see some reductions in pricing in the latter part of
2003 in the United States. Canadian rate trends have trailed
those of the United States, leading to expectations that
Canadian premium rates





|                               |                               
|------------------------------ | ------------------------------
|10   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



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##### 



will continue to be firm for much of 2004, with
some softening as the year progresses. 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 6% 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 this performance-based revenue as accurately as
we have been able to in the past. Further, we have no control
over the process by which insurance companies estimate their own
loss reserves, which affects our ability to forecast contingent
commissions. Because these contingent commissions affect our
revenue, any decrease in their payment to us could adversely
affect our results of operations. Recently, legal proceedings
challenging the appropriateness of revenue sharing arrangements
between insurance companies and brokerages, including contingent
profit and volume override arrangements, have been commenced
against certain insurance brokerages. These proceedings allege
that such revenue sharing arrangements conflict with a
brokers duty to its clients. While we have not been named
as a defendant in any such proceeding, and disagree with the
underlying premise that these revenue sharing arrangements
create a conflict of interest, we could be the subject of a
similar action in the future. A finding that such arrangements
conflict with a brokers duty to its clients could have a
material adverse affect on our revenue and profitability.

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

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

A substantial portion of our total assets
are represented by goodwill and other intangible assets as a
result of our acquisitions and under 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





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    11



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##### 



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. A deterioration in our operating results may
adversely affect the carrying value of our goodwill and other
indefinite life intangible assets. The loss of a significant
client at one of our brokerages could result in an impairment of
goodwill associated with such brokerage, which would cause us to
take an impairment to goodwill. Such an impairment would
adversely affect our earnings.

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 could
negatively impact our acquisition strategy in the United States
due to his significant relationships and expertise in the
insurance industry.

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

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

The insurance brokerage business is highly
competitive and we actively compete with other insurance
brokerages for customers 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. 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.





|                               |                               
|------------------------------ | ------------------------------
|12   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



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##### 



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, 2003, Fairfax Financial
Holdings Limited owned or controlled 26% of our common shares,
32% 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 2003. We
expect that this percentage will decrease as we complete more
acquisitions in the United States. If a conflict of interest
arose between us and Fairfax or one of its subsidiaries, we
cannot 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 (PIPEDA) 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.

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





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    13



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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 implemented
enterprise reporting software that enables us to extract
financial and operating data from our brokerages electronically;
however, in the event of a technical or other failure we may be
unable to use this software effectively to compile our financial
data or to prevent inconsistent reporting of financial
information.


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 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.





|                               |                               
|------------------------------ | ------------------------------
|14   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



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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 2002 to March 3,
2004, the price of our common shares on the TSX has ranged from
a low of C$15.50 to a high of C$29.00, and on the NYSE has
ranged from a low of $11.45 to a high of $17.90.

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 largest shareholder may substantially
influence certain actions requiring shareholders
approval.

As of December 31, 2003, Fairfax owned or
controlled 26% 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 32% 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.

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.





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    15



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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, we hold
158 leases covering approximately 720,000 square feet with
a total annual base rent for all of these locations of
approximately $10 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, 2003.





|                               |                               
|------------------------------ | ------------------------------
|16   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



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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
|     |                                       |      |  |        |  |      |  |        |  |          
|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                         |      |  | $15.05 |  |      |  | $11.55 |  |           |  | C$23.12 |  |  |  | C$17.34 |  |  |  | $0.05  | 
|     | Second Quarter                        |      |  | $17.18 |  |      |  | $13.05 |  |           |  | C$23.27 |  |  |  | C$19.00 |  |  |  | $0.05  | 
|     | Third Quarter                         |      |  | $19.97 |  |      |  | $15.50 |  |           |  | C$27.50 |  |  |  | C$20.95 |  |  |  | $0.05  | 
|     | Fourth Quarter                        |      |  | $17.05 |  |      |  | $15.00 |  |           |  | C$22.99 |  |  |  | C$19.40 |  |  |  | $0.05  | 
|2004 |                                       |      |  |        |  |      |  |        |  |           |  |         |  |  |  |         |  |  |  |       
|     | First Quarter (through March 3, 2004) |      |  | $17.90 |  |      |  | $15.94 |  |           |  | C$23.83 |  |  |  | C$20.42 |  |  |  | $0.05  | 

On December 31 2003, the closing price of
our common shares on the NYSE was $16.76 and on the TSX the
closing sale price was C$21.90. The exchange rate in effect at
December 31, 2003 was C$1.00 per $0.7738. As of
March 3, 2004, there were 30,299,170 of our common shares
issued and outstanding. As of the close of business
March 3, 2004, we had approximately 280 holders of
record of our common shares.

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. Dividends paid after
December 31, 2002 have been, and dividends, if any, that
may be declared in the future, 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.

Our results for the five year period ended
December 31, 2003 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 respects from U.S. GAAP. For a discussion of the
principal differences between Canadian GAAP and U.S. GAAP
as it relates to us, see note 18 to our audited
consolidated financial statements included elsewhere in this
Form 10-K.





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    17



---



##### 



|                                             |                                                                     |                                                                      |         |         |      |      |         |         |        |      |         |         |      |   |        |        |     |   |        |        |     | 
|-------------------------------------------- | ------------------------------------------------------------------- | -------------------------------------------------------------------- | ------- | ------- | ---- | ---- | ------- | ------- | ------ | ---- | ------- | ------- | ---- | - | ------ | ------ | --- | - | ------ | ------ | --- | 
|                                             |                                                                     |                                                                     
|                                             |                                                                     | Year Ended December 31,                                             
|(in thousands of U.S. dollars,               |                                                                     |                                                                     
|except per share amounts)(1)                 |                                                                     | 2003                                                                 |         | 2002    |      | 2001 |         | 2000    |        | 1999
|                                             |                                                                     |                                                                      |         |         |      |      |         |         |        |     
|Consolidated statement of earnings
    data: |                                                                     |                                                                      |         |         |      |      |         |         |        |      |         |         |      |   |        |       
|Canadian GAAP                                |                                                                     |                                                                      |         |         |      |      |         |         |        |      |         |         |      |   |        |        |     |   |        |       
|Revenue:                                     |                                                                     |                                                                      |         |         |      |      |         |         |        |      |         |         |      |   |        |        |     |   |        |       
|                                             | Commission income                                                   |                                                                      | $       | 259,461 |      |      | $       | 200,976 |        |      | $       | 143,063 |      |   | $      | 86,410 |     |   | $      | 47,964 |    
|                                             | Contingent commissions and volume overrides                         |                                                                      |         | 18,530  |      |      |         | 11,464  |        |      |         | 5,899   |      |   |        | 4,909  |     |   |        | 2,824  |    
|                                             | Other                                                               |                                                                      |         | 8,368   |      |      |         | 7,520   |        |      |         | 5,031   |      |   |        | 3,921  |     |   |        | 3,309  |    
|                                             |                                                                     |                                                                      |         |         |      |      |         |         |        |      |         |         |      |   |        |        |     |   |        |       
|                                             |                                                                     |                                                                      | 286,359 |         |      |      | 219,960 |         |        |      | 153,993 |         |      |   | 95,240 |        |     |   | 54,097 |       
|                                             |                                                                     |                                                                      |         |         |      |      |         |         |        |      |         |         |      |   |        |        |     |   |        |       
|Expenses:                                    |                                                                     |                                                                      |         |         |      |      |         |         |        |      |         |         |      |   |        |        |     |   |        |       
|                                             | Compensation                                                        |                                                                      |         | 156,320 |      |      |         | 118,667 |        |      |         | 88,015  |      |   |        | 54,701 |     |   |        | 29,519 |    
|                                             | Selling, occupancy and administration                               |                                                                      |         | 56,606  |      |      |         | 44,932  |        |      |         | 35,276  |      |   |        | 21,778 |     |   |        | 13,235 |    
|                                             | Depreciation                                                        |                                                                      |         | 6,244   |      |      |         | 5,492   |        |      |         | 3,940   |      |   |        | 1,885  |     |   |        | 1,275  |    
|                                             | Interest expense                                                    |                                                                      |         | 5,191   |      |      |         | 7,317   |        |      |         | 7,447   |      |   |        | 1,981  |     |   |        | 632    |    
|                                             | Intangible asset amortization                                       |                                                                      |         | 3,208   |      |      |         | 1,671   |        |      |         | 4,940   |      |   |        | 3,260  |     |   |        | 1,626  |    
|                                             | (Gain) loss on disposal of property, equipment
    and other assets |                                                                      |         | (202    | )    |      |         | (2,679  | )      |      |         | (173    | )    |   |        | 127    |     |   |        | 14     |    
|                                             | (Gain) on put option liability                                      |                                                                      |         | (160    | )    |      |         | (186    | )      |      |         | (719    | )    |   |        |       |     |   |        |       |    
|                                             | Non-cash stock based compensation                                   |                                                                      |         | 4,801   |      |      |         | 1,089   |        |      |         |        |      |   |        |       |     |   |        |       |    
|                                             | Proceeds from life insurance                                        |                                                                      |         | (1,000  | )    |      |         |        |        |      |         |        |      |   |        |       |     |   |        |       |    
|                                             |                                                                     |                                                                      |         |         |      |      |         |         |        |      |         |         |      |   |        |        |     |   |        |       
|                                             |                                                                     |                                                                      | 231,008 |         |      |      | 176,303 |         |        |      | 138,726 |         |      |   | 83,732 |        |     |   | 46,301 |       
|                                             |                                                                     |                                                                      |         |         |      |      |         |         |        |      |         |         |      |   |        |        |     |   |        |       
|Net earnings before income taxes             |                                                                     |                                                                      | 55,351  |         |      |      | 43,657  |         |        |      | 15,267  |         |      |   | 11,508 |        |     |   | 7,796  |       
|Provision for income tax expense             |                                                                     |                                                                      | 18,842  |         |      |      | 14,256  |         |        |      | 5,262   |         |      |   | 5,370  |        |     |   | 4,052  |       
|                                             |                                                                     |                                                                      |         |         |      |      |         |         |        |      |         |         |      |   |        |        |     |   |        |       
|Net earnings(2)                              |                                                                     | $                                                                    | 36,509  |         |      | $    | 29,401  |         |        | $    | 10,005  |         |      | $ | 6,138  |        |     | $ | 3,744  |       
|                                             |                                                                     |                                                                      |         |         |      |      |         |         |        |      |         |         |      |   |        |        |     |   |        |       
|Earnings per share(2)                        |                                                                     |                                                                      |         |         |      |      |         |         |        |      |         |         |      |   |        |        |     |   |        |       
|                                             | Basic                                                               |                                                                      |         | $1.22   |      |      |         | $1.27   |        |      |         | $0.53   |      |   |        | $0.34  |     |   |        | $0.22  |    
|                                             | Diluted                                                             |                                                                      |         | $1.14   |      |      |         | $1.06   |        |      |         | $0.50   |      |   |        | $0.34  |     |   |        | $0.22  |    
|Weighted average shares outstanding:         |                                                                     |                                                                      |         |         |      |      |         |         |        |      |         |         |      |   |        |        |     |   |        |       
|                                             | Basic                                                               |                                                                      |         | 29,967  |      |      |         | 23,181  |        |      |         | 19,012  |      |   |        | 18,327 |     |   |        | 16,941 |    
|                                             | Diluted                                                             |                                                                      |         | 33,767  |      |      |         | 30,199  |        |      |         | 20,105  |      |   |        | 18,327 |     |   |        | 16,941 |    
|Dividends declared per share(3)              |                                                                     |                                                                      | $0.20   |         |      |      | $0.18   |         |        |      | $0.18   |         |      |   | $0.13  |        |     |   | $     |       
|U.S. GAAP                                    |                                                                     |                                                                      |         |         |      |      |         |         |        |      |         |         |      |   |        |        |     |   |        |       
|                                             | Net earnings (Canadian GAAP)                                        |                                                                      | $       | 36,509  |      |      | $       | 29,401  |        |      | $       | 10,005  |      |   | $      | 6,138  |     |   | $      | 3,744  |    
|                                             |                                                                     | Adjustment to investment held for sale                               |         |         |     |      |         |         | (2,236 | )    |         |         | 520  |   |        |        |    |   |        |        |    | 
|                                             |                                                                     | Cumulative effect of change in accounting policy
    for put options |         |         | 335  |      |         |         |       |      |         |         |     |   |        |        |    |   |        |        |    | 
|                                             |                                                                     | Adjustment to put option liability                                   |         |         | (409 | )    |         |         | (814   | )    |         |         | (811 | ) |        |        |    |   |        |        |    | 
|                                             |                                                                     | Change in reporting currency                                         |         |         |     |      |         |         |       |      |         |         | 144  |   |        |        | 405 |   |        |        | 233 | 
|                                             |                                                                     |                                                                      |         |         |      |      |         |         |        |      |         |         |      |   |        |        |     |   |        |       
|                                             | Net earnings (U.S. GAAP)(4)                                         |                                                                      | $       | 36,435  |      |      | $       | 26,351  |        |      | $       | 9,858   |      |   | $      | 6,543  |     |   | $      | 3,977  |    
|                                             |                                                                     |                                                                      |         |         |      |      |         |         |        |      |         |         |      |   |        |        |     |   |        |       
|Net earnings per share (U.S. GAAP)(4)        |                                                                     |                                                                      |         |         |      |      |         |         |        |      |         |         |      |   |        |        |     |   |        |       
|                                             | Basic                                                               |                                                                      |         | $1.22   |      |      |         | $1.14   |        |      |         | $0.52   |      |   |        | $0.36  |     |   |        | $0.23  |    
|                                             | Diluted                                                             |                                                                      |         | $1.14   |      |      |         | $0.96   |        |      |         | $0.49   |      |   |        | $0.36  |     |   |        | $0.23  |    






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





|                               |                               
|------------------------------ | ------------------------------
|18   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



---



##### 





|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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, 2003, 2002, 2001, 2000 and 1999 had goodwill
    not been amortized:

|                                      |  |                         |        |      |  |      |        |      |  |      |        |  |  |   |       |  |  |   |       | 
|------------------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ----- |  |  | - | ----- | 
|                                      |  |                        
|                                      |  | Year Ended December 31,
|(in thousands of U.S. dollars, except |  |                        
|per share amounts)                    |  | 2003                    |        | 2002 |  | 2001 |        | 2000 |  | 1999
|                                      |  |                         |        |      |  |      |        |      |  |     
|Reported net earnings  Canadian GAAP |  | $                       | 36,509 |      |  | $    | 29,401 |      |  | $    | 10,005 |  |  | $ | 6,138 |  |  | $ | 3,744 | 
|Add back: Goodwill amortization       |  |                         |       |      |  |      |       |      |  |      | 3,996  |  |  |   | 2,820 |  |  |   | 1,490 | 
|                                      |  |                         |        |      |  |      |        |      |  |      |        |  |  |   |       |  |  |   |       | 
|Net earnings adjusted for goodwill    |  | $                       | 36,509 |      |  | $    | 29,401 |      |  | $    | 14,001 |  |  | $ | 8,958 |  |  | $ | 5,234 | 
|                                      |  |                         |        |      |  |      |        |      |  |      |        |  |  |   |       |  |  |   |       | 
|Basic EPS  Reported                  |  | $                       | 1.22   |      |  | $    | 1.27   |      |  | $    | 0.53   |  |  | $ | 0.34  |  |  | $ | 0.22  | 
|Basic EPS  Adjusted for goodwill     |  | $                       | 1.22   |      |  | $    | 1.27   |      |  | $    | 0.74   |  |  | $ | 0.49  |  |  | $ | 0.31  | 
|Diluted EPS  Reported                |  | $                       | 1.14   |      |  | $    | 1.06   |      |  | $    | 0.50   |  |  | $ | 0.34  |  |  | $ | 0.22  | 
|Diluted EPS  Adjusted for goodwill   |  | $                       | 1.14   |      |  | $    | 1.06   |      |  | $    | 0.70   |  |  | $ | 0.49  |  |  | $ | 0.31  | 
|                                     



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | We commenced payment of dividends in the second
    quarter of 2000.                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(4) | 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 U.S. GAAP for the years ended
    December 31, 2003, 2002, 2001, 2000 and 1999 had goodwill
    not been amortized:

|                                      |  |                         |        |      |  |      |        |      |  |      |        |  |  |   |       |  |  |   |       | 
|------------------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ----- |  |  | - | ----- | 
|                                      |  |                        
|                                      |  | Year Ended December 31,
|(in thousands of U.S. dollars, except |  |                        
|per share amounts)                    |  | 2003                    |        | 2002 |  | 2001 |        | 2000 |  | 1999
|                                      |  |                         |        |      |  |      |        |      |  |     
|Reported net earnings  U.S. GAAP     |  | $                       | 36,435 |      |  | $    | 26,351 |      |  | $    | 9,858  |  |  | $ | 6,543 |  |  | $ | 3,977 | 
|Add back: Goodwill amortization       |  |                         |       |      |  |      |       |      |  |      | 4,065  |  |  |   | 2,988 |  |  |   | 1,583 | 
|                                      |  |                         |        |      |  |      |        |      |  |      |        |  |  |   |       |  |  |   |       | 
|Net earnings adjusted for goodwill    |  | $                       | 36,435 |      |  | $    | 26,351 |      |  | $    | 13,923 |  |  | $ | 9,531 |  |  | $ | 5,560 | 
|                                      |  |                         |        |      |  |      |        |      |  |      |        |  |  |   |       |  |  |   |       | 
|Basic EPS  Reported                  |  | $                       | 1.22   |      |  | $    | 1.14   |      |  | $    | 0.52   |  |  | $ | 0.36  |  |  | $ | 0.23  | 
|Basic EPS  Adjusted for goodwill     |  | $                       | 1.22   |      |  | $    | 1.14   |      |  | $    | 0.73   |  |  | $ | 0.52  |  |  | $ | 0.33  | 
|Diluted EPS  Reported                |  | $                       | 1.14   |      |  | $    | 0.96   |      |  | $    | 0.49   |  |  | $ | 0.36  |  |  | $ | 0.23  | 
|Diluted EPS  Adjusted for goodwill   |  | $                       | 1.14   |      |  | $    | 0.96   |      |  | $    | 0.69   |  |  | $ | 0.52  |  |  | $ | 0.33  | 
|                                     





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    19



---



##### 



|                                       |                            |                                         |                                                                                                        |         |        |      |         |         |        |        |         |         |     |        |         |         |   |       |         |         |   |       | 
|-------------------------------------- | -------------------------- | --------------------------------------- | ------------------------------------------------------------------------------------------------------ | ------- | ------ | ---- | ------- | ------- | ------ | ------ | ------- | ------- | --- | ------ | ------- | ------- | - | ----- | ------- | ------- | - | ----- | 
|                                       |                            |                                        
|                                       |                            | As of December 31                      
|                                       |                            |                                        
|(in thousands of U.S. dollars)(1)      |                            | 2003                                    |                                                                                                        | 2003    |        | 2002 |         | 2000    |        | 1999  
|                                       |                            |                                         |                                                                                                        |         |        |      |         |         |        |       
|Consolidated balance sheet data        |                            |                                         |                                                                                                        |         |        |      |         |         |        |        |         |         |     |        |         |         |   |       |         |        
|Total assets                           |                            | $                                       | 700,603                                                                                                |         |        | $    | 596,876 |         |        | $      | 502,296 |         |     | $      | 206,157 |         |   | $     | 171,202 |        
|Total debt(2)                          |                            | $                                       | 113,799                                                                                                |         |        | $    | 107,038 |         |        | $      | 196,952 |         |     | $      | 34,665  |         |   | $     | 20,565  |        
|Total shareholders equity             |                            | $                                       | 342,790                                                                                                |         |        | $    | 284,274 |         |        | $      | 135,271 |         |     | $      | 112,212 |         |   | $     | 105,462 |        
|Reconciliation to U.S. GAAP:           |                            |                                         |                                                                                                        |         |        |      |         |         |        |        |         |         |     |        |         |         |   |       |         |        
|                                       | Total shareholders equity |                                         |                                                                                                        |         |        |      |         |         |        |        |         |         |     |        |         |         |   |       |         |         |  
|                                       | (Canadian GAAP)            |                                         | $                                                                                                      | 342,790 |        |      | $       | 284,274 |        |        | $       | 135,271 |     |        | $       | 112,212 |   |       | $       | 105,462 |  
|                                       |                            | Adjustment to investment held for sale  |                                                                                                        |         | (1,716 | )    |         |         | (1,716 | )      |         |         | 520 |        |         |         |  |       |         |         |  |      
|                                       |                            | Accumulated other comprehensive income: |                                                                                                        |         |        |      |         |         |        |        |         |         |     |        |         |         |   |       |         |         |   |      
|                                       |                            |                                         | Unrealized gains (losses), net of tax of
    $(56)  2003, $85  2002,
    $(122)  2000, $(26)  1999 |         |        | 90   |         |         |        | (83    | )       |         |     | (140   | )       |         |   | 198   |         |         |   | 42    | 
|                                       |                            |                                         | Cumulative translation account                                                                         |         |        |     |         |         |        | 496    |         |         |     |       |         |         |   | 5,811 |         |         |   | 9,836 | 
|                                       |                            |                                         | Adjustment to put option liability                                                                     |         |        |     |         |         |        | (1,702 | )       |         |     | (4,898 | )       |         |   |      |         |         |   |      | 
|                                       |                            |                                         | Executive share purchase plan loan                                                                     |         |        |     |         |         |        | (1,912 | )       |         |     | (2,142 | )       |         |   |      |         |         |   |      | 
|                                       |                            |                                         |                                                                                                        |         |        |      |         |         |        |        |         |         |     |        |         |         |   |       |         |        
|Total shareholders equity (U.S. GAAP) |                            | $                                       | 341,164                                                                                                |         |        | $    | 279,357 |         |        | $      | 128,611 |         |     | $      | 118,221 |         |   | $     | 115,340 |        
|                                       |                            |                                         |                                                                                                        |         |        |      |         |         |        |        |         |         |     |        |         |         |   |       |         |        






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



|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|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. 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 (U.S. 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 that has grown rapidly since its formation in 1998
through mergers, acquisitions and organic growth. We provide a
broad array of property and casualty, life and health, employee
benefits, investment and risk management products and services
through offices located in the United States and Canada. We are
pursuing a growth strategy that includes expansion of our
geographic footprint across the United States and deeper
penetration of the insurance brokerage market in both the United
States and Canada. Both acquisitions and internal growth are
core components of our strategic plan for revenue expansion.

We anticipate that increases in revenue, higher
revenue per employee, expense control and more advantageous
commission arrangements with insurance firms will be
instrumental in margin expansion efforts.





|                               |                               
|------------------------------ | ------------------------------
|20   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



---



##### 



As of December 31, 2003, our operations
included 10 regional hub brokerages  five
in the United States and five in Canada  and more
than 150 offices staffed by approximately 2,500 people. Our
strategic plan calls for the addition of approximately 10
additional U.S. hubs to extend our geographic footprint.
Brokerages large enough to be considered hubs will generally
have annual revenue in excess of $10 million. In addition
to larger, hub acquisitions by the parent
corporation, each regional hub is tasked with pursuing smaller,
fold-in acquisitions that either expand its geographic
penetration or add new specialization or expertise to the
regional operation.

