UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-Q


x
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the quarterly period ended June 30, 2009oro
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the transition period from _____________ to
    ________________




Commission
file number 001-13619




BROWN
& BROWN, INC.


(Exact
name of Registrant as specified in its charter)


Florida
              (brown  brown logo)
              59-0864469(State
      or other jurisdiction of
              (I.R.S.
      Employer Identification Number)incorporation
      or organization)220
      South Ridgewood Avenue,
              32114Daytona
      Beach, FL
              (Zip
      Code)(Address
      of principal executive offices)




Registrant’s
telephone number, including area code: (386) 252-9601


Registrant’s
Website: www.bbinsurance.com




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing requirements for
the past 90days.


Yes     x     No     o




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


Yes     o     No     o




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated
filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.


Large accelerated
      filer    x
              
              Accelerated filer
      oNon-accelerated
      filer      o
              (Do
      not check if a smaller reporting company)
              Smaller reporting
      company o




Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o  No x


The
number of shares of the Registrant’s common stock, $.10 par value, outstanding
as of August 6, 2009 was 141,477,011.




BROWN
& BROWN, INC.




INDEX


PAGE
      NO.PART
      I. FINANCIAL INFORMATIONItem
      1.
                Financial
      Statements (Unaudited):Condensed
      Consolidated Statements of Income for the three and six months
      ended June 30, 2009 and 2008
                
                4Condensed
      Consolidated Balance Sheets as of June 30, 2009 and December 31,
      2008
                
                5Condensed
      Consolidated Statements of Cash Flows for the six months
      ended June 30, 2009 and 2008
                
                6Notes
      to Condensed Consolidated Financial Statements
                
                7Item
      2.
                Management’s
      Discussion and Analysis of Financial Condition and Results
      of Operations
                
                17Item
      3.
                Quantitative
      and Qualitative Disclosures About Market Risk
                
                34Item
      4.
                Controls
      and Procedures
                
                35PART
      II. OTHER INFORMATIONItem
      1.
                Legal
      Proceedings
                
                35Item1A.
                Risk
      Factors
                
                35Item
      4.
                Submission
      of Matters to a Vote of Security Holders
                
                36Item 5.
                Other Information
                
                36Item
      6.
                Exhibits
                
                36SIGNATURE
                
                37


2




Disclosure
Regarding Forward-Looking Statements




Brown
& Brown, Inc., together with its subsidiaries (collectively, “we”, “Brown
& Brown” or the “Company”), makes “forward-looking statements” within the
“safe harbor” provision of the Private Securities Litigation Reform Act of 1995,
as amended, throughout this report and in the documents we incorporate by
reference into this report. You can identify these statements by forward-looking
words such as “may,” “will,” “should,” “expect,” “anticipate,” “believe,”
“intend,” “estimate,” “plan” and “continue” or similar words. We have based
these statements on our current expectations about future events. Although we
believe the expectations expressed in the forward-looking statements included in
this Form 10-Q and those reports, statements, information and announcements are
based on reasonable assumptions within the bounds of our knowledge of our
business, a number of factors could cause actual results to differ materially
from those expressed in any forward-looking statements, whether oral or written,
made by us or on our behalf. Many of these factors have previously been
identified in filings or statements made by us or on our behalf. Important
factors which could cause our actual results to differ materially from the
forward-looking statements in this report include the following items, in
additions to those matters described in Part I, Item 2 “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and Part II, Item
1A “Risk Factors”:


●
                    Material
      adverse changes in economic conditions in the markets we serve and in the
      general economy;●
                    Future
      regulatory actions and conditions in the states in which we conduct our
      business;●
                    Competition
      from others in the insurance agency, wholesale brokerage, insurance
      programs and service business;●
                    A
      significant portion of business written by Brown & Brown is for
      customers located in California, Florida, Indiana, Michigan, New Jersey,
      New York, Pennsylvania, Texas and Washington. Accordingly, the occurrence
      of adverse economic conditions, an adverse regulatory climate, or a
      disaster in any of these states could have a material adverse effect on
      our business;●
                    The
      integration of our operations with those of businesses or assets we have
      acquired or may acquire in the future and the failure to realize the
      expected benefits of such integration; and●
                    Other
      risks and uncertainties as may be detailed from time to time in our public
      announcements and Securities and Exchange Commission (“SEC”)
      filings.




Forward-looking
statements that we make or that are made by others on our behalf are based on a
knowledge of our business and the environment in which we operate, but because
of the factors listed above, among others, actual results may differ from those
in the forward-looking statements. Consequently, these cautionary statements
qualify all of the forward-looking statements we make herein. We cannot assure
you that the results or developments anticipated by us will be realized or, even
if substantially realized, that those results or developments will yield the
expected consequences for us or affect us, our business or our operations in the
way we expect. We caution readers not to place undue reliance on these
forward-looking statements, which speak only as of their dates. We assume no
obligation to update any of the forward-looking statements.







PART I
-FINANCIAL INFORMATION




ITEM 1 –
FINANCIAL STATEMENTS (UNAUDITED)




BROWN
& BROWN, INC.


CONDENSED
CONSOLIDATED STATEMENTS OF INCOME


(UNAUDITED)


(in
      thousands, except per share data)
                
                For
      the three months
                  ended
      June 30,
                
                
                For
      the six months
                  ended
      June 30,2009
                
                
                2008
                
                
                2009
                
                
                2008REVENUESCommissions
      and fees
                
                $
                244,595
                
                
                $
                238,835
                
                
                $
                508,559
                
                
                $
                492,363Investment
      income
                
                
                460
                
                
                
                1,909
                
                
                
                770
                
                
                
                3,908Other
      income, net
                
                
                1,314
                
                
                
                976
                
                
                
                620
                
                
                
                2,164Total
      revenues
                
                
                246,369
                
                
                
                241,720
                
                
                
                509,949
                
                
                
                498,435EXPENSESEmployee
      compensation and benefits
                
                
                122,625
                
                
                
                120,514
                
                
                
                249,966
                
                
                
                241,701Non-cash
      stock-based compensation
                
                
                1,695
                
                
                
                1,800
                
                
                
                3,511
                
                
                
                3,744Other
      operating expenses
                
                
                35,620
                
                
                
                34,384
                
                
                
                71,484
                
                
                
                65,588Amortization
                
                
                12,519
                
                
                
                11,392
                
                
                
                24,904
                
                
                
                22,508Depreciation
                
                
                3,299
                
                
                
                3,292
                
                
                
                6,632
                
                
                
                6,538Interest
                
                
                3,632
                
                
                
                3,744
                
                
                
                7,266
                
                
                
                7,178Total
      expenses
                
                
                179,390
                
                
                
                175,126
                
                
                
                363,763
                
                
                
                347,257Income
      before income taxes
                
                
                66,979
                
                
                
                66,594
                
                
                
                146,186
                
                
                
                151,178Income
      taxes
                
                
                26,311
                
                
                
                26,196
                
                
                
                57,506
                
                
                
                59,020Net
      income
                
                $
                40,668
                
                
                $
                40,398
                
                
                $
                88,680
                
                
                $
                92,158Net
      income per share:Basic
                
                $
                0.29
                
                
                $
                0.29
                
                
                $
                0.63
                
                
                $
                0.65Diluted
                
                $
                0.29
                
                
                $
                0.29
                
                
                $
                0.63
                
                
                $
                0.65Weighted
      average number of shares outstanding:Basic
                
                
                141,523
                
                
                
                140,723
                
                
                
                141,540
                
                
                
                140,713Diluted
                
                
                141,888
                
                
                
                141,265
                
                
                
                141,865
                
                
                
                141,330Dividends
      declared per share
                
                $
                0.075
                
                
                $
                0.07
                
                
                $
                0.15
                
                
                $
                0.14




See
accompanying notes to condensed consolidated financial statements.


4




BROWN
& BROWN, INC.


CONDENSED
CONSOLIDATED


BALANCE
SHEETS


(UNAUDITED)


(in
      thousands, except per share data)
                
                June
      30,
                  2009
                
                
                December
      31,
                  2008ASSETSCurrent
      Assets:Cash
      and cash equivalents
                
                $
                189,994
                
                
                $
                78,557Restricted
      cash and investments
                
                
                160,121
                
                
                
                144,750Short-term
      investments
                
                
                7,640
                
                
                
                7,511Premiums,
      commissions and fees receivable
                
                
                235,463
                
                
                
                244,515Deferred
      income taxes
                
                
                —
                
                
                
                14,171Other
      current assets
                
                
                24,302
                
                
                
                33,528Total
      current assets
                
                
                617,520
                
                
                
                523,032Fixed
      assets, net
                
                
                63,189
                
                
                
                63,520Goodwill
                
                
                1,050,720
                
                
                
                1,023,372Amortizable
      intangible assets, net
                
                
                488,021
                
                
                
                495,627Other
      assets
                
                
                10,762
                
                
                
                14,029Total
      assets
                
                $
                2,230,212
                
                
                $
                2,119,580LIABILITIES
      AND SHAREHOLDERS’ EQUITYCurrent
      Liabilities:Premiums
      payable to insurance companies
                
                $
                397,991
                
                
                $
                357,707Premium
      deposits and credits due customers
                
                
                39,003
                
                
                
                43,577Accounts
      payable
                
                
                33,378
                
                
                
                18,872Accrued
      expenses
                
                
                78,493
                
                
                
                96,325Current
      portion of long-term debt
                
                
                4,015
                
                
                
                6,162Total
      current liabilities
                
                
                552,880
                
                
                
                522,643Long-term
      debt
                
                
                250,289
                
                
                
                253,616Deferred
      income taxes, net
                
                
                98,635
                
                
                
                90,143Other
      liabilities
                
                
                15,223
                
                
                
                11,437Shareholders’
      Equity:Common
      stock, par value $0.10 per share; authorized 280,000 shares; issued and
      outstanding 141,481 at 2009 and 141,544 at 2008
                
                
                14,148
                
                
                
                14,154Additional
      paid-in capital
                
                
                254,185
                
                
                
                250,167Retained
      earnings
                
                
                1,044,852
                
                
                
                977,407Accumulated
      other comprehensive income, net of related income tax effect of $0 at 2009
      and $8 at 2008
                
                
                —
                
                
                
                13Total
      shareholders’ equity
                
                
                1,313,185
                
                
                
                1,241,741Total
      liabilities and shareholders’ equity
                
                $
                2,230,212
                
                
                $
                2,119,580




See
accompanying notes to condensed consolidated financial statements.


