##### 









SECURITIES AND EXCHANGE COMMISSION




FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF

THE SECURITIES EXCHANGE ACT OF 1934


For Quarter Ended: March 31, 2004

Commission file number: 1-31310

(HUB INTL. LOGO)

HUB INTERNATIONAL LIMITED

(Exact name of registrant as specified in its
Charter)

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

(877) 402-6601

Registrants telephone number, including
area code

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

Yes þ          No o

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Rule 12b-2 of the
Exchange Act.)

Yes þ          No o

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

|                   |  |                                        
|------------------ |  | ---------------------------------------
|ClassCommon Shares |  | Outstanding at April 30, 200430,503,657



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##### 



HUB INTERNATIONAL LIMITED

INDEX

|                                                                                                      |  |      |    | 
|----------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                      |  | Page
|                                                                                                      |  |     
|PART I. FINANCIAL INFORMATION                                                                         |  |      |    | 
|                                                                                                     
|Item 1. Financial Statements
    (Unaudited)                                                          |  |      | 3  | 
|                                                                                                     
|Consolidated Balance Sheets as of March 31,
    2004 and December 31, 2003                            |  |      | 3  | 
|                                                                                                     
|Consolidated Statements of Earnings for the three
    months ended March 31, 2004 and 2003            |  |      | 4  | 
|                                                                                                     
|Consolidated Statements of Retained Earnings for
    the three months ended March 31, 2004 and 2003   |  |      | 5  | 
|                                                                                                     
|Consolidated Statements of Cash Flows for the
    three months ended March 31, 2004 and 2003          |  |      | 6  | 
|                                                                                                     
|Notes to Interim Consolidated Financial Statements                                                    |  |      | 7  | 
|                                                                                                     
|Item 2. Managements Discussion
    and Analysis of Financial Condition and
    Results of Operations |  |      | 20 | 
|                                                                                                     
|Item 3. Quantitative and Qualitative
    Disclosures about Market Risk                                |  |      | 31 | 
|                                                                                                     
|Item 4. Controls and
    Procedures                                                                   |  |      | 31 | 
|                                                                                                     
|PART II. OTHER INFORMATION                                                                            |  |      |    | 
|                                                                                                     
|Item 1. Legal Proceedings                                                                             |  |      | 32 | 
|                                                                                                     
|Item 2. Changes in Securities, Use
    of Proceeds and Issuer Purchases of
    Equity Securities      |  |      | 32 | 
|                                                                                                     
|Item 5. Other Information                                                                             |  |      | 32 | 
|                                                                                                     
|Item 6. Exhibits and Reports on
    Form 8-K                                                          |  |      | 33 | 
|                                                                                                     
|SIGNATURE                                                                                             |  |      | 34 | 





|                              |                             
|----------------------------- | ----------------------------
|2   HUB INTERNATIONAL LIMITED | INTERIM REPORTMARCH 31, 2004



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##### 



PART I. FINANCIAL INFORMATION



Item 1. Financial Statements
(Unaudited)


Hub International Limited

Consolidated Balance Sheets


As of March 31, 2004 and
December 31, 2003

(in thousands of U.S. dollars)


|                                                  |  |             |         |      |  |   |         | 
|------------------------------------------------- |  | ----------- | ------- | ---- |  | - | ------- | 
|                                                  |  | 2004        |         | 2003
|                                                  |  |             |         |     
|                                                  |  | (Unaudited) |         |     
|ASSETS                                            |  |             |         |      |  |   |         | 
|Current assets:                                   |  |             |         |      |  |   |         | 
|Cash and cash equivalents                         |  | $           | 87,304  |      |  | $ | 82,052  | 
|Trust cash                                        |  |             | 43,901  |      |  |   | 54,534  | 
|Accounts and other receivables                    |  |             | 114,321 |      |  |   | 163,728 | 
|Income taxes receivable                           |  |             | 4,040   |      |  |   | 6,768   | 
|Future income taxes                               |  |             | 4,769   |      |  |   | 2,865   | 
|Prepaid expenses                                  |  |             | 4,324   |      |  |   | 4,449   | 
|                                                  |  |             |         |      |  |   |         | 
|Total current assets                              |  |             | 258,659 |      |  |   | 314,396 | 
|Goodwill                                          |  |             | 305,490 |      |  |   | 305,862 | 
|Other intangible assets                           |  |             | 39,592  |      |  |   | 42,903  | 
|Property and equipment                            |  |             | 23,816  |      |  |   | 24,181  | 
|Future income taxes                               |  |             | 6,095   |      |  |   | 6,458   | 
|Other assets                                      |  |             | 6,031   |      |  |   | 6,803   | 
|                                                  |  |             |         |      |  |   |         | 
|Total assets                                      |  | $           | 639,683 |      |  | $ | 700,603 | 
|                                                  |  |             |         |      |  |   |         | 
|LIABILITIES AND SHAREHOLDERS
    EQUITY          |  |             |         |      |  |   |         | 
|Current liabilities:                              |  |             |         |      |  |   |         | 
|Accounts payable and accrued liabilities          |  | $           | 157,005 |      |  | $ | 226,168 | 
|Contingent consideration payable                  |  |             | 558     |      |  |   |        | 
|Income taxes payable                              |  |             | 2,463   |      |  |   | 3,804   | 
|Future income taxes                               |  |             | 232     |      |  |   | 114     | 
|Current portion long-term debt and capital leases |  |             | 2,777   |      |  |   | 3,362   | 
|                                                  |  |             |         |      |  |   |         | 
|Total current liabilities                         |  |             | 163,035 |      |  |   | 233,448 | 
|Long-term debt and capital leases                 |  |             | 75,121  |      |  |   | 75,437  | 
|Subordinated convertible debentures               |  |             | 35,000  |      |  |   | 35,000  | 
|Future income taxes                               |  |             | 13,687  |      |  |   | 13,928  | 
|                                                  |  |             |         |      |  |   |         | 
|Total liabilities                                 |  |             | 286,843 |      |  |   | 357,813 | 
|                                                  |  |             |         |      |  |   |         | 
|Commitments and Contingencies                     |  |             |         |      |  |   |         | 
|Shareholders equity                              |  |             |         |      |  |   |         | 
|Share capital                                     |  |             | 255,690 |      |  |   | 254,845 | 
|Issuable shares                                   |  |             | 44      |      |  |   | 721     | 
|Contributed surplus                               |  |             | 7,882   |      |  |   | 4,806   | 
|Cumulative translation account                    |  |             | 18,770  |      |  |   | 20,062  | 
|Retained earnings                                 |  |             | 70,454  |      |  |   | 62,356  | 
|                                                  |  |             |         |      |  |   |         | 
|Total shareholders equity                        |  |             | 352,840 |      |  |   | 342,790 | 
|                                                  |  |             |         |      |  |   |         | 
|Total liabilities and shareholders
    equity    |  | $           | 639,683 |      |  | $ | 700,603 | 
|                                                  |  |             |         |      |  |   |         | 

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





|                             |                               
|---------------------------- | ------------------------------
|INTERIM REPORTMARCH 31, 2004 | HUB INTERNATIONAL LIMITED    3



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##### 



Hub International Limited

Consolidated Statements of Earnings


For the three months ended March 31, 2004
and 2003

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


(Unaudited)


|                                                          |                                                                     |      |        |        |   |   |        |        |  
|--------------------------------------------------------- | ------------------------------------------------------------------- | ---- | ------ | ------ | - | - | ------ | ------ | -
|                                                          |                                                                     | 2004 |        | 2003  
|                                                          |                                                                     |      |        |       
|Revenue                                                   |                                                                     |      |        |        |   |   |        |       
|                                                          | Commission income                                                   |      | $      | 61,629 |   |   | $      | 54,541 |  
|                                                          | Contingent commissions and volume overrides                         |      |        | 15,037 |   |   |        | 12,377 |  
|                                                          | Other                                                               |      |        | 2,683  |   |   |        | 1,959  |  
|                                                          |                                                                     |      |        |        |   |   |        |       
|                                                          |                                                                     |      | 79,349 |        |   |   | 68,877 |       
|                                                          |                                                                     |      |        |        |   |   |        |       
|Expenses                                                  |                                                                     |      |        |        |   |   |        |       
|                                                          | Compensation                                                        |      |        | 40,637 |   |   |        | 37,012 |  
|                                                          | Selling, occupancy and administration                               |      |        | 15,553 |   |   |        | 13,106 |  
|                                                          | Depreciation                                                        |      |        | 1,587  |   |   |        | 1,394  |  
|                                                          | Interest expense                                                    |      |        | 1,660  |   |   |        | 1,367  |  
|                                                          | Intangible asset amortization                                       |      |        | 781    |   |   |        | 801    |  
|                                                          | Loss/(gain) on disposal of property, equipment
    and other assets |      |        | 38     |   |   |        | (56    | )
|                                                          | Loss on write-off of trademarks                                     |      |        | 2,587  |   |   |        |       |  
|                                                          | Loss on put option liability                                        |      |        |       |   |   |        | 27     |  
|                                                          | Non-cash stock based compensation                                   |      |        | 1,614  |   |   |        | 962    |  
|                                                          |                                                                     |      |        |        |   |   |        |       
|                                                          |                                                                     |      | 64,457 |        |   |   | 54,613 |       
|                                                          |                                                                     |      |        |        |   |   |        |       
|Net earnings before income taxes                          |                                                                     |      | 14,892 |        |   |   | 14,264 |       
|                                                          |                                                                     |      |        |        |   |   |        |       
|Provision for income tax expense
    (benefit)            |                                                                     |      |        |        |   |   |        |       
|                                                          | Current                                                             |      |        | 6,738  |   |   |        | 5,661  |  
|                                                          | Future                                                              |      |        | (1,469 | ) |   |        | (301   | )
|                                                          |                                                                     |      |        |        |   |   |        |       
|                                                          |                                                                     |      | 5,269  |        |   |   | 5,360  |       
|                                                          |                                                                     |      |        |        |   |   |        |       
|Net earnings                                              |                                                                     | $    | 9,623  |        |   | $ | 8,904  |       
|                                                          |                                                                     |      |        |        |   |   |        |       
|Earnings per share                                        |                                                                     |      |        |        |   |   |        |       
|                                                          | Basic                                                               |      | $      | 0.32   |   |   | $      | 0.30   |  
|                                                          | Diluted                                                             |      | $      | 0.29   |   |   | $      | 0.28   |  
|Weighted average shares
    outstanding  Basic (000s)   |                                                                     |      | 30,015 |        |   |   | 29,326 |       
|Weighted average shares
    outstanding  Diluted (000s) |                                                                     |      | 34,258 |        |   |   | 33,465 |       

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





|                              |                             
|----------------------------- | ----------------------------
|4   HUB INTERNATIONAL LIMITED | INTERIM REPORTMARCH 31, 2004



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##### 



Hub International Limited

Consolidated Statements of Retained
Earnings


For the three months ended March 31, 2004
and 2003

(in thousands of U.S. dollars)


(Unaudited)


|                                            |  |      |        |      |  |   |        |  
|------------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | -
|                                            |  | 2004 |        | 2003
|                                            |  |      |        |     
|Retained earnings  Beginning of
    period |  | $    | 62,356 |      |  | $ | 31,915 |  
|Net earnings                                |  |      | 9,623  |      |  |   | 8,904  |  
|Dividends                                   |  |      | (1,525 | )    |  |   | (1,513 | )
|                                            |  |      |        |      |  |   |        |  
|Retained earnings  End of
    period       |  | $    | 70,454 |      |  | $ | 39,306 |  
|                                            |  |      |        |      |  |   |        |  

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





|                             |                               
|---------------------------- | ------------------------------
|INTERIM REPORTMARCH 31, 2004 | HUB INTERNATIONAL LIMITED    5



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##### 



Hub International Limited

Consolidated Statements of Cash
Flows


For the three months ended March 31, 2004
and 2003

(in thousands of U.S. dollars)