We generally acquire larger, hub
brokerages, for a combination of cash and stock. Although there
are variations in the purchase terms for each hub, our goal is
to pay 30% - 70% of the hub purchase price in
our common stock, while setting escrow periods of up to
10 years for the sellers to hold these shares. We believe
the use of escrowed stock in major acquisitions creates
increased alignment of interests between senior managers and the
public shareholders of the corporation. We have paid all cash
for the acquisition of certain brokerages, and may pay an all
cash purchase price for brokerages in the future. As of
December 31, 2003, senior managers of the company and its
hubs owned approximately 4,129,000 shares, or 12.5% of
shares outstanding, while all employees as a group held
approximately 9,176,000 shares, or 27.8% of total shares
outstanding.

During the three years ended December 31,
2003, we acquired 24 brokerages in the United States and another
9 brokerages in Canada, adding a combined $156.5 million to
our revenue as of the dates of acquisition. Of these
acquisitions, 4 were regional hubs, all based in the United
States. United States revenue has grown to 62% of our total in
2003 from 21% in 2000, reflecting primarily acquisition growth
but also organic growth and our strategic plan to use
acquisitions to expand across the United States. Organic growth
is similar to the same-store-sales calculation used by
retailers. It includes revenue growth from units included in our
financial statements for at least 12 months. Because we
apply the purchase method of accounting for acquisitions,
acquired brokerages financial results are included only
from the date of acquisition.

We acquired brokerages with aggregate annual
revenue of $8.1 million in 2003, down from approximately
$59.6 million of acquired revenue in 2002. The slower pace
of acquisitions in 2003 resulted from a number of factors,
including competition for brokerages by banks and other buyers
willing to acquire insurance brokers at higher valuations than
we and most industry peers have been willing to pay.

Our management believes pricing discipline is a
key to successful acquisition efforts and did not complete
potential acquisitions that did not meet our pricing criteria.
During 2003, for example, we considered an acquisition of a
large brokerage firm in Chicago, but decided against the
potential transaction as a result of our due diligence process.
This process led to diversion of a significant amount of
managements time, which weighed against other acquisition
efforts. We still continue to have a goal of acquiring an
average of 2 hub operations per year, increasing our base of
U.S. hubs to 15 from the current six. Acquisitions will be
driven by opportunity, pricing and fit, however, not by a rigid
timetable.

Our revenue base is diversified across a large
number of insurance products and services, including:

Commercial insurance

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





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|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    21



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Personal insurance

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

Commercial lines have increased as a percentage
of our total revenue, increasing to 77% in 2003 from 18% in
2001, largely as a result of our more rapid expansion in the
United States, where middle market companies and other
commercial clients are the primary source of revenue. In 2003,
commercial lines constituted 89% of U.S. revenue and 58% of
Canadian revenue. In British Columbia (Canada), we are the
largest broker of government underwritten auto insurance, a
personal line. In addition, Canadas public health care
system eliminates a significant portion of the demand for
employer-provided health insurance, a major commercial product
line for us in the United States.

We employ a number of distribution channels to
deliver products and services to clients. Among the distribution
channels we employ are:



|  |                                                                                                                                                                                                                                                                                                   
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Retail sales and service centers that target
    middle-market companies, providing a broad range of property and
    casualty insurance, life and health insurance, risk management
    and financial services;                                                                                  
| 
| | 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, and in 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, Montreal and
    Toronto;                                     
| 
| | 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 globally from offices in
    New York, Toronto, Montreal and Vancouver.

In addition, we are a member of the Worldwide
Broker Network, a consortium of international brokerages which
we can access to service U.S. or Canadian clients who
require insurance internationally.

Because we have a diverse mix of products,
services, insurer relationships and distribution channels,
revenue and profitability levels are not usually highly
susceptible to major changes as a result of a single product or
service. (An exception occurred in 2003. See US
Results on page 25.) However, general economic trends
can influence both overall insurance rates  and
commissions  and availability or costs of individual
types of coverage.

During the 1990s, for example, insurance rates
were generally considered low, or soft, as insurance
companies sought to maximize the flow of premium dollars that
they could invest profitability in a rising stock market and in
other investments. Beginning in 2000, as return on investment
began to shrink, insurance rates began to rise, or
harden, a pace that accelerated rapidly after the
terrorist attack of September 11, 2001. During the past two
years, premium rates have remained firm for most types of
coverage, rising 10% to 15% per year in many cases. During
2003, the Canadian market remained firm, but the
U.S. market experienced some softening of premium rates for
property and casualty coverage. Rates for liability, health and
other types of coverage continued to experience increases
however. Looking toward 2004, we anticipate some continued
softening in the U.S. market and the beginning of softening
in the Canadian market as the year progresses.

For us, as for other brokers, rising rates can
present both positive and negative effects. Rising premiums
usually yield stronger commission levels, if the insurance buyer
maintains its coverage levels. However, many insurance buyers
will respond to rising rates by reducing total coverage, often
by raising deductibles, reducing limits of coverage, or by
leaving some risks uninsured. In addition, a weak economic
environment often leads to lower sales and employee headcounts
at client companies, leading in turn to reduced demand for
employee benefits, liability and other types of coverage tied to
business activity levels. Our ability to achieve organic revenue
growth is not solely dependent on





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|22   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



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##### 



rising or declining rates, but results from a
more complex mixture of general economic growth, access to
coverage from insurers and marketing/sales expertise.


Our strategic plan has traditionally included a
highly decentralized structure that offered a large degree of
autonomy to each regional hub operation. We have
sought to acquire strong businesses and retain the services and
commitment of the management teams that built those businesses
successfully. Decentralization has been a core component of this
growth plan. As the company continues to grow, however, it is
likely that added investment will be made to coordinate more
functions from the head office, enhancing the potential for
cross-selling, international coordination, marketing efficiency,
total expense management and financial controls.

Because we are a service organization,
compensation and other personnel costs make up the largest
component of total expenses  70% in 2003. Property
and equipment are comprised primarily of furniture, computer
systems and office equipment. Therefore, Hubs capital
resources, including external borrowings, internally generated
cash flow and issuance of common shares, are targeted primarily
toward acquisitions.

Results of Operations

Year ended December 31, 2003 compared
to year ended December 31, 2002

We achieved growth in revenue and profitability
in 2003. Although the pace of acquisitions did not match that of
2002, we benefited from strong organic growth rates in most
hubs, contributions from brokerages acquired in 2002 and the
currency exchange benefits of a strengthening Canadian dollar.
Overall, our management believes the company made strong
progress on several fronts in 2003, including increased
penetration of the commercial middle market in British Columbia,
expansion of the professional liability practice in Chicago and
growth of the wholesale brokerage business in New York and
Toronto.

As a result of these and other factors, we
reported a 30% revenue increase to $286.4 million in 2003,
while net earnings increased 24% to $36.5 million. Diluted
earnings per share increased 8% to $1.14 from $1.06. The slower
rate of growth in diluted earnings per share as compared to
growth in revenue and net earnings reflected a larger number of
average shares outstanding, resulting from both our
U.S. IPO in June 2002 and the use of common shares in both
acquisitions and compensation programs.





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|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    23



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

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

|                                            |  |         |         |           |  |           |         |                |  |               |        |           |  |           |    |   |  |   |         |   |  |   |        |   |  |  |     |   
|------------------------------------------- |  | ------- | ------- | --------- |  | --------- | ------- | -------------- |  | ------------- | ------ | --------- |  | --------- | -- | - |  | - | ------- | - |  | - | ------ | - |  |  | --- | --
|                                            |  |         |         |           |  |           |         |                |  |               |        |          
|                                            |  | Revenue |         |           |  |           |         | Adjustment for |  |               |        |          
|                                            |  |         |         | Total net |  | Total net |         | (acquisitions) |  | Organic       |        | Organic  
|                                            |  | 2003    |         | 2002      |  | change($) |         | growth(%)      |  | and disposals |        | growth($) |  | growth(%)
|                                            |  |         |         |           |  |           |         |                |  |               |        |           |  |          
|Total                                       |  |         |         |           |  |           |         |                |  |               |        |           |  |           |    |   |  |   |         |   |  |   |        |   |  |  |     |   
|Commission Income                           |  | $       | 259,461 |           |  | $         | 200,976 |                |  | $             | 58,485 |           |  |           | 29 | % |  | $ | (36,303 | ) |  | $ | 22,182 |   |  |  | 11  | % 
|Contingent Commissions and Volume Overrides |  |         | 18,530  |           |  |           | 11,464  |                |  |               | 7,066  |           |  |           | 62 | % |  |   | (2,951  | ) |  |   | 4,115  |   |  |  | 36  | % 
|Other Income                                |  |         | 8,368   |           |  |           | 7,520   |                |  |               | 848    |           |  |           | 11 | % |  |   | (749    | ) |  |   | 99     |   |  |  | 1   | % 
|                                            |  |         |         |           |  |           |         |                |  |               |        |           |  |           |    |   |  |   |         |   |  |   |        |   |  |  |     |   
|Total                                       |  | $       | 286,359 |           |  | $         | 219,960 |                |  | $             | 66,399 |           |  |           | 30 | % |  | $ | (40,003 | ) |  | $ | 26,396 |   |  |  | 12  | % 
|                                            |  |         |         |           |  |           |         |                |  |               |        |           |  |           |    |   |  |   |         |   |  |   |        |   |  |  |     |   
|U.S.                                        |  |         |         |           |  |           |         |                |  |               |        |           |  |           |    |   |  |   |         |   |  |   |        |   |  |  |     |   
|Commission Income                           |  | $       | 158,025 |           |  | $         | 120,741 |                |  | $             | 37,284 |           |  |           | 31 | % |  | $ | (35,038 | ) |  | $ | 2,246  |   |  |  | 2   | % 
|Contingent Commissions and Volume Overrides |  |         | 13,493  |           |  |           | 7,780   |                |  |               | 5,713  |           |  |           | 73 | % |  |   | (2,872  | ) |  |   | 2,841  |   |  |  | 37  | % 
|Other Income                                |  |         | 5,701   |           |  |           | 5,628   |                |  |               | 73     |           |  |           | 1  | % |  |   | (753    | ) |  |   | (680   | ) |  |  | (12 | )%
|                                            |  |         |         |           |  |           |         |                |  |               |        |           |  |           |    |   |  |   |         |   |  |   |        |   |  |  |     |   
|Total                                       |  | $       | 177,219 |           |  | $         | 134,149 |                |  | $             | 43,070 |           |  |           | 32 | % |  | $ | (38,663 | ) |  | $ | 4,407  |   |  |  | 3   | % 
|                                            |  |         |         |           |  |           |         |                |  |               |        |           |  |           |    |   |  |   |         |   |  |   |        |   |  |  |     |   
|Canada                                      |  |         |         |           |  |           |         |                |  |               |        |           |  |           |    |   |  |   |         |   |  |   |        |   |  |  |     |   
|Commission Income                           |  | $       | 101,436 |           |  | $         | 80,235  |                |  | $             | 21,201 |           |  |           | 26 | % |  | $ | (1,265  | ) |  | $ | 19,936 |   |  |  | 25  | % 
|Contingent Commissions and Volume Overrides |  |         | 5,037   |           |  |           | 3,684   |                |  |               | 1,353  |           |  |           | 37 | % |  |   | (79     | ) |  |   | 1,274  |   |  |  | 35  | % 
|Other Income                                |  |         | 2,667   |           |  |           | 1,892   |                |  |               | 775    |           |  |           | 41 | % |  |   | 4       |   |  |   | 779    |   |  |  | 41  | % 
|                                            |  |         |         |           |  |           |         |                |  |               |        |           |  |           |    |   |  |   |         |   |  |   |        |   |  |  |     |   
|Total                                       |  | $       | 109,140 |           |  | $         | 85,811  |                |  | $             | 23,329 |           |  |           | 27 | % |  | $ | (1,340  | ) |  | $ | 21,989 |   |  |  | 26  | % 
|                                            |  |         |         |           |  |           |         |                |  |               |        |           |  |           |    |   |  |   |         |   |  |   |        |   |  |  |     |   

Of the $66.4 million in new revenue we
reported, $40.0 million, or 60% reflected growth through
acquisition, while $26.4 million, or 40% resulted from
organic growth. By comparison, acquired units added
$46.1 million, or 70% of 2002s sales growth, while
organic growth contributed $19.9 million, or 30% of our
revenue increases. Organic growth figures for both revenue and
earnings include the impact of foreign exchange rate changes
between the U.S. and Canadian dollars. In 2003, the rise of the
Canadian dollar versus the U.S. dollar contributed
5 percentage points of our 12% organic growth rate in
revenue.

Commission income, which usually ranges from 5%
to 20% of the premium charged by insurers, provides
approximately 91% of our revenue base. In addition to these
core commissions, the company derives revenue from:



|  |                                                                                                                                                                                               
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Volume overrides  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  additional
    compensation based on the profit an insurance company makes on
    the book of business a brokerage places with the insurance
    company.            
| 
| | Other income  comprised of fees and
    interest income, including income earned while we hold client
    premiums on behalf of insurance companies.                                         

Volume overrides and contingent commissions are
typically paid in the first or second quarter, based on
prior-year performance. The sharp increase in contingent
commissions and volume overrides in 2003 reflected increased
profitability of business placed by us at higher premium rates
and increased concentrations of some placements among a group of
selected insurers.

In addition to the variations that can result
from changes in organic growth rates, acquisitions and other
variables related to operations, both 2003 and 2002 results
included a number of factors that can complicate any efforts at





|                               |                               
|------------------------------ | ------------------------------
|24   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



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##### 



direct comparisons. The following chart shows the
net earnings and diluted per-share impacts that several of these
factors had over the past two years. They are shown here as an
added disclosure to increase investor understanding.


|                                      |                                   |              |        |             |   |   |      |       |  
|------------------------------------- | --------------------------------- | ------------ | ------ | ----------- | - | - | ---- | ----- | -
|(in thousands of U.S. dollars, except |                                   |              |        |            
|per share amounts)                    |                                   | Net Earnings |        | Diluted EPS
|                                      |                                   |              |        |            
|2003 net earnings (Canadian GAAP)     |                                   | $            | 36,509 |             |   | $ | 1.14 |      
|                                      | Impact of foreign exchange        |              |        | (2,056      | ) |   |      | (0.06 | )
|                                      | Life insurance proceeds           |              |        | (1,000      | ) |   |      | (0.03 | )
|                                      | Non-cash stock based compensation |              |        | 4,801       |   |   |      | 0.14  |  
|                                      |                                   |              |        |             |   |   |      |      
|                                      | Adjusted 2003 results             |              | $      | 38,254      |   |   | $    | 1.19  |  
|                                      |                                   |              |        |             |   |   |      |      
|2002 net earnings (Canadian GAAP)     |                                   | $            | 29,401 |             |   | $ | 1.06 |      
|                                      | Gain on sale of Old Lyme          |              |        | (2,613      | ) |   |      | (0.09 | )
|                                      | Non-cash stock based compensation |              |        | 1,089       |   |   |      | 0.04  |  
|                                      |                                   |              |        |             |   |   |      |      
|                                      | Adjusted 2002 results             |              | $      | 27,877      |   |   | $    | 1.01  |  
|                                      |                                   |              |        |             |   |   |      |      

As shown above, we benefited from both a stronger
Canadian dollar and the receipt of life insurance proceeds in
2003, while 2002 results were strengthened by the sale of two
insurance subsidiaries. The impact of foreign exchange on 2002
earnings was insignificant. In addition, 2003 included a full
years amortization of non-cash stock based compensation,
versus 2002 which included only six months of amortization.
Excluding the effects of these items, net income would have
increased 37% in 2003, versus 24% under Canadian GAPP, and
diluted earnings per share would have increased 18% in 2003,
versus 8% under Canadian GAAP.

Changes in currency exchange rates are not an
unusual item. Because we derive our revenue from both the United
States and Canada and do not use derivatives to manage our
Canadian pre-tax income, foreign exchange fluctuations will
continue to impact our results. We have highlighted the impact
of these changes because currency translation effects can lead
to reported results that are less meaningful than local-currency
results as an indicator of underlying operations. This year the
strength of the Canadian dollar versus the U.S. dollar had
a positive impact on our results. A decline would have a
negative effect. See Market Risk.

U.S. Results

U.S. revenue grew 32% to
$177.2 million, or 62% of revenue, in 2003, due to both
organic growth and the contributions of operations acquired in
2002. Acquisitions added $38.7 million to
revenue  90% of the increase  while
organic growth provided $4.4 million, or 10% of revenue
growth. Our U.S. operations posted an organic growth rate
of 3% in 2003, an 81% decrease from 16% in 2002. Core commission
income increased 2%, while contingent commissions and volume
overrides grew 37%.

During 2003 we experienced an unusual timing
issue at a single hub that provides lender-placed auto insurance
coverage for financial institutions. Lender-placed coverage is
primarily collision coverage on automobiles financed through a
financial institution. This is a high-volume business that is
generally very profitable for us. However, in the third quarter
of 2003, two financial institutions adjusted their credit
policies, leading to cancellation of several quarters
worth of policies in a single quarter resulting in 2003 revenue
being reduced by approximately $4.3 million. Excluding the
impact of this product line, U.S. organic growth was 9% in
2003.

During 2003, U.S. insurance premium rates
remained strong  or hard  for most product
lines, although rates for property coverage showed only modest
increases as the year progressed. Hard insurance pricing in 2002
contributed strongly to a significant increase in contingent
profitability income from insurers in 2003, as these insurers
benefited from the near-term impact of higher rates implemented
in 2002. Our management believes contingent commissions are
likely to rise or decline only marginally in 2004 versus 2003
levels, reflecting a relative moderation in the pace of rate
increases.

In the United States, our brokerages benefited
from new business generation, additional revenue from businesses
acquired during 2002 and moderate premium rate increases. While
higher premium rates on most product lines





|                               |                                
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|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    25



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##### 



added nominally to total premium amounts, client
response to higher rates often included a reduction in total
coverage, increasing deductibles and other cost-savings
techniques. In addition, the relative weakness in the
U.S. economy led to declines in sales levels and staff
headcount at many of our clients. Many products, including
employee benefits and product liability coverage, are linked
closely to the level of business activity at our clients. A weak
economy reduces total risk, total coverage and total premiums
for these clients.


As a result, our management believes an economic
recovery that adds jobs and revenue at our client could make a
meaningful contribution to organic growth in 2004. In addition,
stronger revenue and earnings of our clients could lead these
clients to reinstate coverages or lower deductibles, which also
would have a beneficial impact on total premiums and commissions.

Canadian Results

Canadian revenue grew 27% to $109.2 million,
or 38% of consolidated revenue, in 2003, primarily as a result
of a strengthening of the Canadian dollar against the
U.S. dollar as well as organic growth. Canadian brokerages
posted organic growth of 26%, of which 14 percentage points
reflected a stronger Canadian dollar. Acquisitions added only
$1.3 million, or 6%, of the revenue increase, reflecting a
slower pace of fold-in acquisitions in Canada than in the United
States. Apart from foreign currency gains, in Canada, our
brokerages benefited from strong organic growth and a sustained
pace of increases in insurance premium rates. Canadian rate
trends have trailed those of the United States, leading to
expectations that Canadian premium rates will continue to be
firm for much of 2004, with some softening as the year
progresses. Because Canadian revenue includes a lower percentage
of commercial business and more personal lines, any acceleration
in economic growth that adds to payrolls is not expected to have
as strong a benefit in Canada as in the United States. The
strong rate of organic growth in Canada reflected both increased
market penetration and continued strength in premium rates. Our
strong relationships with and access to insurers in Canada
proved to be an important competitive advantage in 2003, leading
to increased sales to clients who were unable to obtain coverage
from other sources. As was the case in the United States,
Canadian operations benefited strongly from an increase in
contingent commissions and volume overrides, which grew 37% in
2003, versus a decline of 12% in 2002.

Compensation Expense

The majority of our expenses are related to
compensation, which increased 35% in 2003 to
$161.1 million. As a percentage of revenue, compensation
increased to 56% from 54% in 2002, due in large part to an
increase in non-cash stock based compensation. Total
compensation includes both cash based salaries and benefits and
non-cash stock based compensation. Cash-based compensation grew
32% to $156.3 million in 2003, while non-cash stock based
compensation increased 341% to $4.8 million.

|                                  |  |      |         |      |  |          |         |         |  |  |     |   |  |  |    |  
|--------------------------------- |  | ---- | ------- | ---- |  | -------- | ------- | ------- |  |  | --- | - |  |  | -- | -
|                                  |  |      |         |      |  |          |         | % of   
|($ in thousands)                  |  | 2003 |         | 2002 |  | % Change |         | Revenue
|                                  |  |      |         |      |  |          |         |        
|Compensation Comparison           |  |      |         |      |  |          |         |         |  |  |     |   |  |  |    |  
|Compensation (cash)               |  | $    | 156,320 |      |  | $        | 118,667 |         |  |  | 32  | % |  |  | 54 | %
|Non-cash stock based compensation |  |      | 4,801   |      |  |          | 1,089   |         |  |  | 341 | % |  |  | 2  | %
|                                  |  |      |         |      |  |          |         |         |  |  |     |   |  |  |    |  
|Total                             |  | $    | 161,121 |      |  | $        | 119,756 |         |  |  | 35  | % |  |  | 56 | %
|                                  |  |      |         |      |  |          |         |         |  |  |     |   |  |  |    |  

We have undertaken a number of initiatives to
reduce or maintain compensation expense. During 2002, members of
the executive management group agreed to accept 50% of their
earned bonuses in the form of stock options, rather than cash.
At the close of 2003, we obtained agreement from managers to
restructure the companys management bonus agreement. Under
the new agreement the non-cash stock option component of the
annual bonus was eliminated in exchange for restricted share
units to be issued in the first quarter of 2004. In addition,
whereas the management bonus agreement was previously
contractual in nature, the restructured plan is no longer
contractual and may be subject to change as we deem necessary.
Management has estimated that approximately $16.9 million
of restricted share units will be issued in connection with the
modifications. The amount of restricted share units to be issued
was based upon a multiple of the previous two years average
bonus. The restricted share units will all vest in full on
January 1, 2011 subject to continued employment. Although
the impact of this change is





|                               |                               
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|26   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



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##### 



expected to be earnings-neutral in 2004, the
long-term effect is to reduce compensation costs as a percentage
of revenue.