5




BROWN
& BROWN, INC.


CONDENSED
CONSOLIDATED STATEMENTS OF


CASH
FLOWS


(UNAUDITED)


For
      the six months
                  ended
      June 30,(in
      thousands)
                
                2009
                
                
                2008Cash
      flows from operating activities:Net
      income
                
                $
                88,680
                
                
                $
                92,158Adjustments
      to reconcile net income to net cash provided by operating
      activities:Amortization
                
                
                24,904
                
                
                
                22,508Depreciation
                
                
                6,632
                
                
                
                6,538Non-cash
      stock-based compensation
                
                
                3,511
                
                
                
                3,744Deferred
      income taxes
                
                
                22,670
                
                
                
                25,934Net
      loss (gain) on sales of investments, fixed assets and customer
      accounts
                
                
                462
                
                
                
                (759
                )Changes
      in operating assets and liabilities, net of effect from acquisitions and
      divestitures:Restricted
      cash and investments (increase) decrease
                
                
                (15,371
                )
                
                
                38,774Premiums,
      commissions and fees receivable decrease (increase)
                
                
                10,919
                
                
                
                (21,098
                )Other
      assets decrease (increase)
                
                
                11,509
                
                
                
                (3,708
                )Premiums
      payable to insurance companies increase
                
                
                39,686
                
                
                
                26,209Premium
      deposits and credits due customers (decrease)
                
                
                (4,703
                )
                
                
                (9,004
                )Accounts
      payable increase
                
                
                14,394
                
                
                
                136Accrued
      expenses (decrease)
                
                
                (18,315
                )
                
                
                (17,678
                )Other
      liabilities increase (decrease)
                
                
                9
                
                
                
                (1,386
                )Net
      cash provided by operating activities
                
                
                184,987
                
                
                
                162,368Cash
      flows from investing activities:Additions
      to fixed assets
                
                
                (6,262
                )
                
                
                (8,194
                )Payments
      for businesses acquired, net of cash acquired
                
                
                (38,773
                )
                
                
                (187,042
                )Proceeds
      from sales of fixed assets and customer accounts
                
                
                634
                
                
                
                2,703Purchases
      of investments
                
                
                (4,247
                )
                
                
                (3,950
                )Proceeds
      from sales of investments
                
                
                4,098
                
                
                
                810Net
      cash used in investing activities
                
                
                (44,550
                )
                
                
                (195,673
                )Cash
      flows from financing activities:Proceeds
      from long-term debt
                
                
                —
                
                
                
                25,000Payments
      on long-term debt
                
                
                (8,266
                )
                
                
                (10,767
                )Borrowings
      on revolving credit facility
                
                
                7,580
                
                
                
                —Payments
      on revolving credit facility
                
                
                (7,580
                )
                
                
                —Issuances
      of common stock for employee stock benefit plans
                
                
                501
                
                
                
                535Cash
      dividends paid
                
                
                (21,235
                )
                
                
                (19,697
                )Net
      cash (used in) provided by financing activities
                
                
                (29,000
                )
                
                
                (4,929
                )Net
      increase (decrease) in cash and cash equivalents
                
                
                111,437
                
                
                
                (38,234
                )Cash
      and cash equivalents at beginning of period
                
                
                78,557
                
                
                
                38,234Cash
      and cash equivalents at end of period
                
                $
                189,994
                
                
                $
                —




See
accompanying notes to condensed consolidated financial statements.


6




BROWN
& BROWN, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)




NOTE
1 · Nature of Operations




Brown &
Brown, Inc., a Florida corporation, and its subsidiaries is a diversified
insurance agency, wholesale brokerage, insurance programs and services
organization that markets and sells to its customers insurance products and
services, primarily in the property and casualty area. Brown & Brown’s
business is divided into four reportable segments: the Retail Division, which
provides a broad range of insurance products and services to commercial,
professional, public and quasi-public entities, and individual customers;
the Wholesale Brokerage Division, which markets and sells excess and surplus
commercial insurance and reinsurance, primarily through independent agents and
brokers; the National Programs Division, which is composed of two units —
Professional Programs, which provides professional liability and related package
products for certain professionals delivered through nationwide networks of
independent agents, and Special Programs, which markets targeted products and
services designated for specific industries, trade groups, public and
quasi-public entities and market niches; and the Services Division, which
provides insurance-related services, including third-party claims administration
and comprehensive medical utilization management services in both the workers’
compensation and all-lines liability arenas, as well as Medicare set-aside
services.




NOTE
2 · Basis of Financial Reporting




The
accompanying unaudited, condensed, consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America (“GAAP”) for interim financial information and with the
instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by GAAP for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. These unaudited, condensed, consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements and the notes thereto set forth in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2008.




Results
of operations for the three and six months ended June 30, 2009 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2009.




NOTE
3 · Net Income Per Share




Basic
net income per share is computed by dividing net income available to
shareholders by the weighted average number of shares outstanding for the
period. Basic net income per share excludes dilution. Diluted net income per
share reflects the potential dilution that could occur if stock options or other
contracts to issue common stock were exercised or converted to common
stock.




The
following table sets forth the computation of basic net income per share and
diluted net income per share:


For
      the three months
                  ended
      June 30,
                
                
                For
      the six months
                  ended
      June 30,(in
      thousands, except per
      share data)
                
                2009
                
                
                2008
                
                
                2009
                
                
                2008Net
      income
                
                $
                40,668
                
                
                $
                40,398
                
                
                $
                88,680
                
                
                $
                92,158Weighted
      average number of common shares Outstanding
                
                
                141,523
                
                
                
                140,723
                
                
                
                141,540
                
                
                
                140,713Dilutive
      effect of stock options using the treasury stock method
                
                
                365
                
                
                
                542
                
                
                
                325
                
                
                
                617Weighted
      average number of shares Outstanding
                
                
                141,888
                
                
                
                141,265
                
                
                
                141,865
                
                
                
                141,330Net
      income per share:Basic
                
                $
                0.29
                
                
                $
                0.29
                
                
                $
                0.63
                
                
                $
                0.65Diluted
                
                $
                0.29
                
                
                $
                0.29
                
                
                $
                0.63
                
                
                $
                0.65
 7




NOTE
4 · New Accounting Pronouncements




Business
Combinations — In December 2007, the Financial Accounting Standards Board
(“FASB”) issued Statement of Financial Accounting Standards No. 141(R),
Business Combinations (“SFAS 141R”). SFAS 141R requires an acquirer to recognize
100% of the fair values of acquired assets, including goodwill, and assumed
liabilities, (with only limited exceptions) upon initially obtaining control of
an acquired entity even if the acquirer has not acquired 100% of its target.
Additionally, the fair value of contingent consideration arrangements (such as
earnout purchase arrangements) at the acquisition date must be included in the
purchase price consideration. Transaction costs are expensed as incurred. SFAS
141R also modifies the recognition of pre-acquisition contingencies, such as
environmental or legal issues, restructuring plans and acquired research and
development value in purchase accounting. SFAS 141R amends SFAS No. 109,
Accounting for Income Taxes, to require the acquirer to recognize changes in the
amount of its deferred tax benefits that are recognizable because of a business
combination, either in income from continuing operations in the period of the
combination or directly in contributed capital, depending on the circumstances.
SFAS 141R is effective for fiscal years beginning after December 15, 2008.
Effective January 1, 2009, the Company adopted SFAS 141R on a prospective basis.
As a result, the recorded purchase price for all acquisitions consummated after
January 1, 2009 will include an estimation of the fair value of liabilities
associated with any potential earnout provisions. Subsequent changes in these
earnout obligations will be recorded in the consolidated statement of income
when incurred. Potential earnout obligations are typically based upon future
earnings of the acquired entities, usually between one to three
years.




In
April 2008, the FASB issued FSP No. FAS 142-3, Determination of the Useful Life
of Intangible Assets (“FSP 142-3”). FSP 142-3 amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under SFAS 142. This pronouncement
requires enhanced disclosures concerning a company’s treatment of costs incurred
to renew or extend the term of a recognized intangible asset. FSP 142-3 is
effective for financial statements issued for fiscal years beginning after
December 15, 2008. The adoption of FSP 142-3 did not have any material
impact on our consolidated financial statements.




