NU Online News Service, July 21, 2:40 p.m.EDT

Daytona Beach, Fla.-based insurance broker Brown & Brownreported a slight increase in net income for the second quarter ofthis year, but the economic downturn continues to produce strainson the firm's organic growth.

"Q-2 was another interesting quarter," said J. Powell Brown,Brown & Brown's president and chief executive officer, duringan earnings conference call with analysts today. "The economycontinues to have the biggest impact on our numbers and rates areunder pressure all over and all around the country as we continueto watch Washington D.C. with great interest relative to healthcare reform."

For the second quarter, the broker reported net income increasedover the same period last year by less than 1 percent, or $270,000,to $40.67 million. Earnings per share were flat at 29 cents ashare. Revenues showed a slight up-tick of 2 percent, or $4.65million, rising to $246 million.

For the first six months of the year, net income dropped 4percent from the previous year, or $3.48 million, to $88.7 million.Earnings per share dropped 2 cents during the period to 63 cents.Revenues rose 2 percent, or $11.5 million to $510 million.

Cory T. Walker, chief financial officer for the firm, noted thatdespite an increase in core commission and fees of almost 3percent, or $6 million, to $238 million, much of that growth camethrough acquisition. Without acquisitions, core commissions andfees would have been down close to 5 percent.

The results were also helped by an increase in contingentcommission of $1.4 million to $6.8 million in the quarter.

Mr. Walker said the firm estimates third-quarter contingentcommission payments between $8 million and $9 million, andfourth-quarter commission to drop to around $1 million.

Jim W. Henderson, vice chairman and chief operating officer,commenting on the effects of the economic downturn on the firm,said that up until last year Brown & Brown had neverexperienced negative organic growth in its 70-year history.

In general, the executives described an insurance market thatremains very competitive, with the standard market still takingbusiness away from the wholesale market.

Mr. Brown said rates throughout the country were stillexhibiting downward pressure along with clients purchasing lessrisk.

Competition remains intense, coming primarily from regionalcarriers, and Mr. Brown said he expected that to continue.

Mr. Henderson said that despite the flight to the standardmarket, the excess and surplus lines market remains disciplined inits underwriting. He said he expected to see some moderate organicgrowth on that end of the business in the third and fourth quartersbecause of it.

The strategy for most insurers is to be very aggressive inpricing new business but maintain pricing on renewals, Mr. Powellsaid. Carriers are not dropping their rates, but there areexceptions, he added. The only overall increase he could point towas for coastal properties.

The biggest challenge on renewal business is dealing with lostaccounts due to bankruptcies, he observed.

Overall premiums are down despite insurers' attempts to keepprices flat because the overall insured risk, such as the number ofpersonnel or auto fleets on the road, have dropped as clients havedownsized, noted Mr. Powell.

On the health care issue, he did not venture to say how anyindividual proposal would affect employee benefit offerings.

"We don't really know," he observed. "We're watchingclosely."