In addition to cash compensation, we have
employed non-cash compensation tools such as stock options,
restricted shares and restricted share units for senior
employees. In response to investor interest in the true impact
of these costs, we began recognizing the expense of non-cash
stock based compensation during 2002. We recognized
$4.8 million of expense for the full year in 2003,
including both stock options and restricted share units, versus
$1.1 million of expense for two quarters of 2002. Options
vest evenly over three years and expire in seven years from
issuance. Shares derived from the options are held in escrow for
a period of five years from the date the options are granted,
subject to early release in certain circumstances. Restricted
share units vest over periods ranging from 48 months to
95 months. Our policy is to expense the fair value of
non-cash stock based compensation to employees over the period
in which entitlement to the compensation vests. The amount of
expense recognized in each quarter related to stock options will
vary with respect to exercise and forfeiture of options.

In total, as of December 31, 2003, we had
issued and outstanding approximately 1.5 million stock
options at a weighted average exercise price of $15.64. Our
closing share price on the New York Stock Exchange was
$16.76 on December 31, 2003.

Selling, Occupancy and Administration
Expense

Selling, occupancy and administration expense
increased 26% to $56.6 million in 2003. As a percentage of
revenue, selling, occupancy and administration expense declined
slightly to 19.8%, versus 20.4% in 2002.

Depreciation

Depreciation declined slightly to 2.2% of revenue
in 2003 from 2.5% in 2002. The lower relative impact reflected
control of capital expenditures while revenue grew. This number
is not particularly important, as our business is not driven by
capital expenditures.

Interest Expense

Interest expense decreased 29% to
$5.2 million from $7.3 million in 2002. This decline
reflected in large part the application of $80 million in
proceeds for the 2002 IPO to pay down debt. In addition,
interest expense was reduced by the benefits of
performance-based forgiveness of interest payments due under a
loan agreement with an insurer and an interest rate swap during
the third and fourth quarters of 2003. The interest rate swap
effectively converted $65 million of fixed interest rate
senior notes into floating rate instruments, reducing interest
expense on the senior notes by $0.8 million in 2003.

Intangible Asset Amortization

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

Gain on Put Option Liability

In addition to the issuance of stock options, we
issued put options to a number of individuals as part of the
sale of their brokerages to us. These put options allowed the
former owners to require us to repurchase our shares issued to
them when we acquired their brokerages. We negotiated the
cancellation of put options with one group of former owners
during 2002 and negotiated the cancellation of all remaining put
options during 2003.

Provision for Income Tax Expense

Our effective tax rate increased in 2003 to 34%
from 33%. The difference in tax rates was affected most directly
by non-taxable items in both 2003 and 2002. Approximately
$2.6 million of 2002 earnings  resulting from
the sale of





|                               |                                
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|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    27



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##### 



two subsidiaries, Old Lyme Insurance Company of
Rhode Island Inc. and Old Lyme Insurance Company, Ltd.
(collectively, Old Lyme)  were
non-taxable, while $1 million of 2003 earnings 
resulting from life insurance proceeds  were
non-taxable. Absent these two items, the tax rates were
unchanged at approximately 34.7% in both years. Based on
existing operations, management anticipates that our effective
tax rate will likely be in the range of 36%  39% in
2004.


Net Earnings and Earnings Per Share

Our net earnings increased 24% to
$36.5 million in 2003, primarily as a result of growth in
revenue. As a percentage of revenue, net earnings declined
approximately 0.6 percentage points to 12.8% in 2003 from
13.4% in 2002. Diluted earnings per share increased at a
somewhat slower rate than net earnings  8% to $1.14,
due primarily to a larger number of shares outstanding.

Our use of shares as a core component of our
acquisition proceeds and as a form of executive compensation has
led to significant increases in the number of shares outstanding
over the past few years. In addition, we issued 6.9 million
common shares in our June 2002 U.S. IPO and listing on the
New York Stock Exchange. The weighted average number of
diluted shares outstanding increased from 20.1 million in
2001 to 30.2 million in 2002 and 33.8 million in 2003.
The impact of new acquisitions on the level of weighted average
diluted shares outstanding in 2004 will be determined by both
the size of acquisitions and their timing within the coming year.

As shown in the table on page 25, net
earnings increased $2.6 million or $0.09 per diluted
share, in 2002 on the sale of two insurance subsidiaries and
decreased $1.1 million or $0.04 per diluted share due
to non-cash stock based compensation. In 2003, diluted earnings
per share increased $0.03 per diluted share from life
insurance proceeds and another $0.06 per diluted share from
foreign exchange rates and net earnings decreased
$4.8 million or $0.14 per diluted share due to
non-cash stock based compensation. Excluding these effects our
diluted earnings per share would have increased from $1.01 in
2002 to $1.19 in 2003 on a comparable basis.

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

|                                            |  |         |         |           |  |           |         |                |  |               |        |           |  |           |     |    |  |   |         |   |  |   |        |   |  |  |     |   
|------------------------------------------- |  | ------- | ------- | --------- |  | --------- | ------- | -------------- |  | ------------- | ------ | --------- |  | --------- | --- | -- |  | - | ------- | - |  | - | ------ | - |  |  | --- | --
|                                            |  |         |         |           |  |           |         |                |  |               |        |          
|                                            |  | Revenue |         |           |  |           |         | Adjustment for |  |               |        |          
|                                            |  |         |         | Total Net |  | Total Net |         | (Acquisitions) |  | Organic       |        | Organic  
|                                            |  | 2002    |         | 2001      |  | Change($) |         | Growth(%)      |  | and Disposals |        | Growth($) |  | Growth(%)
|                                            |  |         |         |           |  |           |         |                |  |               |        |           |  |          
|Total                                       |  |         |         |           |  |           |         |                |  |               |        |           |  |           |     |    |  |   |         |   |  |   |        |   |  |  |     |   
|Commission Income                           |  | $       | 200,976 |           |  | $         | 143,063 |                |  | $             | 57,913 |           |  |           | 40  | %  |  | $ | (39,213 | ) |  | $ | 18,700 |   |  |  | 13  | % 
|Contingent Commissions and Volume Overrides |  |         | 11,464  |           |  |           | 5,899   |                |  |               | 5,565  |           |  |           | 94  | %  |  |   | (4,194  | ) |  |   | 1,371  |   |  |  | 23  | % 
|Other Income                                |  |         | 7,520   |           |  |           | 5,031   |                |  |               | 2,489  |           |  |           | 49  | %  |  |   | (2,702  | ) |  |   | (213   | ) |  |  | (4  | )%
|                                            |  |         |         |           |  |           |         |                |  |               |        |           |  |           |     |    |  |   |         |   |  |   |        |   |  |  |     |   
|Total                                       |  | $       | 219,960 |           |  | $         | 153,993 |                |  | $             | 65,967 |           |  |           | 43  | %  |  | $ | (46,109 | ) |  | $ | 19,858 |   |  |  | 13  | % 
|                                            |  |         |         |           |  |           |         |                |  |               |        |           |  |           |     |    |  |   |         |   |  |   |        |   |  |  |     |   
|U.S.                                        |  |         |         |           |  |           |         |                |  |               |        |           |  |           |     |    |  |   |         |   |  |   |        |   |  |  |     |   
|Commission Income                           |  | $       | 120,741 |           |  | $         | 71,202  |                |  | $             | 49,539 |           |  |           | 70  | %  |  | $ | (39,906 | ) |  | $ | 9,633  |   |  |  | 14  | % 
|Contingent Commissions and Volume Overrides |  |         | 7,780   |           |  |           | 1,693   |                |  |               | 6,087  |           |  |           | 360 | %  |  |   | (4,214  | ) |  |   | 1,873  |   |  |  | 111 | % 
|Other Income                                |  |         | 5,628   |           |  |           | 2,534   |                |  |               | 3,094  |           |  |           | 122 | %  |  |   | (2,729  | ) |  |   | 365    |   |  |  | 14  | % 
|                                            |  |         |         |           |  |           |         |                |  |               |        |           |  |           |     |    |  |   |         |   |  |   |        |   |  |  |     |   
|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  | % 
|                                            |  |         |         |           |  |           |         |                |  |               |        |           |  |           |     |    |  |   |         |   |  |   |        |   |  |  |     |   

Revenue

We increased total revenue by $65.9 million,
or 43%, to $219.9 million in 2002 from $154.0 million
in 2001. Of this increase, $46.1 million or 70% was
attributable to acquisitions, primarily from the acquisitions of
Kaye, Burnham and





|                               |                               
|------------------------------ | ------------------------------
|28   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



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##### 



Flanagan in 2001, and $19.9 million or 30%
was attributable to organic growth. Commission income increased
by $57.9 million, or 40%, to $200.9 million in 2002,
from $143.1 million in 2001. Excluding the effect of
acquisitions, commission income increased by $18.7 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
$2.5 million, or 49%, to $7.5 million from
$5.0 million in 2001. Excluding the effects of acquisitions
of $2.7 million, other income decreased by
$0.2 million.


U.S. Results

Total revenue from U.S. Operations increased
by $58.7 million, or 78%, to $134.1 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 $49.5 million, or 70%, to
$120.7 million in 2002 from $71.2 million in 2001.
Excluding the effect of acquisitions, commission income
increased $9.6 million, or 14% 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 $3.1 million, or 122%, to
$5.6 million in 2002 from $2.5 million in 2001.
Excluding the effect of acquisitions of $2.7 million, other
income increased $0.4 million, or 14% 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 Results

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
$8.0 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 $9.1 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, 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 Expense

Compensation expense in 2002 increased by
$30.7 million, or 35%, to $118.7 million from
$88.0 million in 2001. Compensation expense 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 expense 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
Expense

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.





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|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    29



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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.

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.





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|------------------------------ | ------------------------------
|30   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



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Cash Flow, Liquidity and Capital
Resources

We improved our financial position and capacity
for acquisitions in 2003 through positive cash flow from
operations and a private debt offering. As a result of these
factors, as of December 31, 2003, we had cash and cash
equivalents of $82.1 million, an increase of 102%, from
$40.6 million as of December 31, 2002. Operating
activities generated $53.9 million of cash in 2003 compared
to $19.1 million in 2002. The amount of cash provided by
operating activities is affected by net earnings for the period,
non-cash income and expenses, the collection of accounts and
other receivables and the payment of accounts payable and
accrued liabilities. In 2003, $20.1 million of cash was
used in investing activities, primarily for the acquisitions of
property and equipment and the purchase of subsidiaries compared
to $8.4 million in 2002. Also in 2003, $4.6 million of
cash was provided from financing activities, primarily resulting
from our private debt offering, of $65.0 million, and
offset by the repayment of long-term debt and capital leases,
and the payment of dividends. In 2003, the effect of exchange
rate changes on cash and cash equivalents was an increase of
$3.1 million compared to $0.1 million in 2002. Net
debt, defined as long-term debt ($78.8 million) and
subordinated convertible debentures ($35.0 million) less
non-trust cash (cash and cash equivalents of $82.1 million)
as of December 31, 2003, was $31.7 million compared
with $66.4 million as of December 31, 2002.

As a broker, we collect and hold premiums paid by
clients, deduct commissions and other expenses from these
payments, and hold the remainder in trust, which we remit to the
insurers who provide coverage to clients. We earn interest on
these funds during the time between receipt of the cash and the
time the cash is paid to insurers. The cash held in trust is
shown separately on our balance sheet. 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.

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



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Revolving U.S. dollar LIBOR loan 
    This undrawn facility was renegotiated in December 2003 subject
    to completion of the definitive amended agreement. Under the new
    terms, the unsecured facility totals $50 million and bears
    interest at a floating rate of prime plus 1% or 112.5 basis
    points above LIBOR, which were 1.12% and 1.42% at
    December 31, 2003 and 2002, respectively. The facility is
    available on a revolving basis for one year and expires on
    December 13, 2004; however if the revolving period is not
    extended, we may convert the outstanding balance under the
    facility to a three year non-revolving term loan repayable at
    the end of three years with an interest rate of 137.5 basis
    points above the Canadian dollar interest swap rate. An annual
    commitment fee of 20 basis points is assessed on the unused
    balance. Borrowings under this facility totaled $NIL and
    $50 million at December 31, 2003 and 2002,
    respectively. We are in compliance with all financial covenants
    governing this facility as of December 31, 2003 and 2002.
|   
|(2) | Demand U.S. dollar base rate
    loan  We have an undrawn $9.3 million facility
    which expires on July 18, 2004 and bears interest at the
    banks U.S. base rate plus 50 bonus points. Borrowings
    under this facility are repayable on demand.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

In June 2003, we completed a private placement of
$65 million in principal amount of unsecured senior notes.
The senior notes were issued in two series. Series A
represents $10 million of 5.71% senior notes with
interest due semi-annually, and principal due of $3,333
annually, June 15, 2008 through June 15, 2010.
Series B represents $55 million of 6.16% senior
notes with interest due semi-annually, and principal due of
$11,000 annually June 15, 2009 through June 15, 2013.
The senior notes were sold on a private basis in the United
States to institutional accredited investors. Net proceeds of
the sale of the senior notes were used to pay down
$50 million of our revolving U.S. Dollar LIBOR Loan
with the balance held for general corporate purposes, which may
include future acquisitions. We incurred approximately
$0.7 million in fees and expenses related to the offering
of these notes, which were capitalized and are being amortized
to expense over the term of the notes. At December 31,
2003, $65 million was outstanding under the senior notes.
We are in compliance with all financial covenants governing the
senior notes.

On July 16, 2003, we entered into an
interest rate swap agreement. The effect of the swap is to
convert the fixed rate interest payments of 5.71% and 6.16% on
$10 million and $55 million, respectively, of the
senior notes in order to ensure that we pay a market related
interest rate on a portion of our borrowings. Under Canadian
GAAP, we account for the swap transaction using the synthetic
instruments method under which the net interest expense on the
swap and associated debt is reported in earnings as if it were a
single, synthetic, financial instrument. As at





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|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    31



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##### 



December 31, 2003, we estimate the fair
value of the swap to be $2.6 million, which is not
recognized in these financial statements. Accordingly,
$2.6 million is the estimated amount that we would need to
pay to terminate the swap as of December 31, 2003.


Also at December 31, 2003 we had outstanding
a $7.5 million term loan 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 reduces 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).
Credits were earned for 2003 and 2002 which reduced interest
payments to zero from $750 and $229, respectively.

In addition to these primary credit sources, we
ended 2003 with $6.3 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,
$0.5 million is secured by liens on certain assets of our
subsidiaries.

Also at December 31, 2003, we had
outstanding $35.0 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 32% of our total outstanding common shares as of
December 31, 2003, versus the 26% of outstanding shares
held on that date.

At the close of 2003, our cash position included
approximately $35.1 million deployed as working capital at
the brokerage level and approximately $47.0 million
available for acquisitions. It is impossible to define exactly
how many acquisitions or how much new revenue could be acquired
through the use of this cash, additional cash flow from
operations and application of credit facilities, as acquisition
pricing and other factors vary during the course of the year.
However, we intend to use common shares as compensation for
approximately 30-70% of the value of a hub acquisition, and
generally have paid a multiple of 5-8 times earnings before
interest, taxes, depreciation and amortization (frequently
referred to as EBITDA) for acquired brokerages.

We believe that our capital resources, including
existing cash, funds generated from operations and borrowings
available under credit facilities, will be sufficient to satisfy
the companys financial requirements, 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.

Our debt to capitalization ratio (defined as debt
expressed as a percentage of debt and shareholders equity)
decreased to 25% at December 31, 2003, compared with 27% at
December 31, 2002. If all lines of credit and other loan
facilities were fully utilized by the company at
December 31, 2003, our ratio of debt to capitalization
would have been 34%, which is below the range 35% to 38%
that our management believes is suitably conservative for our
business model. Under our loan covenants, our debt to
capitalization ratio must be maintained below the 45% level. As
of December 31, 2003, we were in compliance with the
financial covenants under all of our debt instruments.





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|------------------------------ | ------------------------------
|32   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



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##### 



Contingent obligations

The table below summarizes our contractual
obligations and commercial commitments as of December 31,
2003:


|                                    |  |       |         |        |  |           |   |       |  |       |        |         |  |   |        |  |  |   |        |  |  |   |        | 
|----------------------------------- |  | ----- | ------- | ------ |  | --------- | - | ----- |  | ----- | ------ | ------- |  | - | ------ |  |  | - | ------ |  |  | - | ------ | 
|Payments due by period              |  |       |         | On     |  | Less than |   | 1 - 3 |  | 4 - 5 |        | After  
|(in thousands)                      |  | Total |         | demand |  | 1 Year    |   | Years |  | Years |        | 5 Years
|                                    |  |       |         |        |  |           |   |       |  |       |        |        
|Contractual Obligations             |  |       |         |        |  |           |   |       |  |       |        |         |  |   |        |  |  |   |        |  |  |   |        | 
|Long-term debt                      |  | $     | 78,149  |        |  | $         |  |       |  | $     | 3,134  |         |  | $ | 9,883  |  |  | $ | 17,798 |  |  | $ | 47,334 | 
|Capital lease obligations           |  |       | 650     |        |  |           |  |       |  |       | 228    |         |  |   | 422    |  |  |   |       |  |  |   |       | 
|Operating lease obligations         |  |       | 61,493  |        |  |           |  |       |  |       | 10,963 |         |  |   | 26,671 |  |  |   | 12,648 |  |  |   | 11,211 | 
|Executive share purchase plan loans |  |       | 489     |        |  |           |  |       |  |       |       |         |  |   |       |  |  |   |       |  |  |   | 489    | 
|                                    |  |       |         |        |  |           |   |       |  |       |        |         |  |   |        |  |  |   |        |  |  |   |        | 
|Total                               |  | $     | 140,781 |        |  | $         |  |       |  | $     | 14,325 |         |  | $ | 36,976 |  |  | $ | 30,446 |  |  | $ | 59,034 | 
|                                    |  |       |         |        |  |           |   |       |  |       |        |         |  |   |        |  |  |   |        |  |  |   |        | 

Acquisitions

In connection with the acquisition of Hooper
Hayes and Associates, Inc., in 2002 we issued
196,000 shares (the Retractable Shares) that
are being held in escrow subject to release over a period of
three years upon the satisfaction of certain performance
targets. As of December 31, 2003, 63,000 shares have
been released from escrow.

As part of the negotiations of the contingent
consideration for J.P. Flanagan Corporation
(Flanagan) total additional consideration of 37,500
of our common shares were earned at December 31, 2003
valued at approximately $635, based on the closing price of the
shares at December 31, 2003 on the NYSE. The common shares
have been recorded as issuable shares and included
in shareholders equity and goodwill has been increased by
the same amount at December 31, 2003. Also as part of the
negotiations the former owner agreed to relinquish his rights to
put options on the 730,000 shares previously issued as well
as on shares issued as contingent consideration. In addition we
expect to issue non-cash stock based compensation in the form of
84,375 restricted share units in the first quarter of 2004. Half
of these restricted share units will vest in 4 years and
the balance will vest in 7 years.

In connection with other various acquisitions
completed through December 31, 2003, we may be obligated to
pay contingent consideration up to a maximum sum of
approximately $8.2 million cash and $0.2 million in
common shares based upon the acquired brokerages achieving
certain targets. The contingent payments are payable on various
dates through September, 2006 according to the terms and
conditions of each purchase agreement. Any additional
consideration will be recorded as an adjustment to goodwill once
the contingency is resolved. In connection with contingent
consideration earned as at December 31, 2003, the financial
statements reflect a liability to pay cash of $71 and to issue
common shares valued at approximately $635 as of
December 31, 2003.

Other

In connection with our executive share purchase
plan, under certain circumstances, we may be obligated to
purchase loans for officers, directors and employees from a
Canadian chartered bank totaling $4,513 and $5,077 as of
December 31, 2003 and 2002 respectively, to assist in
purchasing our common shares. As collateral, the employees have
pledged 478,000 and 602,000 common shares as of
December 31, 2003 and 2002, respectively, which have a
market value of $8,105 and $7,677 as of December 31, 2003
and 2002, respectively. Interest on the loans in the amount of
$279, $264 and $377 for the years ended December 31, 2003,
2002 and 2001, respectively, was paid by us and is included in
compensation expense. We no longer make loans to our executive
officers and directors.

We have undertaken a number of initiatives to
reduce and maintain compensation expense. During 2002, members
of the executive management group agreed to accept 50% of their
earned bonuses in the form of stock options, rather than cash.
At the close of 2003, we obtained agreement from managers to
restructure the companys management bonus agreement to
reduce total compensation expense over the long term. Under the
new agreement the non-cash stock option component of the annual
bonus was eliminated in exchange for restricted





|                               |                                
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|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    33



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##### 



share units to be issued in the first quarter of
2004. In addition, whereas the management bonus agreement was
previously contractual in nature, the restructured plan is no
longer contractual and may be subject to change as we deem
necessary. Our management has estimated that approximately
$16.9 million of restricted share units will be issued in
connection with the modifications. The amount of restricted
share units to be issued was based upon a multiple of the
previous two years average bonus. The restricted share units
will vest in full on July 1, 2011, subject to continued
employment of the awardee. Although the impact of this change is
expected to be earnings-neutral in 2004, the long-term effect is
intended to be a slower rate of increase in compensation expense
relative to revenue growth.


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 our 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 results of operations.

Shareholders equity

Restricted share units. We committed to award, under our
equity incentive plan, an aggregate of 266,000 restricted shares
that would be paid for by the participants (none of whom are
members of our senior management or directors) with loans either
from us or from a bank (guaranteed by us). In addition, we
committed to award an aggregate of 471,000 restricted share
units that would be exercisable for common shares, without
payment of cash consideration. On June 30, 2003, we awarded
610,000 restricted share units in satisfaction of substantially
all of the above-mentioned commitments. The restricted share
units vest over periods ranging from 68 months to
95 months. In the first quarter of 2004, 1,005,690
restricted share units were issued in connection with the
restructure of our management bonus agreement and 84,375
restricted share units were issued in connection with the
renegotiation of contingent consideration for Flanagan.


Share repurchases.For the year ended December 31,
2003, no common shares were repurchased by us, other than 6,470
common shares under the executive share purchase plan.

Shares reserved for issuance.As of December 31, 2003,
3.6 million common shares were reserved for issuance under
our equity incentive plan. As of December 31, 2003, an
aggregate of approximately 2.1 million stock options and
restricted share units were outstanding which would reduce such
shares reserved for issuance. The issuance of approximately
1,090,065 additional restricted share units in the first quarter
of 2004 will also reduce such shares reserved for issuance.

