Brown & Brown Grows Quarterly Net 17%

Insurance broker Brown & Brown reported that, despite a challenging soft market, second-quarter net income increased 17 percent helped by new business, recent acquisitions and the sale of a long-term investment.

For the quarter, the Daytona Beach, Fla.-based broker reported net income grew $7.6 million to $52 million from the same period last year. Earnings per share increased 5 cents to 37 cents a share. Revenues rose 12 percent, or $26 million, to $247 million.

Net income for the first six months of the year rose 18 percent, or $17 million, to $112 million, with earnings per share rising 12 cents to 79 cents a share. Revenues rose 12 percent, or $54 million, over the same period last year to $505 million.

The numbers were helped primarily by the sale of the broker's shares in a long-term investment--Rock-Tenn Company--for a pre-tax gain of $9.8 million.

During an analyst's conference call today, J. Hyatt Brown said rates were down nationally anywhere from 10-to-30 percent, with small areas of firming, depending on location and lines of business. He said insurers are competing aggressively, describing a few as abandoning underwriting in an effort to gain business.

He predicted the firm would "slough through" the soft market in the third quarter and was optimistic Brown & Brown would end the year with revenue growth between zero and 5 percent.

Organic growth in commissions and fees for the quarter was minus-1 percent, compared to the same period last year, at $18 million.

Powell Brown, president of the firm, said the company is expecting to see new business growth in Florida as condominiums, which were not insurable because they lacked hurricane glass or shutters, are retrofitted and come onto the insurance market.

In the area of acquisitions, Jim W. Henderson, vice chairman and chief operating officer, said the firm closed on three acquisitions in the second quarter totaling $22 million in revenue. For the year so far, the company has completed 12 deals totaling $46 million.

He said the "current soft market is creating interest in agencies in terms of looking for options" to sell now or in the future.

Discussing the future of contingent commissions, Hyatt Brown, company chairman and chief executive officer, noted that despite the move by three insurers to abandon volume-based commissions--Chubb, Travelers, and yesterday the Hartford--he did not believe many others would follow suit.

He said regional carriers have no intention of abandoning the system, a primary source of contingents for the firm.

The competition between regional and national carriers, and the differing terms of compensation, serves as a "safeguard" for brokers from the nationals underpaying them, Mr. Hyatt Brown said.