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Exhibit 99.2 Talbot Financial Corporation Consolidated Financial Statements
For the Six Months Ended June 30, 2004




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Talbot Financial Corporation
Consolidated Balance Sheets
As of June 30, 2004 and December 31, 2003
(in thousands of U.S. dollars) June 30,
    
    December 31,2004
    
    2003(unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    $
    22,936
    
    
    $
    13,367Trust cash
    
    
    10,630
    
    
    
    11,360Marketable securities
    
    
    4,232
    
    
    
    4,041Accounts and other receivables
    
    
    15,184
    
    
    
    18,824Notes receivable
    
    
    405
    
    
    
    1,357Deferred income taxes  current
    
    
    2,292
    
    
    
    1,590Prepaid and other current assets
    
    
    
    
    
    
    59Total current assets
    
    
    55,679
    
    
    
    50,598Goodwill
    
    
    11,410
    
    
    
    11,410Intangible assets  net
    
    
    17,537
    
    
    
    20,324Property and equipment  net
    
    
    3,692
    
    
    
    4,057Deferred income taxes
    
    
    9,670
    
    
    
    10,410Other assets
    
    
    93
    
    
    
    115Total assets
    
    $
    98,081
    
    
    $
    96,914LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesInsurance company payables
    
    $
    21,298
    
    
    $
    25,216Accounts payable and accrued liabilities
    
    
    12,414
    
    
    
    9,168Accrued benefits
    
    
    1,537
    
    
    
    1,525Income taxes payable to parent
    
    
    1,597
    
    
    
    1,467Current portion of notes payable to parent
    
    
    1,383
    
    
    
    5,185Current portion of long-term debt and capital leases
    
    
    5,477
    
    
    
    4,951Deferred compensation liability
    
    
    3,846
    
    
    
    Total current liabilities
    
    
    47,552
    
    
    
    47,512Notes payable to parent  long-term
    
    
    2,900
    
    
    
    Long-term debt and capital leases
    
    
    5,803
    
    
    
    8,987Deferred revenue
    
    
    62
    
    
    
    124Deferred compensation liability
    
    
    
    
    
    
    3,656Total liabilities
    
    
    56,317
    
    
    
    60,279Contingencies (Note 3)Shareholders equityShare capital
    
    
    
    
    
    
    Contributed surplus
    
    
    41,319
    
    
    
    41,033Accumulated other comprehensive income
    
    
    181
    
    
    
    432Retained earnings (deficit)
    
    
    264
    
    
    
    (4,830
    )Total shareholders equity
    
    
    41,764
    
    
    
    36,635Total liabilities and shareholders equity
    
    $
    98,081
    
    
    $
    96,914
 (the accompanying notes form an integral part of the financial statements) 2




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Talbot Financial Corporation
Consolidated Statements of Earnings
For the Six Months Ended June 30, 2004 and 2003
(in thousands of U.S. dollars) 2004
    
    2003(unaudited)
    
    (unaudited)RevenueCommission income
    
    $
    41,614
    
    
    $
    37,951Contingent commissions and volume overrides
    
    
    9,355
    
    
    
    8,388Financial services commissions and fees
    
    
    5,481
    
    
    
    5,155Other
    
    
    106
    
    
    
    7856,556
    
    
    
    51,572ExpensesCompensation and employee benefits
    
    
    34,476
    
    
    
    32,459Facilities and equipment
    
    
    3,772
    
    
    
    3,219Depreciation
    
    
    692
    
    
    
    650Communications
    
    
    2,463
    
    
    
    2,801Other operating expenses
    
    
    3,560
    
    
    
    2,652Interest expense
    
    
    437
    
    
    
    527Intangible asset amortization
    
    
    2,782
    
    
    
    3,20348,182
    
    
    
    45,511Net earnings before income taxes
    
    
    8,374
    
    
    
    6,061Provision for income tax expenseCurrent
    
    
    3,292
    
    
    
    2,430Deferred
    
    
    (12
    )
    
    
    (153
    )3,280
    
    
    
    2,277Net earnings
    
    $
    5,094
    
    
    $
    3,784
 (the accompanying notes form an integral part of the financial statements) 3




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Talbot Financial Corporation
Consolidated Statements of Shareholders Equity
For the Six Months Ended June 30, 2004 and 2003
(in thousands of U.S. dollars) 2004
    
    2003(unaudited)
    
    (unaudited)Accumulated other comprehensive income  beginning of
period
    
    $
    432
    
    
    
    
    
    
    $
    (118
    )Change during year
    
    
    (251
    )
    
    $
    (251
    )
    