Shareholders equity increased by
$58.5 million, or 21%, to $342.8 million as of
December 31, 2003 from $284.3 million as of
December 31, 2002. This increase resulted from net earnings
of $36.5 million, an increase in contributed surplus of
$3.5 million related primarily to non-cash stock based
compensation expense, $7.1 million increase due to the
release of the put option liability, $0.4 million due to
shares issued in conjunction with purchase of subsidiaries and
other items, $1.0 million due to shares issued in
conjunction with the contingent consideration payments, as well
as an increase in the cumulative translation account of
$18.0 million, due mainly to the strengthening of the
Canadian dollar compared to the U.S. dollar in 2003. The
increase in shareholders equity was offset by the payment
of dividends of $6.1 million in 2003, and a reduction in
share capital of $1.9 million as a result of a transfer
from long-term assets on company funded loans to executives used
to purchase company shares pursuant to our executive share
purchase plan. We no longer make loans to our executive
officers. This treatment is consistent with U.S. GAAP.

Market risk

Interest rate risk

We are exposed to interest rate risk in
connection with our senior notes due to the interest rate swap
entered into in July which converted the fixed rate interest
payments on the $65 million of senior notes outstanding
into floating rate payments. At December 31, 2003, we had
$65 million of floating rate debt outstanding. Each
100 basis point increase in interest rates charged on the
balance of our outstanding floating rate debt as of
December 31, 2003 will result in approximately
$0.4 million decrease in our earnings.





|                               |                               
|------------------------------ | ------------------------------
|34   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



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##### 



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
had experienced a significant decline in its value compared to
the U.S. dollar in 2001 and 2002 but has increased
significantly in value throughout 2003. At December 31,
2003 and 2002 one U.S. dollar equaled $1.2924 and $1.5779
Canadian dollars, respectively. The table below summarizes the
effect that a $0.01 decline or increase in the value of the
Canadian dollar would have had on our revenue, net earnings and
cumulative translation account for the twelve months ended
December 31, 2003, 2002 and 2001.

|                                                   |  |      |       |      |  |      |       |  |  |      |       | 
|-------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- |  |  | ---- | ----- | 
|(in thousands of U.S. dollars, except percentages) |  | 2003 |       | 2002 |  | 2001
|                                                   |  |      |       |      |  |     
|Revenue                                            |  | +/-$ | 1,523 |      |  | +/-$ | 1,346 |  |  | +/-$ | 1,254 | 
|Net earnings                                       |  | +/-$ | 195   |      |  | +/-$ | 231   |  |  | +/-$ | 146   | 
|Cumulative translation account                     |  | +/-$ | 343   |      |  | +/-$ | 846   |  |  | +/-$ | 729   | 

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.

Goodwill and other intangible assets

Intangible assets arising from acquisitions
consist of the following:

|                               |       |      |         |         |  |   |         |         | 
|------------------------------ | ----- | ---- | ------- | ------- |  | - | ------- | ------- | 
|(in thousands of U.S. dollars) |       | 2003 |         | 2002   
|                               |       |      |         |        
|Customer relationships         |       | $    | 43,422  |         |  | $ | 41,762  |        
|Non-competition covenants      |       |      | 2,643   |         |  |   | 2,298   |        
|Trademarks                     |       |      | 2,587   |         |  |   | 2,587   |        
|Goodwill                       |       |      | 323,185 |         |  |   | 296,513 |        
|Accumulated amortization       |       |      | (23,072 | )       |  |   | (17,284 | )      
|                               |       |      |         |         |  |   |         |        
|                               | Total |      | $       | 348,765 |  |   | $       | 325,876 | 
|                               |       |      |         |         |  |   |         |        

We completed our impairment testing on the
balance of goodwill and intangible assets as of January 1,
2004, 2003 and 2002. Based on the testing performed, no
impairment losses were incurred.

The amounts allocated to customer relationships
were determined by discounting 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 Hub 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. When an employee leaves Hub,
the non-competition covenant becomes effective and the value
assigned is then amortized over the life of covenant. Prior to
2002 we amortized goodwill primarily over a period of forty
years. Under the new accounting standards adopted in 2002,
goodwill is not amortized and is evaluated annually for





|                               |                                
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|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    35



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impairment. For the past three years ended
December 31, 2003, our amortization has been comprised of
the following:


|                               |       |      |       |       |  |      |       |       |  |   |       |       | 
|------------------------------ | ----- | ---- | ----- | ----- |  | ---- | ----- | ----- |  | - | ----- | ----- | 
|(in thousands of U.S. dollars) |       | 2003 |       | 2002  |  | 2001
|                               |       |      |       |       |  |     
|Customer relationships         |       | $    | 3,040 |       |  | $    | 1,627 |       |  | $ | 759   |      
|Non-competition covenants      |       |      | 168   |       |  |      | 44    |       |  |   | 56    |      
|Goodwill                       |       |      |      |       |  |      |      |       |  |   | 4,125 |      
|                               |       |      |       |       |  |      |       |       |  |   |       |      
|                               | Total |      | $     | 3,208 |  |      | $     | 1,671 |  |   | $     | 4,940 | 
|                               |       |      |       |       |  |      |       |       |  |   |       |      

We estimate that our amortization charges for
intangible assets from 2004 through 2008 for all acquisitions
consummated to date will be:

|                               |       |      |       |       |  |      |       |       |  |      |       |       |  |   |       |       |  |   |       |       | 
|------------------------------ | ----- | ---- | ----- | ----- |  | ---- | ----- | ----- |  | ---- | ----- | ----- |  | - | ----- | ----- |  | - | ----- | ----- | 
|Year ended December 31,        |       |      |       |       |  |      |       |       |  |     
|(in thousands of U.S. dollars) |       | 2004 |       | 2005  |  | 2006 |       | 2007  |  | 2008
|                               |       |      |       |       |  |      |       |       |  |     
|Customer relationships         |       | $    | 3,089 |       |  | $    | 3,089 |       |  | $    | 3,089 |       |  | $ | 3,072 |       |  | $ | 3,068 |      
|Non-competition covenants      |       |      | 63    |       |  |      | 44    |       |  |      | 82    |       |  |   | 80    |       |  |   | 21    |      
|Trademarks                     |       |      | 2,587 |       |  |      |      |       |  |      |      |       |  |   |      |       |  |   |      |      
|                               |       |      |       |       |  |      |       |       |  |      |       |       |  |   |       |       |  |   |       |      
|                               | Total |      | $     | 5,739 |  |      | $     | 3,133 |  |      | $     | 3,171 |  |   | $     | 3,152 |  |   | $     | 3,089 | 
|                               |       |      |       |       |  |      |       |       |  |      |       |       |  |   |       |       |  |   |       |      

Related party transactions

We had transactions with, and recorded revenue
from, the following related parties:

|                                  |  |      |        |      |  |      |        |  |  |   |        | 
|--------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|                                  |  | 2003 |        | 2002 |  | 2001
|                                  |  |      |        |      |  |     
|Northbridge Financial Corporation |  | $    | 18,504 |      |  | $    | 12,787 |  |  | $ | 9,761  | 
|Crum & Forster Holdings,
    Inc. |  |      | 1,259  |      |  |      | 914    |  |  |   | 1,039  | 
|Fairfax Inc.                      |  |      | 8,411  |      |  |      | 6,278  |  |  |   |       | 
|                                  |  |      |        |      |  |      |        |  |  |   |        | 
|                                  |  | $    | 28,174 |      |  | $    | 19,979 |  |  | $ | 10,800 | 
|                                  |  |      |        |      |  |      |        |  |  |   |        | 

As of December 31, 2003 and 2002, we had
accounts receivable and accounts payable balances with the above
related parties in the amounts of $3,185 and $17,999, for 2003,
respectively, and $2,104 and $12,180 for 2002, 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 26% of our common shares as of
December 31, 2003.

As of December 31, 2003 and 2002, long-term
debt related to put options of $NIL and $5,940, respectively,
and subordinated convertible debentures of $35,000 at the end of
both years, are due to related parties.

During 2003, 2002 and 2001, we incurred expenses
related to rental of premises from related parties in the amount
of $2,102, $1,691 and $1,373, respectively. At December 31,
2003 and 2002, we also had accounts receivable due from related
parties in the amount of $3,530 and $3,801, respectively, of
which the majority were loans to employees to enable them to
purchase our common shares. Of the accounts receivable, as of
December 31, 2003 and 2002, $1,918 and $2,207,
respectively, were related to company loans to employees to
purchase shares under our executive share purchase plan. As
collateral, the employees have pledged 153,000 and 177,000
common shares as of December 31, 2003 and 2002,
respectively, which have a market value of $2,590 and $2,263 as
of December 31, 2003 and 2002, respectively.

Off-Balance Sheet Transactions

Under Canadian GAPP, we account for the interest
rate swap transaction which converted fixed rate interest
payments of 5.71% and 6.16% on the senior notes of
$10 million and $55 million, respectively, using the
synthetic instruments method. Under this method, we report in
earnings the net interest expense on the swap and associated
debt as if it were a single, synthetic, financial instrument.
The fair value of the swap, estimated at $2.6 million is not





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|------------------------------ | ------------------------------
|36   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



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##### 



recognized in our Canadian GAAP financial
statements. Under U.S. GAAP, we have designated the swap
transaction of a hedge of changes in the fair value of our fixed
rate debt caused by changes in interest rates and record the
swap on our U.S. GAAP balance sheet at is fair value. Changes in
fair value of the swap are reported in earnings. Changes in the
fair value of the debt being hedged which are attributable to
changes in interest rates are recognized in earnings by
adjustment of the carrying amount of the debt. We have no other
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 and related impairment
evaluation, 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 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 third party valuators to
assist us in conducting asset valuations.

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

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.





|                               |                                
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|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    37



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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 that the carrying amount of intangibles,
other than goodwill and intangible assets with indefinite useful
lives, may warrant revision or may not be recoverable. The
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.

Stock-based compensation

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

We 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 our managements judgment and the use of different
judgments, estimates, and assumptions could produce
significantly different results of fair value of the stock
options and, as a result, significantly different results of
operations.

Effects of recent accounting
pronouncements

We are not aware of any new accounting
pronouncements which will impact on our financial reporting.

Item 7A.    Quantitative
and Qualitative Disclosures About Market Risk

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





|                               |                               
|------------------------------ | ------------------------------
|38   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



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##### 



Item 8.    Financial
Statements and Supplementary Data

Index to consolidated financial
statements

|                                                                                                           |  |      |    | 
|---------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                           |  | Page
|                                                                                                           |  |     
|Report of Independent Auditors to the Board of
    Directors and Shareholders of Hub International Limited |  |      | 40 | 
|Consolidated Balance Sheets as of
    December 31, 2003 and 2002                                           |  |      | 41 | 
|Consolidated Statements of Earnings for the Years
    Ended December 31, 2003, 2002 and 2001               |  |      | 42 | 
|Consolidated Statements of Retained Earnings for
    the Years Ended December 31, 2003, 2002 and 2001      |  |      | 43 | 
|Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2003, 2002 and 2001             |  |      | 44 | 
|Notes to Consolidated Financial Statements for
    the Years Ended December 31, 2003, 2002 and 2001        |  |      | 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                   |  |  | 45 | 
|         | 3  |             |  | Acquisitions                                                 |  |  | 49 | 
|         | 4  |             |  | Accounts and other receivables                               |  |  | 52 | 
|         | 5  |             |  | Intangible assets                                            |  |  | 53 | 
|         | 6  |             |  | Property and equipment                                       |  |  | 54 | 
|         | 7  |             |  | Accounts payable and accrued liabilities                     |  |  | 55 | 
|         | 8  |             |  | Debt                                                         |  |  | 55 | 
|         | 9  |             |  | Defined Contribution Plan                                    |  |  | 56 | 
|         | 10 |             |  | Commitments and contingencies                                |  |  | 57 | 
|         | 11 |             |  | Shareholders equity                                         |  |  | 58 | 
|         | 12 |             |  | Equity Incentive Plan                                        |  |  | 59 | 
|         | 13 |             |  | Fair value of financial instruments                          |  |  | 60 | 
|         | 14 |             |  | Income taxes                                                 |  |  | 61 | 
|         | 15 |             |  | Interest and income taxes paid                               |  |  | 62 | 
|         | 16 |             |  | Segmented information                                        |  |  | 62 | 
|         | 17 |             |  | Related party transactions                                   |  |  | 64 | 
|         | 18 |             |  | Reconciliation to U.S. GAAP                                  |  |  | 65 | 
|         | 19 |             |  | Quarterly data                                               |  |  | 68 | 
|         | 20 |             |  | Subsequent event                                             |  |  | 68 | 





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    39



---



##### 



Report of Independent Auditors 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, 2003 and 2002 and the related
consolidated statements of earnings, retained earnings and cash
flows for each of the years in the three year period ended
December 31, 2003. These financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statement 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, 2003 and 2002, and
the results of their operations and their cash flows for each of
the years in the three year period ended December 31, 2003,
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.

(-s- PricewaterhouseCoopers LLP)

Chicago, Illinois

February 19, 2004






|                               |                               
|------------------------------ | ------------------------------
|40   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



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##### 



Hub International Limited

Consolidated Balance Sheets


As of December 31,

(in thousands of U.S. dollars)


|                                                  |  |      |         |      |  |   |         | 
|------------------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | 
|                                                  |  | 2003 |         | 2002
|                                                  |  |      |         |     
|ASSETS                                            |  |      |         |      |  |   |         | 
|Current assets:                                   |  |      |         |      |  |   |         | 
|Cash and cash equivalents                         |  | $    | 82,052  |      |  | $ | 40,642  | 
|Trust cash                                        |  |      | 54,534  |      |  |   | 53,648  | 
|Accounts and other receivables                    |  |      | 163,728 |      |  |   | 136,573 | 
|Income taxes receivable                           |  |      | 6,768   |      |  |   | 2,153   | 
|Future income taxes                               |  |      | 2,865   |      |  |   | 3,324   | 
|Prepaid expenses                                  |  |      | 4,449   |      |  |   | 1,587   | 
|                                                  |  |      |         |      |  |   |         | 
|Total current assets                              |  |      | 314,396 |      |  |   | 237,927 | 
|Goodwill                                          |  |      | 305,862 |      |  |   | 281,712 | 
|Other intangible assets                           |  |      | 42,903  |      |  |   | 44,164  | 
|Property and equipment                            |  |      | 24,181  |      |  |   | 21,298  | 
|Future income taxes                               |  |      | 6,458   |      |  |   | 3,715   | 
|Other assets                                      |  |      | 6,803   |      |  |   | 8,060   | 
|                                                  |  |      |         |      |  |   |         | 
|Total assets                                      |  | $    | 700,603 |      |  | $ | 596,876 | 
|                                                  |  |      |         |      |  |   |         | 
|LIABILITIES AND SHAREHOLDERS
    EQUITY          |  |      |         |      |  |   |         | 
|Current liabilities:                              |  |      |         |      |  |   |         | 
|Accounts payable and accrued liabilities          |  | $    | 226,168 |      |  | $ | 187,034 | 
|Contingent consideration payable                  |  |      |        |      |  |   | 8,423   | 
|Income taxes payable                              |  |      | 3,804   |      |  |   | 1,198   | 
|Future income taxes                               |  |      | 114     |      |  |   | 1,164   | 
|Current portion long-term debt and capital leases |  |      | 3,362   |      |  |   | 3,029   | 
|                                                  |  |      |         |      |  |   |         | 
|Total current liabilities                         |  |      | 233,448 |      |  |   | 200,848 | 
|Long-term debt and capital leases                 |  |      | 75,437  |      |  |   | 69,009  | 
|Subordinated convertible debentures               |  |      | 35,000  |      |  |   | 35,000  | 
|Future income taxes                               |  |      | 13,928  |      |  |   | 7,745   | 
|                                                  |  |      |         |      |  |   |         | 
|Total liabilities                                 |  |      | 357,813 |      |  |   | 312,602 | 
|                                                  |  |      |         |      |  |   |         | 
|Commitments and Contingencies                     |  |      |         |      |  |   |         | 
|Shareholders equity                              |  |      |         |      |  |   |         | 
|Share capital                                     |  |      | 254,845 |      |  |   | 235,197 | 
|Issuable shares                                   |  |      | 721     |      |  |   | 13,743  | 
|Contributed surplus                               |  |      | 4,806   |      |  |   | 1,234   | 
|Cumulative translation account                    |  |      | 20,062  |      |  |   | 2,185   | 
|Retained earnings                                 |  |      | 62,356  |      |  |   | 31,915  | 
|                                                  |  |      |         |      |  |   |         | 
|Total shareholders equity                        |  |      | 342,790 |      |  |   | 284,274 | 
|                                                  |  |      |         |      |  |   |         | 
|Total liabilities and shareholders
    equity    |  | $    | 700,603 |      |  | $ | 596,876 | 
|                                                  |  |      |         |      |  |   |         | 

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





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    41



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##### 



Hub International Limited

Consolidated Statements of Earnings


For the Years Ended
December 31,

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


|                                                          |                                                                                        |      |         |         |   |      |         |         |   |   |         |         |  
|--------------------------------------------------------- | -------------------------------------------------------------------------------------- | ---- | ------- | ------- | - | ---- | ------- | ------- | - | - | ------- | ------- | -
|                                                          |                                                                                        | 2003 |         | 2002    |   | 2001
|                                                          |                                                                                        |      |         |         |   |     
|Revenue                                                   |                                                                                        |      |         |         |   |      |         |         |   |   |         |        
|                                                          | Commission income                                                                      |      | $       | 259,461 |   |      | $       | 200,976 |   |   | $       | 143,063 |  
|                                                          | Contingent commissions and volume overrides                                            |      |         | 18,530  |   |      |         | 11,464  |   |   |         | 5,899   |  
|                                                          | Other                                                                                  |      |         | 8,368   |   |      |         | 7,520   |   |   |         | 5,031   |  
|                                                          |                                                                                        |      |         |         |   |      |         |         |   |   |         |        
|                                                          |                                                                                        |      | 286,359 |         |   |      | 219,960 |         |   |   | 153,993 |        
|                                                          |                                                                                        |      |         |         |   |      |         |         |   |   |         |        
|Expenses                                                  |                                                                                        |      |         |         |   |      |         |         |   |   |         |        
|                                                          | Compensation                                                                           |      |         | 156,320 |   |      |         | 118,667 |   |   |         | 88,015  |  
|                                                          | Selling, occupancy and administration                                                  |      |         | 56,606  |   |      |         | 44,932  |   |   |         | 35,276  |  
|                                                          | Depreciation                                                                           |      |         | 6,244   |   |      |         | 5,492   |   |   |         | 3,940   |  
|                                                          | Interest expense                                                                       |      |         | 5,191   |   |      |         | 7,317   |   |   |         | 7,447   |  
|                                                          | Intangible asset amortization                                                          |      |         | 3,208   |   |      |         | 1,671   |   |   |         | 4,940   |  
|                                                          | Gain on disposal of investment held for sale,
    property, equipment and other assets |      |         | (202    | ) |      |         | (2,679  | ) |   |         | (173    | )
|                                                          | Gain on put option liability                                                           |      |         | (160    | ) |      |         | (186    | ) |   |         | (719    | )
|                                                          | Non-cash stock based compensation                                                      |      |         | 4,801   |   |      |         | 1,089   |   |   |         |        |  
|                                                          | Proceeds from life insurance                                                           |      |         | (1,000  | ) |      |         |        |   |   |         |        |  
|                                                          |                                                                                        |      |         |         |   |      |         |         |   |   |         |        
|                                                          |                                                                                        |      | 231,008 |         |   |      | 176,303 |         |   |   | 138,726 |        
|                                                          |                                                                                        |      |         |         |   |      |         |         |   |   |         |        
|Net earnings before income taxes                          |                                                                                        |      | 55,351  |         |   |      | 43,657  |         |   |   | 15,267  |        
|                                                          |                                                                                        |      |         |         |   |      |         |         |   |   |         |        
|Provision for income tax expense                          |                                                                                        |      |         |         |   |      |         |         |   |   |         |        
|                                                          | Current                                                                                |      |         | 16,922  |   |      |         | 12,851  |   |   |         | 4,967   |  
|                                                          | Future                                                                                 |      |         | 1,920   |   |      |         | 1,405   |   |   |         | 295     |  
|                                                          |                                                                                        |      |         |         |   |      |         |         |   |   |         |        
|                                                          |                                                                                        |      | 18,842  |         |   |      | 14,256  |         |   |   | 5,262   |        
|                                                          |                                                                                        |      |         |         |   |      |         |         |   |   |         |        
|Net earnings                                              |                                                                                        | $    | 36,509  |         |   | $    | 29,401  |         |   | $ | 10,005  |        
|                                                          |                                                                                        |      |         |         |   |      |         |         |   |   |         |        
|Earnings per share                                        |                                                                                        |      |         |         |   |      |         |         |   |   |         |        
|                                                          | Basic                                                                                  |      |         | $1.22   |   |      |         | $1.27   |   |   |         | $0.53   |  
|                                                          | Diluted                                                                                |      |         | $1.14   |   |      |         | $1.06   |   |   |         | $0.50   |  
|Weighted average shares
    outstanding  Basic (000s)   |                                                                                        |      | 29,967  |         |   |      | 23,181  |         |   |   | 19,012  |        
|Weighted average shares
    outstanding  Diluted (000s) |                                                                                        |      | 33,767  |         |   |      | 30,199  |         |   |   | 20,105  |        

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





|                               |                               
|------------------------------ | ------------------------------
|42   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



---



##### 



Hub International Limited

Consolidated Statements of Retained
Earnings


For the Years Ended
December 31,

(in thousands of U.S. dollars)


|                                          |  |      |        |      |  |      |        |   |  |   |        |  
|----------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                          |  | 2003 |        | 2002 |  | 2001
|                                          |  |      |        |      |  |     
|Retained earnings  Beginning of
    year |  | $    | 31,915 |      |  | $    | 6,995  |   |  | $ | 587    |  
|Net earnings                              |  |      | 36,509 |      |  |      | 29,401 |   |  |   | 10,005 |  
|Dividends                                 |  |      | (6,068 | )    |  |      | (4,481 | ) |  |   | (3,597 | )
|                                          |  |      |        |      |  |      |        |   |  |   |        |  
|Retained earnings  End of
    year       |  | $    | 62,356 |      |  | $    | 31,915 |   |  | $ | 6,995  |  
|                                          |  |      |        |      |  |      |        |   |  |   |        |  