(Unaudited)


|                                                                 |                                                                     |      |        |         |   |   |         |         |  
|---------------------------------------------------------------- | ------------------------------------------------------------------- | ---- | ------ | ------- | - | - | ------- | ------- | -
|                                                                 |                                                                     | 2004 |        | 2003   
|                                                                 |                                                                     |      |        |        
|OPERATING ACTIVITIES                                             |                                                                     |      |        |         |   |   |         |        
|Net earnings                                                     |                                                                     | $    | 9,623  |         |   | $ | 8,904   |        
|Items not affecting working capital                              |                                                                     |      |        |         |   |   |         |        
|                                                                 | Amortization and depreciation                                       |      |        | 2,368   |   |   |         | 2,195   |  
|                                                                 | Loss/(gain) on disposal of property, equipment
    and other assets |      |        | 38      |   |   |         | (56     | )
|                                                                 | Loss on write-off of trademarks                                     |      |        | 2,587   |   |   |         |        |  
|                                                                 | Loss on put option liability                                        |      |        |        |   |   |         | 27      |  
|                                                                 | Non-cash stock based compensation                                   |      |        | 1,614   |   |   |         | 962     |  
|                                                                 | Future income taxes                                                 |      |        | (1,469  | ) |   |         | (301    | )
|Non-cash working capital items                                   |                                                                     |      |        |         |   |   |         |        
|                                                                 | Trust cash                                                          |      |        | 10,633  |   |   |         | 15,721  |  
|                                                                 | Accounts and other receivables                                      |      |        | 50,021  |   |   |         | 37,080  |  
|                                                                 | Prepaid expenses                                                    |      |        | 125     |   |   |         | (1,261  | )
|                                                                 | Accounts payable and accrued liabilities                            |      |        | (69,049 | ) |   |         | (50,508 | )
|                                                                 | Other assets                                                        |      |        | 128     |   |   |         |        |  
|                                                                 | Income taxes                                                        |      |        | 1,387   |   |   |         | 1,962   |  
|                                                                 |                                                                     |      |        |         |   |   |         |        
|Net cash flows from operating activities                         |                                                                     |      | 8,006  |         |   |   | 14,725  |        
|                                                                 |                                                                     |      |        |         |   |   |         |        
|INVESTING ACTIVITIES                                             |                                                                     |      |        |         |   |   |         |        
|Property and equipment  purchases                               |                                                                     |      | (1,396 | )       |   |   | (1,493  | )      
|Property and equipment  proceeds on
    sale                    |                                                                     |      | 67     |         |   |   | 7       |        
|Purchase of subsidiaries, net of cash received                   |                                                                     |      | (257   | )       |   |   | (11,221 | )      
|Sale of subsidiaries                                             |                                                                     |      |       |         |   |   | 291     |        
|Other assets                                                     |                                                                     |      | 560    |         |   |   | (24     | )      
|                                                                 |                                                                     |      |        |         |   |   |         |        
|Net cash flows used for investing activities                     |                                                                     |      | (1,026 | )       |   |   | (12,440 | )      
|                                                                 |                                                                     |      |        |         |   |   |         |        
|FINANCING ACTIVITIES                                             |                                                                     |      |        |         |   |   |         |        
|Long-term debt and capital leases 
    repayments               |                                                                     |      | (1,015 | )       |   |   | (698    | )      
|Share capital  issued for cash, net of
    issue costs          |                                                                     |      | 40     |         |   |   | (31     | )      
|                                                                 |                                                                     |      |        |         |   |   |         |        
|Net cash flows used for financing activities                     |                                                                     |      | (975   | )       |   |   | (729    | )      
|                                                                 |                                                                     |      |        |         |   |   |         |        
|Effect of exchange rate changes on cash and
    cash equivalents |                                                                     |      | (753   | )       |   |   | 1,025   |        
|                                                                 |                                                                     |      |        |         |   |   |         |        
|Change in cash and cash equivalents                              |                                                                     |      | 5,252  |         |   |   | 2,581   |        
|Cash and cash equivalents 
    Beginning of period              |                                                                     |      | 82,052 |         |   |   | 40,642  |        
|                                                                 |                                                                     |      |        |         |   |   |         |        
|Cash and cash equivalents  End of
    period                    |                                                                     | $    | 87,304 |         |   | $ | 43,223  |        
|                                                                 |                                                                     |      |        |         |   |   |         |        

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





|                              |                             
|----------------------------- | ----------------------------
|6   HUB INTERNATIONAL LIMITED | INTERIM REPORTMARCH 31, 2004



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##### 



Hub International Limited

Notes to Interim Consolidated Financial
Statements


For the three months ended March 31, 2004
and 2003 (unaudited) (in thousands of U.S. dollars, except per
share amounts or as otherwise indicated)



1.  Nature of 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 the Toronto
Stock Exchange (TSX: HBG).


2.  Summary of Significant
Accounting Policies

The interim consolidated financial statements do
not include all disclosures required by Canadian generally
accepted accounting principles (Canadian GAAP) for annual
financial statements and accordingly, should be read in
conjunction with the Companys consolidated financial
statements for the year ended December 31, 2003 as set out
on pages 39 to 68 of the Companys 2003 Annual Report on
Form 10-K. 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 Canadian GAAP using the same accounting
principles as were used for the Companys consolidated
financial statements for the year ended December 31, 2003.
The results of the operations are not necessarily indicative of
the operating results for the fiscal year or any future period.
These principles differ in certain respects from United States
generally accepted accounting principles (U.S. GAAP) and, to the
extent that they affect the Company, the differences are
described in note 13 Reconciliation to U.S. GAAP.


3.  Intangible Assets

As of March 31, 2004 and December 31,
2003 the gross carrying amount and accumulated amortization of
intangible assets other than goodwill were as follows:


|                                   |                           |                      |         |                         |  |       |        |          |  |              |         |         |  |  |         |         |  |   |       |       |  |  |         |         | 
|---------------------------------- | ------------------------- | -------------------- | ------- | ----------------------- |  | ----- | ------ | -------- |  | ------------ | ------- | ------- |  |  | ------- | ------- |  | - | ----- | ----- |  |  | ------- | ------- | 
|                                   |                           |                      |         |                        
|                                   |                           | As of March 31, 2004 |         | As of December 31, 2003
|                                   |                           |                      |         |                        
|                                   |                           | Gross                |         |                         |  | Gross |        |         
|                                   |                           | carrying             |         | Accumulated             |  |       |        | carrying |  | Accumulated  |         |        
|                                   |                           | amount               |         | amortization            |  | Total |        | amount   |  | amortization |         | Total  
|                                   |                           |                      |         |                         |  |       |        |          |  |              |         |        
|Definite life intangible assets:   |                           |                      |         |                         |  |       |        |          |  |              |         |         |  |  |         |         |  |   |       |       |  |  |         |        
|                                   | Customer relationships    |                      |         | $43,474                 |  |       |        | $6,244   |  |              |         | $37,230 |  |  |         | $43,422 |  |   | $     | 5,480 |  |  |         | $37,942 | 
|                                   | Non-competition covenants |                      |         | 474                     |  |       |        | 286      |  |              |         | 188     |  |  |         | 476     |  |   |       | 269   |  |  |         | 207     | 
|                                   | Trademarks                |                      |         |                        |  |       |        |         |  |              |         |        |  |  |         | 2,587   |  |   |       |      |  |  |         | 2,587   | 
|                                   |                           |                      |         |                         |  |       |        |          |  |              |         |         |  |  |         |         |  |   |       |       |  |  |         |        
|                                   |                           |                      | 43,948  |                         |  |       | 6,530  |          |  |              | 37,418  |         |  |  | 46,485  |         |  |   | 5,749 |       |  |  | 40,736  |        
|                                   |                           |                      |         |                         |  |       |        |          |  |              |         |         |  |  |         |         |  |   |       |       |  |  |         |        
|Indefinite life intangible assets: |                           |                      |         |                         |  |       |        |          |  |              |         |         |  |  |         |         |  |   |       |       |  |  |         |        
|                                   | Non-competition covenants |                      |         | 2,174                   |  |       |        |         |  |              |         | 2,174   |  |  |         | 2,167   |  |   |       |      |  |  |         | 2,167   | 
|                                   |                           |                      |         |                         |  |       |        |          |  |              |         |         |  |  |         |         |  |   |       |       |  |  |         |        
|Total                              |                           |                      | $46,122 |                         |  |       | $6,530 |          |  |              | $39,592 |         |  |  | $48,652 |         |  | $ | 5,749 |       |  |  | $42,903 |        
|                                   |                           |                      |         |                         |  |       |        |          |  |              |         |         |  |  |         |         |  |   |       |       |  |  |         |        

During the first quarter 2004 the Company adopted
a strategic plan to make use of the Hub brand
throughout the Company. Certain of the Companys
subsidiaries will change their names and as a result the Company
recognized a non-cash loss on the write-off of trademarks of
$2,587, before income taxes.





|                             |                               
|---------------------------- | ------------------------------
|INTERIM REPORTMARCH 31, 2004 | HUB INTERNATIONAL LIMITED    7



---



##### 



Additions during the three months ended
March 31, 2004 and 2003 were as follows:

|                                   |                           |      |    |      |  |   |     |     | 
|---------------------------------- | ------------------------- | ---- | -- | ---- |  | - | --- | --- | 
|                                   |                           | 2004 |    | 2003
|                                   |                           |      |    |     
|Definite life intangible assets:   |                           |      |    |      |  |   |     |    
|                                   | Customer relationships    |      | $  | 66   |  |   | $   | 370 | 
|Indefinite life intangible assets: |                           |      |    |      |  |   |     |    
|                                   | Non-competition covenants |      |    | 8    |  |   |     | 43  | 
|                                   |                           |      |    |      |  |   |     |    
|Total                              |                           | $    | 74 |      |  | $ | 413 |    
|                                   |                           |      |    |      |  |   |     |    

The Company is unable to estimate the useful life
of certain non-competition covenants. These indefinite life
intangible assets are reviewed annually for impairment. Once a
non-competition covenant is triggered, following the departure
of an employee from the Company, the Companys policy is to
amortize the related intangible asset over the period of the
contractual obligation.

The changes in the carrying amount of goodwill
for the three months ended March 31, 2004 and the year ended
December 31, 2003, are as follows:

|                                  |  |            |        |            |  |       |         |   |  |   |         |  
|--------------------------------- |  | ---------- | ------ | ---------- |  | ----- | ------- | - |  | - | ------- | -
|                                  |  | Operations |        | Operations |  |      
|                                  |  | in Canada  |        | in U.S.    |  | Total
|                                  |  |            |        |            |  |      
|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 |  
|Goodwill acquired during 2004     |  |            | 352    |            |  |       | 548     |   |  |   | 900     |  
|Cumulative translation adjustment |  |            | (1,272 | )          |  |       |        |   |  |   | (1,272  | )
|                                  |  |            |        |            |  |       |         |   |  |   |         |  
|Balance as of March 31, 2004      |  | $          | 91,159 |            |  | $     | 214,331 |   |  | $ | 305,490 |  
|                                  |  |            |        |            |  |       |         |   |  |   |         |  

Additions to goodwill and intangible assets
during the first quarter 2004 arose from the acquisition of a
book of business in Canada, and earn-out targets on prior year
acquisitions being met in the quarter.

For the three months ended March 31, 2004,
and 2003, amortization has been comprised of the following:

|                          |  |      |     |      |  |   |     | 
|------------------------- |  | ---- | --- | ---- |  | - | --- | 
|                          |  | 2004 |     | 2003
|                          |  |      |     |     
|Customer relationships    |  | $    | 764 |      |  | $ | 781 | 
|Non-competition covenants |  |      | 17  |      |  |   | 20  | 
|                          |  |      |     |      |  |   |     | 
|Total                     |  | $    | 781 |      |  | $ | 801 | 
|                          |  |      |     |      |  |   |     | 

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

|                          |  |      |       |      |  |      |       |      |  |      |       |  |  |   |       |  |  |   |       | 
|------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ----- |  |  | - | ----- |  |  | - | ----- | 
|                          |  | 2004 |       | 2005 |  | 2006 |       | 2007 |  | 2008
|                          |  |      |       |      |  |      |       |      |  |     
|Year ended December 31,   |  |      |       |      |  |      |       |      |  |      |       |  |  |   |       |  |  |   |       | 
|Customer relationships    |  | $    | 3,079 |      |  | $    | 3,079 |      |  | $    | 3,079 |  |  | $ | 3,079 |  |  | $ | 3,079 | 
|Non-competition covenants |  |      | 60    |      |  |      | 44    |      |  |      | 82    |  |  |   | 79    |  |  |   | 12    | 
|                          |  |      |       |      |  |      |       |      |  |      |       |  |  |   |       |  |  |   |       | 
|Total                     |  | $    | 3,139 |      |  | $    | 3,123 |      |  | $    | 3,161 |  |  | $ | 3,158 |  |  | $ | 3,091 | 
|                          |  |      |       |      |  |      |       |      |  |      |       |  |  |   |       |  |  |   |       | 





|                              |                             
|----------------------------- | ----------------------------
|8   HUB INTERNATIONAL LIMITED | INTERIM REPORTMARCH 31, 2004



---



##### 



4.  Debt

Long-term debt and capital leases


|                                                           |  |           |        |      |              |   |        |  
|---------------------------------------------------------- |  | --------- | ------ | ---- | ------------ | - | ------ | -
|                                                           |  | March 31, |        |      | December 31, |  
|                                                           |  | 2004      |        | 2003 |             
|                                                           |  |           |        |     
|Series A Senior Notes, with interest at
    5.71% (1)      |  | $         | 10,000 |      |              | $ | 10,000 |  
|Series B Senior Notes, with interest at
    6.16% (1)      |  |           | 55,000 |      |              |   | 55,000 |  
|Term loan, interest only at 10%, due February
    2007 (3) |  |           | 7,500  |      |              |   | 7,500  |  
|Various other notes payable and debt (4)                   |  |           | 4,805  |      |              |   | 5,649  |  
|Capital leases (4)                                         |  |           | 593    |      |              |   | 650    |  
|                                                           |  |           |        |      |              |   |        |  
|Long-term debt and capital leases                          |  |           | 77,898 |      |              |   | 78,799 |  
|Less current portion                                       |  |           | (2,777 | )    |              |   | (3,362 | )
|                                                           |  |           |        |      |              |   |        |  
|                                                           |  | $         | 75,121 |      |              | $ | 75,437 |  
|                                                           |  |           |        |      |              |   |        |  