    
    170
    
    
    $
    170Accumulated other comprehensive income  end of period
    
    $
    181
    
    
    
    
    
    
    $
    52Deficit  beginning of period
    
    $
    (4,830
    )
    
    
    
    
    
    $
    (9,032
    )Net earnings
    
    
    5,094
    
    
    
    5,094
    
    
    
    3,784
    
    
    
    3,784Comprehensive income
    
    
    
    
    
    $
    4,843
    
    
    
    
    
    
    $
    3,954Retained earnings (deficit)  end of period
    
    $
    264
    
    
    
    
    
    
    $
    (5,248
    )Contributed surplus  beginning of period
    
    $
    41,033
    
    
    
    
    
    
    $
    36,798Contribution from Parent
    
    
    
    
    
    
    
    
    
    
    4,000Contribution of stock options by Parent
    
    
    286
    
    
    
    
    
    
    
    59Contributed surplus  end of period
    
    $
    41,319
    
    
    
    
    
    
    $
    40,857
 (the accompanying notes form an integral part of the financial statements) 4




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Talbot Financial Corporation
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2004 and 2003
(in thousands of U.S. dollars) 2004
    
    2003(unaudited)
    
    (unaudited)OPERATING ACTIVITIESNet earnings
    
    $
    5,094
    
    
    $
    3,784Items not affecting working capitalAmortization and depreciation
    
    
    3,474
    
    
    
    3,853Deferred income taxes
    
    
    40
    
    
    
    (866
    )Non-cash stock based compensation
    
    
    287
    
    
    
    59Change in non-operating cash working capital items, net of effects of
acquisitionsTrust cash
    
    
    730
    
    
    
    (1,796
    )Accounts and other receivables
    
    
    3,640
    
    
    
    2,609Notes receivables
    
    
    952
    
    
    
    (1,270
    )Prepaid and other current assets
    
    
    80
    
    
    
    219Accounts payable and accrued liabilities
    
    
    (674
    )
    
    
    294Accrued benefits reserve
    
    
    12
    
    
    
    16Deferred revenue
    
    
    (62
    )
    
    
    (62
    )Deferred compensation liability
    
    
    190
    
    
    
    551Income taxes payable to parent
    
    
    129
    
    
    
    862Net cash flows from operating activities
    
    $
    13,892
    
    
    $
    8,253INVESTING ACTIVITIESProperty and equipment  purchases
    
    
    (327
    )
    
    
    (1,199
    )Purchases of investment held for sale
    
    
    (437
    )
    
    
    (883
    )Purchase of subsidiaries, net of cash received
    
    
    
    
    
    
    (3,596
    )Net cash flows used for investing activities
    
    
    (764
    )
    
    
    (5,678
    )FINANCING ACTIVITIESLong-term debt  repayments
    
    
    (2,658
    )
    
    
    (2,462
    )Notes payable to Parent  repayments
    
    
    (901
    )
    
    
    (1,084
    )Contribution from Parent
    
    
    
    
    
    
    4,000Net cash flows (used for) from financing activities
    
    
    (3,559
    )
    
    
    454Change in cash and cash equivalents
    
    
    9,569
    
    
    
    3,029Cash and cash equivalents  Beginning of period
    
    
    13,367
    
    
    
    11,148Cash and cash equivalents  End of period
    
    $
    22,936
    
    
    $
    14,177
 (the accompanying notes form an integral part of the financial statements) 5