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





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    43



---



##### 



Hub International Limited

Consolidated Statements of Cash
Flows


For the Years Ended
December 31,

(in thousands of U.S. dollars)


|                                                                 |                                                                                        |      |         |        |   |      |         |         |   |   |          |         |  
|---------------------------------------------------------------- | -------------------------------------------------------------------------------------- | ---- | ------- | ------ | - | ---- | ------- | ------- | - | - | -------- | ------- | -
|                                                                 |                                                                                        | 2003 |         | 2002   |   | 2001
|                                                                 |                                                                                        |      |         |        |   |     
|OPERATING ACTIVITIES                                             |                                                                                        |      |         |        |   |      |         |         |   |   |          |        
|Net earnings                                                     |                                                                                        | $    | 36,509  |        |   | $    | 29,401  |         |   | $ | 10,005   |        
|Items not affecting working capital                              |                                                                                        |      |         |        |   |      |         |         |   |   |          |        
|                                                                 | Amortization and depreciation                                                          |      |         | 9,452  |   |      |         | 7,163   |   |   |          | 8,880   |  
|                                                                 | Gain on disposal of investment held for sale,
    property, equipment and other assets |      |         | (202   | ) |      |         | (2,679  | ) |   |          | (173    | )
|                                                                 | Gain on put option liability                                                           |      |         | (160   | ) |      |         | (186    | ) |   |          | (719    | )
|                                                                 | Non-cash stock based compensation                                                      |      |         | 4,801  |   |      |         | 1,089   |   |   |          |        |  
|                                                                 | Future income taxes                                                                    |      |         | 1,920  |   |      |         | 1,405   |   |   |          | 295     |  
|Non-cash working capital items                                   |                                                                                        |      |         |        |   |      |         |         |   |   |          |        
|                                                                 | Trust cash                                                                             |      |         | (886   | ) |      |         | (3,222  | ) |   |          | (38,070 | )
|                                                                 | Accounts and other receivables                                                         |      |         | (4,067 | ) |      |         | (26,665 | ) |   |          | (5,511  | )
|                                                                 | Prepaid expenses                                                                       |      |         | (2,616 | ) |      |         | 1,287   |   |   |          | (299    | )
|                                                                 | Accounts payable and accrued liabilities                                               |      |         | 13,431 |   |      |         | 11,673  |   |   |          | 32,571  |  
|                                                                 | Other assets                                                                           |      |         | (2,062 | ) |      |         |        |   |   |          |        |  
|                                                                 | Income taxes                                                                           |      |         | (2,184 | ) |      |         | (202    | ) |   |          | 1,863   |  
|                                                                 |                                                                                        |      |         |        |   |      |         |         |   |   |          |        
|Net cash flows from operating activities                         |                                                                                        |      | 53,936  |        |   |      | 19,064  |         |   |   | 8,842    |        
|                                                                 |                                                                                        |      |         |        |   |      |         |         |   |   |          |        
|INVESTING ACTIVITIES                                             |                                                                                        |      |         |        |   |      |         |         |   |   |          |        
|Property and equipment  purchases                               |                                                                                        |      | (6,125  | )      |   |      | (4,469  | )       |   |   | (10,298  | )      
|Property and equipment  proceeds on
    sale                    |                                                                                        |      | 69      |        |   |      | 6       |         |   |   | 96       |        
|Proceeds from investment held for sale                           |                                                                                        |      |        |        |   |      | 43,521  |         |   |   |         |        
|Purchase of subsidiaries, net of cash received                   |                                                                                        |      | (14,881 | )      |   |      | (50,813 | )       |   |   | (123,221 | )      
|Sale of subsidiaries                                             |                                                                                        |      | 1,098   |        |   |      | 2,623   |         |   |   |         |        
|Other assets                                                     |                                                                                        |      | (307    | )      |   |      | 684     |         |   |   | (646     | )      
|                                                                 |                                                                                        |      |         |        |   |      |         |         |   |   |          |        
|Net cash flows used for investing activities                     |                                                                                        |      | (20,146 | )      |   |      | (8,448  | )       |   |   | (134,069 | )      
|                                                                 |                                                                                        |      |         |        |   |      |         |         |   |   |          |        
|FINANCING ACTIVITIES                                             |                                                                                        |      |         |        |   |      |         |         |   |   |          |        
|Bank debt                                                        |                                                                                        |      |        |        |   |      | (55,000 | )       |   |   | 55,122   |        
|Long-term debt  advances                                        |                                                                                        |      | 65,000  |        |   |      | 51,175  |         |   |   | 21,096   |        
|Subordinated convertible debentures 
    advances               |                                                                                        |      |        |        |   |      |        |         |   |   | 61,624   |        
|Long-term debt and capital leases 
    repayments               |                                                                                        |      | (54,540 | )      |   |      | (50,094 | )       |   |   | (5,154   | )      
|Subordinated convertible debenture 
    repayment               |                                                                                        |      |        |        |   |      | (26,800 | )       |   |   |         |        
|Share capital  issued for cash, net of
    issue costs          |                                                                                        |      | (61     | )      |   |      | 88,147  |         |   |   | 3,621    |        
|Share capital  repurchases                                      |                                                                                        |      |        |        |   |      |        |         |   |   | (281     | )      
|Proceeds from sale of executive purchase plan
    shares         |                                                                                        |      | 222     |        |   |      |        |         |   |   |         |        
|Dividends paid                                                   |                                                                                        |      | (6,068  | )      |   |      | (4,481  | )       |   |   | (3,597   | )      
|                                                                 |                                                                                        |      |         |        |   |      |         |         |   |   |          |        
|Net cash flows from financing activities                         |                                                                                        |      | 4,553   |        |   |      | 2,947   |         |   |   | 132,431  |        
|                                                                 |                                                                                        |      |         |        |   |      |         |         |   |   |          |        
|Effect of exchange rate changes on cash and
    cash equivalents |                                                                                        |      | 3,067   |        |   |      | 100     |         |   |   | (144     | )      
|                                                                 |                                                                                        |      |         |        |   |      |         |         |   |   |          |        
|Change in cash and cash equivalents                              |                                                                                        |      | 41,410  |        |   |      | 13,663  |         |   |   | 7,060    |        
|Cash and cash equivalents 
    Beginning of year                |                                                                                        |      | 40,642  |        |   |      | 26,979  |         |   |   | 19,919   |        
|                                                                 |                                                                                        |      |         |        |   |      |         |         |   |   |          |        
|Cash and cash equivalents  End of
    year                      |                                                                                        | $    | 82,052  |        |   | $    | 40,642  |         |   | $ | 26,979   |        
|                                                                 |                                                                                        |      |         |        |   |      |         |         |   |   |          |        

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





|                               |                               
|------------------------------ | ------------------------------
|44   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



---



##### 



HUB International Limited

Notes to Consolidated Financial
Statements


For the years ended December 31, 2003,
2002 and 2001

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


Private Debt Offering

During the second quarter of 2003, the Company
completed a private placement of $65 million unsecured
senior notes (see note 8). Net proceeds on the sale of the
notes were used to pay down $50 million of existing
indebtedness and for general corporate purposes which may
include future acquisitions.


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.


On May 30, 2002 the Company completed the
sale of Old Lyme to Fairfax Inc, a related party, and recorded a
non-taxable gain on the sale of $2.6 million. This gain
increased 2002 annual basic earnings per share and diluted
earnings per share by $0.11 and $0.09, respectively.

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.






|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    45



---



##### 



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. The principal estimates
used in the preparation of these financial statements are the
determination of the provision for cancelled policies relating
to revenue renegotiation, the allocation of the purchase price
on acquisitions, the valuation of reporting units when testing
the recoverability of goodwill and other intangible assets, the
estimation of the useful lives of definite life intangible
assets, and the measurement of stock based compensation. Actual
results could differ from those estimated.


Foreign currency translation

The operations of the Companys subsidiaries
outside of the U.S. are self-sustaining. The assets and
liabilities of these subsidiaries as at December 31, 2003
and 2002 were translated to U.S. dollars at the year-end
exchange rate. Revenue and expenses for 2003 and 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 by
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 at the acquisition date.


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, 2003, 2002 and 2001,
respectively.


In addition, the Company is also party to
interest rate swap transactions which are subject to credit
risk. Credit risk arises from the possibility that
counterparties may default on their obligations to the Company.
Derivative contracts generally expose the Company to credit loss
if changes in market rates affect a counterpartys position
unfavorably and the counterparty defaults on payment.





|                               |                               
|------------------------------ | ------------------------------
|46   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



---



##### 



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.


Property and equipment

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


Business combinations

Acquisitions of subsidiaries have been accounted
for using the purchase method, whereby the results of acquired
companies are included only from the date of acquisition.
Consideration which is contingent on maintaining or achieving
specified earnings levels in future periods is recognized as an
additional cost of the purchase when the contingency is resolved
and the additional consideration is issued or becomes issuable.


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 on a straight-line basis
over their useful lives. These intangible assets are subject to
an annual impairment test comparing carrying values to net
recoverable amounts.

The Company completed its impairment testing on
the balance of goodwill and intangible assets as of
January 1, 2004, 2003 and 2002. Based on the testing
performed, no impairment losses were incurred.

No goodwill amortization expense was incurred for
the year ended December 31, 2003 and 2002. For the year
ended December 31, 2001 the Company incurred goodwill
amortization expense of $4,125 before tax and approximately
$3,996 after tax ($0.20 per diluted share).

The effect of the adoption of Section 3062
on net earnings and earnings per share for the years ended
December 31, 2003, 2002 and 2001 was as follows:

|                                    |  |      |        |      |  |      |        |  |  |   |        | 
|----------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|                                    |  | 2003 |        | 2002 |  | 2001
|                                    |  |      |        |      |  |     
|Reported net earnings               |  | $    | 36,509 |      |  | $    | 29,401 |  |  | $ | 10,005 | 
|Add back: Goodwill amortization     |  |      |       |      |  |      |       |  |  |   | 3,996  | 
|                                    |  |      |        |      |  |      |        |  |  |   |        | 
|Net earnings adjusted for goodwill  |  | $    | 36,509 |      |  | $    | 29,401 |  |  | $ | 14,001 | 
|                                    |  |      |        |      |  |      |        |  |  |   |        | 
|Basic EPS  Reported                |  | $    | 1.22   |      |  | $    | 1.27   |  |  | $ | 0.53   | 
|Basic EPS  Adjusted for goodwill   |  | $    | 1.22   |      |  | $    | 1.27   |  |  | $ | 0.74   | 
|Diluted EPS  Reported              |  | $    | 1.14   |      |  | $    | 1.06   |  |  | $ | 0.50   | 
|Diluted EPS  Adjusted for goodwill |  | $    | 1.14   |      |  | $    | 1.06   |  |  | $ | 0.70   | 





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    47



---



##### 



Interest rate swap

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


Guarantees

In February 2003, the CICA issued an accounting
guideline on the disclosure of guarantees, which broadens the
definition of guarantees and requires substantially expanded
disclosure. This new guideline was effective for the Company
this year. As this guideline requires disclosure only, there was
no impact on the consolidated statements of earnings and
retained earnings and consolidated balance sheets. See
note 10(b). A guarantee is a contract that contingently
requires the guarantor to make payments to a third party based
on (i) changes in an underlying interest rate, foreign
exchange rate or other variable, including the occurrence or
non-occurrence of an event, that is related to an asset,
liability or equity security held by the guaranteed party,
(ii) an indemnification provided to the third party with
the characteristics listed above, (iii) another
entitys failure to perform under an obligating agreement,
or (iv) another entitys failure to perform related to
its indebtedness.


Stock based compensation

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


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 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.






|                               |                               
|------------------------------ | ------------------------------
|48   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



---



##### 



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. Earnings per
common share have been calculated as follows:

|                                                                |                                                                              |      |         |       |  |      |         |       |  |  |         |       | 
|--------------------------------------------------------------- | ---------------------------------------------------------------------------- | ---- | ------- | ----- |  | ---- | ------- | ----- |  |  | ------- | ----- | 
|                                                                |                                                                              | 2003 |         | 2002  |  | 2001
|                                                                |                                                                              |      |         |       |  |     
|Net earnings (numerator)                                        |                                                                              |      | $36,509 |       |  |      | $29,401 |       |  |  | $10,005 |      
|Effect of dilutive securities:                                  |                                                                              |      |         |       |  |      |         |       |  |  |         |      
|                                                                | Interest on 8.5% subordinated convertible
    debentures (net of income tax) |      |         | 1,886 |  |      |         | 2,520 |  |  |         |      | 
|                                                                | Cash in lieu of dividends on restricted share
    units (net of income tax)  |      |         | 111   |  |      |         |      |  |  |         |      | 
|                                                                |                                                                              |      |         |       |  |      |         |       |  |  |         |      
|Net earnings plus assumed conversions (numerator)               |                                                                              |      | $38,506 |       |  |      | $31,921 |       |  |  | $10,005 |      
|                                                                |                                                                              |      |         |       |  |      |         |       |  |  |         |      
|Weighted average shares outstanding 
    basic (denominator)   |                                                                              |      | 29,967  |       |  |      | 23,181  |       |  |  | 19,012  |      
|Effect of dilutive securities:                                  |                                                                              |      |         |       |  |      |         |       |  |  |         |      
|                                                                | Contingently issuable shares                                                 |      |         | 11    |  |      |         | 307   |  |  |         |      | 
|                                                                | Put options                                                                  |      |         |      |  |      |         | 2,149 |  |  |         | 1,093 | 
|                                                                | Restricted share units                                                       |      |         | 299   |  |      |         |      |  |  |         |      | 
|                                                                | Stock options                                                                |      |         | 147   |  |      |         |      |  |  |         |      | 
|                                                                | Retractable shares                                                           |      |         | 133   |  |      |         | 49    |  |  |         |      | 
|                                                                | 8.5% subordinated convertible debentures                                     |      |         | 3,210 |  |      |         | 4,513 |  |  |         |      | 
|                                                                |                                                                              |      |         |       |  |      |         |       |  |  |         |      
|Weighted average shares outstanding 
    Diluted (denominator) |                                                                              |      | 33,767  |       |  |      | 30,199  |       |  |  | 20,105  |      
|                                                                |                                                                              |      |         |       |  |      |         |       |  |  |         |      
|Earnings per common share:                                      |                                                                              |      |         |       |  |      |         |       |  |  |         |      
|                                                                | Basic                                                                        |      |         | $1.22 |  |      |         | $1.27 |  |  |         | $0.53 | 
|                                                                | Diluted                                                                      |      |         | $1.14 |  |      |         | $1.06 |  |  |         | $0.50 | 

Put options

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

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 2003, the Company acquired 9 insurance
    brokerages for total consideration of approximately $8,674, of
    which $8,136 was cash and the remainder of $538 in 32,000 common
    shares of the Company. These acquisitions were accounted for
    under the purchase method. The allocation of aggregate purchase
    prices to the fair value of the assets acquired was as follows:
    goodwill  $6,389, customer relationships 
    $1,352, non-competition covenants  $337, current
    assets  $4,298, capital assets   $24,
    current liabilities  $3,726.





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    49



---



##### 



| |                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Of the goodwill acquired $1,367 is deductible for
    tax purposes. In addition the Company also recognized $1,800 of
    goodwill associated with contingent consideration relating to
    prior year acquisitions.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As part of the negotiations of the contingent
    consideration for J.P. Flanagan Corporation
    (Flanagan) total additional consideration of 37,500
    of our common shares were earned at December 31, 2003
    valued at approximately $635, based on the closing price of the
    shares at December 31, 2003 on the NYSE. The common shares
    have been recorded as issuable shares and included
    in shareholders equity and goodwill has been increased by
    the same amount at December 31, 2003. Also as part of the
    negotiations the former owner agreed to relinquish his rights to
    put options on the 730,000 shares previously issued as well
    as on shares issued as contingent consideration. In addition we
    expect to issue non-cash stock based compensation in the form of
    84,375 restricted share units in the first quarter of 2004. Half
    of these restricted share units will vest in 4 years and
    the balance will vest in 7 years.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | 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. which was 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 Stewart Group, Inc. (Burnham), were
    entitled to additional consideration based upon certain acquired
    operations of Burnham achieving 2002 profitability targets. The
    additional consideration to be issued was a multiple of the
    final adjusted profitability as of December 31, 2002 for
    those operations. The total additional consideration was $22,166
    of which $8,423 was cash and the remainder of $13,743 in 1,228
    common shares of the Company. The Company issued the common
    shares in March 2003. As of December 31, 2002, the Company
    had accrued the cash portion of the contingent consideration and
    the share portion of the contingent consideration had been
    recorded as issuable shares and included in
    shareholders equity. As part of the negotiations of the
    contingent consideration, the former owners of Burnham agreed to
    relinquish their rights to put options on all of the 1,423
    common shares issued as part of the 2002 acquisition, as well as
    on shares issued as contingent consideration in exchange for
    release from escrow provisions on those same common shares. The
    total additional consideration of $22,794 is shown as an
    addition to goodwill and customer relationships in the table
    below.





|                               |                               
|------------------------------ | ------------------------------
|50   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



---



##### 



The allocation of the purchase price, including
goodwill and other identifiable intangible assets, and the cost
of the acquired brokerages in 2002 are summarized as follows:

|                                                                           |  |              |        |               |  |               |        |         |  |       |        |   |  |   |        |  |  |   |        |  
|-------------------------------------------------------------------------- |  | ------------ | ------ | ------------- |  | ------------- | ------ | ------- |  | ----- | ------ | - |  | - | ------ |  |  | - | ------ | -
|                                                                           |  |              |        |               |  | 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   | )
|Property, equipment 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 |  
|Common 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.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(c) | During 2001, the Company purchased all of the
    issued and outstanding shares of Kaye, Burnham and 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.





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    51



---



##### 



The allocation of the purchase price, including
goodwill and other identifiable intangible assets, and the cost
of the acquired brokerages in 2001 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  |  
|Property, equipment 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  |  
|Common 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   |  
|                                                     |  |      |               |         |  |          |              |        |  |       |              |   |  |   |         |   |  |   |         |  

Contingent consideration

In addition to the consideration shown above, the
previous owners of certain other acquisitions are entitled to
contingent consideration if certain revenue or profitability
targets are met. See note 10 Commitments and
contingencies.




|   |                               
|-- | ------------------------------
|4. | Accounts and other receivables

Accounts and other receivables consist of the
following:


|                                         |  |              |         |      |  |   |         |  
|---------------------------------------- |  | ------------ | ------- | ---- |  | - | ------- | -
|                                         |  |             
|                                         |  | December 31,
|                                         |  |             
|                                         |  | 2003         |         | 2002
|                                         |  |              |         |     
|Client premiums receivable               |  | $            | 138,494 |      |  | $ | 112,008 |  
|Commissions receivable                   |  |              | 22,228  |      |  |   | 21,739  |  
|Less: Allowance for doubtful accounts    |  |              | (1,086  | )    |  |   | (714    | )
|Less: Allowance for policy cancellations |  |              | (1,343  | )    |  |   | (875    | )
|                                         |  |              |         |      |  |   |         |  
|                                         |  |              | 158,293 |      |  |   | 132,158 |  
|Other receivables                        |  |              | 5,435   |      |  |   | 4,415   |  
|                                         |  |              |         |      |  |   |         |  
|                                         |  | $            | 163,728 |      |  | $ | 136,573 |  
|                                         |  |              |         |      |  |   |         |  





|                               |                               
|------------------------------ | ------------------------------
|52   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



---



##### 



Allowance for doubtful accounts:

|                                                              |  |      |       |      |  |      |      |   |  |   |      |  
|------------------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ---- | - |  | - | ---- | -
|                                                              |  | 2003 |       | 2002 |  | 2001
|                                                              |  |      |       |      |  |     
|Balance, January 1                                            |  | $    | 714   |      |  | $    | 815  |   |  | $ | 502  |  
|Charged to net earnings before income taxes                   |  |      | 1,057 |      |  |      | 233  |   |  |   | 305  |  
|Deductions of amounts previously charged to the
    provision |  |      | (810  | )    |  |      | (335 | ) |  |   | (247 | )
|Acquired through acquisitions                                 |  |      | 125   |      |  |      | 1    |   |  |   | 255  |  
|                                                              |  |      |       |      |  |      |      |   |  |   |      |  
|Balance, December 31                                          |  | $    | 1,086 |      |  | $    | 714  |   |  | $ | 815  |  
|                                                              |  |      |       |      |  |      |      |   |  |   |      |  

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

5.  Intangible assets

As of December 31, 2003 and 2002 the gross
carrying amount and accumulated amortization of intangible
assets other than goodwill were as follows:


|                                   |                           |                         |        |                         |  |       |       |          |  |              |        |        |  |   |        |        |  |   |       |       |  |   |        |        | 
|---------------------------------- | ------------------------- | ----------------------- | ------ | ----------------------- |  | ----- | ----- | -------- |  | ------------ | ------ | ------ |  | - | ------ | ------ |  | - | ----- | ----- |  | - | ------ | ------ | 
|                                   |                           |                         |        |                        
|                                   |                           | As of December 31, 2003 |        | As of December 31, 2002
|                                   |                           |                         |        |                        
|                                   |                           | Gross                   |        |                         |  | Gross |       |         
|                                   |                           | Carrying                |        | Accumulated             |  |       |       | Carrying |  | Accumulated  |        |       
|                                   |                           | Amount                  |        | Amortization            |  | Total |       | Amount   |  | Amortization |        | Total 
|                                   |                           |                         |        |                         |  |       |       |          |  |              |        |       
|Definite life intangible assets:   |                           |                         |        |                         |  |       |       |          |  |              |        |        |  |   |        |        |  |   |       |       |  |   |        |       
|                                   | Customer relationships    |                         | $      | 43,422                  |  |       | $     | 5,480    |  |              | $      | 37,942 |  |   | $      | 41,762 |  |   | $     | 2,383 |  |   | $      | 39,379 | 
|                                   | Non-competition covenants |                         |        | 476                     |  |       |       | 269      |  |              |        | 207    |  |   |        | 158    |  |   |       | 100   |  |   |        | 58     | 
|                                   | Trademarks                |                         |        | 2,587                   |  |       |       |         |  |              |        | 2,587  |  |   |        |       |  |   |       |      |  |   |        |       | 
|                                   |                           |                         |        |                         |  |       |       |          |  |              |        |        |  |   |        |        |  |   |       |       |  |   |        |       
|                                   |                           |                         | 46,485 |                         |  |       | 5,749 |          |  |              | 40,736 |        |  |   | 41,920 |        |  |   | 2,483 |       |  |   | 39,437 |       
|                                   |                           |                         |        |                         |  |       |       |          |  |              |        |        |  |   |        |        |  |   |       |       |  |   |        |       
|Indefinite life intangible assets: |                           |                         |        |                         |  |       |       |          |  |              |        |        |  |   |        |        |  |   |       |       |  |   |        |       
|                                   | Non-competition covenants |                         |        | 2,167                   |  |       |       |         |  |              |        | 2,167  |  |   |        | 2,140  |  |   |       |      |  |   |        | 2,140  | 
|                                   | Trademarks                |                         |        |                        |  |       |       |         |  |              |        |       |  |   |        | 2,587  |  |   |       |      |  |   |        | 2,587  | 
|                                   |                           |                         |        |                         |  |       |       |          |  |              |        |        |  |   |        |        |  |   |       |       |  |   |        |       
|                                   |                           |                         | 2,167  |                         |  |       |      |          |  |              | 2,167  |        |  |   | 4,727  |        |  |   |      |       |  |   | 4,727  |       
|                                   |                           |                         |        |                         |  |       |       |          |  |              |        |        |  |   |        |        |  |   |       |       |  |   |        |       
|Total                              |                           | $                       | 48,652 |                         |  | $     | 5,749 |          |  | $            | 42,903 |        |  | $ | 46,647 |        |  | $ | 2,483 |       |  | $ | 44,164 |       
|                                   |                           |                         |        |                         |  |       |       |          |  |              |        |        |  |   |        |        |  |   |       |       |  |   |        |       

Additions during 2003 and 2002 were as follows:

|                                   |                           |      |       |       |  |   |        |        | 
|---------------------------------- | ------------------------- | ---- | ----- | ----- |  | - | ------ | ------ | 
|                                   |                           | 2003 |       | 2002 
|                                   |                           |      |       |      
|Definite life intangible assets:   |                           |      |       |       |  |   |        |       
|                                   | Customer relationships    |      | $     | 1,602 |  |   | $      | 20,074 | 
|                                   | Non-competition covenants |      |       | 206   |  |   |        |       | 
|                                   |                           |      |       |       |  |   |        |       
|                                   |                           |      | 1,808 |       |  |   | 20,074 |       
|Indefinite life intangible assets: |                           |      |       |       |  |   |        |       
|                                   | Non-competition covenants |      |       | 136   |  |   |        | 459    | 
|                                   |                           |      |       |       |  |   |        |       
|Total                              |                           | $    | 1,944 |       |  | $ | 20,533 |       
|                                   |                           |      |       |       |  |   |        |       

The Company is unable to estimate the useful life
of certain non-competition covenants. 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.