In
November 2008, the FASB ratified EITF Issue No. 08-7, Accounting for
Defensive Intangible Assets (“EITF 08-7”). EITF 08-7 applies to defensive
intangible assets, which are acquired intangible assets that the acquirer does
not intend to actively use but intends to hold to prevent its competitors from
obtaining access to them. As these assets are separately identifiable, EITF 08-7
requires an acquiring entity to account for defensive intangible assets as a
separate unit of accounting which should be amortized to expense over the period
the asset diminished in value. Defensive intangible assets must be recognized at
fair value in accordance with SFAS 141R and SFAS 157. EITF 08-7 is effective for
financial statements issued for fiscal years beginning after December 15,
2008. The adoption of EITF 08-7 did not have any material impact on our
consolidated financial statements.


Subsequent
Events - In May 2009, the FASB issued SFAS No. 165 Subsequent
Events, (“SFAS 165”), which establishes general standards of accounting for, and
disclosures of, events that occur after the balance sheet date but before the
financial statements are issued or are available to be issued. SFAS 165 is
effective on a prospective basis for interim or annual periods ending after
June 15, 2009, and was adopted on June 1, 2009.  This
standard did not have a material impact on the Company’s financial condition,
results of operations and cash flows.


Subsequent events have
been evaluated through the date and time the condensed consolidated financial
statements were issued on August 10, 2009.  No material
subsequent events have occurred since June 30, 2009 that required
recognition or disclosure in our condensed consolidated financial
statements.


International
Accounting Standards — International Financial Reporting Standards
(“IFRS”) are a set of standards and interpretations adopted by the International
Accounting Standards board. The Securities and Exchange Commission is currently
considering a potential IFRS adoption process in the United States, which could,
in the near term, provide domestic issuers with an alternative accounting method
and which could ultimately replace U.S. GAAP reporting requirements with IFRS
reporting requirements. We are currently investigating the implications should
we be required to adopt IFRS in the
future.


8




NOTE
5 · Business Combinations




Acquisitions
in 2009




For
the six months ended June 30, 2009, Brown & Brown acquired the assets and
assumed certain liabilities of six insurance intermediaries and a book of
business (customer accounts). The aggregate purchase price of these acquisitions
was $41,415,000 including $36,285,000 of net cash payments, the assumption of
$1,323,000 of liabilities and $3,807,000 of recorded earn-out payables. All of
these acquisitions were acquired primarily to expand Brown & Brown’s
core businesses and to attract and hire high-quality individuals. Acquisition
purchase prices are typically based on a multiple of average annual operating
profit earned over a one- to three-year period within a minimum and maximum
price range. The recorded purchase price for all acquisitions consummated after
January 1, 2009 will include an estimation of the fair value of liabilities
associated with any potential earn-out provisions. Subsequent changes in the
fair value of earn-out obligations will be recorded in the consolidated
statement of income when incurred.




The
fair value of earn-out obligations is based on the present value of the expected
future payments to be made to the sellers of the acquired businesses in
accordance with the provisions outlined in the respective purchase agreements.
In determining fair value, the acquired business’s future performance is
estimated using financial projections developed by management for the acquired
business and reflects market participant assumptions regarding revenue growth
and/or profitability. The expected future payments are estimated on the basis of
the earn-out formula and performance targets specified in each purchase
agreement compared to the associated financial projections. These payments are
then discounted to present value using a risk-adjusted rate that takes into
consideration the likelihood that the forecasted earn-out payments will be
made. The change to the fair value of
earn-out obligations recorded in net income for the three or six months ended
June 30, 2009 was not material.




All
of these acquisitions have been accounted for as business combinations and are
as follows:


(in
      thousands)
                
                Name
              
              Business
                Segment
              
              2009
                Date
      of
                Acquisition
              
              Net
                Cash
                Paid
              
              Note
                Payable
              
              Recorded
                Earn-out
                Payable
              
              Recorded
                Purchase
                Price
              
              Maximum
                Potential
                Earn-out
                PayableConner
      Strong Companies, Inc.
              
              Retail
              
              January
      2
              
              $
              23,621
              
              $
              —
              
              $
              —
              
              $
              23,621
              
              $
              —Other
              
              Various
              
              Various
              
              
              12,664
              
              
              —
              
              
              3,807
              
              
              16,471
              
              
              8,666Total
              
              
              
              
              
              $
              36,285
              
              $
              —
              
              $
              3,807
              
              $
              40,092
              
              $
              8,666




The
following table summarizes the estimated fair values of the aggregate assets and
liabilities acquired as of the date of each acquisition:


(in
      thousands)
                  
                  Conner
                    Strong
                  
                  
                  Other
                  
                  
                  TotalFiduciary
      cash
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  —Other
      current assets
                  
                  
                  556
                  
                  
                  
                  1,310
                  
                  
                  
                  1,866Fixed
      assets
                  
                  
                  52
                  
                  
                  
                  96
                  
                  
                  
                  148Goodwill
                  
                  
                  14,062
                  
                  
                  
                  8,062
                  
                  
                  
                  22,124Purchased
      customer accounts
                  
                  
                  9,100
                  
                  
                  
                  8,114
                  
                  
                  
                  17,214Noncompete
      agreements
                  
                  
                  —
                  
                  
                  
                  65
                  
                  
                  
                  65Other
      assets
                  
                  
                  —
                  
                  
                  
                  (2
                  )
                  
                  
                  (2
                  )Total
      assets acquired
                  
                  
                  23,770
                  
                  
                  
                  17,645
                  
                  
                  
                  41,415Other
      current liabilities
                  
                  
                  (149
                  )
                  
                  
                  (1,174
                  )
                  
                  
                  (1,323
                  )Total
      liabilities assumed
                  
                  
                  (149
                  )
                  
                  
                  (1,174
                  )
                  
                  
                  (1,323
                  )Net
      assets acquired
                  
                  $
                  23,621
                  
                  
                  $
                  16,471
                  
                  
                  $
                  40,092




The
weighted average useful lives for the above acquired amortizable intangible
assets are as follows: purchased customer accounts, 14.9 years; and noncompete
agreements, 5.0 years.




Goodwill
of $22,124,000, of which $19,072,000 is expected to be deductible for income tax
purposes, was assigned to the Retail, Wholesale Brokerage, National Programs and
Services Divisions in the amounts of $18,112,000, $93,000, $3,919,000 and $0,
respectively.


9


The
results of operations for the acquisitions completed during 2009 have been
combined with those of the Company since their respective acquisition dates.
The total revenues and net
loss from the acquisitions completed during 2009 included in the Condensed
Consolidated Statement of Income for the three months ended June 30, 2009 was
$3,359,000 and $26,000, respectively.  The total revenues and
net income from the acquisitions completed during 2009 included in the Condensed
Consolidated Statement of Income for the six months ended June 30, 2009 was
$6,364,000 and $474,000, respectively. If the acquisitions had occurred
as of the beginning of each period, the Company’s results of operations
would be as shown in the following table. These unaudited pro forma results are
not necessarily indicative of the actual results of operations that would have
occurred had the acquisitions actually been made at the beginning of the
respective periods.


(UNAUDITED)
                  
                  For
      the three months
                    ended
      June 30,
                  
                  
                  For
      the six months
                    ended
      June 30,(in
      thousands, except per share data)
                  
                  2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Total
      revenues
                  
                  $
                  246,723
                  
                  
                  $
                  245,956
                  
                  
                  $
                  512,685
                  
                  
                  $
                  507,766Income
      before income taxes
                  
                  
                  67,097
                  
                  
                  
                  68,046
                  
                  
                  
                  147,139
                  
                  
                  
                  154,348Net
      income
                  
                  
                  40,740
                  
                  
                  
                  41,279
                  
                  
                  
                  89,258
                  
                  
                  
                  94,090Net
      income per share:Basic
                  
                  $
                  0.29
                  
                  
                  $
                  0.29
                  
                  
                  $
                  0.63
                  
                  
                  $
                  0.67Diluted
                  
                  $
                  0.29
                  
                  
                  $
                  0.29
                  
                  
                  $
                  0.63
                  
                  
                  $
                  0.67Weighted
      average number of shares outstanding:Basic
                  
                  
                  141,523
                  
                  
                  
                  140,723
                  
                  
                  
                  141,540
                  
                  
                  
                  140,713Diluted
                  
                  
                  141,888
                  
                  
                  
                  141,265
                  
                  
                  
                  141,865
                  
                  
                  
                  141,330




Acquisitions
in 2008




For
the six months ended June 30, 2008, Brown & Brown acquired the assets and
assumed certain liabilities of 20 insurance intermediaries, the stock of one
insurance intermediary and several books of business (customer accounts). The
aggregate purchase price of these acquisitions was $194,400,000, including
$182,698,000 of net cash payments, the issuance of $4,713,000 in notes
payable and the assumption of $6,989,000 of liabilities. All of these
acquisitions were acquired primarily to expand Brown & Brown’s core
businesses and to attract and hire high-quality individuals. Acquisition
purchase prices are typically based on a multiple of average annual operating
profits earned over a one- to three-year period within a minimum and maximum
price range. The initial asset allocation of an acquisition is based on the
minimum purchase price, and any subsequent earn-out payment is allocated to
goodwill. Acquisitions are initially recorded at preliminary fair values.
Subsequently, the Company completes the final fair value allocations and any
adjustments to assets or liabilities acquired are recorded in the current
period.




All
of these acquisitions have been accounted for as business combinations and are
as follows:


(in
      thousands)
                          
                          Name
                        
                        Business
                          Segment
                        
                        2008
                          Date
      of
                          Acquisition
                        
                        Net
                          Cash
                          Paid
                        
                        
                        Notes
                          Payable
                        
                        
                        Recorded
                          Purchase
                          PriceLDP
      Consulting Group, Inc.
                        
