J. Hyatt Brown, chairman and chief operating officer of DaytonaBeach, Fla.-based insurance broker Brown & Brown, returned tothe helm after heart surgery to report on the company's 15 percentincrease in net income for the second quarter.

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During an analyst's conference call today, Mr. Brown said he hasreturned to work part-time as he continues to recover from aquadruple-bypass operation in June. He said the surgery becamenecessary due to a hereditary health condition.

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Mr. Brown added that he is expected to make a full recovery andreturn to work full-time sometime in mid-August.

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The firm reported net income in the second quarter rose $4.9million, going from $32.2 million, or 46 cents a share, to morethan $37 million, or 53 cents a share. Revenues rose 24 percent, or$38 million, going from $158 million to $196 million.

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For the first six months of 2005, net income increased 17percent, or $12 million, going from $69 million, or 99 cents ashare, to $80 million, or $1.15 a share. Revenues for the firsthalf of the year rose 23 percent, or $75 million, going from $324million to $398 million.

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Looking at the insurance markets, Mr. Brown said there arecapacity problems in Florida when it comes to writing propertyinsurance, but for non-coastal properties prices for the line areflat or down as much as 10 percent.

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He said among those who are willing to write insurance pricingis up 10-to-15 percent for coastal properties.

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He warned that three counties in Florida with hurricaneexposure--Dade, Broward and Palm Beach--could suffer afourth-quarter shortage of insurers willing to write propertycoverage.

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The rest of the country continues to see price reductions in the10-to-20 percent range, according to Mr. Brown. He said most pricecompetition comes from regional insurers who do not have legacyissues such as asbestos.

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He said California workers' compensation continues to see ratedeclines as more companies enter the state since reforms werepassed a year ago.

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However, he said he did not see a return to the soft Californiamarket of the late 1980's and 1990's, noting that nationalcompanies continue to hold the line on pricing while the industryitself still needs to deal with inadequate reserves.

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"I think we will see plateaus in pricing as companies look attheir combined ratios," he said, adding that the competition doesnot appear to be "predatory" as it has in the past.

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On the issue of contingency fee investigations by individualstates, he said the firm received inquiries from 18 states sincethe investigations began last year. He said the firm has notreceived any requests for any additional information andinvestigators have "been silent" since the requests.

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When asked about complying with the federal Sarbanes-Oxley Actdisclosure requirements and investigations of price-fixing incommercial insurance sales, Mr. Brown said the company is "betteroff than we were" as a consequence.

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He said they have made the firm a tighter-run operation, and heexpects the costs from complying with the accounting disclosure actwill begin to come down this year.

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