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    53



---



##### 



The changes in the carrying amount of goodwill
for the years ended December 31, 2003 and 2002, are as
follows:

|                                  |  |            |        |            |  |       |         |   |  |   |         |  
|--------------------------------- |  | ---------- | ------ | ---------- |  | ----- | ------- | - |  | - | ------- | -
|                                  |  | Operations |        | Operations |  |      
|                                  |  | in Canada  |        | in U.S.    |  | Total
|                                  |  |            |        |            |  |      
|Balance as of December 31, 2001   |  | $          | 74,282 |            |  | $     | 146,566 |   |  | $ | 220,848 |  
|Goodwill acquired during 2002     |  |            | 2,341  |            |  |       | 60,265  |   |  |   | 62,606  |  
|Goodwill disposed during 2002     |  |            | (2,054 | )          |  |       | (505    | ) |  |   | (2,559  | )
|Cumulative translation adjustment |  |            | 817    |            |  |       |        |   |  |   | 817     |  
|                                  |  |            |        |            |  |       |         |   |  |   |         |  
|Balance as of December 31, 2002   |  |            | 75,386 |            |  |       | 206,326 |   |  |   | 281,712 |  
|Goodwill acquired during 2003     |  |            | 535    |            |  |       | 7,654   |   |  |   | 8,189   |  
|Goodwill disposed during 2003     |  |            | (478   | )          |  |       | (197    | ) |  |   | (675    | )
|Cumulative translation adjustment |  |            | 16,636 |            |  |       |        |   |  |   | 16,636  |  
|                                  |  |            |        |            |  |       |         |   |  |   |         |  
|Balance as of December 31, 2003   |  | $          | 92,079 |            |  | $     | 213,783 |   |  | $ | 305,862 |  
|                                  |  |            |        |            |  |       |         |   |  |   |         |  

For the years ended December 31, 2003, 2002
and 2001, amortization has been comprised of the following:

|                          |  |      |       |      |  |      |       |  |  |   |       | 
|------------------------- |  | ---- | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|                          |  | 2003 |       | 2002 |  | 2001
|                          |  |      |       |      |  |     
|Customer relationships    |  | $    | 3,040 |      |  | $    | 1,627 |  |  | $ | 759   | 
|Non-competition covenants |  |      | 168   |      |  |      | 44    |  |  |   | 56    | 
|Goodwill                  |  |      |      |      |  |      |      |  |  |   | 4,125 | 
|                          |  |      |       |      |  |      |       |  |  |   |       | 
|Total                     |  | $    | 3,208 |      |  | $    | 1,671 |  |  | $ | 4,940 | 
|                          |  |      |       |      |  |      |       |  |  |   |       | 

The Company estimates the amortization charges
for 2004 through 2008 for all acquisitions consummated to date
will be:

|                          |  |      |       |      |  |      |       |      |  |      |       |  |  |   |       |  |  |   |       | 
|------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ----- |  |  | - | ----- |  |  | - | ----- | 
|Year ended December 31,   |  | 2004 |       | 2005 |  | 2006 |       | 2007 |  | 2008
|                          |  |      |       |      |  |      |       |      |  |     
|Customer relationships    |  | $    | 3,089 |      |  | $    | 3,089 |      |  | $    | 3,089 |  |  | $ | 3,072 |  |  | $ | 3,068 | 
|Non-competition covenants |  |      | 63    |      |  |      | 44    |      |  |      | 82    |  |  |   | 80    |  |  |   | 21    | 
|Trademarks                |  |      | 2,587 |      |  |      |      |      |  |      |      |  |  |   |      |  |  |   |      | 
|                          |  |      |       |      |  |      |       |      |  |      |       |  |  |   |       |  |  |   |       | 
|Total                     |  | $    | 5,739 |      |  | $    | 3,133 |      |  | $    | 3,171 |  |  | $ | 3,152 |  |  | $ | 3,089 | 
|                          |  |      |       |      |  |      |       |      |  |      |       |  |  |   |       |  |  |   |       | 

6.  Property and equipment

|                       |  |      |        |              |  |          |        |      |  |              |        |          |  |   |        |  |  |   |        |  |  |   |        | 
|---------------------- |  | ---- | ------ | ------------ |  | -------- | ------ | ---- |  | ------------ | ------ | -------- |  | - | ------ |  |  | - | ------ |  |  | - | ------ | 
|                       |  |      |        |             
|                       |  | 2003 |        | 2002        
|                       |  |      |        |             
|                       |  |      |        | Accumulated  |  | Net Book |        |      |  | Accumulated  |        | Net Book
|                       |  | Cost |        | Depreciation |  | Value    |        | Cost |  | Depreciation |        | Value   
|                       |  |      |        |              |  |          |        |      |  |              |        |         
|Leasehold improvements |  | $    | 10,522 |              |  | $        | 3,419  |      |  | $            | 7,103  |          |  | $ | 9,749  |  |  | $ | 2,015  |  |  | $ | 7,734  | 
|Office equipment       |  |      | 15,416 |              |  |          | 8,357  |      |  |              | 7,059  |          |  |   | 12,190 |  |  |   | 5,939  |  |  |   | 6,251  | 
|Computer equipment     |  |      | 24,998 |              |  |          | 14,979 |      |  |              | 10,019 |          |  |   | 17,530 |  |  |   | 10,217 |  |  |   | 7,313  | 
|                       |  |      |        |              |  |          |        |      |  |              |        |          |  |   |        |  |  |   |        |  |  |   |        | 
|                       |  | $    | 50,936 |              |  | $        | 26,755 |      |  | $            | 24,181 |          |  | $ | 39,469 |  |  | $ | 18,171 |  |  | $ | 21,298 | 
|                       |  |      |        |              |  |          |        |      |  |              |        |          |  |   |        |  |  |   |        |  |  |   |        | 

Included in computer equipment is computer
software with a net book value of $5,137 and $2,641 at
December 31, 2003 and 2002, respectively. Depreciation
expense of $1,538, $1,087 and $621 was charged against these
assets for the years ended December 31, 2003, 2002 and
2001, respectively.

During 2003 and 2002, property and equipment were
acquired at an aggregate cost of $8,272 and $4,494,
respectively, of which $2,147 and $25, respectively, were
acquired by means of capital leases and other financing.





|                               |                               
|------------------------------ | ------------------------------
|54   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



---



##### 



The cost above reflects certain property and
equipment held under capital leases of which the remaining
liability at December 31, 2003 and 2002 was $650 and $993,
respectively.

7.  Accounts payable and accrued
liabilities

Accounts payable and accrued liabilities consist
of the following:

|                                               |  |              |         |      |  |   |         | 
|---------------------------------------------- |  | ------------ | ------- | ---- |  | - | ------- | 
|                                               |  |             
|                                               |  | December 31,
|                                               |  |             
|                                               |  | 2003         |         | 2002
|                                               |  |              |         |     
|Insurance premiums payable                     |  | $            | 176,211 |      |  | $ | 150,929 | 
|Other accounts payable and accrued liabilities |  |              | 49,957  |      |  |   | 36,105  | 
|                                               |  |              |         |      |  |   |         | 
|                                               |  | $            | 226,168 |      |  | $ | 187,034 | 
|                                               |  |              |         |      |  |   |         | 

8.  Debt

|                                                          |  |              |        |      |  |   |        |  
|--------------------------------------------------------- |  | ------------ | ------ | ---- |  | - | ------ | -
|                                                          |  |             
|                                                          |  | December 31,
|                                                          |  |             
|                                                          |  | 2003         |        | 2002
|                                                          |  |              |        |     
|Series A Senior Notes, with interest at
    5.71%(1)      |  | $            | 10,000 |      |  | $ |       |  
|Series B Senior Notes, with interest at
    6.16%(1)      |  |              | 55,000 |      |  |   |       |  
|Revolving U.S. Dollar LIBOR loan(2)                       |  |              |       |      |  |   | 50,000 |  
|Put options(3)                                            |  |              |       |      |  |   | 5,940  |  
|Term loan, interest only at 10%, due February
    2007(4) |  |              | 7,500  |      |  |   | 7,500  |  
|Various other unsecured notes payable and debt(5)         |  |              | 5,649  |      |  |   | 7,605  |  
|Capital leases(5)                                         |  |              | 650    |      |  |   | 993    |  
|                                                          |  |              |        |      |  |   |        |  
|Long-term debt and capital leases                         |  |              | 78,799 |      |  |   | 72,038 |  
|Less current portion                                      |  |              | (3,362 | )    |  |   | (3,029 | )
|                                                          |  |              |        |      |  |   |        |  
|                                                          |  | $            | 75,437 |      |  | $ | 69,009 |  
|                                                          |  |              |        |      |  |   |        |  

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

|                                              |  |   |        | 
|--------------------------------------------- |  | - | ------ | 
|For the twelve months ending
    December 31, |  |   |        | 
|2004                                          |  | $ | 3,362  | 
|2005                                          |  |   | 1,745  | 
|2006                                          |  |   | 919    | 
|2007                                          |  |   | 7,641  | 
|2008                                          |  |   | 3,333  | 
|2009 and thereafter                           |  |   | 61,799 | 
|                                              |  |   |        | 
|                                              |  | $ | 78,799 | 
|                                              |  |   |        | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Senior Notes  In June 2003, the
    Company, completed a private placement of $65 million in
    principal amount of unsecured senior notes. The senior notes
    were issued in two series. Series A represents
    $10 million of 5.71% senior notes with interest due
    semi-annually, and principal of $3,333 due annually,
    June 15, 2008 through June 15, 2010. Series B
    represents $55 million of 6.16% senior notes with
    interest due semi-annually, and principal of $11,000 due
    annually June 15, 2009 through June 15, 2013. The
    senior notes were sold on a private basis in the United States
    to institutional accredited investors. Net proceeds of the sale
    of the senior notes were used to pay down $50 million of
    the Companys revolving U.S. Dollar LIBOR Loan with
    the balance held for general corporate purposes, which may
    include future acquisitions. The Company incurred approximately
    $0.7 million in fees and expenses related to the offering
    of these notes, which were capitalized and are being amortized
    to expense over the term of the notes. At December 31,
    2003, $65 million was outstanding under these senior notes.
    The Company is in compliance with all financial covenants
    governing these notes.





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    55



---



##### 





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On July 16, 2003, the Company entered into
    an interest rate swap agreement. The effect of the swap is to
    convert the fixed rate interest payments of 5.71% and 6.16% on
    $10 million and $55 million, respectively, of the
    senior notes in order to ensure that the Company pays a market
    related interest rate on a portion of its borrowings. As at
    December 31, 2003, the Company estimated the fair value of
    the swap to be $2.6 million, which is not recognized in
    these financial statements. Accordingly, $2.6 million is
    the estimated amount that the Company would need to pay to
    terminate the swap as of December 31, 2003.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Revolving U.S. dollar LIBOR loan 
    This undrawn facility was renegotiated in December 2003, subject
    to completion of the definitive amended agreement. Under the new
    terms, the unsecured facility totals $50 million, bears
    interest at a floating rate of prime plus 1% or 112.5 basis
    points above LIBOR, which were 1.12% and 1.42% at
    December 31, 2003 and 2002, respectively. The facility is
    available on a revolving basis for one year and expires on
    December 13, 2004; however if the revolving period is not
    extended, the Company may convert the outstanding balance under
    the facility to a three year non-revolving term loan repayable
    at the end of three years with an interest rate of
    137.5 basis points above the Canadian dollar interest swap
    rate. An annual commitment fee of 20 basis points is
    assessed on the unused balance. Borrowings under this facility
    totaled $NIL and $50 million at December 31, 2003 and
    2002, respectively. The Company was in compliance with all
    financial covenants governing this facility as of
    December 31, 2003 and 2002.
|   
|(3) | Put Options  as discussed in
    note 3(a), the former owner of Flanagan has relinquished
    his right to put options on 730,000 commons shares of the
    Company. Accordingly, an amount of $5,940, previously classified
    as long-term debt, has been reclassed as share capital (see
    note 11).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(4) | 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) which reduces 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 2003 and 2002 which reduced
    interest payments to zero from $750 and $229, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(5) | Certain property and equipment have been pledged
    as collateral in amounts not less than the outstanding balance
    of the loan at December 31, 2003 and December 31,
    2002, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                



---

Demand U.S. dollar base rate loan

The Company has an undrawn $9.3 million
facility which expires on July 18, 2004 and bears interest
at the banks U.S. base rate plus 50 basis
points. Borrowings on the facility are repayable on demand.

Subordinated convertible debentures

In connection with the acquisition of Kaye on
June 28, 2001, the Company issued $35 million
aggregate principal amount, 8.5% convertible subordinated
debentures (the Fairfax notes) due June 28, 2007 to certain
subsidiaries of Fairfax Financial Holdings Limited (Fairfax).
The Fairfax notes are convertible by the holders at any time
into the Companys common shares at 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 32% of the
Companys outstanding common shares as of December 31,
2003.

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 $1,781, $1,425, and $648 for 2003,
2002 and 2001 respectively. Subsequent to year-end a defined
contribution plan was put in place for Canadian employees.





|                               |                               
|------------------------------ | ------------------------------
|56   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



---



##### 



10. Commitments and
contingencies



|    |                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | The Company is committed under lease agreements
    for office premises and computer equipment. At December 31,
    2003, aggregate minimum rental commitments (net of expected
    sub-lease receipts) under operating leases are as follows:

|                    |  |   |        | 
|------------------- |  | - | ------ | 
|2004                |  | $ | 10,963 | 
|2005                |  |   | 10,010 | 
|2006                |  |   | 8,927  | 
|2007                |  |   | 7,734  | 
|2008                |  |   | 6,519  | 
|2009 and thereafter |  |   | 17,340 | 
|                    |  |   |        | 
|                    |  | $ | 61,493 | 
|                    |  |   |        | 



| |                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Rent expense for the year ended December 31,
    2003, 2002, and 2001 amounted to $11,503, $9,684 and $7,665
    respectively, net of sublease rental income of $1,282, $737 and
    $620 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 $4,513 and
    $5,077 as of December 31, 2003 and 2002 respectively, to
    assist in purchasing common shares of the Company. The Company
    no longer makes loans to its executive officers and directors.
    As collateral, the employees have pledged 478,000 and 602,000
    common shares as of December 31, 2003 and 2002,
    respectively, which have a market value of $8,105 and $7,677 as
    of December 31, 2003 and 2002, respectively. Interest on
    the loans in the amount of $279, $264 and $377 for the years
    ended December 31, 2003, 2002 and 2001, respectively, was
    paid by the Company and is included in compensation expense.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(c) | On December 24, 2003 executive management
    profitability bonuses were restructured. Under the new
    agreement, the stock option component of the annual bonus was
    eliminated in exchange for restricted share units to be issued
    in the first quarter of 2004. Management has estimated that
    approximately $16.9 million of restricted share units will
    be issued. These restricted share units will all vest on
    January 1, 2011 subject to continued employment. Hubs
    policy is to expense the fair value of non-cash stock based
    compensation evenly over the period they are earned. Non-cash
    stock based compensation expense related to the 2003 bonuses was
    $1,405 and is included in non-cash stock based compensation.



|    |                                                                                                                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(d) | In connection with the acquisition of Hooper
    Hayes and Associates, Inc., in 2002 the Company issued
    196,000 shares (the Retractable Shares) that
    are being held in escrow subject to release over a period of
    three years upon the satisfaction of certain performance
    targets. As of December 31, 2003, 63,000 shares have
    been released from escrow.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As part of the negotiations of the contingent
    consideration for J.P. Flanagan Corporation
    (Flanagan) total additional consideration of 37,500
    of our common shares were earned at December 31, 2003
    valued at approximately $635, based on the closing price of the
    shares at December 31, 2003 on the NYSE. The common shares
    have been recorded as issuable shares and included
    in shareholders equity and goodwill has been increased by
    the same amount at December 31, 2003. Also as part of the
    negotiations the former owner agreed to relinquish his rights to
    put options on the 730,000 shares previously issued as well
    as on shares issued as contingent consideration. In addition we
    expect to issue non-cash stock based compensation in the form of
    84,375 restricted share units in the first quarter of 2004. Half
    of these restricted share units will vest in 4 years and
    the balance will vest in 7 years.
|
| | In connection with other various acquisitions
    completed through December 31, 2003, the Company may be
    obligated to pay contingent consideration up to a maximum sum of
    approximately $8.2 million cash and $0.2 million in
    common shares based upon the acquired brokerages achieving
    certain targets. The contingent payments are payable on various
    dates through September, 2006 according to the terms and
    conditions of each purchase agreement. Any additional
    consideration will be recorded as an adjustment to goodwill once
    the contingency is resolved. In connection with contingent
    consideration earned as at December 31, 2003, the                                                                                                                                                                                                                                                                                                      





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    57



---



##### 



| |                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------
| | financial statements reflect a liability to pay
    cash of $71 and to issue common shares valued at approximately
    $635 as of December 31, 2003.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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, 2003 and 2002, 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, 2003 and 2002, there were an unlimited number
of common shares authorized, of which 30,143 and 29,025 were
issued and outstanding as at December 31, 2003 and
December 31, 2002 respectively.


|                                                                  |  |               |        |        |  |   |         |  
|----------------------------------------------------------------- |  | ------------- | ------ | ------ |  | - | ------- | -
|                                                                  |  |              
|                                                                  |  | Common shares
|                                                                  |  | Outstanding  
|                                                                  |  |              
|                                                                  |  | (000s)       |        | Amount
|                                                                  |  |               |        |       
|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 |  
|Purchase of subsidiaries                                          |  |               | 32     |        |  |   | 538     |  
|Repurchases of executive share purchase plan
    shares           |  |               | (7     | )      |  |   | (66     | )
|Share issue costs, net of future tax asset                        |  |               |       |        |  |   | (61     | )
|Shares issued for contingent consideration                        |  |               | 1,246  |        |  |   | 14,041  |  
|Cancellation of shares                                            |  |               | (8     | )      |  |   | (91     | )
|Restricted share units released                                   |  |               | 7      |        |  |   | 112     |  
|Stock options exercised                                           |  |               | 1      |        |  |   | 14      |  
|Reclassification of executive share purchase plan
    loans       |  |               | (153   | )      |  |   | (1,918  | )
|Release of put option liability                                   |  |               |       |        |  |   | 7,079   |  
|                                                                  |  |               |        |        |  |   |         |  
|Balance, December 31, 2003                                        |  |               | 30,143 |        |  | $ | 254,845 |  
|                                                                  |  |               |        |        |  |   |         |  





|                               |                               
|------------------------------ | ------------------------------
|58   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



---



##### 



Issuable shares

|                                      |  |               |        |        |  |   |         |  
|------------------------------------- |  | ------------- | ------ | ------ |  | - | ------- | -
|                                      |  |              
|                                      |  | Common Shares
|                                      |  |              
|                                      |  | (000s)       |        | Amount
|                                      |  |               |        |       
|Balance, December 31, 2001            |  |               |       |        |  | $ |        |  
|Issuable for contingent consideration |  |               | 1,228  |        |  |   | 13,743  |  
|                                      |  |               |        |        |  |   |         |  
|Balance, December 31, 2002            |  |               | 1,228  |        |  |   | 13,743  |  
|Issued                                |  |               | (1,228 | )      |  |   | (13,743 | )
|Issuable for contingent consideration |  |               | 43     |        |  |   | 721     |  
|                                      |  |               |        |        |  |   |         |  
|Balance, December 31, 2003            |  |               | 43     |        |  | $ | 721     |  
|                                      |  |               |        |        |  |   |         |  

Contributed surplus

|                                  |  |      |       |      |  |      |       |  |  |   |   | 
|--------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- |  |  | - | - | 
|                                  |  | 2003 |       | 2002 |  | 2001
|                                  |  |      |       |      |  |     
|Balance at December 31,           |  | $    | 1,234 |      |  | $    |      |  |  | $ |  | 
|Non-cash stock based compensation |  |      | 3,284 |      |  |      | 1,082 |  |  |   |  | 
|Other                             |  |      | 288   |      |  |      | 152   |  |  |   |  | 
|                                  |  |      |       |      |  |      |       |  |  |   |   | 
|Balance at December 31            |  | $    | 4,806 |      |  | $    | 1,234 |  |  | $ |  | 
|                                  |  |      |       |      |  |      |       |  |  |   |   | 

Cumulative translation account

|                                                                        |  |      |        |      |  |      |       |   |  |   |        |  
|----------------------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ----- | - |  | - | ------ | -
|                                                                        |  | 2003 |        | 2002 |  | 2001
|                                                                        |  |      |        |      |  |     
|Balance at December 31,                                                 |  | $    | 2,185  |      |  | $    | 2,770 |   |  | $ | 195    |  
|Translation of self-sustaining foreign operations                       |  |      | 19,553 |      |  |      | (269  | ) |  |   | 9,479  |  
|Translation of debt financing of self-sustaining
    foreign operations |  |      | (1,676 | )    |  |      | (316  | ) |  |   | (6,904 | )
|                                                                        |  |      |        |      |  |      |       |   |  |   |        |  
|Balance at December 31                                                  |  | $    | 20,062 |      |  | $    | 2,185 |   |  | $ | 2,770  |  
|                                                                        |  |      |        |      |  |      |       |   |  |   |        |  

12. Equity Incentive Plan

On February 28, 2003, the Company issued
options exercisable for 267,000 common shares at an exercise
price of $13.79 per share, the U.S. dollar equivalent
of the closing sales 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. The number of common shares that may
be issued under the Equity Incentive Plan is limited to
3,631,820 common shares.