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Talbot Financial Corporation
Notes to Consolidated Financial Statements For the six months ended June 30, 2004 and 2003 (unaudited)
(in thousands of U.S. dollars, or as otherwise indicated) 1. Nature of operations and recent significant transactions Business operations Talbot Financial Corporation (the Company) is an insurance brokerage that
provides a variety of property and casualty, life and health, employee
benefits, investment and risk management products and services primarily in the
western United States. Additionally, the Company provides training to
financial institutions on the selection and distribution of investment products
(including but not limited to fixed annuities, variable annuities, equities and
mutual funds) through the financial institutions branches. The Company is a
wholly owned subsidiary of Safeco Corporation (the Parent). 2. Summary of significant accounting policies Basis of presentation The interim consolidated financial statements do not include all disclosures
required by generally accepted accounting principles in the United States (U.S.
GAAP) for annual financial statements and accordingly, should be read in
conjunction with the Companys audited consolidated financial statements for
the year ended December 31, 2003. In the opinion of management, all adjustments
(consisting of items of a normal recurring nature) considered necessary for a
fair presentation of the accompanying financial statements have been reflected
therein. These interim consolidated financial statements of the Company are
expressed in United States (U.S.) dollars and have been prepared in accordance
with U.S. GAAP using the same accounting principles as were used for the
Companys consolidated financial statements for the year ended December 31,
2003. These principles differ in certain respects from Canadian generally
accepted accounting principles (Canadian GAAP) and, to the extent that they
affect the Company, the differences are described in note 4 Reconciliation to
Canadian GAAP. The results of operations are not necessarily indicative of
the operating results for the fiscal year or any future period. Stock based compensation Certain employees of the Company participate in the Parents stock based
incentive compensation plan. Prior to 2003, the Company applied Accounting
Principles Board Opinion 25 (APB 25) in accounting for stock options, as
allowed under SFAS 123, Accounting for Stock-Based Compensation, as amended.
Under APB 25, the Company recognized no compensation expense related to options
because the exercise price of the Parents stock options equaled the fair
market value of the underlying stock on the date of grant. In December 2002, the FASB issued SFAS 148, Accounting for Stock-Based
Compensation  Transition and Disclosure, amending SFAS 123, to provide
alternative methods of transition to the fair value method of accounting for
stock-based employee compensation under SFAS 123. Effective January 1, 2003,
the Company adopted the fair value method for accounting for stock options as
defined in SFAS 123, using the prospective basis transition method. Under the
method, the Company has recognized stock-based compensation expense for options
granted, modified or settled after January 1, 2003. The parent typically
grants options to employees in the second quarter of each year. Stock-based
compensation expense was $441 ($287 after tax) and $90 ($59 after tax) in the
consolidated statements of earnings for the six months ended June 30, 2004 and
June 30, 2003, respectively. The following table illustrates the effect on net earnings if the fair value
based method had been applied to all outstanding and unvested awards for the
six months ended as follows: June 30,
    
    June 30,2004
    
    2003(unaudited)
    
    (unaudited)Net earnings, as reported
    
    $
    5,094
    
    
    $
    3,784Add: Stock-based employee
compensation expense included
in reported net earnings, net
of related tax effects
    
    
    286
    
    
    
    59Deduct: Total stock-based
employee compensation expense
determined under fair value
based method for all awards,
net of related tax effects
    
    
    (408
    )
    
    
    (208
    )Pro forma net earnings
    
    $
    4,972
    
    
    $
    3,635
 6




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Talbot Financial Corporation
Notes to Consolidated Financial Statements For the six months ended June 30, 2004 and 2003 (unaudited)
(in thousands of U.S. dollars, or as otherwise indicated) 3. Contingencies In connection with various acquisitions completed through June 30, 2004, the
Company may be entitled to reduce the outstanding debt obligations up to a
maximum sum of approximately $3,460 based upon the acquired brokerages failing
to achieve certain operating earnings targets. These clawback provisions are
calculated on various dates through September 2006 according to the terms and
conditions of each purchase agreement. Any reduction of the outstanding debt
will be recorded as an adjustment to goodwill once the contingency is resolved. In connection with one acquisition completed in May 2003, the Company may be
obligated to pay cash contingent consideration up to a maximum of $2.8 million
based upon the acquired brokerage achieving certain operating earnings targets.
The contingent payment is payable in July 2005. Any additional consideration
will be recorded as an adjustment to goodwill once the contingency is resolved.
In connection with contingent consideration as of June 30, 2004 and June 30,
2003, the financial statements do not reflect a liability, as the contingency
has not yet been resolved. 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. 4. Reconciliation to Canadian GAAP The consolidated financial statements have been prepared in accordance with
U.S. GAAP, which differs in certain respects from Canadian GAAP. Net Earnings There were no differences between U.S. GAAP and Canadian GAAP affecting net
earnings for the six months ended June 30, 2004 and the six months ended June
30, 2003. Shareholders Equity The table below sets out the differences between U.S. GAAP and Canadian GAAP
that affect shareholders equity at June 30, 2004 and December 31, 2003: June 30,
    
    December 31,2004
    
    2003(unaudited)Shareholders equity based on U.S. GAAP
    
    $
    41,764
    
    
    $
    36,635Adjustment to carrying value of marketable securities,
net of tax of $97  June 30, 2004; $233  2003
    
    
    (181
    )
    
    
    (432
    )Shareholders equity based on Canadian GAAP
    
    $
    41,583
    
    
    $
    36,203
 Under U.S. GAAP, the Company has classified all marketable securities as
available-for-sale which requires the securities to be reported at fair value,
with unrealized gains and losses, net of tax, reported as a separate component
of shareholders equity. Under Canadian GAAP, such securities are reported at
cost less any provision for other than temporary losses in value. 5. Subsequent event Effective July 1, 2004, the Company was acquired by Hub International Limited. 7