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

|                                          |  |   |        | 
|----------------------------------------- |  | - | ------ | 
|For the twelve months ended March
    31, |  |   |        | 
|2005                                      |  | $ | 2,777  | 
|2006                                      |  |   | 1,641  | 
|2007                                      |  |   | 8,211  | 
|2008                                      |  |   | 90     | 
|2009                                      |  |   | 3,512  | 
|2010 and thereafter                       |  |   | 61,667 | 
|                                          |  |   |        | 
|                                          |  | $ | 77,898 | 
|                                          |  |   |        | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Senior Notes  As of March 31,
    2004 the Company has $65 million aggregate principal amount
    of unsecured senior notes outstanding. The senior notes were
    issued in two series: Series A represents $10 million
    aggregate principal amount of 5.71% senior notes with interest
    due semi-annually, and principal of $3,333 due annually,
    June 15, 2008 through June 15, 2010 and Series B
    represents $55 million aggregate principal amount of 6.16%
    senior notes with interest due semi-annually, and principal due
    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 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 March 31, 2004, $65 million was
    outstanding under these senior notes. The Company is in
    compliance with all financial covenants governing these notes.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 on the 5.71% senior
    notes and 6.16% senior notes in amounts of $10 million and
    $55 million, respectively, in order to ensure that the
    Company pays a current market interest rate on that portion of
    its borrowings. The Company accounts for the swap transaction
    using the synthetic instruments method under which the net
    interest expense on the swap and associated debt is reported in
    earnings as if it were a single, synthetic, financial
    instrument. As of March 31, 2004, the Company estimated the fair
    value of the swap was $0.2 million, which is not recognized
    in these financial statements. Accordingly, $0.2 million is
    the estimated amount that the Company would need to pay to
    terminate the swap as of March 31, 2004.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Revolving U.S. dollar LIBOR loan  This
    undrawn facility was renegotiated in April 2004. Under the new
    terms, the unsecured facility totals $75 million, bears
    interest at a floating rate of prime plus 1% or 112.5 basis
    points above LIBOR, which were 1.09% and 1.12% at March 31,
    2004 and December 31, 2003, respectively. The facility is
    available on a revolving basis for one year and expires on
    April 22, 2005 however if the revolving





|                             |                               
|---------------------------- | ------------------------------
|INTERIM REPORTMARCH 31, 2004 | HUB INTERNATIONAL LIMITED    9



---



##### 



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | 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 at March 31, 2004 and
    December 31, 2003, respectively. The Company is in
    compliance with all financial covenants governing this facility.                                                                                                                                                                                                                                                                                                             
|   
|(3) | This term loan is from an insurance carrier. The
    terms of the loan provide for an incentive arrangement whereby a
    credit can be earned that will reduce annual interest payments
    under the loan (based on target premiums placed with the
    carrier) and reduce the principal repayment due in February 2007
    (based on both target premiums placed with the carrier as well
    as the loss ratio on premiums placed with the carrier). Under
    this incentive arrangement both the annual interest payments as
    well as the principal payment can be reduced to zero. Credits
    earned for the year ended December 31, 2003 reduced
    interest payments to zero from $750. It is not yet determinable
    if a credit has been earned for 2004. Interest on this loan
    totaled $0.2 million for the three months ended
    March 31, 2004 and 2003.
|   
|(4) | Certain property and equipment have been pledged
    as collateral in amounts not less than the outstanding balance
    of the loan at March 31, 2004 and December 31, 2003,
    respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    




Demand U.S. dollar base rate loan

The Company has an undrawn $9.2 million
facility which expires on July 18, 2004 and bears interest
at the banks U.S. rate plus 50 basis points.
Borrowings on the facility are repayable on demand.

Subordinated convertible debentures

In connection with the acquisition of Kaye Group
Inc. (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 33% of the
Companys outstanding common shares as of March 31,
2004.

5.  Commitments and
Contingencies

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | In connection with the Companys executive
    share purchase plan, under certain circumstances the Company may
    be obligated to purchase loans for officers and employees from a
    Canadian chartered bank totaling $4,307 and $4,513 as of
    March 31, 2004 and December 31, 2003, respectively, to
    assist in purchasing common shares of the Company. As
    collateral, the employees have pledged 466,000 and 478,000
    common shares as of March 31, 2004 and December 31,
    2003, respectively, which have a market value of $8,619 and
    $8,105 as of March 31, 2004 and December 31, 2003,
    respectively. Interest on the loans in the amount of $51 and $68
    for the three months ended March 31, 2004 and 2003,
    respectively was paid by the Company and is included in
    compensation expense.
|   
|(b) | 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
    March 31, 2004, 63,000 shares have been released from
    escrow.                                                                                                                                                                                                                                                                                                                                                                                                                                                          



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In connection with other various acquisitions
    completed through March 31, 2004, the Company may be
    obligated to pay contingent consideration up to a maximum sum of
    approximately $7.1 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





|                               |                             
|------------------------------ | ----------------------------
|10   HUB INTERNATIONAL LIMITED | INTERIM REPORTMARCH 31, 2004



---



##### 



| |                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | contingency is resolved. In connection with
    contingent consideration earned as at March 31, 2004, the
    financial statements reflect a liability to pay cash of $514 and
    to issue common shares valued at approximately $44 as of
    March 31, 2004.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(c) | Subsequent to March 31, 2004, Kaye Insurance
    Associates, Inc. (Kaye Insurance), a subsidiary of
    the Company, received a subpoena from the Office of the Attorney
    General of the State of New York seeking information regarding
    certain compensation agreements between insurance brokers and
    insurance companies. The New York Attorney General subpoenaed
    information on such compensation agreements from several other
    major insurance brokers as well. Such compensation agreements,
    also known as contingent agreements, between insurance companies
    and brokers are a long- standing and common practice within the
    insurance industry. Kaye Insurance has a practice of disclosing
    such agreements to its clients, including on its invoices to
    clients and on its web site. In addition, the Company discloses
    the arrangements in its public filings. The Company will fully
    cooperate with this inquiry. While it is not possible to predict
    the outcome of this investigation, if such compensation
    agreements were to be restricted or no longer permitted, the
    Companys results of operations may be materially adversely
    affected.
|   
|(d) | In the ordinary course of business, the Company
    and its subsidiaries are subject to various claims and lawsuits
    consisting primarily of alleged errors and omissions in
    connection with the placement of insurance. In the opinion of
    management, the ultimate resolution of all asserted and
    potential claims and lawsuits will not have a material adverse
    effect on the consolidated financial position or results of
    operations of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

6.  Shareholders
Equity

Share capital


At March 31, 2004 and December 31,
2003, there were an unlimited number of non-voting, preferred
shares authorized, issuable in series on such terms and
conditions as set by the Board of Directors, of which no shares
were issued. At March 31, 2004 and December 31, 2003,
there were an unlimited number of common shares authorized, of
which 30,194 and 30,143 were issued and outstanding as at
March 31, 2004 and December 31, 2003, respectively.

|                                                        |  |               |        |   |        |   |         |  
|------------------------------------------------------- |  | ------------- | ------ | - | ------ | - | ------- | -
|                                                        |  |              
|                                                        |  | Common shares
|                                                        |  | Outstanding  
|                                                        |  |              
|                                                        |  |              
|                                                        |  | (000s)       |        |   | Amount
|                                                        |  |               |        |  
|Balance, December 31, 2003.                             |  |               | 30,143 |   |        | $ | 254,845 |  
|Repurchases of executive share purchase plan
    shares |  |               | (1     | ) |        |   | (16     | )
|Shares issued for contingent consideration              |  |               | 43     |   |        |   | 721     |  
|Cancellation of shares                                  |  |               | (2     | ) |        |   | (26     | )
|Stock options exercised                                 |  |               | 11     |   |        |   | 166     |  
|                                                        |  |               |        |   |        |   |         |  
|Balance, March 31, 2004.                                |  |               | 30,194 |   |        | $ | 255,690 |  
|                                                        |  |               |        |   |        |   |         |  

Issuable shares

|                                      |  |               |     |        |  |   |      |  
|------------------------------------- |  | ------------- | --- | ------ |  | - | ---- | -
|                                      |  |              
|                                      |  | Common shares
|                                      |  |              
|                                      |  | (000s)       |     | Amount
|                                      |  |               |     |       
|Balance, December 31, 2003            |  |               | 43  |        |  | $ | 721  |  
|Issued                                |  |               | (43 | )      |  |   | (721 | )
|Issuable for contingent consideration |  |               | 2   |        |  |   | 44   |  
|                                      |  |               |     |        |  |   |      |  
|Balance, March 31, 2004               |  |               | 2   |        |  | $ | 44   |  
|                                      |  |               |     |        |  |   |      |  





|                             |                                
|---------------------------- | -------------------------------
|INTERIM REPORTMARCH 31, 2004 | HUB INTERNATIONAL LIMITED    11



---



##### 



Contributed surplus

|                                  |  |        |       | 
|--------------------------------- |  | ------ | ----- | 
|                                  |  | Amount
|                                  |  |       
|Balance, December 31, 2003        |  | $      | 4,806 | 
|Non-cash stock based compensation |  |        | 3,020 | 
|Other                             |  |        | 56    | 
|                                  |  |        |       | 
|Balance, March 31, 2004           |  | $      | 7,882 | 
|                                  |  |        |       | 

Cumulative translation account

|                                                                        |  |        |        |  
|----------------------------------------------------------------------- |  | ------ | ------ | -
|                                                                        |  | Amount
|                                                                        |  |       
|Balance December 31, 2003                                               |  | $      | 20,062 |  
|Translation of self-sustaining foreign operations                       |  |        | (1,303 | )
|Translation of debt financing of self-sustaining
    foreign operations |  |        | 11     |  
|                                                                        |  |        |        |  
|Balance, March 31, 2004                                                 |  | $      | 18,770 |  
|                                                                        |  |        |        |  

7.  Equity Incentive Plan

A summary of the stock option activity and
related information for the three months ended March 31,
2004 consists of the following:


|                           |  |         |       |                |                  |   |       | 
|-------------------------- |  | ------- | ----- | -------------- | ---------------- | - | ----- | 
|                           |  | Number  |       |                | Weighted-average
|                           |  | (000s) |       | exercise price
|                           |  |         |       |               
|Balance, December 31, 2003 |  |         | 1,498 |                |                  | $ | 15.64 | 
|Granted                    |  |         |      |                |                  | $ |      | 
|Exercised                  |  |         | (11   | )              |                  | $ | 14.70 | 
|Forfeited                  |  |         |      |                |                  | $ |      | 
|                           |  |         |       |                |                  |   |       | 
|Balance, March 31, 2004    |  |         | 1,487 |                |                  | $ | 15.35 | 
|                           |  |         |       |                |                  |   |       | 

The following table summarizes information about
the stock options outstanding at:

|               |  |                |       |                   |  |             |            |             |  |                  |     |             |  |  |       |  |  |  |            |  |  |  |     | 
|-------------- |  | -------------- | ----- | ----------------- |  | ----------- | ---------- | ----------- |  | ---------------- | --- | ----------- |  |  | ----- |  |  |  | ---------- |  |  |  | --- | 
|               |  |                |       |                  
|               |  | March 31, 2004 |       | December 31, 2003
|               |  |                |       |                  
|               |  | Number         |       | Weighted-average  |  | Number      |            | Number      |  | Weighted-average |     | Number     
|               |  | outstanding    |       | remaining         |  | exercisable |            | outstanding |  | remaining        |     | exercisable
|               |  | (000s)        |       | contractual life  |  | (000s)     |            | (000s)     |  | contractual life |     | (000s)    
|Exercise price |  |                |       |                   |  |             |            |             |  |                  |     |            
|$15.67         |  |                | 1,226 |                   |  |             | 5.21 years |             |  |                  | 417 |             |  |  | 1,230 |  |  |  | 5.43 years |  |  |  | 417 | 
|$13.79         |  |                | 261   |                   |  |             | 5.92 years |             |  |                  | 6   |             |  |  | 268   |  |  |  | 6.08 years |  |  |  | 6   | 
|               |  |                |       |                   |  |             |            |             |  |                  |     |             |  |  |       |  |  |  |            |  |  |  |     | 
|               |  |                | 1,487 |                   |  |             | 5.34 years |             |  |                  | 423 |             |  |  | 1,498 |  |  |  | 5.55 years |  |  |  | 423 | 
|               |  |                |       |                   |  |             |            |             |  |                  |     |             |  |  |       |  |  |  |            |  |  |  |     | 

Non-cash stock based compensation related to
stock options of $1,614 and $962 for the three months ended
March 31, 2004 and 2003, respectively, was expensed with
offsetting credits to contributed surplus. The Company
recognizes the fair value of stock based compensation as an
expense over the period in which entitlement to the compensation
vests.