A summary of the stock option activity and
related information for the years ended December 31, 2003
and 2002 consists of the following (no stock options were issued
prior to 2002):

|                           |  |         |       |                  |  |   |       | 
|-------------------------- |  | ------- | ----- | ---------------- |  | - | ----- | 
|                           |  | Number  |       | Weighted-Average
|                           |  | (000s) |       | Exercise Price  
|                           |  |         |       |                 
|Balance, December 31, 2001 |  |         |      |                  |  | $ |      | 
|Granted                    |  |         | 1,270 |                  |  | $ | 15.67 | 
|Exercised                  |  |         |      |                  |  | $ |      | 
|Forfeited                  |  |         |      |                  |  | $ |      | 
|                           |  |         |       |                  |  |   |       | 
|Balance, December 31, 2002 |  |         | 1,270 |                  |  | $ | 15.67 | 
|Granted                    |  |         | 268   |                  |  | $ | 13.79 | 
|Exercised                  |  |         | (1    | )                |  | $ | 15.67 | 
|Forfeited                  |  |         | (39   | )                |  | $ | 15.67 | 
|                           |  |         |       |                  |  |   |       | 
|Balance, December 31, 2003 |  |         | 1,498 |                  |  | $ | 15.64 | 
|                           |  |         |       |                  |  |   |       | 





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    59



---



##### 



The following table summarizes information about
the stock options outstanding at December 31, 2003 and 2002:


|               |  |             |       |                  |  |             |            |             |  |                  |     |             |  |  |       |  |  |  |            |  |  |  |   | 
|-------------- |  | ----------- | ----- | ---------------- |  | ----------- | ---------- | ----------- |  | ---------------- | --- | ----------- |  |  | ----- |  |  |  | ---------- |  |  |  | - | 
|               |  |             |       |                 
|               |  | 2003        |       | 2002            
|               |  |             |       |                 
|               |  | Number      |       | Weighted-average |  | Number      |            | Number      |  | Weighted-average |     | Number     
|               |  | Outstanding |       | Remaining        |  | Exercisable |            | Outstanding |  | Remaining        |     | Exercisable
|Exercise price |  | (000s)     |       | Contractual life |  | (000s)     |            | (000s)     |  | Contractual life |     | (000s)    
|               |  |             |       |                  |  |             |            |             |  |                  |     |            
|$15.67         |  |             | 1,230 |                  |  |             | 5.43 years |             |  |                  | 417 |             |  |  | 1,270 |  |  |  | 6.45 years |  |  |  |  | 
|$13.79         |  |             | 268   |                  |  |             | 6.08 years |             |  |                  | 6   |             |  |  |      |  |  |  |            |  |  |  |  | 
|               |  |             |       |                  |  |             |            |             |  |                  |     |             |  |  |       |  |  |  |            |  |  |  |   | 
|               |  |             | 1,498 |                  |  |             | 5.55 years |             |  |                  | 423 |             |  |  | 1,270 |  |  |  | 6.45 years |  |  |  |  | 
|               |  |             |       |                  |  |             |            |             |  |                  |     |             |  |  |       |  |  |  |            |  |  |  |   | 

The fair value of the stock options granted in
2003 was approximately $1.2 million (weighted average
exercise price was $13.79 per share). The aggregate fair
value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following
assumptions for the options issued in 2003:

|                        |  |      |         |      |  |  |         | 
|----------------------- |  | ---- | ------- | ---- |  |  | ------- | 
|                        |  | 2003 |         | 2002
|                        |  |      |         |     
|Dividend yield          |  |      | 2.00%   |      |  |  | 1.15%   | 
|Expected volatility     |  |      | 40.1%   |      |  |  | 30.0%   | 
|Risk free interest rate |  |      | 2.90%   |      |  |  | 4.14%   | 
|Expected life           |  |      | 5 years |      |  |  | 5 years | 

Non-cash stock based compensation related to
stock options of $2,309 and $1,089 for the year ended
December 31, 2003 and 2002, respectively, was expensed with
offsetting credits to contributed surplus.

Shares derived from the options are held in
escrow and subject to transfer restrictions for the period of
five years from the date the options are granted, subject to
early release in certain circumstances.

On June 30, 2003, the Company awarded
605,000 restricted share units to employees of the Company. The
restricted share units are exercisable for common shares without
payment of cash consideration and vest over periods ranging from
68 months to 95 months. In addition, in December 2003,
the Company agreed to award approximately $16.9 million of
restricted share units in connection with the restructure of
executive management profitability bonuses  see
note 10(c).

Non-cash stock based compensation for the year
ended December 31, 2003 and 2002 is comprised of the
following:

|                                   |                                                                     |      |       |       |  |   |       |       | 
|---------------------------------- | ------------------------------------------------------------------- | ---- | ----- | ----- |  | - | ----- | ----- | 
|                                   |                                                                     | 2003 |       | 2002 
|                                   |                                                                     |      |       |      
|Non-cash stock based compensation: |                                                                     |      |       |       |  |   |       |      
|                                   | Stock options granted June 2002                                     |      | $     | 1,899 |  |   | $     | 1,089 | 
|                                   | Stock options granted February 2003                                 |      |       | 410   |  |   |       |      | 
|                                   | Restricted share units related to 2003 bonuses
    (see note 10(c)) |      |       | 1,405 |  |   |       |      | 
|                                   | Restricted share units                                              |      |       | 1,087 |  |   |       |      | 
|                                   |                                                                     |      |       |       |  |   |       |      
|                                   |                                                                     | $    | 4,801 |       |  | $ | 1,089 |      
|                                   |                                                                     |      |       |       |  |   |       |      

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, 2003 and 2002,
approximate fair value because of the short -term nature of
these instruments. The carrying value of the Companys
variable rate debt at December 31, 2003 and 2002, of $385
and $50,587 respectively, approximates fair market value.

In connection with the acquisition of Kaye in
2001, the Company issued 8.5% subordinated convertible
debentures due June 28, 2007 with a carrying amount and
aggregate principal of $35 million. These debentures remain





|                               |                               
|------------------------------ | ------------------------------
|60   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



---



##### 



outstanding at December 31, 2003. 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 long-term debt approximate
fair values.

14. Income taxes

Income taxes for 2003, 2002 and 2001, amounted to
$18.9 million, $14.3 million and $5.3 million,
respectively, resulting in an effective tax rate of 34%, 33% and
34% in 2003, 2002, and 2001, respectively.

The provision for income tax expense differs from
the result that would have been obtained by applying the
combined Canadian statutory federal and provincial income tax
rate of 36.62%, 38.62% and 41.7% in 2003, 2002 and 2001,
respectively, as follows:

|                                        |  |      |        |      |  |      |        |   |  |   |        |  
|--------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                        |  | 2003 |        | 2002 |  | 2001
|                                        |  |      |        |      |  |     
|Provision for tax at statutory rates    |  | $    | 20,270 |      |  | $    | 16,852 |   |  | $ | 6,366  |  
|Income earned outside of Canada         |  |      | (1,688 | )    |  |      | (2,036 | ) |  |   | (3,170 | )
|Non-taxable life insurance proceeds     |  |      | (366   | )    |  |      |       |   |  |   |       |  
|Non-taxable gain on sale of Old Lyme    |  |      |       |      |  |      | (1,009 | ) |  |   |       |  
|Non-deductible amortization of goodwill |  |      |       |      |  |      |       |   |  |   | 1,579  |  
|Other                                   |  |      | 626    |      |  |      | 449    |   |  |   | 487    |  
|                                        |  |      |        |      |  |      |        |   |  |   |        |  
|Provision for tax                       |  | $    | 18,842 |      |  | $    | 14,256 |   |  | $ | 5,262  |  
|                                        |  |      |        |      |  |      |        |   |  |   |        |  

The components of the future tax assets and
liabilities at December 31, 2003 and 2002, were as follows:

|                                                        |                                                         |      |        |       |  |   |        |       | 
|------------------------------------------------------- | ------------------------------------------------------- | ---- | ------ | ----- |  | - | ------ | ----- | 
|                                                        |                                                         | 2003 |        | 2002 
|                                                        |                                                         |      |        |      
|Future income tax assets                                |                                                         |      |        |       |  |   |        |      
|                                                        | Loss carryforwards                                      |      | $      | 2,895 |  |   | $      | 2,235 | 
|                                                        | IPO costs                                               |      |        | 2,003 |  |   |        | 2,182 | 
|                                                        | Non-deductible book reserves                            |      |        | 2,211 |  |   |        | 1,767 | 
|                                                        | Non-cash stock based compensation                       |      |        | 1,633 |  |   |        | 285   | 
|                                                        | Other                                                   |      |        | 581   |  |   |        | 570   | 
|                                                        |                                                         |      |        |       |  |   |        |      
|Total future income tax assets                          |                                                         |      | 9,323  |       |  |   | 7,039  |      
|Less: current portion future income tax assets          |                                                         |      | (2,865 | )     |  |   | (3,324 | )    
|                                                        |                                                         |      |        |       |  |   |        |      
|Future income tax assets                                |                                                         | $    | 6,458  |       |  | $ | 3,715  |      
|                                                        |                                                         |      |        |       |  |   |        |      
|Future income tax liabilities                           |                                                         |      |        |       |  |   |        |      
|                                                        | Goodwill and other intangible asset amortization        |      | $      | 9,504 |  |   | $      | 6,261 | 
|                                                        | Unrealized foreign currency gains on long-term
    debt |      |        | 1,744 |  |   |        |      | 
|                                                        | Other accrual adjustments                               |      |        | 1,373 |  |   |        | 1,012 | 
|                                                        | Property and equipment depreciation                     |      |        | 1,335 |  |   |        | 391   | 
|                                                        | Other                                                   |      |        | 86    |  |   |        | 1,245 | 
|                                                        |                                                         |      |        |       |  |   |        |      
|Total future income tax liabilities                     |                                                         |      | 14,042 |       |  |   | 8,909  |      
|Less: current portion future income tax
    liabilities |                                                         |      | (114   | )     |  |   | (1,164 | )    
|                                                        |                                                         |      |        |       |  |   |        |      
|Future income tax liabilities                           |                                                         | $    | 13,928 |       |  | $ | 7,745  |      
|                                                        |                                                         |      |        |       |  |   |        |      

The Company has net operating loss carryforwards
of $13,970 at December 31, 2003 that expire 2008 through
2010 resulting in a future tax asset of $2,724. In addition, the
Company has state net operating loss carryforwards in the
U.S. of approximately $3,610 which expire 2019 through 2023
resulting in a future tax asset of $171. Such net operating
losses are currently available to offset certain future state
and local taxable income.





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    61



---



##### 



15. Interest and income taxes
paid

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

|                  |  |      |        |      |  |      |        |  |  |   |       | 
|----------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ----- | 
|                  |  | 2003 |        | 2002 |  | 2001
|                  |  |      |        |      |  |     
|Interest paid     |  | $    | 5,731  |      |  | $    | 7,714  |  |  | $ | 6,818 | 
|Income taxes paid |  | $    | 21,007 |      |  | $    | 13,124 |  |  | $ | 3,444 | 

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.





|                               |                               
|------------------------------ | ------------------------------
|62   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



---



##### 



Geographic revenue is determined based upon the
functional currency of the various subsidiaries. Financial
information by operating and geographic segment for 2003, 2002
and 2001 is as follows:

|                                            |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|------------------------------------------- |  | ------ | ------- | ---- |  | ------------ | ------- | ------ |  | ---- | ------- | ------------ |  | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                            |  |        |         |     
|                                            |  | 2003   |         | 2002
|                                            |  |        |         |     
|                                            |  | Canada |         | U.S. |  | Consolidated |         | Canada |  | U.S. |         | Consolidated
|                                            |  |        |         |      |  |              |         |        |  |      |         |             
|Revenue                                     |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|Brokerage                                   |  | $      | 109,238 |      |  | $            | 177,487 |        |  | $    | 286,725 |              |  | $ | 85,761  |   |  | $ | 134,249 |   |  | $ | 220,010 |  
|Corporate                                   |  |        | 20,331  |      |  |              | 1,803   |        |  |      | 22,134  |              |  |   | 19,758  |   |  |   | 54,183  |   |  |   | 73,941  |  
|Elimination of intra-segment revenue        |  |        | (20,429 | )    |  |              | (2,071  | )      |  |      | (22,500 | )            |  |   | (19,708 | ) |  |   | (54,283 | ) |  |   | (73,991 | )
|                                            |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|                                            |  | $      | 109,140 |      |  | $            | 177,219 |        |  | $    | 286,359 |              |  | $ | 85,811  |   |  | $ | 134,149 |   |  | $ | 219,960 |  
|                                            |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|Net earnings (loss) before income
    taxes |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|Brokerage                                   |  | $      | 17,600  |      |  | $            | 43,105  |        |  | $    | 60,705  |              |  | $ | 10,688  |   |  | $ | 38,229  |   |  | $ | 48,917  |  
|Corporate                                   |  |        | 6,771   |      |  |              | (12,125 | )      |  |      | (5,354  | )            |  |   | 8,879   |   |  |   | (14,139 | ) |  |   | (5,260  | )
|                                            |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|                                            |  | $      | 24,371  |      |  | $            | 30,980  |        |  | $    | 55,351  |              |  | $ | 19,567  |   |  | $ | 24,090  |   |  | $ | 43,657  |  
|                                            |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|Income tax expense (benefit) 
    current  |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|Brokerage                                   |  | $      | 7,020   |      |  | $            | 14,302  |        |  | $    | 21,322  |              |  | $ | 4,472   |   |  | $ | 11,871  |   |  | $ | 16,343  |  
|Corporate                                   |  |        | 209     |      |  |              | (4,609  | )      |  |      | (4,400  | )            |  |   | 778     |   |  |   | (4,270  | ) |  |   | (3,492  | )
|                                            |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|                                            |  | $      | 7,229   |      |  | $            | 9,693   |        |  | $    | 16,922  |              |  | $ | 5,250   |   |  | $ | 7,601   |   |  | $ | 12,851  |  
|                                            |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|Income tax expense (benefit) 
    future   |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|Brokerage                                   |  | $      | (355    | )    |  | $            | 2,876   |        |  | $    | 2,521   |              |  | $ | (408    | ) |  | $ | 2,280   |   |  | $ | 1,872   |  
|Corporate                                   |  |        | (883    | )    |  |              | 282     |        |  |      | (601    | )            |  |   | (18     | ) |  |   | (449    | ) |  |   | (467    | )
|                                            |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|                                            |  | $      | (1,238  | )    |  | $            | 3,158   |        |  | $    | 1,920   |              |  | $ | (426    | ) |  | $ | 1,831   |   |  | $ | 1,405   |  
|                                            |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|Net earnings (loss)                         |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|Brokerage                                   |  | $      | 10,935  |      |  | $            | 25,927  |        |  | $    | 36,862  |              |  | $ | 6,624   |   |  | $ | 24,078  |   |  | $ | 30,702  |  
|Corporate                                   |  |        | 7,445   |      |  |              | (7,798  | )      |  |      | (353    | )            |  |   | 8,119   |   |  |   | (9,420  | ) |  |   | (1,301  | )
|                                            |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|                                            |  | $      | 18,380  |      |  | $            | 18,129  |        |  | $    | 36,509  |              |  | $ | 14,743  |   |  | $ | 14,658  |   |  | $ | 29,401  |  
|                                            |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|Identifiable assets                         |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|Brokerage                                   |  | $      | 176,653 |      |  | $            | 442,517 |        |  | $    | 619,170 |              |  | $ | 132,142 |   |  | $ | 412,379 |   |  | $ | 544,521 |  
|Corporate                                   |  |        | 65,316  |      |  |              | 16,117  |        |  |      | 81,433  |              |  |   | 28,920  |   |  |   | 23,435  |   |  |   | 52,355  |  
|                                            |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|                                            |  | $      | 241,969 |      |  | $            | 458,634 |        |  | $    | 700,603 |              |  | $ | 161,062 |   |  | $ | 435,814 |   |  | $ | 596,876 |  
|                                            |  |        |         |      |  |              |         |        |  |      |         |              |  |   |         |   |  |   |         |   |  |   |         |  
|Amortization of
    intangible assets       |  | $      | 75      |      |  | $            | 3,133   |        |  | $    | 3,208   |              |  | $ | 36      |   |  | $ | 1,635   |   |  | $ | 1,671   |  
|Additions to property
    and equipment     |  | $      | 2,942   |      |  | $            | 5,185   |        |  | $    | 8,127   |              |  | $ | 2,370   |   |  | $ | 2,124   |   |  | $ | 4,494   |  
|Depreciation                                |  | $      | 2,350   |      |  | $            | 3,894   |        |  | $    | 6,244   |              |  | $ | 1,823   |   |  | $ | 3,669   |   |  | $ | 5,492   |  
|Interest income                             |  | $      | 914     |      |  | $            | 735     |        |  | $    | 1,649   |              |  | $ | 683     |   |  | $ | 1,070   |   |  | $ | 1,753   |  
|Interest expense                            |  | $      | 4,752   |      |  | $            | 439     |        |  | $    | 5,191   |              |  | $ | 6,416   |   |  | $ | 901     |   |  | $ | 7,317   |  





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    63



---



##### 



|                                                   |  |        |         |      |  |              |         |   |  |   |         |  
|-------------------------------------------------- |  | ------ | ------- | ---- |  | ------------ | ------- | - |  | - | ------- | -
|                                                   |  |       
|                                                   |  | 2001  
|                                                   |  |       
|                                                   |  | Canada |         | U.S. |  | Consolidated
|                                                   |  |        |         |      |  |             
|Revenue                                            |  |        |         |      |  |              |         |   |  |   |         |  
|Brokerage                                          |  | $      | 78,488  |      |  | $            | 75,458  |   |  | $ | 153,946 |  
|Corporate                                          |  |        | 16,960  |      |  |              | 237     |   |  |   | 17,197  |  
|Elimination of intra-segment revenue               |  |        | (16,884 | )    |  |              | (266    | ) |  |   | (17,150 | )
|                                                   |  |        |         |      |  |              |         |   |  |   |         |  
|                                                   |  | $      | 78,564  |      |  | $            | 75,429  |   |  | $ | 153,993 |  
|                                                   |  |        |         |      |  |              |         |   |  |   |         |  
|Net earnings (loss) before income
    taxes        |  |        |         |      |  |              |         |   |  |   |         |  
|Brokerage                                          |  | $      | 6,625   |      |  | $            | 13,200  |   |  | $ | 19,825  |  
|Corporate                                          |  |        | 6,126   |      |  |              | (10,684 | ) |  |   | (4,558  | )
|                                                   |  |        |         |      |  |              |         |   |  |   |         |  
|                                                   |  | $      | 12,751  |      |  | $            | 2,516   |   |  | $ | 15,267  |  
|                                                   |  |        |         |      |  |              |         |   |  |   |         |  
|Income tax expense (benefit) 
    current         |  |        |         |      |  |              |         |   |  |   |         |  
|Brokerage                                          |  | $      | 4,044   |      |  | $            | 4,929   |   |  | $ | 8,973   |  
|Corporate                                          |  |        | 320     |      |  |              | (4,326  | ) |  |   | (4,006  | )
|                                                   |  |        |         |      |  |              |         |   |  |   |         |  
|                                                   |  | $      | 4,364   |      |  | $            | 603     |   |  | $ | 4,967   |  
|                                                   |  |        |         |      |  |              |         |   |  |   |         |  
|Income tax expense (benefit) 
    future          |  |        |         |      |  |              |         |   |  |   |         |  
|Brokerage                                          |  | $      | (134    | )    |  | $            | 864     |   |  | $ | 730     |  
|Corporate                                          |  |        | (642    | )    |  |              | 207     |   |  |   | (435    | )
|                                                   |  |        |         |      |  |              |         |   |  |   |         |  
|                                                   |  | $      | (776    | )    |  | $            | 1,071   |   |  | $ | 295     |  
|                                                   |  |        |         |      |  |              |         |   |  |   |         |  
|Net earnings (loss)                                |  |        |         |      |  |              |         |   |  |   |         |  
|Brokerage                                          |  | $      | 2,715   |      |  | $            | 7,407   |   |  | $ | 10,122  |  
|Corporate                                          |  |        | 6,448   |      |  |              | (6,565  | ) |  |   | (117    | )
|                                                   |  |        |         |      |  |              |         |   |  |   |         |  
|                                                   |  | $      | 9,163   |      |  | $            | 842     |   |  | $ | 10,005  |  
|                                                   |  |        |         |      |  |              |         |   |  |   |         |  
|Identifiable assets                                |  |        |         |      |  |              |         |   |  |   |         |  
|Brokerage                                          |  | $      | 109,896 |      |  | $            | 319,989 |   |  | $ | 429,885 |  
|Investment held for sale                           |  |        |        |      |  |              | 40,772  |   |  |   | 40,772  |  
|Corporate                                          |  |        | 28,212  |      |  |              | 3,427   |   |  |   | 31,639  |  
|                                                   |  |        |         |      |  |              |         |   |  |   |         |  
|                                                   |  | $      | 138,108 |      |  | $            | 364,188 |   |  | $ | 502,296 |  
|                                                   |  |        |         |      |  |              |         |   |  |   |         |  
|Amortization of goodwill and intangible
    assets |  | $      | 2,316   |      |  | $            | 2,624   |   |  | $ | 4,940   |  
|Additions to property and equipment                |  | $      | 1,624   |      |  | $            | 9,910   |   |  | $ | 11,534  |  
|Depreciation                                       |  | $      | 1,755   |      |  | $            | 2,185   |   |  | $ | 3,940   |  
|Interest income                                    |  | $      | 805     |      |  | $            | 1,188   |   |  | $ | 1,993   |  
|Interest expense                                   |  | $      | 6,337   |      |  | $            | 1,110   |   |  | $ | 7,447   |  

17. Related party transactions

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

|                                  |  |      |        |      |  |      |        |  |  |   |        | 
|--------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|                                  |  | 2003 |        | 2002 |  | 2001
|                                  |  |      |        |      |  |     
|Northbridge Financial Corporation |  | $    | 18,504 |      |  | $    | 12,787 |  |  | $ | 9,761  | 
|Crum & Forster Holdings, Inc.     |  |      | 1,259  |      |  |      | 914    |  |  |   | 1,039  | 
|Fairfax Inc                       |  |      | 8,411  |      |  |      | 6,278  |  |  |   |       | 
|                                  |  |      |        |      |  |      |        |  |  |   |        | 
|                                  |  | $    | 28,174 |      |  | $    | 19,979 |  |  | $ | 10,800 | 
|                                  |  |      |        |      |  |      |        |  |  |   |        | 

As of December 31, 2003 and 2002, the
Company had accounts receivable and accounts payable balances
with the above related parties in the amounts of $3,185 and
$17,999, for 2003, respectively, and $2,104 and $12,180 for
2002, respectively. All revenue and related accounts receivable
and accounts payable are the result of transactions in





|                               |                               
|------------------------------ | ------------------------------
|64   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



---



##### 



the normal course of business. The companies
above are related through common ownership by Fairfax, which
owns approximately 26% of the Companys common shares as of
December 31, 2003.


