UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 11-K
| x | Annual report pursuant to section 15(d) of the Securities Exchange Act of 1934 |
For the fiscal year ended December 31, 2004.
OR
| ¨ | Transition report pursuant to section 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
Commission file number 333-44735
| A. | Full title of the plan and address of the plan, if different from that of the issuer below: |
HRH RETIREMENT SAVINGS PLAN
| B. | Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: |
HILB ROGAL & HOBBS COMPANY
4951 Lake Brook Drive, Suite 500
GLEN ALLEN, VIRGINIA 23060
(804) 747-6500
| Page Number(s) | ||||||
| A. | Financial Statements and Schedule: | |||||
| Report of Independent Registered Public Accounting Firm – BDO Seidman, LLP | 1 | |||||
| Report of Independent Registered Public Accounting Firm – Ernst & Young LLP | 2 | |||||
| Financial Statements: |
3 | |||||
| Statement of Changes in Net Assets Available for Benefits | 4 | |||||
| Notes to Financial Statements | 5 | |||||
| Schedule H, Line 4i – Schedule of Assets (Held at End of Year) |
13 | |||||
| B. | Exhibits | |||||
| 23.1 | Consent of Independent Registered Public Accounting Firm – BDO Seidman, LLP | |||||
| 23.2 | Consent of Independent Registered Public Accounting Firm – Ernst & Young LLP | |||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan Administrator has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
| HRH RETIREMENT SAVINGS PLAN | ||||||
| By: |
Hilb Rogal & Hobbs Company, Plan Administrator | |||||
| DATE: June 28, 2005 |
By: |
/s/ Carolyn Jones | ||||
| Carolyn Jones | ||||||
| Senior Vice President, Chief Financial Hilb Rogal & Hobbs Company | ||||||
Financial Statements and Supplemental Schedule
December 31, 2004 and 2003 and year ended December 31, 2004 with Reports of Independent Registered Public Accounting Firms
HRH Retirement Savings Plan
Financial Statements and Supplemental Schedule
December 31, 2004 and 2003 and year ended December 31, 2004
Report of Independent Registered Public Accounting Firm
To the Plan Administrator
HRH Retirement Savings Plan
Glen Allen, Virginia
We have audited the accompanying statement of net assets available for benefits of the HRH Retirement Savings Plan as of December 31, 2004 and the related statement of changes in net assets available for benefits for the year then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the Standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the HRH Retirement Savings Plan as of December 31, 2004 and the related statement of changes in net assets available for benefits for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Our audit was performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets held for investment purposes at the end of the year is presented for purposes of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
| /s/ BDO Seidman, LLP |
Richmond, Virginia
June 17, 2005
1
Report of Independent Registered Public Accounting Firm
Plan Administrator
HRH Retirement Savings Plan
We have audited the accompanying statement of net assets available for benefits of the HRH Retirement Savings Plan as of December 31, 2003. This financial statement is the responsibility of the Plan’s management. Our responsibility is to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provided a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2003, in conformity with U.S. generally accepted accounting principles.
| /s/ Ernst & Young LLP |
Richmond, Virginia
June 27, 2005
2
Statements of Net Assets Available for Benefits
| December 31 | ||||||
| 2004 |
2003 | |||||
| Assets |
||||||
| Investments, at fair value: |
||||||
| Common Trust Fund |
$ | — | $ | 33,216,415 | ||
| Mutual Funds |
107,518,993 | 77,217,120 | ||||
| Collective Trust Funds |
4,794,676 | — | ||||
| Cash |
10,005,593 | — | ||||
| HRH Common Stock |
13,674,588 | 15,741,839 | ||||
| HRH Stock Liquidity Fund |
— | 86,578 | ||||
| Participant Loans |
4,834,256 | 3,847,065 | ||||
| Investment, at contract value: |
||||||
| Group Annuity Contract |
42,483,248 | — | ||||
| Total investments |
183,311,354 | 130,109,017 | ||||
| Contribution receivable due from Hilb Rogal & Hobbs Company |
5,268,486 | 4,185,278 | ||||
| Net assets available for benefits |
$ | 188,579,840 | $ | 134,294,295 | ||
See accompanying notes.