|                               |                             
|------------------------------ | ----------------------------
|12   HUB INTERNATIONAL LIMITED | INTERIM REPORTMARCH 31, 2004



---



##### 



Non-cash stock based compensation for the three
months ended March 31, 2004 and 2003 is comprised of the
following:

|                                   |                                                   |      |       |      |  |   |     |     | 
|---------------------------------- | ------------------------------------------------- | ---- | ----- | ---- |  | - | --- | --- | 
|                                   |                                                   | 2004 |       | 2003
|                                   |                                                   |      |       |     
|Non-cash stock based compensation: |                                                   |      |       |      |  |   |     |    
|                                   | Stock options granted June 2002                   |      | $     | 491  |  |   | $   | 509 | 
|                                   | Stock options granted February 2003               |      |       | 102  |  |   |     | 104 | 
|                                   | Stock based compensation granted for 2003 bonuses |      |       | 633  |  |   |     | 349 | 
|                                   | Restricted share units                            |      |       | 388  |  |   |     |    | 
|                                   |                                                   |      |       |      |  |   |     |    
|                                   |                                                   | $    | 1,614 |      |  | $ | 962 |    
|                                   |                                                   |      |       |      |  |   |     |    

8.  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. Certain stock
options under the equity incentive plan in which the average
market price exceeds the exercise price of the Companys
common shares for the period that the options were outstanding
were dilutive for the three months ended March 31, 2004 and
were included in the calculation of diluted earnings per share.
Earnings per common share have been calculated as follows:


|                                                                |                                                                              |      |        |       |  |   |        |       | 
|--------------------------------------------------------------- | ---------------------------------------------------------------------------- | ---- | ------ | ----- |  | - | ------ | ----- | 
|                                                                |                                                                              | 2004 |        | 2003 
|                                                                |                                                                              |      |        |      
|Net earnings (numerator)                                        |                                                                              | $    | 9,623  |       |  | $ | 8,904  |      
|Effect of dilutive securities:                                  |                                                                              |      |        |       |  |   |        |      
|                                                                | Interest on 8.5% subordinated convertible
    debentures (net of income tax) |      |        | 475   |  |   |        | 471   | 
|                                                                |                                                                              |      |        |       |  |   |        |      
|Net earnings plus assumed conversions (numerator)               |                                                                              | $    | 10,098 |       |  | $ | 9,375  |      
|                                                                |                                                                              |      |        |       |  |   |        |      
|Weighted average shares outstanding 
    Basic (denominator)   |                                                                              |      | 30,015 |       |  |   | 29,326 |      
|Effect of dilutive securities:                                  |                                                                              |      |        |       |  |   |        |      
|                                                                | 8.5% subordinated convertible debentures                                     |      |        | 2,705 |  |   |        | 3,210 | 
|                                                                | Stock options                                                                |      |        | 1,077 |  |   |        |      | 
|                                                                | Put options                                                                  |      |        |      |  |   |        | 730   | 
|                                                                | Restricted share units                                                       |      |        | 326   |  |   |        |      | 
|                                                                | Retractable shares                                                           |      |        | 133   |  |   |        | 196   | 
|                                                                | Issuable shares                                                              |      |        | 2     |  |   |        | 3     | 
|                                                                |                                                                              |      |        |       |  |   |        |      
|Weighted average shares outstanding 
    Diluted (denominator) |                                                                              |      | 34,258 |       |  |   | 33,465 |      
|                                                                |                                                                              |      |        |       |  |   |        |      
|Earnings per common share:                                      |                                                                              |      |        |       |  |   |        |      
|                                                                | Basic                                                                        |      | $      | 0.32  |  |   | $      | 0.30  | 
|                                                                | Diluted                                                                      |      | $      | 0.29  |  |   | $      | 0.28  | 

9.  Income Taxes

Income taxes for the three months ended
March 31, 2004 and 2003 amounted to $5.3 million and
$5.4 million, respectively, resulting in an effective tax
rate of 35.4% and 37.6% in 2004 and 2003, respectively. The
decrease in our effective tax rate was primarily the result of a
reduction in Canadian tax rates.






|                             |                                
|---------------------------- | -------------------------------
|INTERIM REPORTMARCH 31, 2004 | HUB INTERNATIONAL LIMITED    13



---



##### 



10. Interest and Income Taxes
Paid

Interest and income taxes paid for the three
months ended March 31, 2004 and 2003 were:


|                  |  |      |       |      |  |   |       | 
|----------------- |  | ---- | ----- | ---- |  | - | ----- | 
|                  |  | 2004 |       | 2003
|                  |  |      |       |     
|Interest paid     |  | $    | 161   |      |  | $ | 532   | 
|Income taxes paid |  | $    | 5,381 |      |  | $ | 4,444 | 

11. 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.






|                               |                             
|------------------------------ | ----------------------------
|14   HUB INTERNATIONAL LIMITED | INTERIM REPORTMARCH 31, 2004



---



##### 



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

|                                            |  |                                      |        |      |      |   |        |              |  |   |        |   |  |      |        |   |              |   |        |   |  |   |        |  
|------------------------------------------- |  | ------------------------------------ | ------ | ---- | ---- | - | ------ | ------------ |  | - | ------ | - |  | ---- | ------ | - | ------------ | - | ------ | - |  | - | ------ | -
|                                            |  |                                     
|                                            |  | For the three months ended March 31,
|                                            |  |                                     
|                                            |  |                                      |        |     
|                                            |  | 2004                                 |        | 2003
|                                            |  |                                      |        |     
|                                            |  | Canada                               |        |      | U.S. |   |        | Consolidated |  |   | Canada |   |  | U.S. |        |   | Consolidated |  
|                                            |  |                                      |        |      |      |   |        |              |  |   |        |  
|Revenue                                     |  |                                      |        |      |      |   |        |              |  |   |        |   |  |      |        |   |              |   |        |   |  |   |        |  
|Brokerage                                   |  | $                                    | 30,469 |      |      | $ | 48,776 |              |  | $ | 79,245 |   |  | $    | 23,564 |   |              | $ | 45,292 |   |  | $ | 68,856 |  
|Corporate                                   |  |                                      | 5,484  |      |      |   | 553    |              |  |   | 6,037  |   |  |      | 5,650  |   |              |   | 535    |   |  |   | 6,185  |  
|Elimination of intra-segment revenue        |  |                                      | (5,388 | )    |      |   | (545   | )            |  |   | (5,933 | ) |  |      | (5,616 | ) |              |   | (548   | ) |  |   | (6,164 | )
|                                            |  |                                      |        |      |      |   |        |              |  |   |        |   |  |      |        |   |              |   |        |   |  |   |        |  
|                                            |  | $                                    | 30,565 |      |      | $ | 48,784 |              |  | $ | 79,349 |   |  | $    | 23,598 |   |              | $ | 45,279 |   |  | $ | 68,877 |  
|                                            |  |                                      |        |      |      |   |        |              |  |   |        |   |  |      |        |   |              |   |        |   |  |   |        |  
|Net earnings (loss) before income
    taxes |  |                                      |        |      |      |   |        |              |  |   |        |   |  |      |        |   |              |   |        |   |  |   |        |  
|Brokerage                                   |  | $                                    | 6,377  |      |      | $ | 10,993 |              |  | $ | 17,370 |   |  | $    | 1,949  |   |              | $ | 12,995 |   |  | $ | 14,944 |  
|Corporate                                   |  |                                      | 1,214  |      |      |   | (3,692 | )            |  |   | (2,478 | ) |  |      | 2,512  |   |              |   | (3,192 | ) |  |   | (680   | )
|                                            |  |                                      |        |      |      |   |        |              |  |   |        |   |  |      |        |   |              |   |        |   |  |   |        |  
|                                            |  | $                                    | 7,591  |      |      | $ | 7,301  |              |  | $ | 14,892 |   |  | $    | 4,461  |   |              | $ | 9,803  |   |  | $ | 14,264 |  
|                                            |  |                                      |        |      |      |   |        |              |  |   |        |   |  |      |        |   |              |   |        |   |  |   |        |  
|Income tax expense (benefit) 
    current  |  |                                      |        |      |      |   |        |              |  |   |        |   |  |      |        |   |              |   |        |   |  |   |        |  
|Brokerage                                   |  | $                                    | 2,277  |      |      | $ | 5,825  |              |  | $ | 8,102  |   |  | $    | 668    |   |              | $ | 5,771  |   |  | $ | 6,439  |  
|Corporate                                   |  |                                      | 67     |      |      |   | (1,431 | )            |  |   | (1,364 | ) |  |      | 464    |   |              |   | (1,242 | ) |  |   | (778   | )
|                                            |  |                                      |        |      |      |   |        |              |  |   |        |   |  |      |        |   |              |   |        |   |  |   |        |  
|                                            |  | $                                    | 2,344  |      |      | $ | 4,394  |              |  | $ | 6,738  |   |  | $    | 1,132  |   |              | $ | 4,529  |   |  | $ | 5,661  |  
|                                            |  |                                      |        |      |      |   |        |              |  |   |        |   |  |      |        |   |              |   |        |   |  |   |        |  
|Income tax expense (benefit) 
    future   |  |                                      |        |      |      |   |        |              |  |   |        |   |  |      |        |   |              |   |        |   |  |   |        |  
|Brokerage                                   |  | $                                    | (47    | )    |      | $ | (1,362 | )            |  | $ | (1,409 | ) |  | $    | 153    |   |              | $ | (560   | ) |  | $ | (407   | )
|Corporate                                   |  |                                      | (61    | )    |      |   | 1      |              |  |   | (60    | ) |  |      | (19    | ) |              |   | 125    |   |  |   | 106    |  
|                                            |  |                                      |        |      |      |   |        |              |  |   |        |   |  |      |        |   |              |   |        |   |  |   |        |  
|                                            |  | $                                    | (108   | )    |      | $ | (1,361 | )            |  | $ | (1,469 | ) |  | $    | 134    |   |              | $ | (435   | ) |  | $ | (301   | )
|                                            |  |                                      |        |      |      |   |        |              |  |   |        |   |  |      |        |   |              |   |        |   |  |   |        |  
|Net earnings (loss)                         |  |                                      |        |      |      |   |        |              |  |   |        |   |  |      |        |   |              |   |        |   |  |   |        |  
|Brokerage                                   |  | $                                    | 4,147  |      |      | $ | 6,530  |              |  | $ | 10,677 |   |  | $    | 1,128  |   |              | $ | 7,784  |   |  | $ | 8,912  |  
|Corporate                                   |  |                                      | 1,208  |      |      |   | (2,262 | )            |  |   | (1,054 | ) |  |      | 2,067  |   |              |   | (2,075 | ) |  |   | (8     | )
|                                            |  |                                      |        |      |      |   |        |              |  |   |        |   |  |      |        |   |              |   |        |   |  |   |        |  
|                                            |  | $                                    | 5,355  |      |      | $ | 4,268  |              |  | $ | 9,623  |   |  | $    | 3,195  |   |              | $ | 5,709  |   |  | $ | 8,904  |  
|                                            |  |                                      |        |      |      |   |        |              |  |   |        |   |  |      |        |   |              |   |        |   |  |   |        |  
|Amortization of
    intangible assets       |  | $                                    | 27     |      |      | $ | 754    |              |  | $ | 781    |   |  | $    | 11     |   |              | $ | 790    |   |  | $ | 801    |  
|Additions to property and equipment         |  | $                                    | 513    |      |      | $ | 883    |              |  | $ | 1,396  |   |  | $    | 1,000  |   |              | $ | 274    |   |  | $ | 1,274  |  
|Depreciation                                |  | $                                    | 642    |      |      | $ | 945    |              |  | $ | 1,587  |   |  | $    | 482    |   |              | $ | 912    |   |  | $ | 1,394  |  
|Interest income                             |  | $                                    | 297    |      |      | $ | 165    |              |  | $ | 462    |   |  | $    | 186    |   |              | $ | 242    |   |  | $ | 428    |  
|Interest expense                            |  | $                                    | 1,393  |      |      | $ | 267    |              |  | $ | 1,660  |   |  | $    | 1,059  |   |              | $ | 308    |   |  | $ | 1,367  |  





|                             |                                
|---------------------------- | -------------------------------
|INTERIM REPORTMARCH 31, 2004 | HUB INTERNATIONAL LIMITED    15



