Brown & Brown Reports Quarterly Net Down 12%

Daytona Beach, Fla.-based insurance broker Brown & Brown reported 2007 fourth-quarter net income dropped 12 percent with a loss in organic growth and price decreases holding down earnings.

J. Hyatt Brown, chairman and chief executive officer, called the quarter a challenge with premiums renewals at 15-to-30 percent less than the expiring premiums.

During an analyst's conference call, Mr. Brown said the firm expects to see prices continue to fall through a good part of next year, as underwriters continue to make a profit with low severity exposures. But he said that should change at some point because that is the historic nature of the business.

Mr. Brown said this is the first quarter since the company has gone public that it lost money in comparative quarters.

Fourth-quarter net income was down to $33 million, off by $4.6 million, which translates to 23 cents a share, a drop of 4 cents a share compared to the same period in 2006. Revenues saw a slight increase of more than 1 percent, or $2.6 million, to $217 million.

For the year net income rose 11 percent to $200 million, a gain of $19 million. Earnings per share increased 13 cents to $1.35 a share. Revenues rose 9 percent, or $82 million, to $960 million.

Organic growth showed losses almost universally across the board, except for professional programs which increased 5.5 percent.

Retail brokerage organic growth lost 7 percent, with Florida retail hit the hardest with an 11 percent loss. Wholesale brokerage business showed a loss of 16 percent, which Mr. Brown noted was also not helped by the migration of accounts from the nonadmitted to admitted market.

Organic growth in total commissions and fees showed a loss of 8 percent.

Mr. Brown said that in his 48 years experience in the industry he has never seen the market the way it is today with companies continuing to remain as profitable with little severity. Coupled with that is offshore competition that continues to bring additional capacity into the markets, driving prices down further.

"It's a good time for consumers," he said.

On the expense front, he said the company will continue to invest in recruiting new people and training future producers. He said while it takes a while before these individuals begin to produce, the company program for training has produced people who "end up doing exceptionally well."

He also said the company has no plans to release core producers to cut expenses, but there would be changes made in offices where individuals are not measuring up to the firm's production standards.