                        Retail
                        
                        January
      24
                        
                        
                        39,226
                        
                        
                        
                        —
                        
                        
                        
                        39,226Powers
      & Effler Insurance Brokers
                        
                        Retail
                        
                        April
      1
                        
                        
                        25,029
                        
                        
                        
                        —
                        
                        
                        
                        25,029HBA
      Insurance Group, Inc.
                        
                        Retail
                        
                        June
      1
                        
                        
                        48,297
                        
                        
                        
                        2,000
                        
                        
                        
                        50,297Other
                        
                        Various
                        
                        Various
                        
                        
                        70,146
                        
                        
                        
                        2,713
                        
                        
                        
                        72,859Total
                        
                        
                        
                        
                        
                        $
                        182,698
                        
                        
                        $
                        4,713
                        
                        
                        $
                        187,411




The
following table summarizes the estimated fair values of the aggregate assets and
liabilities acquired as of the date of each acquisition:


(in
      thousands)
                
                LDP
                
                
                Powers
                
                
                HBA
                
                
                Other
                
                
                TotalFiduciary
      cash
                
                $
                173
                
                
                $
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                173Other
      current assets
                
                
                1,121
                
                
                
                75
                
                
                
                —
                
                
                
                1,201
                
                
                
                2,397Fixed
      assets
                
                
                19
                
                
                
                353
                
                
                
                652
                
                
                
                451
                
                
                
                1,475Goodwill
                
                
                29,108
                
                
                
                17,220
                
                
                
                35,149
                
                
                
                44,034
                
                
                
                125,511Purchased
      customer accounts
                
                
                13,958
                
                
                
                7,545
                
                
                
                14,390
                
                
                
                28,421
                
                
                
                64,314Noncompete
      agreements
                
                
                55
                
                
                
                11
                
                
                
                141
                
                
                
                301
                
                
                
                508Other
      Assets
                
                
                11
                
                
                
                —
                
                
                
                —
                
                
                
                11
                
                
                
                22Total
      assets acquired
                
                
                44,445
                
                
                
                25,204
                
                
                
                50,332
                
                
                
                74,419
                
                
                
                194,400Other
      current liabilities
                
                
                (5,219
                )
                
                
                (175
                )
                
                
                (35
                )
                
                
                (1,560
                )
                
                
                (6,989
                )Total
      liabilities assumed
                
                
                (5,219
                )
                
                
                (175
                )
                
                
                (35
                )
                
                
                (1,560
                )
                
                
                (6,989
                )Net
      assets acquired
                
                $
                39,226
                
                
                $
                25,029
                
                
                $
                50,297
                
                
                $
                72,859
                
                
                $
                187,411
 10


The
weighted average useful lives for the above acquired amortizable intangible
assets are as follows: purchased customer accounts, 15.0 years; and noncompete
agreements, 5.0 years.




Goodwill
of $125,511,000, all of which is expected to be deductible for income tax
purposes, was assigned to the Retail, Wholesale Brokerage, National Programs and
Services Divisions in the amounts of $121,568,000, $3,623,000, $320,000 and $0,
respectively.




The
results of operations for the acquisitions completed during 2008 have been
combined with those of the Company since their respective acquisition dates. If
the acquisitions had occurred as of the beginning of each period, the
Company’s results of operations would be as shown in the following table. These
unaudited pro forma results are not necessarily indicative of the actual results
of operations that would have occurred had the acquisitions actually been made
at the beginning of the respective periods.


(UNAUDITED)
                  
                  For
      the three months
                    ended
      June 30,
                  
                  
                  For
      the six months
                    ended
      June 30,(in
      thousands, except per share data)
                  
                  2008
                  
                  
                  2007
                  
                  
                  2008
                  
                  
                  2007Total
      revenues
                  
                  $
                  247,078
                  
                  
                  $
                  265,896
                  
                  
                  $
                  518,419
                  
                  
                  $
                  544,217Income
      before income taxes
                  
                  
                  68,337
                  
                  
                  
                  90,937
                  
                  
                  
                  157,777
                  
                  
                  
                  195,672Net
      income
                  
                  
                  41,456
                  
                  
                  
                  55,977
                  
                  
                  
                  96,181
                  
                  
                  
                  119,739Net
      income per share:Basic
                  
                  $
                  0.29
                  
                  
                  $
                  0.40
                  
                  
                  $
                  0.68
                  
                  
                  $
                  0.85Diluted
                  
                  $
                  0.29
                  
                  
                  $
                  0.40
                  
                  
                  $
                  0.68
                  
                  
                  $
                  0.85Weighted
      average number of shares outstanding:Basic
                  
                  
                  140,723
                  
                  
                  
                  140,384
                  
                  
                  
                  140,713
                  
                  
                  
                  140,303Diluted
                  
                  
                  141,265
                  
                  
                  
                  141,120
                  
                  
                  
                  141,330
                  
                  
                  
                  141,170




For
acquisitions consummated prior to January 1, 2009, additional consideration paid
to sellers as a result of purchase price “earn-out” provisions are recorded as
adjustments to intangible assets when the contingencies are settled. The
net additional consideration paid by the Company in 2009 as a result of these
adjustments totaled $5,280,000, of which $5,224,000 was allocated to goodwill,
$31,000 to noncompete agreements and $25,000 to purchased customer accounts. Of
the $5,280,000 net additional consideration paid, $2,488,000 was paid in cash
and $2,792,000 was issued in notes payable. The net additional
consideration paid by the Company in 2008 as a result of these adjustments
totaled $7,157,000, of which $7,106,000 was allocated to goodwill, $30,000 to
non-compete agreements and $21,000 of net liabilities were forgiven. Of the
$7,157,000 net additional consideration paid, $4,517,000 was paid in cash and
$2,640,000 was issued in notes payable. As of June 30, 2009, the maximum future
contingency payments related to acquisitions totaled $203,216,000, of which
$3,807,000 is recorded as non-current other liabilities.


11




NOTE
6 · Goodwill




Goodwill
is subject to at least an annual assessment for impairment by applying a fair
value-based test. Brown & Brown completed its most recent annual assessment
as of November 30, 2008 and identified no impairment as a result of the
evaluation.




The
changes in goodwill for the six months ended June 30, 2009 are as
follows:


(in
      thousands)
                
                Retail
                
                
                Wholesale
                  Brokerage
                
                
                National
                  Programs
                
                
                Services
                
                
                TotalBalance
      as of January 1, 2009
                
                $
                620,588
                
                
                $
                246,216
                
                
                $
                147,298
                
                
                $
                9,270
                
                
                $
                1,023,372Goodwill
      of acquired businesses
                
                
                22,478
                
                
                
                200
                
                
                
                4,670
                
                
                
                —
                
                
                
                27,348Goodwill
      disposed of relating to sales of businesses
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Balance
      as of June 30, 2009
                
                $
                643,066
                
                
                $
                246,416
                
                
                $
                151,968
                
                
                $
                9,270
                
                
                $
                1,050,720




NOTE
7 · Amortizable Intangible Assets




Amortizable
intangible assets at June 30, 2009 and December 31, 2008 consisted of the
following:


June
      30, 2009
                                                                    
                                                                    
                                                                    December
      31, 2008(in
      thousands)
                                                                    
                                                                    Gross
                                                                      Carrying
                                                                      Value
                                                                    
                                                                    
                                                                    Accumulated
                                                                      Amortization
                                                                    
                                                                    
                                                                    Net
                                                                      Carrying
                                                                      Value
                                                                    
                                                                    
                                                                    Weighted
                                                                      Average
                                                                      Life
                                                                      (years)
                                                                    
                                                                    
                                                                    Gross
                                                                      Carrying
                                                                      Value
                                                                    
                                                                    
                                                                    Accumulated
                                                                      Amortization
                                                                    
                                                                    
                                                                    Net
                                                                      Carrying
                                                                      Value
                                                                    
                                                                    
                                                                    Weighted
                                                                      Average
                                                                      Life
                                                                      (years)Purchased
      customer accounts
                                                                    
                                                                    $
                                                                    742,126
                                                                    
                                                                    
                                                                    $
                                                                    (256,047
                                                                    )
                                                                    
                                                                    $
                                                                    486,079
                                                                    
                                                                    
                                                                    
                                                                    14.9
                                                                    
                                                                    
                                                                    $
                                                                    724,953
                                                                    
                                                                    
                                                                    $
                                                                    (231,748
                                                                    )
                                                                    
                                                                    $
                                                                    493,205
                                                                    
                                                                    
                                                                    
                                                                    14.9Noncompete
      agreements
                                                                    
                                                                    
                                                                    24,551
                                                                    
                                                                    
                                                                    
                                                                    (22,609
                                                                    )
                                                                    
                                                                    
                                                                    1,942
                                                                    
                                                                    
                                                                    
                                                                    7.3
                                                                    
                                                                    
                                                                    
                                                                    24,455
                                                                    
                                                                    
                                                                    
                                                                    (22,033
                                                                    )
                                                                    
                                                                    
                                                                    2,422
                                                                    
                                                                    
                                                                    
                                                                    7.3Total
                                                                    
                                                                    $
                                                                    766,677
                                                                    
                                                                    
                                                                    $
                                                                    (278,656
                                                                    )
                                                                    
                                                                    $
                                                                    488,021
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    $
                                                                    749,408
                                                                    
                                                                    
                                                                    $
                                                                    (253,781
                                                                    )
                                                                    
                                                                    $
                                                                    495,627




Amortization
expense for other amortizable intangible assets for the years ending December
31, 2009, 2010, 2011, 2012 and 2013 is estimated to be $49,807,000, $49,224,000,
$47,791,000, $47,175,000, and $46,274,000, respectively.