---



##### 



|                    |  |                                            |         |      |      |   |         |              |  |   |         |  |  |      |         |  |              |   |         |  |  |   |         | 
|------------------- |  | ------------------------------------------ | ------- | ---- | ---- | - | ------- | ------------ |  | - | ------- |  |  | ---- | ------- |  | ------------ | - | ------- |  |  | - | ------- | 
|                    |  |                                           
|                    |  | As of March 31, 2004 and December 31, 2003
|                    |  |                                           
|                    |  |                                            |         |     
|                    |  | 2004                                       |         | 2003
|                    |  |                                            |         |     
|                    |  | Canada                                     |         |      | U.S. |   |         | Consolidated |  |   | Canada  |  |  | U.S. |         |  | Consolidated |  
|                    |  |                                            |         |      |      |   |         |              |  |   |         | 
|Identifiable assets |  |                                            |         |      |      |   |         |              |  |   |         |  |  |      |         |  |              |   |         |  |  |   |         | 
|Brokerage           |  | $                                          | 159,544 |      |      | $ | 398,165 |              |  | $ | 557,709 |  |  | $    | 176,653 |  |              | $ | 442,517 |  |  | $ | 619,170 | 
|Corporate           |  |                                            | 64,949  |      |      |   | 17,025  |              |  |   | 81,974  |  |  |      | 65,316  |  |              |   | 16,117  |  |  |   | 81,433  | 
|                    |  |                                            |         |      |      |   |         |              |  |   |         |  |  |      |         |  |              |   |         |  |  |   |         | 
|                    |  | $                                          | 224,493 |      |      | $ | 415,190 |              |  | $ | 639,683 |  |  | $    | 241,969 |  |              | $ | 458,634 |  |  | $ | 700,603 | 
|                    |  |                                            |         |      |      |   |         |              |  |   |         |  |  |      |         |  |              |   |         |  |  |   |         | 

12. Related Party Transactions

In the three months ended March 31, 2004 and
2003, respectively, the Company had transactions with and
recorded revenue from the following related parties:


|                                  |  |      |       |      |  |   |       | 
|--------------------------------- |  | ---- | ----- | ---- |  | - | ----- | 
|                                  |  | 2004 |       | 2003
|                                  |  |      |       |     
|Northbridge Financial Corporation |  | $    | 4,458 |      |  | $ | 3,419 | 
|Crum & Forster Holdings, Inc.     |  |      | 183   |      |  |   | 217   | 
|Fairfax Inc.                      |  |      | 1,432 |      |  |   | 2,094 | 
|                                  |  |      |       |      |  |   |       | 
|                                  |  | $    | 6,073 |      |  | $ | 5,730 | 
|                                  |  |      |       |      |  |   |       | 

As of March 31, 2004 and December 31,
2003, the Company had accounts receivable and accounts payable
balances with the above related parties in the amounts of $4,486
and $8,264 respectively, at March 31, 2004 and $3,185 and
$17,999 respectively, at December 31, 2003. 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 the Companys common shares as of
March 31, 2004.

As of March 31, 2004 and December 31,
2003 subordinated convertible debentures of $35,000 were due to
related parties.

During the three months ended March 31, 2004
and 2003, the Company incurred expenses related to rental of
premises from related parties in the amount of $430, and $486,
respectively. At March 31, 2004 and December 31, 2003
the Company also had receivables due from related parties in the
amount of $2,879 and $3,530, respectively, of which the majority
were loans to employees to enable them to purchase the
Companys common shares. Of these accounts receivable, as
of March 31, 2004 and December 31, 2003, $1,905 and
$1,918, respectively, were related to Company loans to employees
to purchase shares under the executive share purchase plan. As
collateral, the employees have pledged 152,000 and 153,000
common shares as of March 31, 2004 and December 31,
2003, respectively, which have a market value of $2,806 and
$2,590 as of March 31, 2004 and December 31, 2003,
respectively.

13. 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.





|                               |                             
|------------------------------ | ----------------------------
|16   HUB INTERNATIONAL LIMITED | INTERIM REPORTMARCH 31, 2004



---



##### 



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 three months ended March 31, 2004 and 2003:

|                                                       |                                                                      |      |       |        |   |   |        |       |  
|------------------------------------------------------ | -------------------------------------------------------------------- | ---- | ----- | ------ | - | - | ------ | ----- | -
|                                                       |                                                                      | 2004 |       | 2003  
|                                                       |                                                                      |      |       |       
|Net earnings for the period based on Canadian GAAP     |                                                                      | $    | 9,623 |        |   | $ | 8,904  |      
|Adjustment to put option liability (2)                 |                                                                      |      |      |        |   |   | (42    | )    
|                                                       |                                                                      |      |       |        |   |   |        |      
|Net earnings for the period based on U.S.
    GAAP (3) |                                                                      | $    | 9,623 |        |   | $ | 8,862  |      
|Other comprehensive income: (4)                        |                                                                      |      |       |        |   |   |        |      
|                                                       | Unrealized gain (loss), net of tax of
    $(23)  Q1/04, $54  Q1/03 |      |       | 35     |   |   |        | (85   | )
|                                                       | Foreign currency translation adjustment                              |      |       | (1,292 | ) |   |        | 7,398 |  
|                                                       |                                                                      |      |       |        |   |   |        |      
|Comprehensive income based on U.S. GAAP (4)            |                                                                      | $    | 8,366 |        |   | $ | 16,175 |      
|                                                       |                                                                      |      |       |        |   |   |        |      
|Basic earnings per share based on U.S. GAAP            |                                                                      | $    | 0.32  |        |   | $ | 0.30   |      
|Diluted earnings per share based on U.S. GAAP          |                                                                      | $    | 0.29  |        |   | $ | 0.28   |      

Shareholders equity

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

|                                                |                                                              |           |         |      |              |   |         |    | 
|----------------------------------------------- | ------------------------------------------------------------ | --------- | ------- | ---- | ------------ | - | ------- | -- | 
|                                                |                                                              | March 31, |         |      | December 31, |  
|                                                |                                                              | 2004      |         | 2003
|                                                |                                                              |           |         |     
|Shareholders equity based on Canadian GAAP     |                                                              | $         | 352,840 |      |              | $ | 342,790 |   
|Adjustment to investment held for sale (1)      |                                                              |           | (1,716  | )    |              |   | (1,716  | ) 
|Accumulated other comprehensive income:         |                                                              |           |         |      |              |   |         |   
|                                                | Unrealized gain net of tax of $(81) 
    2004, $(56)  2003 |           |         | 131  |              |   |         | 90 | 
|                                                |                                                              |           |         |      |              |   |         |   
|Shareholders equity based on U.S.
    GAAP (3) |                                                              | $         | 351,255 |      |              | $ | 341,164 |   
|                                                |                                                              |           |         |      |              |   |         |   




Notes:



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Under Canadian GAAP, Old Lyme Insurance Company
    of Rhode Island Inc. and Old Lyme Insurance Company, Ltd.
    (collectively, 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.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Under Canadian GAAP, the fair value of the put
    options (determined using the Black-Scholes model) issued in
    connection with the Flanagan acquisition on May 31, 2001
    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





|                             |                                
|---------------------------- | -------------------------------
|INTERIM REPORTMARCH 31, 2004 | HUB INTERNATIONAL LIMITED    17



---



##### 



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | redemption value of the shares to which the put
    options are attached was reclassified as mezzanine equity
    outside of shareholders equity as a result of the put
    options granted on those shares to certain of the selling
    shareholders. Only July 1, 2003, we 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 the Flanagan acquisition. 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 March 31,
    2004 no put options were outstanding on our common shares.                                                                                                                                  



|    |                                                                                                                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | The condensed consolidated statements of earnings
    and cash flows for the three months ended March 31, 2004
    and 2003 and the condensed consolidated balance sheets as at
    March 31, 2004 and December 31, 2003 under U.S. GAAP
    are as follows:

|                                                                 |  |           |        |           |  |   |         |  
|---------------------------------------------------------------- |  | --------- | ------ | --------- |  | - | ------- | -
|                                                                 |  | March 31, |        | March 31,
|                                                                 |  | 2004      |        | 2003     
|                                                                 |  |           |        |          
|Condensed consolidated statements of earnings:                   |  |           |        |           |  |   |         |  
|Revenue                                                          |  | $         | 79,349 |           |  | $ | 68,877  |  
|Net earnings before income taxes                                 |  | $         | 14,892 |           |  | $ | 14,232  |  
|Net earnings                                                     |  | $         | 9,623  |           |  | $ | 8,862   |  
|Condensed consolidated statements of cash flows:                 |  |           |        |           |  |   |         |  
|Cash provided by operating activities                            |  | $         | 8,006  |           |  | $ | 14,720  |  
|Cash used in investing activities                                |  | $         | (1,026 | )         |  | $ | (12,440 | )
|Cash used in financing activities                                |  | $         | (975   | )         |  | $ | (724    | )
|Effect of exchange rate changes on cash and cash
    equivalents |  | $         | (753   | )         |  | $ | 1,025   |  

|                                       |  |           |         |              |  |   |         | 
|-------------------------------------- |  | --------- | ------- | ------------ |  | - | ------- | 
|                                       |  | March 31, |         | December 31,
|                                       |  | 2004      |         | 2003        
|                                       |  |           |         |             
|Condensed consolidated balance sheets: |  |           |         |              |  |   |         | 
|Total current assets                   |  | $         | 258,659 |              |  | $ | 314,396 | 
|Total assets (5)                       |  | $         | 637,971 |              |  | $ | 696,440 | 
|Total current liabilities              |  | $         | 163,035 |              |  | $ | 233,448 | 
|Total liabilities (5)                  |  | $         | 286,716 |              |  | $ | 355,276 | 
|Total shareholders equity             |  | $         | 351,255 |              |  | $ | 341,164 | 



|    |                                                                                                                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | 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





|                               |                             
|------------------------------ | ----------------------------
|18   HUB INTERNATIONAL LIMITED | INTERIM REPORTMARCH 31, 2004



---



##### 



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | (losses) on debt and equity securities and
    foreign currency translation adjustments. Under Canadian GAAP
    unrealized gains and losses (arising from a temporary decline in
    value) equity securities are not recorded and foreign currency
    translation adjustments are presented as movements in the
    cumulative translation account. Certain disclosures required by
    SFAS 115, Accounting for Certain Investments in Debt and
    Equity Securities, have not been included as such
    disclosures related to the Companys investments in debt
    and equity securities are immaterial to the overall financial
    statement presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(5) | Under Canadian GAAP, the Company accounts for the
    interest rate swap transaction which converted fixed rate
    interest payments of 5.71% and 6.16% on the Senior Notes of
    $10 million and $55 million, respectively, using the
    synthetic instruments method. Under this method, the Company
    reports in earnings the net interest expense on the swap and
    associated debt as if it were a single, synthetic, financial
    instrument. The fair value of the swap, estimated at
    $0.2 million, is not recognized in the Companys
    Canadian GAAP financial statements. Under US GAAP, the Company
    has designated the swap transaction of a hedge of changes in the
    fair value of its fixed rate debt caused by changes in interest
    rates. Under SFAS 133, Accounting for Derivative Instruments
    and Hedging Activities, the Company records the swap at its
    fair value. Changes in fair value of the 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.

14. Subsequent Events



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | On March 15, 2004 the Company announced that
    it has signed a definitive agreement to purchase Talbot
    Financial Corporation, based in New Mexico. The transaction is
    expected to close before the end of the third quarter of 2004.
    The purchase price is expected to be approximately
    $90.0 million in cash. In addition, the Company estimates
    it will incur non-cash stock based compensation expense related
    to the acquisition of $26.0 million, which will be
    amortized to earnings over a 3 year period.



|    |                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | On April 26, 2004 the Company announced that
    it had signed a share purchase agreement to acquire Bush, Cotton
    & Scott LLC based in Bothell, Washington.





|                             |                                
|---------------------------- | -------------------------------
|INTERIM REPORTMARCH 31, 2004 | HUB INTERNATIONAL LIMITED    19



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##### 





|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis of
    Financial Condition and Results of Operations

The following discussion and analysis should
be read in conjunction with our unaudited 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-Q. 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 13
to our unaudited 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.

As of March 31, 2004, 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.

In accordance with our strategic plan, we have
entered into an agreement to acquire Talbot Financial
Corporation, based in New Mexico, for $90 million, plus
$26 million in non-cash stock based compensation that will
be amortized over three years. We expect to complete the
acquisition of Talbot in the third quarter of 2004. In addition,
we acquired Bush, Cotton & Scott, LLC, based in
Washington, in April 2004.

We generally acquire larger hub
brokerages for a combination of cash and shares. 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 shares, 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
March 31, 2004, senior managers of the company and its hubs
owned approximately 4,167,563 shares, or 12.6%, of shares
outstanding, while all employees as a group held approximately
9,355,974 shares, or 26%, of total shares outstanding.

We have acquired 95 brokerages in Canada and the
United States, with substantially all of our large acquisitions
focused in the United States over the past four years.
Accordingly, our revenue base has shifted increasingly to the
United States. United States revenue has grown to 61% of our
total in the first quarter 2004 from 23% in the first quarter
2000, reflecting primarily acquisition growth but also organic
growth. Organic growth is similar to the same-store-salescalculation 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.





|                               |                             
|------------------------------ | ----------------------------
|20   HUB INTERNATIONAL LIMITED | INTERIM REPORTMARCH 31, 2004



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##### 



We have a diverse mix of products, services,
insurer relationships and distribution channels, and as a
result, our revenue and profitability levels are not usually
highly susceptible to major changes related to a single product
or service. However, general economic trends may influence both
overall insurance rates  and commissions 
and availability or costs of individual types of coverage, which
in turn may affect our revenue and profitability levels.