3
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 2004
| Additions |
|||
| Investment income |
$ | 1,959,031 | |
| Transfers from plan mergers |
29,085,321 | ||
| Contributions: |
|||
| Hilb Rogal & Hobbs Company |
5,277,588 | ||
| Employees |
24,827,695 | ||
| 30,105,283 | |||
| Total additions |
61,149,635 | ||
| Deductions |
|||
| Benefit payments |
18,963,019 | ||
| Administrative expenses |
296,150 | ||
| Total deductions |
19,259,169 | ||
| Net realized and unrealized appreciation in fair value of investments |
12,395,079 | ||
| Net increase |
54,285,545 | ||
| Net assets available for benefits at beginning of year |
134,294,295 | ||
| Net assets available for benefits at end of year |
$ | 188,579,840 | |
See accompanying notes.
4
Notes to Financial Statements
December 31, 2004
1. Description of the Plan
The following description of the HRH Retirement Savings Plan (the Plan) provides only general information. Participants should refer to the summary plan description for a more complete description of the Plan’s provisions.
General
The Plan is a defined contribution plan covering substantially all employees of Hilb Rogal & Hobbs Company (the Company). In May 2004, the Company changed its name from Hilb, Rogal and Hamilton Company to Hilb Rogal & Hobbs Company. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Effective January 1, 2004, the Plan was amended to allow for the merger of the Hobbs Group, LLC 401(k) Savings Plan (Hobbs Plan). The Plan assumed control of all the Hobbs Plan assets as of that date with a value of $19,548,229. These assets were physically transferred to the Plan in the first week of January 2004. In January 2004, the Hobbs Plan investments were converted to Plan investments of a similar nature.
On December 31, 2004, the Plan received a transfer of funds from the Zywave, Inc. Employees Profit Sharing Plan relating to participants who joined the Plan in 2004 as the result of a 2004 Company acquisition. The Plan assumed control of these assets as of that date with a value of $9,537,092. These assets were held as cash as of December 31, 2004. In January 2005, these assets were converted to Plan investments and allocated to the appropriate Plan participants.
Trustee and Administrator Change
Effective December 1, 2004, the Plan was amended and restated and a new trustee and administrator were appointed. Investors Bank and Trust Company (the Trustee) was appointed as the new trustee. Diversified Investment Advisors (the Administrator) was appointed as the new administrator. Plan assets transferred to the new Trustee were transferred into funds comparable to those offered by the previous trustee, PNC Bank, N.A.
5
HRH Retirement Savings Plan
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
The conversion initiated a “Black Out” period beginning November 19, 2004, and continued through December 12, 2004. During this period, participants could not direct or diversify funds until the Trustee and Administrator had time to accurately complete the conversion. During this period, employee contributions continued to be made through payroll deductions and the contributions were deposited and held by the Trustee until the completion of the Black Out period. At the end of the Black Out period, these funds were invested in funds as requested by each participant.
Contributions
The Plan includes a before-tax savings feature pursuant to Section 401(k) of the Internal Revenue Code (IRC). Under the before-tax savings feature, participants may elect to contribute from 1% to 100% of their salary on a before-tax basis but at no time shall this contribution exceed limits established by the IRC. Effective June 1, 2005, this feature was amended to permit a contribution range from 1% to 50%. Participants may also contribute amounts representing distributions from other qualified defined benefit or contribution plans. Each year the Company makes a minimum matching contribution from current or accumulated profits of 100% of the first 3% of compensation contributed by a participant. In addition, each year the Company may contribute additional amounts from current or accumulated profits at the option of the Company’s Board of Directors based on a percentage of participants’ compensation. No such contributions were made for 2004.
Participants can elect among several available options for investing their share of Company contributions and voluntary contributions. The accounts of those participants who do not make an investment election are automatically invested in the HRH Conservative Allocation Fund after December 1, 2004, and were automatically invested in the PNC Investment Contract Fund prior to December 1, 2004.
Participant Accounts
Each participant’s account is credited with the participant’s contributions and allocations of (a) the Company’s contributions and (b) Plan earnings, and is charged with an allocation of administrative expenses. These allocations are based upon a participant’s earnings or account balance, as defined. Forfeited balances of terminated participants’ nonvested accounts are used to reduce future Company contributions.
6
HRH Retirement Savings Plan
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
Vesting
Participants immediately vest in their voluntary contributions and earnings thereon. Vesting in the Company’s contribution plus actual earnings thereon is based on their years of continuous service. A participant is 100% vested after five years of credited service. Should the Plan terminate at some future time, participants will become 100% vested in their accounts.