NOTE
8 · Investments




Investments
consisted of the following:


June
      30, 2009
                                                          
                                                          
                                                          December
      31, 2008Carrying
      Value
                                                          
                                                          
                                                          Carrying
      Value(in
      thousands)
                                                          
                                                          Current
                                                          
                                                          
                                                          Non-
                                                            Current
                                                          
                                                          
                                                          Current
                                                          
                                                          
                                                          Non-
                                                            CurrentAvailable-for-sale
      marketable equity securities
                                                          
                                                          $
                                                          25
                                                          
                                                          
                                                          $
                                                          —
                                                          
                                                          
                                                          $
                                                          46
                                                          
                                                          
                                                          $
                                                          —Non-marketable
      equity securities and certificates of deposit
                                                          
                                                          
                                                          7,615
                                                          
                                                          
                                                          
                                                          287
                                                          
                                                          
                                                          
                                                          7,465
                                                          
                                                          
                                                          
                                                          287Total
      investments
                                                          
                                                          $
                                                          7,640
                                                          
                                                          
                                                          $
                                                          287
                                                          
                                                          
                                                          $
                                                          7,511
                                                          
                                                          
                                                          $
                                                          287




The
following table summarizes available-for-sale securities:


(in
      thousands)
                          
                          Cost
                          
                          
                          Gross
                            Unrealized
                            Gains
                          
                          
                          Gross
                            Unrealized
                            Losses
                          
                          
                          Estimated
                            Fair
                            ValueMarketable
      equity securities:June
      30, 2009
                          
                          $
                          25
                          
                          
                          $
                          1
                          
                          
                          $
                          —
                          
                          
                          $
                          26December
      31, 2008
                          
                          $
                          25
                          
                          
                          $
                          21
                          
                          
                          $
                          —
                          
                          
                          $
                          46


12




The
following table summarizes the proceeds and realized gains/(losses) on
non-marketable equity securities and certificates of deposit for the three and
six months ended June 30, 2009 and 2008:


(in
      thousands)
                
                Proceeds
                
                
                Gross
                  Realized
                  Gains
                
                
                Gross
                  Realized
                  LossesFor
      the three months ended:June
      30, 2009
                
                $
                3,536
                
                
                $
                —
                
                
                $
                —June
      30, 2008
                
                $
                657
                
                
                $
                464
                
                
                $
                (9
                )For
      the six months ended:June
      30, 2009
                
                $
                4,098
                
                
                $
                —
                
                
                $
                —June
      30, 2008
                
                $
                707
                
                
                $
                542
                
                
                $
                (9
                )




NOTE
9 · Long-Term Debt




Long-term
debt at June 30, 2009 and December 31, 2008 consisted of the
following:


(in
      thousands)
                
                2009
                
                
                2008Unsecured
      senior notes
                
                $
                250,000
                
                
                $
                250,000Acquisition
      notes payable
                
                
                4,230
                
                
                
                9,665Revolving
      credit facility
                
                
                —
                
                
                
                —Other
      notes payable
                
                
                74
                
                
                
                113Total
      debt
                
                
                254,304
                
                
                
                259,778Less
      current portion
                
                
                (4,015
                )
                
                
                (6,162
                )Long-term
      debt
                
                $
                250,289
                
                
                $
                253,616




In
2004, the Company completed a private placement of $200.0 million of unsecured
senior notes (the “Notes”). The $200.0 million is divided into two series:
(1) Series A, which closed on September 15, 2004, for $100.0 million
due in 2011 and bearing interest at 5.57% per year; and (2) Series B,
which closed on July 15, 2004, for $100.0 million due in 2014 and bearing
interest at 6.08% per year. Brown & Brown used the proceeds from
the Notes for general corporate purposes, including acquisitions and repayment
of existing debt. As of June 30, 2009 and December 31, 2008, there was an
outstanding balance of $200.0 million on the Notes.




On
December 22, 2006, the Company entered into a Master Shelf and Note
Purchase Agreement (the “Master Agreement”) with a national insurance company
(the “Purchaser”). The Purchaser also purchased Notes issued by the Company in
2004. The Master Agreement provides for a $200.0 million private uncommitted
“shelf” facility for the issuance of senior unsecured notes over a three-year
period, with interest rates that may be fixed or floating and with such maturity
dates, not to exceed ten years, as the parties may determine. The Master
Agreement includes various covenants, limitations and events of default similar
to the Notes issued in 2004. The initial issuance of notes under the Master
Agreement occurred on December 22, 2006, through the issuance of $25.0
million in Series C Senior Notes due December 22, 2016, with a fixed
interest rate of 5.66% per year. On February 1, 2008, $25.0 million in
Series D Senior Notes due January 15, 2015, with a fixed interest rate of
5.37% per year were issued. As of June 30, 2009 and December 31, 2008
there was an outstanding balance of $50.0 million under the Master
Agreement.




On
June 12, 2008, the Company entered into an Amended and
Restated Revolving Loan Agreement (the “Loan Agreement”) with a national
banking institution that was dated as of June 3, 2008, amending and
restating the existing Revolving Loan Agreement dated September 29, 2003,
as amended (the “Revolving Agreement”), in order to increase the lending
commitment to $50.0 million (subject to potential increases up to $100.0
million) and to extend the maturity date from December 20, 2011 to
June 3, 2013. The Revolving Agreement initially provided for a revolving
credit facility in the maximum principal amount of $75.0 million. After a series
of amendments that provided covenant exceptions for the notes issued or to be
issued under the Master Agreement and relaxed or deleted certain other
covenants, the maximum principal amount was reduced to $20.0 million. The
calculation of interest and fees is generally based on the Company’s quarterly
ratio of funded debt to earnings before interest, taxes,
depreciation, amortization, and non-cash stock-based compensation. Interest
is charged at a rate equal to 0.50% to 1.00% above the London Interbank Offering
Rate (“LIBOR”) or 1.00% below the base rate, each as more fully defined in the
Loan Agreement. Fees include an upfront fee, an availability fee of 0.10% to
0.20%, and a letter of credit usage fee of 0.50% to 1.00%. The Loan Agreement
contains various covenants, limitations, and events of default customary for
similar facilities for similar borrowers. The 90-day LIBOR was 0.595% and 1.43%
as of June 30, 2009 and December 31, 2008, respectively. There were no
borrowings against this facility at June 30, 2009 or December 31,
2008.




All
three of these outstanding credit agreements require Brown & Brown to
maintain certain financial ratios and comply with certain other covenants. Brown
& Brown was in compliance with all such covenants as of June 30, 2009 and
December 31, 2008.


13




Acquisition
notes payable represent debt incurred to former owners of certain insurance
operations acquired by Brown & Brown. These notes and future contingent
payments are payable in monthly, quarterly and annual installments through April
2011, including interest in the range from 0.0% to 6.0%.




NOTE 10
· Supplemental Disclosures of Cash Flow Information and Non-Cash Financing and
Investing Activities


For
      the six months
                                  ended
      June 30,(in
      thousands)
                                
                                2009
                                
                                
                                2008Cash
      paid during the period for:Interest
                                
                                $
                                7,323
                                
                                
                                $
                                6,915Income
      taxes
                                
                                $
                                24,226
                                
                                
                                $
                                44,431




Brown
& Brown’s significant non-cash investing and financing activities are
summarized as follows:


For
      the six months
                                  ended
      June 30,(in
      thousands)
                                
                                2009
                                
                                
                                2008Unrealized
      holding (loss) gain on available-for-sale securities, net of tax benefit
      of $7 for 2009; net of tax benefit of $3 for 2008
                                
                                $
                                (13
                                )
                                
                                $
                                (5
                                )Notes
      payable issued or assumed for purchased customer accounts
                                
                                $
                                6,599
                                
                                
                                $
                                7,353Notes
      receivable on the sale of fixed assets and customer
    accounts
                                
                                $
                                (981
                                )
                                
                                $
                                162




NOTE
11 · Comprehensive Income




The
components of comprehensive income, net of related income tax effects, are as
follows:


For
      the three months
                                        ended
      June 30,
                                      
                                      
                                      For
      the six months
                                        ended
      June 30,(in
      thousands)
                                      
                                      2009
                                      
                                      
                                      2008
                                      
                                      
                                      2009
                                      
                                      
                                      2008Net
      income
                                      
                                      $
                                      40,668
                                      
                                      
                                      $
                                      40,398
                                      
                                      
                                      $
                                      88,680
                                      
                                      
                                      $
                                      92,158Net
      unrealized holding loss (gain) on available-for-sale
      securities
                                      
                                      
                                      1
                                      
                                      
                                      
                                      (6
                                      )
                                      
                                      
                                      (13
                                      )
                                      
                                      
                                      (5
                                      )Comprehensive
      income
                                      
                                      $
                                      40,669
                                      
                                      
                                      $
                                      40,392
                                      
                                      
                                      $
                                      88,667
                                      
                                      
                                      $
                                      92,153
 14




NOTE
12 · Legal and Regulatory Proceedings




Legal
Proceedings




The
Company is involved in numerous pending or threatened proceedings by or against
Brown & Brown, Inc. or one or more of its subsidiaries that arise in
the ordinary course of business. The damages that may be claimed against the
Company in these various proceedings are in some cases substantial, including in
many instances claims for punitive or extraordinary damages. Some of these
claims and lawsuits have been resolved, others are in the process of being
resolved and others are still in the investigation or discovery phase. The
Company will continue to respond appropriately to these claims and lawsuits and
to vigorously protect its interests.