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 attacks 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
and through the first quarter 2004, the Canadian market remained
firm, but the U.S. market experienced some softening of premium
rates for property and casualty coverage. However, rates for
liability, health and other types of coverage continued to
experience increases. Looking toward the remainder of 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 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 total revenue increased $10.5 million,
or 15%, to $79.3 million for the quarter. Of this increase,
$1.7 million was attributable to acquisitions and
$8.8 million was attributable to organic growth. Of our
total organic growth of 13%, 6 percentage points resulted
from the strengthening of the Canadian dollar in the first
quarter 2004 as compared with the first quarter 2003.

Results of Operations

Three months ended March 31, 2004
compared with three months ended March 31, 2003

Revenue

We achieved growth in revenue and profitability
in the first quarter 2004. We benefited from strong organic
growth rates at most hubs, contributions from brokerages
acquired in 2003 and a strengthening Canadian dollar compared to
the U.S. dollar. Overall, our management believes the company
made strong progress on several fronts in the first quarter
2004, including increased contingent commissions and volume
overrides due to enhanced relationships established with
insurance companies and increased profitability of business
placed by us at higher premium rates, as well as reduced costs
as a percentage of revenue due to increased operating efficiency.

As a result of these and other factors, we
reported a 15% revenue increase to $79.3 million in the
first quarter 2004, while net earnings increased 8% to
$9.6 million from $8.9 million. Diluted earnings per
share increased 4% to $0.29 from $0.28. The slower rate of
growth in net earnings and diluted earnings per share as
compared to growth in revenue is the result of discontinuing use
and related write-off of the value of existing trademarks that
had been used by certain of our subsidiaries in connection with
our strategic plan to make use of the Hub brand
throughout our Company. This write-off resulted in a non-cash
expense of $1.7 million (after-tax), or $0.05 per diluted
share in the first quarter of 2004.





|                             |                                
|---------------------------- | -------------------------------
|INTERIM REPORTMARCH 31, 2004 | HUB INTERNATIONAL LIMITED    21



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##### 



The table below shows a breakdown of our revenue
by segment and type for the three months ended March 31,
2004 including organic growth:

|                                                |  |         |        |           |  |           |        |                |  |               |        |           |  |           |     |  |  |   |        |   |  |   |       |  |  |  |     | 
|----------------------------------------------- |  | ------- | ------ | --------- |  | --------- | ------ | -------------- |  | ------------- | ------ | --------- |  | --------- | --- |  |  | - | ------ | - |  | - | ----- |  |  |  | --- | 
|                                                |  |         |        |           |  |           |        |                |  |               |        |          
|                                                |  | Revenue |        |           |  |           |        | Adjustment     |  |               |        |          
|                                                |  |         |        |           |  |           |        | for            |  |               |        |          
|(in thousands of U.S. dollars,                  |  |         |        | Total Net |  | Total Net |        | (Acquisitions) |  | Organic       |        | Organic  
|except percentages)                             |  | 2004    |        | 2003      |  | Change($) |        | Growth(%)      |  | and Disposals |        | Growth($) |  | Growth(%)
|                                                |  |         |        |           |  |           |        |                |  |               |        |           |  |          
|Total                                           |  |         |        |           |  |           |        |                |  |               |        |           |  |           |     |  |  |   |        |   |  |   |       |  |  |  |     | 
|Commission Income                               |  | $       | 61,629 |           |  | $         | 54,541 |                |  | $             | 7,088  |           |  |           | 13% |  |  | $ | (1,286 | ) |  | $ | 5,802 |  |  |  | 11% | 
|Contingent Commissions and
    Volume Overrides |  |         | 15,037 |           |  |           | 12,377 |                |  |               | 2,660  |           |  |           | 21% |  |  |   | (1     | ) |  |   | 2,659 |  |  |  | 21% | 
|Other Income                                    |  |         | 2,683  |           |  |           | 1,959  |                |  |               | 724    |           |  |           | 37% |  |  |   | (382   | ) |  |   | 342   |  |  |  | 17% | 
|                                                |  |         |        |           |  |           |        |                |  |               |        |           |  |           |     |  |  |   |        |   |  |   |       |  |  |  |     | 
|Total                                           |  | $       | 79,349 |           |  | $         | 68,877 |                |  | $             | 10,472 |           |  |           | 15% |  |  | $ | (1,669 | ) |  | $ | 8,803 |  |  |  | 13% | 
|                                                |  |         |        |           |  |           |        |                |  |               |        |           |  |           |     |  |  |   |        |   |  |   |       |  |  |  |     | 
|U.S.                                            |  |         |        |           |  |           |        |                |  |               |        |           |  |           |     |  |  |   |        |   |  |   |       |  |  |  |     | 
|Commission Income                               |  | $       | 37,092 |           |  | $         | 34,986 |                |  | $             | 2,106  |           |  |           | 6%  |  |  | $ | (1,199 | ) |  | $ | 907   |  |  |  | 3%  | 
|Contingent Commissions and
    Volume Overrides |  |         | 9,643  |           |  |           | 8,800  |                |  |               | 843    |           |  |           | 10% |  |  |   | (1     | ) |  |   | 842   |  |  |  | 10% | 
|Other Income                                    |  |         | 2,049  |           |  |           | 1,493  |                |  |               | 556    |           |  |           | 37% |  |  |   | (377   | ) |  |   | 179   |  |  |  | 12% | 
|                                                |  |         |        |           |  |           |        |                |  |               |        |           |  |           |     |  |  |   |        |   |  |   |       |  |  |  |     | 
|Total                                           |  | $       | 48,784 |           |  | $         | 45,279 |                |  | $             | 3,505  |           |  |           | 8%  |  |  | $ | (1,577 | ) |  | $ | 1,928 |  |  |  | 4%  | 
|                                                |  |         |        |           |  |           |        |                |  |               |        |           |  |           |     |  |  |   |        |   |  |   |       |  |  |  |     | 
|Canada                                          |  |         |        |           |  |           |        |                |  |               |        |           |  |           |     |  |  |   |        |   |  |   |       |  |  |  |     | 
|Commission Income                               |  | $       | 24,537 |           |  | $         | 19,555 |                |  | $             | 4,982  |           |  |           | 25% |  |  | $ | (87    | ) |  | $ | 4,895 |  |  |  | 25% | 
|Contingent Commissions and
    Volume Overrides |  |         | 5,394  |           |  |           | 3,577  |                |  |               | 1,817  |           |  |           | 51% |  |  |   |       |   |  |   | 1,817 |  |  |  | 51% | 
|Other Income                                    |  |         | 634    |           |  |           | 466    |                |  |               | 168    |           |  |           | 36% |  |  |   | (5     | ) |  |   | 163   |  |  |  | 35% | 
|                                                |  |         |        |           |  |           |        |                |  |               |        |           |  |           |     |  |  |   |        |   |  |   |       |  |  |  |     | 
|Total                                           |  | $       | 30,565 |           |  | $         | 23,598 |                |  | $             | 6,967  |           |  |           | 30% |  |  | $ | (92    | ) |  | $ | 6,875 |  |  |  | 29% | 
|                                                |  |         |        |           |  |           |        |                |  |               |        |           |  |           |     |  |  |   |        |   |  |   |       |  |  |  |     | 

Of the $10.5 million in new revenue we
reported, $1.7 million, or 16%, reflected growth through
acquisition, while $8.8 million, or 84%, resulted from
organic growth. By comparison, acquired brokerages added
$12.0 million, or 62%, of first quarter 2003 sales growth,
while organic growth contributed $7.3 million, or 38%, of our
revenue increases. We expect future growth to shift increasingly
to acquisition growth as we complete acquisitions in 2004.
Organic growth figures for both revenue and earnings include the
impact of foreign exchange rate changes between the U.S. and
Canadian dollars. In the first quarter 2004, the rise of the
Canadian dollar versus the U.S. dollar contributed
6 percentage points of our 13% organic growth rate in
revenue.

Commission income, which usually ranges from 5%
to 20% of the premium charged by insurers, provided
approximately 78% of our revenue base in the first quarter 2004.
This percentage is lower in the first quarter 2004 as we earn
the majority of our contingent commissions and volume overrides
early in the year as they are based on prior year performance.
For the year ended December 31, 2003, commission income provided
approximately 91% of our revenue base. In addition to these
core commissions, as stated above, 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.                                         

In addition to the variations that can result
from changes in organic growth rates, acquisitions and other
variables related to operations, the first quarter 2004 and 2003
results included a number of factors that can complicate any
efforts at direct comparisons. The following chart shows the net
earnings and diluted earnings per-share impacts that





|                               |                             
|------------------------------ | ----------------------------
|22   HUB INTERNATIONAL LIMITED | INTERIM REPORTMARCH 31, 2004



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##### 



several of these factors had during first quarter
in 2004 and 2003. 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
|                                                         |                                             |              |       |            
|March 31, 2004 reported net earnings
    (Canadian GAAP) |                                             | $            | 9,623 |             |   | $ | 0.29 |      
|                                                         | Impact of foreign exchange                  |              |       | (659        | ) |   |      | (0.02 | )
|                                                         | Impact of write-off of trademarks           |              |       | 1,656       |   |   |      | 0.05  |  
|                                                         | Impact of non-cash stock based compensation |              |       | 1,339       |   |   |      | 0.04  |  
|                                                         |                                             |              |       |             |   |   |      |      
|                                                         | Adjusted March 31, 2004 results             |              | $     | 11,959      |   |   | $    | 0.36  |  
|                                                         |                                             |              |       |             |   |   |      |      
|March 31, 2003 reported net earnings
    (Canadian GAAP) |                                             | $            | 8,903 |             |   | $ | 0.28 |      
|                                                         | Impact of foreign exchange                  |              |       | (134        | ) |   |      |      |  
|                                                         | Impact of non-cash stock based compensation |              |       | 728         |   |   |      | 0.02  |  
|                                                         |                                             |              |       |             |   |   |      |      
|                                                         | Adjusted March 31, 2003 results             |              | $     | 9,497       |   |   | $    | 0.30  |  
|                                                         |                                             |              |       |             |   |   |      |      

As shown above, we benefited more significantly
from a stronger Canadian dollar in the first quarter 2004 as
compared to 2003. The impact of foreign exchange on first
quarter 2004 earnings generated an increase of $0.7 million
as compared to an increase of $0.1 million in the first
quarter 2003. Also, first quarter 2004 included the write-off of
trademarks of $1.7 million, after tax. This non-cash
expense was incurred as a result of certain of our subsidiaries
changing their names. In addition, non-cash stock based
compensation after tax increased 84% to $1.3 million for
the first quarter of 2004 as compared to $0.7 in 2003, as a
result of additional grants of stock based compensation in 2004
and 2003. Excluding the effects of these items, adjusted net
earnings would have increased 26% in first quarter 2004, versus
an 8% increase in reported net earnings, and adjusted diluted
earnings per share would have increased 20% in first quarter
2004, versus a 4% increase in reported diluted earnings per
share.

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. In the first
quarter 2004, the strength of the Canadian dollar versus the
U.S. dollar had a more positive impact on our results than in
the first quarter 2003. A decline would have a negative effect.
See Market Risk.

U.S.
Results

U.S. revenue grew 8% to $48.8 million, or
61% of revenue, in the first quarter 2004 as compared to 2003,
due to both organic growth and the contributions of operations
acquired in 2003. Acquisitions added $1.6 million to
revenue  45% of the increase while organic growth provided
$1.9 million, or 55% of revenue growth. Our U.S. operations
posted an organic growth rate of 4% in the first quarter 2004, a
64% decrease from 11% in the first quarter 2003. Core commission
income increased 6%, while contingent commissions and volume
overrides grew 10%.

During the first quarter 2004, the U.S. market
experienced some softening of premium rates for property and
casualty coverage. However, rates for liability, health and
other types of coverage continue to experience increases. Hard
insurance pricing in 2003 contributed strongly to a significant
increase in contingent profitability income from insurers in
2004, as these insurers benefited from the near-term impact of
higher rates implemented in 2003.

Canadian
Results

Canadian revenue grew 30% to $30.6 million,
or 39% of consolidated revenue, in the first quarter 2004 as
compared to 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 29%, of
which 16 percentage points reflected a stronger Canadian dollar.
Acquisitions added only $0.1 million, or 1 %, of the
revenue increase, reflecting a slower





|                             |                                
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|INTERIM REPORTMARCH 31, 2004 | HUB INTERNATIONAL LIMITED    23



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##### 



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, however, we
expect rates in Canada to soften commencing in the second
quarter 2004. 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 the first quarter of 2004, 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 51% in the first
quarter 2004, versus 37% in the first quarter 2003.


Compensation Expense

The majority of our expenses are related to
compensation, which increased 11% in the first quarter 2004 to
$42.2 million. As a percentage of revenue, compensation
decreased to 53% from 55% in the first quarter 2003. Total
compensation includes both cash based salaries and benefits and
non-cash stock based compensation. Cash-based compensation grew
10% to $40.6 million in the first quarter 2004, while
non-cash stock based compensation increased 68% to
$1.6 million.

