The first major publicly traded insurance brokerage to report first-quarter results said its net income dropped 13 percent despite managing to increase commissions in a tough market with sinking rates.

Daytona, Fla.-based insurance broker Brown & Brown reported net income fell in part due to a $10 million drop in investment income and increased expenses.

The results, however, were not unexpected by financial analysts that predicted Brown & Brown would come in where it did at 37 cents a share.

The firm reported net income of $52 million for the first quarter, $8 million less than the prior year. Net income per share dropped 5 cents to 37 cents. Revenues were off 1 percent, or $2 million, to $257 million.

While the firm reported a 3 percent increase in commissions and fees of $8 million to $254 million, organic growth fell 4 percent.

The firm completed 13 acquisitions through April of this year, with total annualized revenue of $44 million, the brokerage said.

During an analysts' conference call today, J. Hyatt Brown, chairman and chief executive officer, and J. Powell Brown, president, said the markets are still experiencing rate declines as high as 40 percent throughout the country.

Hyatt Brown indicated that in some areas there are signs of stabilization, especially with Florida's state-run insurer of last resort, Citizens Property Insurance Corp. He said there is a substantial shift from Citizens on wind coverage for condominium and apartments to nonadmitted carriers. The nonadmitted carriers are writing at 5-to-10 percent below Citizens' rates and providing better coverage. The exception to this is in southeast Florida, he added, where Citizens still dominates.

He said it would not be until the fourth quarter before the industry sees a "normalized soft market" with 10-to-15 percent declines instead of the current aggressive pricing.

Also affecting Brown & Brown's results is the downturn in the economy. Business payrolls are being reduced, and that translates into the need for less insurance coverage for some clients, said Mr. Brown.

He said Florida legislators are trying to come up with plans to reduce Citizens' exposures. There is growing fear that should the state be hit with a big loss from a hurricane it will be impossible to cover the losses by going to the bond market. The best solution, he said, would be to allow the market place to come up a solution.

"If we just let a little time go along, the marketplace will solve the problem," he said.

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Brown & Brown Net Income Drops Despite Commission Rise

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