Loans to Participants
The administrator may make loans to a participant from the participant’s account. Loans are secured by the participant’s remaining account balance. Loans of terminated participants and loans in default are treated as distributions to the participant. Principal and interest are repaid ratably through semi-monthly payroll deductions.
Participants may obtain loans based on the vested value of their account balances; however, loans cannot exceed the lesser of 50% of the participant’s account value or a maximum of $50,000 in accordance with the Department of Labor’s regulations on loans to participants. Loans shall bear a reasonable rate of interest established by the Plan Administrator based on local prevailing rates, and must be repaid over a period not to exceed 5 years unless the loan is used to purchase the participant’s primary residence, in which case the loan term may not exceed 15 years.
Payment of Benefits
Upon termination of service, a participant, subject to Plan limitations, may elect to receive either a lump-sum amount equal to the value of his or her account, or monthly, quarterly, semi-annual or annual installments.
Administrative Expenses
Substantially all investment and administrative expenses of the Plan are paid by the Plan.
7
HRH Retirement Savings Plan
Notes to Financial Statements (continued)
2. Significant Accounting Policies
The accounting records of the Plan are maintained on the accrual basis.
The Plan’s investments are stated at fair value except for its group annuity contract in the Stable Value 5 (Transamerica) Fund which is stated at contract value. Common trust and collective trust funds are reported at current unit value which is based on quoted market prices. Shares of mutual funds are valued at quoted market prices which represent the net asset value of shares held by the Plan at year end. HRH common stock is valued at the quoted market price on the last business day of the Plan year. The participant loans are valued at their outstanding balances.
The Stable Value 5 (Transamerica) Fund is reported at contract value, which approximates fair value, as the group annuity contract has been deemed to be fully benefit responsive. Contract value represents contributions plus earnings, less withdrawals or transfers by participants. Beginning with the contract’s inception on December 1, 2004, interest is guaranteed at a crediting interest rate of 4.10% through December 31, 2005. Subsequent to December 31, 2005, the crediting interest rate may be reset quarterly, semi-annually or annually as elected by the Plan. The crediting interest rate is determined by the issuer based on several agreed-upon criteria, but cannot be less than 0%. The average effective yield for this fund for December 1, 2004 through December 31, 2004 approximated 4.10% on an annualized basis.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
3. Investments
Subsequent to the trustee change disclosed in Note 1, all of the Plan’s investments are held by Investors Bank and Trust Company, the trustee of the Plan. Prior to the disclosed trustee change, all of the Plan’s investments were held by PNC Bank, N.A., the former trustee of the Plan.
8
HRH Retirement Savings Plan
Notes to Financial Statements (continued)
3. Investments (continued)
Individual investments representing 5 percent or more of the fair value of net assets available for benefits were as follows:
| December 31 | ||||||
| 2004 |
2003 | |||||
| Common Trust Fund: |
||||||
| PNC Investment Contract Fund |
$ | 33,216,415 | ||||
| Mutual Funds: |
||||||
| Diversified Stock Index Fund |
$ | 11,780,005 | — | |||
| Diversified Value & Income Fund |
10,026,483 | — | ||||
| American Funds Growth of America R4 |
17,413,710 | — | ||||
| American Funds Euro Pacific Growth Fund R4 |
13,999,836 | — | ||||
| Federated Capital Appreciation Fund A |
12,585,911 | — | ||||
| Transamerica Premier Balanced Fund |
14,173,744 | — | ||||
| Fidelity Magellan Fund |
— | 12,126,668 | ||||
| Janus Adviser Balanced Fund |
— | 10,630,919 | ||||
| Janus Adviser Capital Fund |
— | 10,086,401 | ||||
| Putnam International Growth Fund |
— | 9,246,445 | ||||
| BlackRock Index Equity Fund (PNC Index Equity Fund Service Class) |
— | 8,499,216 | ||||
| American Fundamental R4 Fund |
— | 7,364,998 | ||||
| Cash |
10,005,593 | — | ||||
| Common Stock Fund: |
||||||
| HRH Common Stock Fund |
13,674,588 | 15,741,839 | ||||
| Group Annuity Contract: |
||||||
| Stable Value 5 (Transamerica) |
42,483,248 | — | ||||
9
HRH Retirement Savings Plan
Notes to Financial Statements (continued)
3. Investments (continued)
During 2004, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated (depreciated) in value as follows:
| Mutual Funds |
$ | 9,723,749 | |
| Common Trust Fund |
655,967 | ||
| HRH Common Stock |
1,998,083 | ||
| Collective Trust Funds |
17,280 | ||
| $ | 12,395,079 | ||
4. Income Tax Status
The Plan received a determination letter from the Internal Revenue Service dated September 21, 1999, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (IRC) and, therefore, the related trust is exempt from taxation. The Plan has since been amended and restated. Once qualified, the Plan is required to operate in conformity with the IRC to maintain its qualification. The plan administrator believes the Plan currently is designed and being operated in compliance with the applicable requirements of the IRC and therefore, believes that the Plan continues to qualify under Section 401(a) and the related trust continues to be tax exempt.