Compensation comparison

For the three months ended
March 31,


($ in thousands)


|                                  |  |      |        |      |  |          |        |              |  |      |     |  |  |  |     |  |  |  |     | 
|--------------------------------- |  | ---- | ------ | ---- |  | -------- | ------ | ------------ |  | ---- | --- |  |  |  | --- |  |  |  | --- | 
|                                  |  |      |        |      |  |          |        |             
|                                  |  |      |        |      |  |          |        | % of Revenue
|                                  |  |      |        |      |  |          |        |             
|                                  |  | 2004 |        | 2003 |  | % Change |        | 2004         |  | 2003
|                                  |  |      |        |      |  |          |        |              |  |     
|Compensation (cash)               |  | $    | 40,637 |      |  | $        | 37,012 |              |  |      | 10% |  |  |  | 51% |  |  |  | 54% | 
|Non-cash stock based compensation |  |      | 1,614  |      |  |          | 962    |              |  |      | 68% |  |  |  | 2%  |  |  |  | 1%  | 
|                                  |  |      |        |      |  |          |        |              |  |      |     |  |  |  |     |  |  |  |     | 
|Total                             |  | $    | 42,251 |      |  | $        | 37,974 |              |  |      | 11% |  |  |  | 53% |  |  |  | 55% | 
|                                  |  |      |        |      |  |          |        |              |  |      |     |  |  |  |     |  |  |  |     | 

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 2003. We recognized
$1.6 million of expense for the first quarter 2004,
including both stock options and restricted share units, versus
$1.0 million of expense for the first quarter 2003. 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 March 31, 2004, we had
issued and outstanding approximately 1.5 million stock
options at a weighted average exercise price of $15.34. Our
closing share price on the New York Stock Exchange was $18.35 on
March 31, 2004.

Selling, Occupancy and Administration
Expense

Selling, occupancy and administration expense
increased 19% to $15.6 million in the first quarter 2004 as
compared to 2003. As a percentage of revenue, selling, occupancy
and administration expense increased slightly to 20%, versus 19%
in the first quarter 2004. This increase was due primarily to
increased expense related to the implementation of and
compliance with the Sarbanes-Oxley Act.





|                               |                             
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|24   HUB INTERNATIONAL LIMITED | INTERIM REPORTMARCH 31, 2004



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##### 



Depreciation

Depreciation remained consistent at 2% of revenue
in the first quarter 2004 and 2003. The lower relative impact
reflected control of capital expenditures while revenue grew.

Interest Expense

Interest expense increased 21% to
$1.7 million from $1.4 million in the first quarter
2004, primarily as a result of higher debt levels, partially
offset by the benefits of an interest rate swap that was entered
into during the third quarter 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 $0.4 million in the first
quarter 2004.

Intangible Asset Amortization

Intangible asset amortization decreased 2% to
$0.8 million in the first quarter 2004. As a percentage of
revenue this expense remained relatively unchanged at 1%.

Loss on Write-off of Trademarks

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

Provision for Income Tax Expense

Our effective tax rate decreased in the first
quarter 2004 to 35.4% from 37.6%, primarily as a result of a
reduction in Canadian tax rates.

Net Earnings and Earnings Per Share

Our net earnings increased 8% to
$9.6 million in the first quarter 2004, primarily as a
result of growth in revenue. As a percentage of revenue, net
earnings declined approximately 1 percentage point to 12%
in the first quarter 2004 from 13% in the first quarter 2003.
Diluted earnings per share increased at a somewhat slower rate
than net earnings - 4% to $0.29 - due to the
write-off of trademarks.

As shown in the table on page 20, net earnings
increased $0.7 million or $0.02 per diluted share, related
to the strengthening Canadian dollar versus the U.S. dollar and
decreased $1.3 million or $0.04 per diluted share related
to the impact of non-cash stock based compensation, in the first
quarter 2004. Also in 2004, diluted earnings per share decreased
$0.05 per diluted share from the write-off of trademarks. In the
first quarter 2003, net earnings increased $0.1 million
from foreign exchange rates and net earnings decreased $1.3
million or $0.04 per diluted share due to non-cash stock based
compensation. Excluding these effects, our diluted earnings per
share would have increased to $0.36 in the first quarter of 2004
from $0.30 in the first quarter of 2003 on a comparable basis.

Cash Flow, Liquidity and Capital
Resources

As of March 31, 2004, we had cash and cash
equivalents of $87.3 million, an increase of 6.4%, from
$82.1 million as of December 31, 2003. Operating
activities generated $8.0 million of cash in the first
quarter 2004 compared to $14.7 million in the first quarter
2003. 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 the
first quarter 2004, $1.0 million of cash was used in
investing activities, primarily for the acquisitions of property
and equipment and the purchase of subsidiaries compared to
$12.4 million in the first quarter 2003. Also in the first
quarter 2004, $1.0 million of cash was used for





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|INTERIM REPORTMARCH 31, 2004 | HUB INTERNATIONAL LIMITED    25



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##### 



financing activities, primarily resulting from
the repayment of long-term debt and capital leases compared to
$0.7 million in the first quarter 2003. In the first
quarter 2004, the effect of exchange rate changes on cash and
cash equivalents was a decrease of $0.8 million compared to
an increase of $1.0 million in the first quarter 2003. Net
debt, defined as long-term debt ($77.9 million) and
subordinated convertible debentures ($35.0 million) less
non-trust cash (cash and cash equivalents of $87.3 million)
as of March 31, 2004, was $25.6 million compared with
$31.7 million as of December 31, 2003.


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 April 2004. Under the new
    terms, the unsecured facility totals $75 million and bears
    interest at a floating rate of prime plus 1% or 112.5 basis
    points above LIBOR, which were 1.09% and 1.12% at March 31,
    2004 and December 31, 2003 respectively. The facility is
    available on a revolving basis for one year and expires on
    April 22, 2005; 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 at
    March 31, 2004 and December 31, 2003, respectively. We
    are in compliance with all financial covenants governing this
    facility as of March 31, 2004 and December 31, 2003.
|   
|(2) | Demand U.S. dollar base rate loan  We have
    an undrawn $9.2 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

As of March 31, 2004 the Company has
$65 million aggregate principal amount of unsecured senior
notes outstanding. The senior notes were issued in two series:
Series A represents $10 million aggregate principal
amount of 5.71% senior notes with interest due semi-annually,
and principal of $3,333 due annually, June 15, 2008 through
June 15, 2010 and Series B represents $55 million
aggregate principal amount of 6.16% senior notes with interest
due semi-annually, and principal of $11,000 due annually
June 15, 2009 through June 15, 2013. The senior notes
were sold on a private basis in the United States to
institutional accredited investors. Net proceeds of the sale of
the senior notes were used to pay down $50 million of the
Companys revolving U.S. Dollar Libor Loan with the balance
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.

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 on the 5.71% senior
notes and 6.16% senior notes in amounts of $10 million and
$55 million, respectively, in order to ensure that the
Company pays a current market interest rate on that portion of
its borrowings. The Company accounts for the swap transaction
using the synthetic instruments method under which the net
interest expense on the swap and associated debt is reported in
earnings as if it were a single, synthetic, financial
instrument. As of March 31, 2004, the Company estimated the
fair value of the swap was $0.2 million, which is not
recognized in our financial statements. Accordingly,
$0.2 million is the estimated amount that the Company would
need to pay to terminate the swap as of March 31, 2004.

Also at March 31, 2004 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





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|26   HUB INTERNATIONAL LIMITED | INTERIM REPORTMARCH 31, 2004



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##### 



with the carrier). Credits earned for the year
ended December 31, 2003 reduced interest payments to zero
from $0.8 million. It is not yet determinable if a credit
has been earned for 2004.


In addition to these primary credit sources, we
ended March 31, 2004 with $5.4 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 2004 through 2010. Of the outstanding subsidiary debt,
$1.0 million is secured by liens on certain assets of our
subsidiaries.

Also at March 31, 2004, we had outstanding
$35 million aggregate principal amount of 8.5% convertible
subordinated notes due June 28, 2007 held by certain
subsidiaries of Fairfax (the Fairfax notes). The Fairfax notes
are convertible by the holders at any time into our common
shares at C$17.00 per share. If Fairfax converted all of the
Fairfax notes, Fairfax would own approximately 32% of our total
outstanding common shares as of March 31, 2004, versus the
26% of outstanding shares which it held on that date.

At March 31, 2004, our cash position
included approximately $36.5 million deployed as working
capital at the brokerage level and approximately
$50.8 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, a non-GAAP measure) for
acquired brokerages.

We believe that our capital resources, including
existing cash, funds generated from operations and borrowings
available under credit facilities, will be sufficient to satisfy
the companys financial requirements, 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 24% at March 31, 2004, compared with 25% at
December 31, 2003. If all lines of credit and other loan
facilities were fully utilized by the company at March 31,
2004 our ratio of debt to capitalization would have been 33%,
which is below the range of 35% to 38% that our management
believes is suitably conservative for our business model. Under
our loan covenants, our debt to capitalization ratio must be
less than 45%. As of March 31, 2004, we were in compliance
with the financial covenants under all of our debt instruments.

Contingent Obligations

The table below summarizes our contractual
obligations and commercial commitments as of March 31, 2004:

|                                    |  |       |         |        |  |           |   |       |  |       |        |         |  |   |        |  |  |   |        |  |  |   |        | 
|----------------------------------- |  | ----- | ------- | ------ |  | --------- | - | ----- |  | ----- | ------ | ------- |  | - | ------ |  |  | - | ------ |  |  | - | ------ | 
|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                      |  | $     | 77,305  |        |  | $         |  |       |  | $     | 2,546  |         |  | $ | 9,581  |  |  | $ | 17,845 |  |  | $ | 47,333 | 
|Capital lease obligations           |  |       | 593     |        |  |           |  |       |  |       | 231    |         |  |   | 362    |  |  |   |       |  |  |   |       | 
|Operating lease obligations         |  |       | 62,066  |        |  |           |  |       |  |       | 10,862 |         |  |   | 26,642 |  |  |   | 12,906 |  |  |   | 11,656 | 
|Executive share purchase plan loans |  |       | 483     |        |  |           |  |       |  |       |       |         |  |   |       |  |  |   | 483    |  |  |   |       | 
|                                    |  |       |         |        |  |           |   |       |  |       |        |         |  |   |        |  |  |   |        |  |  |   |        | 
|Total                               |  | $     | 140,447 |        |  | $         |  |       |  | $     | 13,639 |         |  | $ | 36,585 |  |  | $ | 31,234 |  |  | $ | 58,989 | 
|                                    |  |       |         |        |  |           |   |       |  |       |        |         |  |   |        |  |  |   |        |  |  |   |        | 





|                             |                                
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|INTERIM REPORTMARCH 31, 2004 | HUB INTERNATIONAL LIMITED    27



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Acquisitions

In connection with the acquisition of Hooper
Hayes and Associates, Inc., in 2003 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
March 31, 2004, 63,000 shares have been released from
escrow.

In connection with other various acquisitions
completed through March 31, 2004, we may be obligated to
pay contingent consideration up to a maximum sum of
approximately $7.1 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 March 31, 2004, the financial
statements reflect a liability to pay cash of $0.5 million
and an obligation to issue common shares valued at approximately
$44,000.

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 $4.3 million and
$4.5 million as of March 31, 2004 and
December 31, 2003, respectively, to assist in purchasing
our common shares. As collateral, the employees have pledged
466,000 and 478,000 common shares as of March 31, 2004 and
December 31, 2003, respectively, which have a market value
of $8.6 million and $8.1 million as of March 31,
2004 and December 31, 2003, respectively. Interest on the
loans in the amount of $51,000 and $68,000 for the period ended
March 31, 2004, and 2003, respectively, was paid by us and
is included in compensation expense. We no longer make loans to
our executive officers and directors.

Subsequent to March 31, 2004, Kaye Insurance
Associates, Inc. (Kaye Insurance), a subsidiary of
Hub, received a subpoena from the Office of the Attorney General
of the State of New York seeking information regarding certain
compensation agreements between insurance brokers and insurance
companies. The New York Attorney General subpoenaed information
on such compensation agreements from several other major
insurance brokers as well. Such compensation agreements, also
known as contingent agreements, between insurance companies and
brokers are a long-standing and common practice within the
insurance industry. Kaye Insurance has a practice of disclosing
such agreements to its clients, including on its invoices to
clients and on its web site. In addition, we disclose the
arrangements in our public filings. We will fully cooperate with
this inquiry. While it is not possible to predict the outcome of
this investigation, if such compensation agreements were to be
restricted or no longer permitted, our results of operations may
be materially adversely affected.

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.In the first quarter of 2004,
restricted share units totaling 983,000 were issued in
connection with the restructure of our management bonus
agreement and 84,000 restricted share units were issued in
connection with the renegotiation of contingent consideration
for Flanagan.

Share repurchases.For the quarter ended March 31,
2004, no common shares were repurchased by us, other than shares
equal in value to $30,000 under the executive purchase plan.