Although
the ultimate outcome of such matters cannot be ascertained and liabilities in
indeterminate amounts may be imposed on Brown & Brown, Inc. or its
subsidiaries, on the basis of present information, availability of insurance and
legal advice, it is the opinion of management that the disposition or ultimate
determination of such claims will not have a material adverse effect on the
Company’s consolidated financial position. However, as (i) one or more of
the Company’s insurance carriers could take the position that portions of these
claims are not covered by the Company’s insurance, (ii) to the extent that
payments are made to resolve claims and lawsuits, applicable insurance policy
limits are eroded and (iii) the claims and lawsuits relating to these
matters are continuing to develop, it is possible that future results of
operations or cash flows for any particular quarterly or annual period could be
materially affected by unfavorable resolutions of these matters.




Governmental
Investigations Regarding Compensation Practices




As
disclosed in prior years, offices of the Company are parties to profit-sharing
contingent commission agreements with certain insurance companies, including
agreements providing for potential payment of revenue-sharing commissions by
insurance companies based primarily on the overall profitability of the
aggregate business written with those insurance companies and/or additional
factors such as retention ratios and the overall volume of business that an
office or offices place with those insurance companies. Additionally, to a
lesser extent, some offices of the Company are parties to override commission
agreements with certain insurance companies, which provide for commission rates
in excess of standard commission rates to be applied to specific lines of
business, such as group health business, and which are based primarily on the
overall volume of business that such office or offices placed with those
insurance companies. The Company has not chosen to discontinue receiving
profit-sharing contingent commissions or override commissions.




Governmental
agencies such as departments of insurance and offices of attorneys general, in a
number of states have looked or are looking into issues related to compensation
practices in the insurance industry, and the Company continues to respond to
written and oral requests for information and/or subpoenas seeking information
related to this topic. The Company is currently in litigation commenced by the
Company against the Attorney General’s Office in Connecticut in an effort to
protect the confidentiality of information sought by, or produced in response
to, a subpoena. In addition, agencies in Arizona, Virginia, Washington and
Florida have concluded their respective investigations of subsidiaries of
Brown & Brown, Inc. based in those states.




The
Company cannot currently predict the impact or resolution of the various
governmental inquiries or related matters and thus cannot reasonably estimate a
range of possible loss, which could be material, or whether the resolution of
these matters may harm the Company’s business and/or lead to a decrease in or
elimination of profit-sharing contingent commissions and override commissions,
which could have a material adverse impact on the Company’s consolidated
financial condition.




For
a more complete discussion of the foregoing matters, please see Item 3 of Part I
of our Annual Report on Form 10-K filed with the Securities and Exchange
Commission for our fiscal year ended December 31, 2008 and Note 13 to the
Consolidated Financial Statements contained in Item 8 of Part II
thereof.




NOTE
13 · Segment Information




Brown
& Brown’s business is divided into four reportable segments: the Retail
Division, which provides a broad range of insurance products and services to
commercial, governmental, professional and individual customers; the Wholesale
Brokerage Division, which markets and sells excess and surplus commercial and
personal lines insurance, and reinsurance, primarily through independent agents
and brokers; the National Programs Division, which is composed of two units -
Professional Programs, which provides professional liability and related package
products for certain professionals delivered through nationwide networks of
independent agents, and Special Programs, which markets targeted products and
services designed for specific industries, trade groups, public and
quasi-public entities, and market niches; and the Services Division, which
provides insurance-related services, including third-party administration,
consulting for the workers’ compensation and employee benefit self-insurance
markets, managed healthcare services and Medicare set-aside services. Brown
& Brown conducts all of its operations within the United States of America
except for one start-up wholesale brokerage operation based in London, England
that commenced business in March 2008 and had $2.6 million of revenues for the
year ended December 31, 2008, and $3.1 million of revenues for the first six
months of 2009.


15




Summarized
financial information concerning Brown & Brown’s reportable segments for the
six months ended June 30, 2009 and 2008 is shown in the following table. The
“Other” column includes any income and expenses not allocated to reportable
segments and corporate-related items, including the inter-company interest
expense charge to the reporting segment.


For
      the six months ended June 30, 2009(in
      thousands)
                
                Retail
                
                
                Wholesale
                  Brokerage
                
                
                National
                  Programs
                
                
                Services
                
                
                Other
                
                
                TotalTotal
      revenues
                
                $
                307,163
                
                
                $
                83,441
                
                
                $
                101,313
                
                
                $
                16,355
                
                
                $
                1,677
                
                
                $
                509,949Investment
      income
                
                
                152
                
                
                
                47
                
                
                
                2
                
                
                
                12
                
                
                
                557
                
                
                
                770Amortization
                
                
                14,975
                
                
                
                5,117
                
                
                
                4,562
                
                
                
                231
                
                
                
                19
                
                
                
                24,904Depreciation
                
                
                3,061
                
                
                
                1,436
                
                
                
                1,324
                
                
                
                188
                
                
                
                623
                
                
                
                6,632Interest
                
                
                16,511
                
                
                
                7,449
                
                
                
                2,861
                
                
                
                359
                
                
                
                (19,914
                )
                
                
                7,266Income
      before income taxes
                
                
                69,893
                
                
                
                11,568
                
                
                
                41,678
                
                
                
                3,625
                
                
                
                19,422
                
                
                
                146,186Total
      assets
                
                
                1,739,230
                
                
                
                654,210
                
                
                
                644,934
                
                
                
                45,582
                
                
                
                (853,744
                )
                
                
                2,230,212Capital
      expenditures
                
                
                2,101
                
                
                
                1,884
                
                
                
                2,193
                
                
                
                87
                
                
                
                (3
                )
                
                
                6,262




For
      the six months ended June 30, 2008(in
      thousands)
                  
                  Retail
                  
                  
                  Wholesale
                    Brokerage
                  
                  
                  National
                    Programs
                  
                  
                  Services
                  
                  
                  Other
                  
                  
                  TotalTotal
      revenues
                  
                  $
                  304,456
                  
                  
                  $
                  92,682
                  
                  
                  $
                  82,901
                  
                  
                  $
                  15,911
                  
                  
                  $
                  2,485
                  
                  
                  $
                  498,435Investment
      income
                  
                  
                  749
                  
                  
                  
                  824
                  
                  
                  
                  186
                  
                  
                  
                  (1
                  )
                  
                  
                  2,150
                  
                  
                  
                  3,908Amortization
                  
                  
                  12,675
                  
                  
                  
                  5,033
                  
                  
                  
                  4,550
                  
                  
                  
                  231
                  
                  
                  
                  19
                  
                  
                  
                  22,508Depreciation
                  
                  
                  2,959
                  
                  
                  
                  1,444
                  
                  
                  
                  1,322
                  
                  
                  
                  220
                  
                  
                  
                  593
                  
                  
                  
                  6,538Interest
                  
                  
                  13,579
                  
                  
                  
                  9,313
                  
                  
                  
                  4,056
                  
                  
                  
                  366
                  
                  
                  
                  (20,136
                  )
                  
                  
                  7,178Income
      before income taxes
                  
                  
                  82,652
                  
                  
                  
                  14,270
                  
                  
                  
                  26,887
                  
                  
                  
                  3,573
                  
                  
                  
                  23,796
                  
                  
                  
                  151,178Total
      assets
                  
                  
                  1,582,866
                  
                  
                  
                  683,470
                  
                  
                  
                  564,174
                  
                  
                  
                  43,022
                  
                  
                  
                  (800,699
                  )
                  
                  
                  2,072,833Capital
      expenditures
                  
                  
                  2,157
                  
                  
                  
                  3,262
                  
                  
                  
                  1,368
                  
                  
                  
                  126
                  
                  
                  
                  1,281
                  
                  
                  
                  8,194


16




ITEM 2 - MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.




THE
FOLLOWING DISCUSSION UPDATES THE MD&A CONTAINED IN THE COMPANY’S ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED IN 2008, AND THE TWO DISCUSSIONS
SHOULD BE READ TOGETHER.




GENERAL




We
are a diversified insurance agency, wholesale brokerage and services
organization headquartered in Daytona Beach and Tampa, Florida. As an insurance
intermediary, our principal sources of revenue are commissions paid by insurance
companies and, to a lesser extent, fees paid directly by customers. Commission
revenues generally represent a percentage of the premium paid by an insured and
are materially affected by fluctuations in both premium rate levels charged by
insurance companies and the insureds’ underlying “insurable exposure units,”
which are units that insurance companies use to measure or express insurance
exposed to risk (such as property values, sales and payroll levels) in order to
determine what premium to charge the insured. These premium rates are
established by insurance companies based upon many factors, including
reinsurance rates paid by insurance carriers, none of which we
control.




The
volume of business from new and existing insured customers, fluctuations in
insurable exposure units and changes in general economic and competitive
conditions all affect our revenues. For example, level rates of inflation or a
continuing general decline in economic activity could limit increases in the
values of insurable exposure units. Conversely, the increasing costs of
litigation settlements and awards have caused some customers to seek higher
levels of insurance coverage. Historically, our revenues have continued to grow
as a result of an intense focus by us on net new business growth and
acquisitions.