5. Related-Party Transactions
Certain plan assets are invested in funds sponsored by the Administrator and stock of the Company. Transactions involving these investments are considered to be party-in-interest transactions for which statutory exemption exists under the Department of Labor Regulations.
6. Differences Between Financial Statements and Form 5500
As discussed in Note 1, effective January 1, 2004, the Plan assumed control of all the Hobbs Plan assets with a value of $19,548,229. The following is a reconciliation of net assets available for benefits per the financial statements to the 2003 Form 5500:
| December 31, 2003 | |||
| Net assets available for benefits per the financial statements |
$ | 134,294,295 | |
| 2004 asset transfer from the Hobbs Plan included in the 2003 Form 5500 |
19,548,229 | ||
| Net assets available for benefits per the 2003 Form 5500 |
$ | 153,842,524 | |
10
HRH Retirement Savings Plan
Notes to Financial Statements (continued)
6. Differences Between Financial Statements and Form 5500 (continued)
The following is a reconciliation of a transfer of assets to the Plan per the financial statements to the 2004 Form 5500:
| Year ended December 31, 2004 |
||||
| Transfers from plan mergers per the financial statements |
$ | 29,085,321 | ||
| 2004 asset transfer from the Hobbs Plan included in the 2003 Form 5500 |
(19,548,229 | ) | ||
| Transfers from plan mergers per the 2004 Form 5500 |
$ | 9,537,092 | ||
11
12
EIN 54-1194795, Plan 001
Schedule H, Line 4i – Schedule of Assets (Held at End of Year)
December 31, 2004
| Identity of Issue, Borrower, Lessor or Similar Party |
Description of Investment, Including Maturity Date, Rate of Interest, Par or Maturity Value |
Current Value | |||
| Mutual Funds: |
|||||
| Diversified Core Bond Fund* |
701,265 shares | $ | 7,384,321 | ||
| Diversified Stock Index * |
1,456,119 shares | 11,780,005 | |||
| Diversified Value & Income Fund* |
869,600 shares | 10,026,483 | |||
| American Funds Growth of America R4 |
639,505 shares | 17,413,710 | |||
| American Funds Euro Pacific Growth Fund R4 |
397,046 shares | 13,999,836 | |||
| Baron Small Cap Fund |
282,179 shares | 6,230,511 | |||
| Calamos Growth A Fund |
87,799 shares | 4,651,620 | |||
| Federated Capital Appreciation Fund A |
496,486 shares | 12,585,911 | |||
| Oppenheimer Developing Markets N Fund |
80,008 shares | 2,125,803 | |||
| Transamerica Premier Balanced Fund* |
627,157 shares | 14,173,744 | |||
| Royce Opportunity Fund |
542,676 shares | 7,147,049 | |||
| 107,518,993 | |||||
| Collective Trust Funds: |
|||||
| Diversified Real Estate Fund* |
208,903 shares | 3,172,030 | |||
| HRH Conservative Allocation Portfolio |
7,153 shares | 72,449 | |||
| HRH Moderate Allocation Portfolio |
68,576 shares | 695,264 | |||
| HRH Aggressive Allocation Portfolio |
83,527 shares | 854,933 | |||
| 4,794,676 | |||||
| Cash |
— | 10,005,593 | |||
| Group Annuity Contract: |
|||||
| Stable Value 5 (Transamerica)* |
— | 42,483,248 | |||
| HRH Common Stock* |
1,320,438 shares | 13,674,588 | |||
| Participant Loans* |
Interest rates ranging from 5.06% to 10.5%; maturity dates vary with remaining terms from 1 to 15 years. |
4,834,256 | |||
| Total investments |
$ | 183,311,354 | |||
| * | Indicates party-in-interest to the Plan. |
13