As of December 31, 2003 and 2002, long-term
debt related to put options of $NIL and $5,940, respectively,
and subordinated convertible debentures of $35,000 at the end of
both years, are due to related parties.

During 2003, 2002 and 2001, the Company incurred
expenses related to rental of premises from related parties in
the amount of $2,102, $1,691 and $1,373, respectively. At
December 31, 2003 and 2002, the Company also had accounts
receivable due from related parties in the amount of $3,530 and
$3,801, respectively, of which the majority were loans to
employees to enable them to purchase shares of the Company. Of
these accounts receivable, as of December 31, 2003 and
2002, $1,918 and $2,207, respectively, were related to Company
loans to employees to purchase shares under the executive share
purchase plan. As collateral, the employees have pledged 153,000
and 177,000 common shares as of December 31, 2003 and 2002,
respectively, which have a market value of $2,590 and $2,263 as
of December 31, 2003 and 2002, respectively.

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,
2003, 2002 and 2001.


|                                                                        |                                                                                          |      |        |        |   |      |        |      |   |   |        |        |  
|----------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- | ---- | ------ | ------ | - | ---- | ------ | ---- | - | - | ------ | ------ | -
|                                                                        |                                                                                          | 2003 |        | 2002   |   | 2001
|                                                                        |                                                                                          |      |        |        |   |     
|Net earnings for the year based on Canadian GAAP                        |                                                                                          | $    | 36,509 |        |   | $    | 29,401 |      |   | $ | 10,005 |       
|Adjustment to investment held for sale(1)                               |                                                                                          |      |       |        |   |      | (2,236 | )    |   |   | 520    |       
|Change in reporting currency(2)                                         |                                                                                          |      |       |        |   |      |       |      |   |   | 144    |       
|Cumulative effect of change in accounting policy
    for put options(3) |                                                                                          |      | 335    |        |   |      |       |      |   |   |       |       
|Adjustment to put option liability(3)                                   |                                                                                          |      | (409   | )      |   |      | (814   | )    |   |   | (811   | )     
|                                                                        |                                                                                          |      |        |        |   |      |        |      |   |   |        |       
|Net earnings for the year based on
    U.S. GAAP(4)                     |                                                                                          |      | 36,435 |        |   |      | 26,351 |      |   |   | 9,858  |       
|Other comprehensive income:(5)                                          |                                                                                          |      |        |        |   |      |        |      |   |   |        |       
|                                                                        | Unrealized gains (losses) net of tax of
    $(38)  2003, $50  2002, $120 
    2001    |      |        | 62     |   |      |        | (81  | ) |   |        | (195   | )
|                                                                        | Reclassification adjustment, net of tax of
    $48  2003, $(85)  2002, $88 
    2001, |      |        | (78    | ) |      |        | 138  |   |   |        | (143   | )
|                                                                        | Foreign currency translation adjustment                                                  |      |        | 17,877 |   |      |        | (585 | ) |   |        | (3,792 | )
|                                                                        |                                                                                          |      |        |        |   |      |        |      |   |   |        |       
|Comprehensive income based on U.S. GAAP(5)                              |                                                                                          | $    | 54,296 |        |   | $    | 25,823 |      |   | $ | 5,728  |       
|                                                                        |                                                                                          |      |        |        |   |      |        |      |   |   |        |       
|Basic earnings per share based on U.S. GAAP                             |                                                                                          | $    | 1.22   |        |   | $    | 1.14   |      |   | $ | 0.52   |       
|Diluted earnings per share based on U.S. GAAP                           |                                                                                          | $    | 1.14   |        |   | $    | 0.96   |      |   | $ | 0.49   |       





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    65



---



##### 



Shareholders equity

The table below sets out the differences between
Canadian GAAP and U.S. GAAP that affect shareholders
equity at December 31, 2003 and 2002:


|                                               |                                                                       |      |         |      |  |   |         |     |  
|---------------------------------------------- | --------------------------------------------------------------------- | ---- | ------- | ---- |  | - | ------- | --- | -
|                                               |                                                                       | 2003 |         | 2002
|                                               |                                                                       |      |         |     
|Shareholders equity based on Canadian GAAP    |                                                                       | $    | 342,790 |      |  | $ | 284,274 |    
|Adjustment to investment held for sale(1)      |                                                                       |      | (1,716  | )    |  |   | (1,716  | )  
|Accumulated other comprehensive income:        |                                                                       |      |         |      |  |   |         |    
|                                               | Unrealized gains (losses), net of tax of
    $(56)  2003, $51  2002 |      |         | 90   |  |   |         | (83 | )
|Cumulative translation account(2)              |                                                                       |      |        |      |  |   | 496     |    
|Adjustment to put option liability(3)          |                                                                       |      |        |      |  |   | (1,702  | )  
|Executive share purchase plan loans            |                                                                       |      |        |      |  |   | (1,912  | )  
|                                               |                                                                       |      |         |      |  |   |         |    
|Shareholders equity based on
    U.S. GAAP(4) |                                                                       | $    | 341,164 |      |  | $ | 279,357 |    
|                                               |                                                                       |      |         |      |  |   |         |    




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:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

|                                                                                             |  |      |   |      |  |      |        |   |  |   |     | 
|-------------------------------------------------------------------------------------------- |  | ---- | - | ---- |  | ---- | ------ | - |  | - | --- | 
|                                                                                             |  | 2003 |   | 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) | 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.



| |                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 certain 2001 acquisitions was allocated to
    equity instruments on the balance sheet. The balance of the
    purchase price was allocated to debt. Changes in the value of
    the put options in periods subsequent to the acquisition date
    are included in earnings. Under U.S. GAAP prior to
    July 1, 2003, the fair value of the share consideration and
    the attached put options was initially recorded in equity and
    the redemption value of the shares to which the put options are
    attached was reclassified as mezzanine equity





|                               |                               
|------------------------------ | ------------------------------
|66   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



---



##### 



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



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Also under U.S. GAAP, the fair value of the
    put options at the date of issuance was also recorded as a debit
    and credit to shareholders equity, representing an
    unearned compensation expense, as the put options require the
    selling shareholders to remain employed by the Company in order
    to be able to exercise the put options. Compensation expense is
    being recognized using the straight-line method over the period
    from the issue date to the exercise date.
|
| | As part of the negotiations of contingent
    consideration the former owners of certain 2001 acquisitions
    agreed to relinquish their rights to put options on
    730,000 common shares at December 31, 2003 and on
    1,423,000 common shares at December 31, 2002.
    Accordingly at December 31, 2003 no put options were
    outstanding on our common shares.                                                                                                                           



|    |                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | The condensed consolidated statements of earnings
    and cash flows for the years ended December 31, 2003, 2002
    and 2001 and the condensed consolidated balance sheets as at
    December 31, 2003 and 2002, under U.S. GAAP are as
    follows:

|                                                                 |  |      |         |      |  |      |         |   |  |   |          |  
|---------------------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | -------- | -
|                                                                 |  | 2003 |         | 2002 |  | 2001
|                                                                 |  |      |         |      |  |     
|Condensed consolidated statements of
    earnings:               |  |      |         |      |  |      |         |   |  |   |          |  
|Revenue                                                          |  | $    | 286,359 |      |  | $    | 219,960 |   |  | $ | 156,079  |  
|Net earnings before income taxes                                 |  | $    | 55,376  |      |  | $    | 40,781  |   |  | $ | 15,213   |  
|Net earnings                                                     |  | $    | 36,435  |      |  | $    | 26,351  |   |  | $ | 9,858    |  
|Condensed consolidated statements of cash
    flows:             |  |      |         |      |  |      |         |   |  |   |          |  
|Cash provided by operating activities                            |  | $    | 53,936  |      |  | $    | 19,456  |   |  | $ | 6,910    |  
|Cash (used in) investing activities                              |  | $    | (20,146 | )    |  | $    | (8,970  | ) |  | $ | (130,687 | )
|Cash provided by financing activities                            |  | $    | 4,553   |      |  | $    | 3,176   |   |  | $ | 130,881  |  
|Effect of exchange rate changes in cash and cash
    equivalents |  | $    | 3,067   |      |  | $    |        |   |  | $ |         |  
|Condensed consolidated balance
    sheets:                       |  |      |         |      |  |      |         |   |  |   |          |  
|Total current assets                                             |  | $    | 314,396 |      |  | $    | 235,416 |   |  |   |          |  
|Total assets(6)                                                  |  | $    | 696,440 |      |  | $    | 593,337 |   |  |   |          |  
|Total current liabilities                                        |  | $    | 233,448 |      |  | $    | 200,848 |   |  |   |          |  
|Total liabilities(6)                                             |  | $    | 355,276 |      |  | $    | 306,268 |   |  |   |          |  
|Mezzanine equity                                                 |  | $    |        |      |  | $    | 7,712   |   |  |   |          |  
|Total shareholders equity                                       |  | $    | 341,164 |      |  | $    | 279,357 |   |  |   |          |  



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(5) | Under U.S. GAAP, comprehensive income is
    measured in accordance with SFAS No. 130, Reporting
    Comprehensive Income. This standard defines comprehensive income
    as all changes in equity other than those resulting from
    investments by owners and distributions to owners and includes
    the change in unrealized gains (losses) on debt and equity
    securities and foreign currency translation adjustments. Under
    Canadian GAAP unrealized gains and losses (arising from a
    temporary decline in value) on equity securities are not
    recorded and foreign currency translation adjustments are
    presented as movements in the cumulative translation account.
    Certain disclosures required by SFAS 115, Accounting for
    Certain Investments in Debt and Equity Securities,





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    67



---



##### 



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | 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, the Company accounts for the
    interest rate swap transaction which converted fixed rate
    interest payments of 5.71% and 6.16% on the Senior Notes of
    $10 million and $55 million, respectively, using the
    synthetic instruments method. Under this method, the Company
    reports in earnings the net interest expense on the swap and
    associated debt as if it were a single, synthetic, financial
    instrument. The fair value of the swap, estimated at
    $2.6 million, is not recognized in the Companys
    Canadian GAAP financial statements. Under U.S. GAAP, the
    Company has designated the swap transaction of a hedge of
    changes in the fair value of its fixed rate debt caused by
    changes in interest rates. Under SFAS 133, Accounting for
    Derivative Instruments and Hedging Activities, the Company
    records the swap on its U.S. GAAP balance sheet at its fair
    value. Changes in fair value of the swap are reported in
    earnings. Changes in the fair value of the debt being hedged
    which are attributable to changes in interest rates are
    recognized in earnings by adjustment of the carrying amount of
    the debt.

Effects of New Accounting
Pronouncements

The Company is not aware of any new accounting
pronouncements which will impact on its financial reporting.

19. Quarterly Data (unaudited)

|                                     |  |         |        |         |  |         |        |         |  |      |        |  |  |   |        |  |  |   |         | 
|------------------------------------ |  | ------- | ------ | ------- |  | ------- | ------ | ------- |  | ---- | ------ |  |  | - | ------ |  |  | - | ------- | 
|                                     |  | First   |        | Second  |  | Third   |        | Fourth  |  | Full
|                                     |  | quarter |        | quarter |  | quarter |        | quarter |  | year
|                                     |  |         |        |         |  |         |        |         |  |     
|Year ended December 31, 2003         |  |         |        |         |  |         |        |         |  |      |        |  |  |   |        |  |  |   |         | 
|Revenue                              |  | $       | 68,877 |         |  | $       | 74,155 |         |  | $    | 64,671 |  |  | $ | 78,656 |  |  | $ | 286,359 | 
|Net earnings                         |  | $       | 8,904  |         |  | $       | 10,109 |         |  | $    | 6,820  |  |  | $ | 10,676 |  |  | $ | 36,509  | 
|Net earnings per share 
    Basic   |  | $       | 0.30   |         |  | $       | 0.34   |         |  | $    | 0.23   |  |  | $ | 0.36   |  |  | $ | 1.22    | 
|Net earnings per share 
    Diluted |  | $       | 0.28   |         |  | $       | 0.31   |         |  | $    | 0.22   |  |  | $ | 0.33   |  |  | $ | 1.14    | 
|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    | 

20. Subsequent event

In the first quarter of 2004 certain of the
Companys subsidiaries changed their names and as a result,
the Company will recognize a non-cash impairment expense of
approximately $2.6 million before tax related to trademarks.






|                               |                               
|------------------------------ | ------------------------------
|68   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



---



##### 





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

None.

Item 9A. Controls and
Procedures

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

Our chief executive officer and chief financial
officer conducted an evaluation of our disclosure controls and
procedures, as such term is defined under Rule 13a-14(c)
and 15d-14(c) promulgated under the Securities Exchange Act of
1934, as amended (the Exchange Act) as of December 31, 2003
(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. In addition, there have been
no significant changes (including corrective actions with regard
to significant deficiencies or material weaknesses) in the
design or operation of our internal control over financial
reporting or in other factors that could significantly affect
our internal control over financial reporting during the fourth
quarter of 2003. Notwithstanding the foregoing, there can be no
assurance that our disclosure controls and procedures will
detect or uncover all failures within our company to disclose
all material information otherwise required to be set forth in
our periodic reports.

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 2004 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 2004 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 2004
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 2004 Proxy Statement and is incorporated herein by reference.



|         |                                           
|-------- | ------------------------------------------
|Item 14. | Principal Accountant Fees and
    Services

Information regarding principal accountant fees
and services is included under the caption entitled
Principal Accountant Fees and Services in the 2004
Proxy Statement and is incorporated herein by reference.





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2003 | 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
October 30, 2003 to furnish a press release under
Item 9 and Item 12 announcing the Companys third
quarter 2003 financial results.

(c) Exhibits

|        |         |                        |  |                                                                                                                                                                                                                                        
|------- | ------- | ---------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |                       
|No.     |         | Description of Exhibit
|        |         |                       
|        | 2.1     |                        |  | Stock Purchase Agreement by and among Hub
    U.S. Holdings, Inc. and Fifth Third Financial Corp., dated
    December 29, 2002 (incorporated by reference to the
    registrants Current Report on Form 8-K filed
    January 7, 2003)
|        | 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                                                                                            





|                               |                               
|------------------------------ | ------------------------------
|70   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



---



##### 



|        |        |                        |  |                                                                                                                                                                                                                                                                                                                                   
|------- | ------ | ---------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |                       
|No.     |        | Description of Exhibit
|        |        |                       
|        | 10.14* |                        |  | HUB International Limited Equity Incentive Plan,
    as amended (incorporated by reference to the registrants
    Definitive Proxy Statement and Management Circular on
    Schedule 14A as filed with the Commission on March 31,
    2003)                                                                                     
|        | 10.15* |                        |  | Amendment to Amended and Restated Credit
    Agreement dated as of August 22, 2002 between Hub
    International Limited and Bank of Montreal (incorporated by
    reference to the registrants Annual Report on
    Form 10-K, for the period ended December 31, 2002 (the
    2002 10-K)                                     
|        | 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
    (incorporated by reference to the 2002 10-K)                                                                                                                                                                       
|        | 10.23  |                        |  | Letter Agreement dated July 15, 2003 between
    Bank of Montreal and HUB International Limited relating to an
    Interest Rate Swap Transaction on USD $10,000,000 (incorporated
    by reference to the registrants Quarterly Report on 10-Q,
    for the period ended September 30, 2003 (the Third
    Quarter 2003 10-Q))
|        | 10.24  |                        |  | Letter Agreement dated July 15, 2003 between
    Bank of Montreal and HUB International Limited relating to an
    Interest Rate Swap Transaction on USD $55,000,000 (incorporated
    by reference to the Third Quarter 2003 10-Q)                                                                                               
|        | 10.25  |                        |  | Note Purchase Agreement between Hub International
    Limited and each of the purchasers regarding the
    U.S. $10,000,000 5.71% Series A Senior Notes due
    June 15, 2010 and U.S. $55,000,000 6.16% Series B
    Senior Notes due June 15, 2013 (excluding any appendixes
    and exhibits thereto)                          
|        | 10.26* |                        |  | Management Bonus Modification Agreement effective
    as of December 31, 2003 between Hub International Limited,
    each Operating Subsidiary and each of the Eligible Managers, as
    applicable (excluding any appendixes and exhibits thereto)                                                                               
|        | 21.1   |                        |  | List of Registrants subsidiaries                                                                                                                                                                                                                                                                                                 
|        | 23.1   |                        |  | Consent of PricewaterhouseCoopers LLP                                                                                                                                                                                                                                                                                             
|        | 31.1   |                        |  | Certification of the Chief Executive Officer,
    Martin P. Hughes, pursuant Rule 13a  14(a) or
    15d  14(a), as enacted pursuant to Section 302
    of the Sarbanes-Oxley Act of 2002                                                                                                                                        
|        | 31.2   |                        |  | Certification of the Chief Financial Officer,
    Dennis J. Pauls, pursuant Rule 13a  14(a) or
    15d  14(a), as enacted pursuant to Section 302
    of the Sarbanes-Oxley Act of 2002                                                                                                                                         
|        | 32.1   |                        |  | Certification of the Chief Executive Officer,
    Martin P. Hughes, pursuant to 18 U.S.C. Section 1350,
    as enacted pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002                                                                                                                                              
|        | 32.2   |                        |  | Certification of the Chief Financial Officer,
    Dennis J. Pauls, pursuant to 18 U.S.C. Section 1350,
    as enacted pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002                                                                                                                                               



---



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





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2003 | 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 15, 2004.



| |                          
| | -------------------------
| | 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 15, 2004.

|                                           |  |                                                                                            
|------------------------------------------ |  | -------------------------------------------------------------------------------------------
|SIGNATURE                                  |  | TITLE                                                                                      
|                                           |  |                                                                                            
|/s/ MARTIN P. HUGHESMartin P. Hughes       |  | Chairman of the Board and Chief Executive Officer
    (Principal Executive Officer)        
|                                          
|/s/ DENNIS J. PAULSDennis J. Pauls         |  | Vice President and Chief Financial Officer
    (Principal Financial and Accounting Officer)
|                                          
|/s/ RICHARD A. GULLIVERRichard A. Gulliver |  | President, Director                                                                        
|                                          
|/s/ R. CRAIG BARTONR. Craig Barton         |  | President, Canadian Operations, Director                                                   
|                                          
|/s/ BRUCE GUTHARTBruce Guthart             |  | Chief Operating Officer and 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                                                                                   
|                                          
|/s/ FRANK WILKINSONFrank Wilkinson         |  | Director                                                                                   





|                               |                               
|------------------------------ | ------------------------------
|72   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003



---



##### 



EXHIBIT INDEX



|        |         |                        |  |                                                                                                                                                                                                                                                                                              
|------- | ------- | ---------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |                       
|No.     |         | Description of Exhibit
|        |         |                       
|        | 2.1     |                        |  | Stock Purchase Agreement by and among Hub
    U.S. Holdings, Inc. and Fifth Third Financial Corp., dated
    December 29, 2002 (incorporated by reference to the
    registrants Current Report on Form 8-K filed
    January 7, 2003)                                                      
|        | 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,
    as amended (incorporated by reference to the registrants
    Definitive Proxy Statement and Management Circular on
    Schedule 14A as filed with the Commission on March 31,
    2003)                                                
|        | 10.15*  |                        |  | Amendment to Amended and Restated Credit
    Agreement dated as of August 22, 2002 between Hub
    International Limited and Bank of Montreal (incorporated by
    reference to the registrants Annual Report on
    Form 10-K, for the period ended December 31, 2002 (the
    2002 10-K)
|        | 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                                                                                                                               





|                               |                                
|------------------------------ | -------------------------------
|ANNUAL REPORTDecember 31, 2003 | HUB INTERNATIONAL LIMITED    73



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##### 



|        |        |                        |  |                                                                                                                                                                                                                                                                                                                                   
|------- | ------ | ---------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |                       
|No.     |        | Description of Exhibit
|        |        |                       
|        | 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
    (incorporated by reference to the 2002 10-K)                                                                                                                                                                       
|        | 10.23  |                        |  | Letter Agreement dated July 15, 2003 between
    Bank of Montreal and HUB International Limited relating to an
    Interest Rate Swap Transaction on USD $10,000,000 (incorporated
    by reference to the registrants Quarterly Report on 10-Q,
    for the period ended September 30, 2003 (the Third
    Quarter 2003 10-Q))
|        | 10.24  |                        |  | Letter Agreement dated July 15, 2003 between
    Bank of Montreal and HUB International Limited relating to an
    Interest Rate Swap Transaction on USD $55,000,000 (incorporated
    by reference to the Third Quarter 2003 10-Q)                                                                                               
|        | 10.25  |                        |  | Note Purchase Agreement between Hub International
    Limited and each of the purchasers regarding the
    U.S. $10,000,000 5.71% Series A Senior Notes due
    June 15, 2010 and U.S. $55,000,000 6.16% Series B
    Senior Notes due June 15, 2013 (excluding any appendixes
    and exhibits thereto)                          
|        | 10.26* |                        |  | Management Bonus Modification Agreement effective
    as of December 31, 2003 between Hub International Limited,
    each Operating Subsidiary and each of the Eligible Managers, as
    applicable (excluding any appendixes and exhibits thereto)                                                                               
|        | 21.1   |                        |  | List of Registrants subsidiaries                                                                                                                                                                                                                                                                                                 
|        | 23.1   |                        |  | Consent of PricewaterhouseCoopers LLP                                                                                                                                                                                                                                                                                             
|        | 31.1   |                        |  | Certification of the Chief Executive Officer,
    Martin P. Hughes, pursuant Rule 13a  14(a) or
    15d  14(a), as enacted pursuant to Section 302
    of the Sarbanes-Oxley Act of 2002                                                                                                                                        
|        | 31.2   |                        |  | Certification of the Chief Financial Officer,
    Dennis J. Pauls, pursuant Rule 13a  14(a) or
    15d  14(a), as enacted pursuant to Section 302
    of the Sarbanes-Oxley Act of 2002                                                                                                                                         
|        | 32.1   |                        |  | Certification of the Chief Executive Officer,
    Martin P. Hughes, pursuant to 18 U.S.C. Section 1350,
    as enacted pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002                                                                                                                                              
|        | 32.2   |                        |  | Certification of the Chief Financial Officer,
    Dennis J. Pauls, pursuant to 18 U.S.C. Section 1350,
    as enacted pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002                                                                                                                                               



---



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



|  |                                                             
|- | ------------------------------------------------------------
|* | Management contract or compensatory plan or
    arrangement.





|                               |                               
|------------------------------ | ------------------------------
|74   HUB INTERNATIONAL LIMITED | ANNUAL REPORTDecember 31, 2003