Our
culture is a strong, decentralized sales culture with a focus on consistent,
sustained growth over the long term. Our senior leadership group includes 11
executive officers with regional responsibility for oversight of designated
operations within the Company. Effective July 1, 2009, J. Powell Brown, who
previously served as President of Brown & Brown, Inc., succeeded his father,
J. Hyatt Brown, when he retired from the position of Chief Executive Officer.
Mr. Hyatt Brown will continue to serve as Chairman of the Board, and will
continue to be actively involved with acquisitions and recruitment.




We
have increased annual revenues from $95.6 million in 1993 (as originally stated,
without giving effect to any subsequent acquisitions accounted for under the
pooling-of-interests method of accounting) to $977.6 million in 2008, a compound
annual growth rate of 16.8%. In the same period, we increased annual net income
from $8.0 million (as originally stated, without giving effect to any subsequent
acquisitions accounted for under the pooling-of-interests method of accounting)
to $166.1 million in 2008, a compound annual growth rate of 22.4%. From 1993
through 2006, excluding the historical impact of poolings, our pre-tax margins
(income before income taxes and minority interest divided by total revenues)
improved in all but one year, and in that year, the pre-tax margin was
essentially flat. These improvements resulted primarily from net new business
growth (new business production offset by lost business), revenues generated by
acquisitions, and continued operating efficiencies.




We
experienced increased overall revenue growth in 2008, which was primarily
attributable to our acquisition in 2008 of 45 agency entities and several books
of business (customer accounts) that generated total annualized revenues of
approximately $120.2 million. In the first six months of 2009, we acquired six
agency entities and a book of business (customer accounts) that generated total
annualized revenues of approximately $17.8 million.




Despite
this increased overall revenue growth, however, the past two years have posed
significant challenges for us and for our industry in the form of a prevailing
decline in insurance premium rates, commonly referred to as a “soft market,”
increased significant governmental involvement in the Florida insurance
marketplace and beginning in the second half of 2008, increased pressure on the
number of insurable exposure units as the consequence of the general weakening
of the economy in the United States. Due to these challenges, among others, we
have suffered substantial loss of revenues. While insurance premium rates
declined during most of 2008 in most lines of coverage, the rate of the decline
seemed to slow in the second half of 2008 and the first six months of 2009. For
the remaining six months of 2009, continued declining exposure units are likely
to have a greater negative impact on our commissions and fees revenues than will
any declining insurance premium rates.


17




We
also earn “profit-sharing contingent commissions,” which are profit-sharing
commissions based primarily on underwriting results, but may also reflect
considerations for volume, growth and/or retention. These commissions are
primarily received in the first and second quarters of each year, based on
underwriting results and the other aforementioned considerations for the prior
year(s). Over the last three years, profit-sharing contingent commissions have
averaged approximately 6.1% of the previous year’s total commissions and fees
revenue. Profit-sharing contingent commissions are typically included in our
total commissions and fees in the Consolidated Statements of Income in the year
received. The term “core commissions and fees” that we use herein excludes
profit-sharing contingent commissions and therefore represents the revenues
earned directly from specific insurance policies sold, and specific fee-based
services rendered. In 2007 and 2008, six national insurance companies announced
the replacement of the current loss-ratio based profit-sharing contingent
commission calculation with a more guaranteed fixed-based methodology, referred
to as “Guaranteed Supplemental Commissions” (“GSC”). Since this new GSC is not
subject to the uncertainty of loss ratios, earnings are accrued throughout the
year based on actual premiums written and included in our calculations of “core
commissions and fees.” During 2008, $13.4 million was earned from GSC, of which
most was collected in the first quarter of 2009. For the six months ended June
30, 2009 and 2008, $8.4 million and $6.5 million, respectively was earned from
GSC.




Fee
revenues are generated primarily by: (1) our Services Division, which provides
insurance-related services, including third-party claims administration and
comprehensive medical utilization management services in both the workers’
compensation and all-lines liability arenas, as well as Medicare set-aside
services, and (2) our Wholesale Brokerage and National Program Divisions which
earn fees primarily for the issuance of insurance policies on behalf of
insurance carriers. Fee revenues, as a percentage of our total commissions and
fees, represented 13.7% in 2008, 14.3% in 2007 and 14.1% in 2006.




Investment
income historically consists primarily of interest earnings on premiums and
advance premiums collected and held in a fiduciary capacity before being
remitted to insurance companies. Our policy is to invest available funds in
high-quality, short-term fixed income investment securities. As a result of the
bank liquidity and solvency issues in the United States in the last quarter of
2008, we moved substantial amounts of our cash into non-interest bearing
checking accounts so that they would be fully insured by the Federal Depository
Insurance Corporation (“FDIC”) or into money-market investment funds, (a portion
of which recently became FDIC insured) of SunTrust and Wells Fargo, two large
banks. Investment income also includes gains and losses realized from the sale
of investments.




Florida
Insurance Overview




Many
states have established “Residual Markets,” which are governmental or
quasi-governmental insurance facilities that provide coverage to individuals
and/or businesses that cannot buy insurance in the private marketplace, i.e.,
“insurers of last resort.” These facilities can be for any type of risk or
exposure; however, the most common are usually automobile or high-risk property
coverage. Residual Markets can also be referred to as: FAIR Plans, Windstorm
Pools, Joint Underwriting Associations, or may even be given names styled after
the private sector such as “Citizens Property Insurance
Corporation.”




In
August 2002, the Florida Legislature created “Citizens Property Insurance
Corporation” (“Citizens”) to be the “insurer of last resort” in Florida and
Citizens therefore charged insurance rates that were higher than those
prevailing in the general private insurance marketplace. In each of 2004 and
2005, four major hurricanes made landfall in Florida, and as a result of the
significant insurance property losses, insurance rates increased in 2006. To
counter the increased property insurance rates, the State of Florida instructed
Citizens to essentially cut its property insurance rates in half beginning in
January 2007. By state law, Citizens has guaranteed these rates through January
1, 2010. Therefore, Citizens became one of the most, if not the most,
competitive risk-bearers for a large percentage of the commercial habitational
coastal property exposures, such as condominiums, apartments, and certain
assisted living facilities. Additionally, Citizens became the only reasonably
available insurance market for certain homeowner policies throughout Florida. By
the end of 2007 and throughout 2008 and the first six months of 2009, Citizens
was one of the largest underwriters of coastal property exposures in
Florida.




Since
Citizens became the principal direct competitor of the insurance carriers that
underwrite the condominium program administered by Florida Intracoastal
Underwriters (“FIU”), one of our subsidiaries, and the excess and surplus lines
insurers represented by our Florida-based wholesale brokers such as Hull &
Company, another of our subsidiaries, these operations lost significant amounts
of revenue to Citizens during 2007. During 2008, FIU’s revenues were relatively
flat and therefore, Citizens’s impact was not as dramatic as in 2007. However,
Citizens continued to be very competitive against the excess and surplus lines
insurers and therefore significantly negatively affected the revenues of our
Florida-based wholesale brokerage operations.




Citizens’s
impact on our Florida Retail Division was less severe than on our National
Program and Wholesale Brokerage Divisions, because to our Florida Retail
Division, Citizens represents another risk-bearer with which to write business,
although at slightly lower commission rates and greater difficulty in placing
coverage. Citizens’s rates for 2009 will remain relatively unchanged. Based on
new legislation passed into law during the second quarter of 2009, however,
Citizens’s rates will increase by approximately 10% effective January 1,
2010.


18




Company
Overview – Second Quarter of 2009




For
the tenth consecutive quarter, we recorded negative internal revenue growth of
our core commissions and fees revenues as a direct result of the continuing
“soft market,” the competitiveness of Citizens, and the general weakness of the
economy since the second half of 2008. Our total commissions and fees revenues
excluding the effect of recent acquisitions, profit-sharing contingencies and
sales of books of businesses over the last three months, had a negative internal
growth rate of (4.7)%. Offsetting the negative internal growth rate was a strong
quarter of revenue from acquisitions completed in 2008 and the first six months
of 2009.




Acquisitions




During
the first six months of 2009, we acquired the assets and assumed certain
liabilities of six insurance intermediary operations, and a book of business
(customer accounts). The aggregate purchase price was $41.4 million, including
$36.3 million of net cash payments, the issuance, the assumption of $1.3 million
of liabilities and $3.8 million of recorded earn-out payables. These
acquisitions had estimated aggregate annualized revenues of $17.8
million.




During
the first six months of 2008, we acquired the assets and assumed certain
liabilities of 21 insurance intermediary operations, the stock of one insurance
intermediary and several books of business (customer accounts). The aggregate
purchase price was $194.4 million, including $182.7 million of net cash
payments, the issuance of $4.7 million in notes payable and the assumption of
$7.0 million of liabilities. These acquisitions had estimated aggregate
annualized revenues of $77.7 million.




Critical
Accounting Policies




Our
Consolidated Financial Statements are prepared in accordance with accounting
principles generally accepted in the United States of America (“GAAP”). The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses. We continually evaluate our estimates, which are based on historical
experience and on various other assumptions that we believe to be reasonable
under the circumstances. These estimates form the basis for our judgments about
the carrying values of our assets and liabilities, which values are not readily
apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions.