Shares reserved for issuance.As of March 31, 2004,
3.6 million common shares were reserved for issuance under
our equity incentive plan. As of March 31, 2004, an
aggregate of approximately 3.2 million stock options and
restricted share units were outstanding which would reduce such
shares reserved for issuance.

Shareholders equity increased by
$10.0 million, or 3%, to $352.8 million as of
March 31, 2004 from $342.8 million as of
December 31, 2003. This increase resulted from net earnings
of $9.6 million, an increase in contributed surplus of





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|28   HUB INTERNATIONAL LIMITED | INTERIM REPORTMARCH 31, 2004



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##### 



$3.1 million related primarily to non-cash
stock based compensation expense and exercise of stock options
for $0.2 million. The increase in shareholders equity
was offset by the declaration of dividends of $1.5 million
in the first quarter 2004, cancellation of shares of
$0.1 million and a decrease in the cumulative translation
account of $1.3 million, due mainly to the weakening of the
Canadian dollar compared to the U.S. dollar in 2004.


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 2003, which converted the fixed rate
interest payments on the $65 million aggregate principal
amount of senior notes into floating rate payments. As a result
each 100 basis point increase in interest rates charged on the
balance of our outstanding floating rate debt as of
March 31, 2004 will result in approximately
$0.4 million decrease in our earnings.

Exchange rate sensitivity

We report our revenue in U.S. dollars. Our
Canadian operations earn revenue and incur expenses in Canadian
dollars. Given our significant Canadian dollar revenue, we are
sensitive to the fluctuations in the value of the Canadian
dollar and are therefore exposed to foreign currency exchange
risk. Foreign currency exchange risk is the potential for loss
in revenue and net income as a result of a decline in the U.S.
dollar value of Canadian dollar revenue due to a decline in the
value of the Canadian dollar compared to the U.S. dollar.

The Canadian dollar is subject to volatility and
experienced a significant decline in its value compared to the
U.S. dollar in 2001 but increased significantly in value
throughout 2003 and the first quarter 2004. At March 31,
2004 and 2003 one U.S. dollar equaled $1.3105 and $1.4693
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 three months ended
March 31, 2004, and 2003.

|                               |  |      |     |      |  |      |     | 
|------------------------------ |  | ---- | --- | ---- |  | ---- | --- | 
|                               |  | 2004 |     | 2003
|(in thousands of U.S. dollars) |  |      |     |     
|                               |  |      |     |     
|Revenue                        |  | +/-$ | 403 |      |  | +/-$ | 357 | 
|Net earnings                   |  | +/-$ | 71  |      |  | +/-$ | 18  | 
|Cumulative translation account |  | +/-$ | 10  |      |  | +/-$ | 118 | 

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:

|                               |  |           |         |              |  |   |         |  
|------------------------------ |  | --------- | ------- | ------------ |  | - | ------- | -
|                               |  | March 31, |         | December 31,
|                               |  | 2004      |         | 2003        
|(in thousands of U.S. dollars) |  |           |         |             
|                               |  |           |         |             
|Customer relationships         |  | $         | 43,474  |              |  | $ | 43,422  |  
|Non-competition covenants      |  |           | 2,648   |              |  |   | 2,643   |  
|Trademarks                     |  |           |        |              |  |   | 2,587   |  
|Goodwill                       |  |           | 322,612 |              |  |   | 323,185 |  
|Accumulated amortization       |  |           | (23,652 | )            |  |   | (23,072 | )
|                               |  |           |         |              |  |   |         |  
|Total                          |  | $         | 345,082 |              |  | $ | 348,765 |  
|                               |  |           |         |              |  |   |         |  

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





|                             |                                
|---------------------------- | -------------------------------
|INTERIM REPORTMARCH 31, 2004 | HUB INTERNATIONAL LIMITED    29



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##### 



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. The amounts
allocated to non-competition covenants 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; in the case of
trademarks, a cash flow royalty savings approach addressing the
economic benefits of the trademarks 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 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. During the
first quarter of 2004 certain of our subsidiaries changed their
names and as a result we recognized a non-cash loss on the
write-off of trademarks of $2.6 million before tax. Prior
to 2003 we amortized goodwill primarily over a period of forty
years. Under the new accounting standards adopted in 2003,
goodwill is not amortized and is evaluated annually for
impairment. For the three months ended March 31, 2004 and
2003, our amortization has been comprised of the following:

|                               |  |      |     |      |  |   |     | 
|------------------------------ |  | ---- | --- | ---- |  | - | --- | 
|(in thousands of U.S. dollars) |  | 2004 |     | 2003
|                               |  |      |     |     
|Customer relationships         |  | $    | 764 |      |  | $ | 781 | 
|Non-competition covenants      |  |      | 17  |      |  |   | 20  | 
|                               |  |      |     |      |  |   |     | 
|Total                          |  | $    | 781 |      |  | $ | 801 | 
|                               |  |      |     |      |  |   |     | 

We estimate that our amortization charges for
intangible assets for 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         |  | $    | 3,079 |      |  | $    | 3,079 |      |  | $    | 3,079 |  |  | $ | 3,079 |  |  | $ | 3,079 | 
|Non-competition covenants      |  |      | 60    |      |  |      | 44    |      |  |      | 82    |  |  |   | 79    |  |  |   | 12    | 
|                               |  |      |       |      |  |      |       |      |  |      |       |  |  |   |       |  |  |   |       | 
|Total                          |  | $    | 3,139 |      |  | $    | 3,123 |      |  | $    | 3,161 |  |  | $ | 3,158 |  |  | $ | 3,091 | 
|                               |  |      |       |      |  |      |       |      |  |      |       |  |  |   |       |  |  |   |       | 

Related Party Transactions

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

|                                  |  |           |       |      |  |   |       | 
|--------------------------------- |  | --------- | ----- | ---- |  | - | ----- | 
|                                  |  |          
|                                  |  | March 31,
|                                  |  |          
|                                  |  | 2003      |       | 2003
|                                  |  |           |       |     
|Northbridge Financial Corporation |  | $         | 4,458 |      |  | $ | 3,419 | 
|Crum & Forster Holdings, Inc.     |  |           | 183   |      |  |   | 217   | 
|Fairfax Inc.                      |  |           | 1,432 |      |  |   | 2,094 | 
|                                  |  |           |       |      |  |   |       | 
|                                  |  | $         | 6,073 |      |  | $ | 5,730 | 
|                                  |  |           |       |      |  |   |       | 

As of March 31, 2004 and December 31,
2003, we had accounts receivable and accounts payable balances
with the above related parties in the amounts of
$4.5 million and $8.3 million, for March 31,
2004, respectively, and $3.2 million and $18.0 million
for December 31, 2003, 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 Financial
Holdings Limited (Fairfax), which owns approximately 26% of our
common shares as of March 31, 2004. At March 31, 2004
Fairfax Inc., which is a subsidiary of Fairfax, owned 100% of
Old Lyme Insurance Company of Rhode Island Inc.
(OLRI) and Old Lyme Insurance Company Limited
(OLIC). Fairfax Inc. is winding down the operations
of OLRI. During the first quarter 2004, Fairfax entered into an
agreement





|                               |                             
|------------------------------ | ----------------------------
|30   HUB INTERNATIONAL LIMITED | INTERIM REPORTMARCH 31, 2004



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##### 



to sell OLIC to Old Lyme Insurance Group, Ltd, a
Company owned primarily by a group of Hub employees, including
Bruce Guthart, our Chief Operating Officer and a director of
Hub, and Michael Sabanos, our Director, Mergers &
Acquisitions. The sale was completed on April 22, 2004. We
will continue to place insurance with OLIC. The compensation
that Hub will earn from the business placed with OLIC and the
fees it earns from managing OLIC will be substantially the same
as if Fairfax continued to own the company.


As of March 31, 2004 and December 31,
2003 subordinated convertible debentures of $35 million
were due to related parties.

During the first quarter of 2004 and 2003, we
incurred expenses related to rental of premises from related
parties in the amount of $0.4 million and $0.5 million
respectively. At March 31, 2004 and December 31, 2003,
we also had accounts receivable due from related parties in the
amount of $2.9 million and $3.5 million respectively,
of which the majority were loans to employees to enable them to
purchase our common shares. Of the accounts receivable, as of
March 31, 2004 and December 31, 2003,
$1.9 million was related to company loans to employees to
purchase shares under our executive share purchase plan. As
collateral, the employees have pledged 152,000 and
153,000 common shares as of March 31, 2004 and
December 31, 2003, respectively, which have a market value
of $2.8 million and $2.6 million as of March 31,
2004 and December 31, 2003, respectively.

Off-balance Sheet Transactions

Under Canadian GAAP, 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 $0.2 million is
not 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.

Effects of Recent Accounting
Pronouncements

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

Item 3. Quantitative and Qualitative
Disclosures about Market Risk

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

Item 4. 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 Rules 13a-15(e)
and 15d-15(e) promulgated under the Securities Exchange Act of
1934, as amended (the Exchange Act) as of March 31, 2004
(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 first
quarter of 2004. Notwithstanding the foregoing, there





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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 II. OTHER INFORMATION

Item 1. Legal Proceedings

Subsequent to March 31, 2004, Kaye
Insurance, a subsidiary of Hub, received a subpoena from the
Office of the Attorney General of the State of New York seeking
information regarding certain compensation agreements between
insurance brokers and insurance companies. The New York Attorney
General subpoenaed information on such compensation agreements
from several other major insurance brokers as well. Such
compensation agreements, also known as contingent agreements,
between insurance companies and brokers are a long-standing and
common practice within the insurance industry. Kaye Insurance
has a practice of disclosing such agreements to its clients,
including on its invoices to clients and on its web site. In
addition, we disclose the arrangements in our public filings. We
will fully cooperate with this inquiry. While it is not possible
to predict the outcome of this investigation, if such
compensation agreements were to be restricted or no longer
permitted, our results of operations may be materially adversely
affected.

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 2. Changes in Securities, Use
of Proceeds and Issuer Purchases of Equity Securities

On March 10, 2004, we issued 37,500 common
shares to the former owner of J.P. Flanagan Corporation as
consideration for contingent obligations payable in connection
with the acquisition of that brokerage.

Item 5. Other Information

Information concerning forward-looking
statements

This Form 10-Q includes, and from time to
time management may make, forward-looking statements which
reflect our current views with respect to future events and
financial performance. These forward-looking statements relate,
among other things, to our plans and objectives for future
operations. These forward-looking statements are subject to
uncertainties and other factors that could cause actual results
to differ materially from such statements. These uncertainties
and other factors include, but are not limited to, risks
associated with:



|  |                                                                                                                                    
|- | -----------------------------------------------------------------------------------------------------------------------------------
| | implementing our business strategies;                                                                                              
| 
| | identifying and consummating acquisitions;                                                                                         
| 
| | successfully integrating acquired businesses;                                                                                      
| 
| | 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; and                                                                                         





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|  |                                                                                                                                                              
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.

Dividends

On February 19, 2004 the Board of Directors
declared a dividend of $0.05 on our common shares, payable
April 30, 2004 for the quarter ended March 31, 2004 to
shareholders of record on April 15, 2004.

Item 6. Exhibits and Reports on
Form 8-K

(a) Exhibits

|     |  |                                                                                                                                                                                                                                                                          
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Certification of the Chief Executive Officer,
    Martin P. Hughes, pursuant to Rule 13a-14(a) or 15d-14(a),
    as enacted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.                                                                               
|    
|31.2 |  | Certification of the Chief Financial Officer,
    Dennis J. Pauls, pursuant to Rule 13a-14(a) or
    15d-14(a), as enacted pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002.                                                                                
|    
|32.1 |  | Certification of the Chief Executive Officer,
    Martin P. Hughes, pursuant to 18 U.S.C.
    Section 1350, as enacted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.                                                                                    
|    
|32.2 |  | Certification of the Chief Financial Officer,
    Dennis J. Pauls, pursuant to 18 U.S.C.
    Section 1350, as enacted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.                                                                                     
|    
|99.1 |  | Information under the caption Risks related
    to our business and Risks related to our common
    shares is incorporated by reference from the
    registrants Annual Report on Form 10-K filed with the
    Securities and Exchange Commission on March 15, 2004.

(b) Current Reports on Form 8-K

We filed a Current Report on Form 8-K on
February 20, 2004 furnishing a press release which provided
the registrants earnings for the year ended
December 31, 2003.

We filed a Current Report on Form 8-K on
March 17, 2004 furnishing a press release announcing the
signing of a definitive agreement to acquire Talbot Financial
Corporation.





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SIGNATURE

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



| |                          
| | -------------------------
| | HUB INTERNATIONAL LIMITED



| |     |                    
| | --- | -------------------
| | By: | /s/ DENNIS J. PAULS

| |                                                              
| | -------------------------------------------------------------
| |                                                              
| | Dennis J. Pauls                                              
| | Vice President and Chief Financial Officer                   
| | (duly authorized officer and Principal Financial
    Officer)

DATE: May 7, 2004






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|34   HUB INTERNATIONAL LIMITED | INTERIM REPORTMARCH 31, 2004