We
believe that of our significant accounting and reporting policies, the more
critical policies include our accounting for revenue recognition, business
acquisitions and purchase price allocations, intangible asset impairments and
reserves for litigation. In particular, the accounting for these areas requires
significant judgments to be made by management. Different assumptions in the
application of these policies could result in material changes in our
consolidated financial position or consolidated results of operations. Refer to
Note 1 in the “Notes to Consolidated Financial Statements” in our Annual Report
on Form 10-K for the year ended December 31, 2008 on file with the Securities
and Exchange Commission (“SEC”) for details regarding our critical and
significant accounting policies. In addition, refer to Note 4 in the “Notes to
Condensed Consolidated Financial Statements” in this Quarterly Report on Form
10-Q for the quarter ended June 30, 2009, for a description of the new
accounting rules governing business acquisitions.


19




RESULTS
OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND
2008




The
following discussion and analysis regarding results of operations and liquidity
and capital resources should be considered in conjunction with the accompanying
Condensed Consolidated Financial Statements and related Notes.




Financial
information relating to our Condensed Consolidated Financial Results for the
three and six months ended June 30, 2009 and 2008 is as follows (in thousands,
except percentages):


For
      the three months
                  ended
      June 30,
                
                
                For
      the six months
                  ended
      June 30,2009
                
                
                2008
                
                
                %
                  Change
                
                
                2009
                
                
                2008
                
                
                %
                  ChangeREVENUESCommissions
      and fees
                
                $
                237,789
                
                
                $
                233,423
                
                
                
                1.9
                %
                
                $
                471,827
                
                
                $
                450,604
                
                
                
                4.7
                %Profit-sharing
      contingent commissions
                
                
                6,806
                
                
                
                5,412
                
                
                
                25.8
                %
                
                
                36,732
                
                
                
                41,759
                
                
                
                (12.0
                )%Investment
      income
                
                
                460
                
                
                
                1,909
                
                
                
                (75.9
                )%
                
                
                770
                
                
                
                3,908
                
                
                
                (80.3
                )%Other
      income, net
                
                
                1,314
                
                
                
                976
                
                
                
                34.6
                %
                
                
                620
                
                
                
                2,164
                
                
                
                (71.3
                )%Total
      revenues
                
                
                246,369
                
                
                
                241,720
                
                
                
                1.9
                %
                
                
                509,949
                
                
                
                498,435
                
                
                
                2.3
                %EXPENSESEmployee
      compensation and benefits
                
                
                122,625
                
                
                
                120,514
                
                
                
                1.8
                %
                
                
                249,966
                
                
                
                241,701
                
                
                
                3.4
                %Non-cash
      stock-based compensation
                
                
                1,695
                
                
                
                1,800
                
                
                
                (5.8
                )%
                
                
                3,511
                
                
                
                3,744
                
                
                
                (6.2
                )%Other
      operating expenses
                
                
                35,620
                
                
                
                34,384
                
                
                
                3.6
                %
                
                
                71,484
                
                
                
                65,588
                
                
                
                9.0
                %Amortization
                
                
                12,519
                
                
                
                11,392
                
                
                
                9.9
                %
                
                
                24,904
                
                
                
                22,508
                
                
                
                10.6
                %Depreciation
                
                
                3,299
                
                
                
                3,292
                
                
                
                0.2
                %
                
                
                6,632
                
                
                
                6,538
                
                
                
                1.4
                %Interest
                
                
                3,632
                
                
                
                3,744
                
                
                
                (3.0
                )%
                
                
                7,266
                
                
                
                7,178
                
                
                
                1.2
                %Total
      expenses
                
                
                179,390
                
                
                
                175,126
                
                
                
                2.4
                %
                
                
                363,763
                
                
                
                347,257
                
                
                
                4.8
                %Income
      before income taxes
                
                
                66,979
                
                
                
                66,594
                
                
                
                0.6
                %
                
                
                146,186
                
                
                
                151,178
                
                
                
                (3.3
                )%Income
      taxes
                
                
                26,311
                
                
                
                26,196
                
                
                
                0.4
                %
                
                
                57,506
                
                
                
                59,020
                
                
                
                (2.6
                )%NET
      INCOME
                
                $
                40,668
                
                
                $
                40,398
                
                
                
                0.7
                %
                
                $
                88,680
                
                
                $
                92,158
                
                
                
                (3.8
                )%Net
      internal growth rate – core commissions and fees
                
                
                (4.7
                )%
                
                
                (7.9
                )%
                
                
                
                
                
                
                (3.5
                )%
                
                
                (6.1
                )%Employee
      compensation and benefits ratio
                
                
                49.8
                %
                
                
                49.9
                %
                
                
                
                
                
                
                49.0
                %
                
                
                48.5
                %Other
      operating expenses ratio
                
                
                14.5
                %
                
                
                14.2
                %
                
                
                
                
                
                
                14.0
                %
                
                
                13.2
                %Capital
      expenditures
                
                $
                3,104
                
                
                $
                4,133
                
                
                
                
                
                
                $
                6,262
                
                
                $
                8,194Total
      assets at June 30, 2009 and 2008
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                2,230,212
                
                
                $
                2,072,833


20




Commissions
and Fees




Commissions
and fees, including profit-sharing contingent commissions, for the second
quarter of 2009 increased $5.8 million, or 2.4%, over the same period in 2008.
Profit-sharing contingent commissions for the second quarter of 2009 increased
$1.4 million over the second quarter of 2008, to $6.8 million. Core commissions
and fees are our commissions and fees, less (i) profit-sharing contingent
commissions and (ii) divested business (commissions and fees generated from
offices, books of business or niches sold or terminated). Core commissions and
fees revenue for the second quarter of 2009 increased $6.1 million, of which
approximately $17.1 million represents core commissions and fees from
acquisitions that had no comparable operations in the same period of 2008. After
divested business of $1.7 million, the remaining net decrease of $11.0 million
represents net lost business, which reflects a (4.7)% internal growth rate for
core commissions and fees.




Commissions
and fees, including profit-sharing contingent commissions, for the six months
ended June 30, 2009 increased $16.2 million, or 3.3%, over the same period in
2008. For the six months ended June 30, 2009, profit-sharing contingent
commissions decreased $5.0 million from the comparable period in 2008, to $36.7
million. Core commissions and fees revenue for the first six months of 2009
increased $24.8 million, of which approximately $40.4 million of the total
increase represents core commissions and fees from acquisitions that had no
comparable operations in the same period of 2008. After divested business of
$3.6 million, the remaining net decrease of $15.6 million represents net lost
business, which reflects a (3.5)% internal growth rate for core commissions and
fees.




Investment
Income




Investment
income for the three months ended June 30, 2009 decreased $1.4 million, or
75.9%, from the same period in 2008. Investment income for the six months ended
June 30, 2009 decreased $3.1 million, or 80.3%, from the same period in 2008.
These decreases are primarily due to substantially lower interest yields on
short-term money-market investments.




Other
Income, net




Other
income for the three months ended June 30, 2009 increased $0.3 million, or
34.6%, from the same period in 2008. Other income for the six months ended June
30, 2009 decreased $1.5 million, or 71.3%, from the same period in 2008. Other
income consists primarily of gains and losses from the sale and disposition of
assets. Although we are not in the business of selling customer accounts, we
periodically will sell an office or a book of business (one or more customer
accounts) that does not produce reasonable margins or demonstrate a potential
for growth.




Employee
Compensation and Benefits




Employee
compensation and benefits for the second quarter of 2009 increased $2.1 million,
or 1.8%, over the same period in 2008. This increase is primarily related to the
addition of new employees from acquisitions completed since May 1, 2008.
Employee compensation and benefits as a percentage of total revenue decreased
marginally to 49.8% for the second quarter of 2009, from 49.9% for the second
quarter of 2008. Of the $2.1 million increase in employee compensation and
benefits, $5.1 million relates to acquisitions that resulted in stand-alone
offices which had no comparable operations in the same period of 2008.
Therefore, excluding the impact of these acquisitions of stand-alone offices,
there was a net reduction of $3.0 million in employee compensation and benefits
in the offices that operated in both periods.




Employee
compensation and benefits for the six months ended June 30, 2009 increased $8.3
million, or 3.4%, over the same period in 2008. This increase is primarily
related to the addition of new employees from acquisitions completed during
2008. Employee compensation and benefits as a percentage of total revenue
increased to 49.0% for the six months ended June 30, 2009, from 48.5% for the
six months ended June 30, 2008. Of the $8.3 million increase in employee
compensation and benefits, $14.8 million relates to acquisitions that resulted
in stand-alone offices which had no comparable operations in the same period of
2008. Therefore, excluding the impact of these acquisitions of stand-alone
offices, there was a net reduction of $6.5 million in employee compensation and
benefits in the offices that operated in both periods.




Non-Cash
Stock-Based Compensation




Non-cash
stock-based compensation for the three and six months ended June 30, 2009
decreased approximately $0.1 million, or 5.8% and $0.2 million or 6.2%, from the
same periods in 2008, respectively. For the entire year of 2009, we expect the
total non-cash stock-based compensation expense to be slightly more than the
total annual cost of $7.3 million in 2008. The increased annual estimated cost
primarily relates to new grants of performance stock (“PSP”) and incentive stock
options issued in February 2008.


21




Other
Operating Expenses




Other
operating expenses for the second quarter of 2009 increased $1.2 million, or
3.6%, from the same period in 2008. Other operating expenses as a percentage of
total revenue increased to 14.5% for the second quarter of 2009, from 14.2% for
the second quarter of 2008. Acquisitions since May 1, 2008 that resulted in
stand-alone offices resulted in approximately $1.5 million of increased other
operating expenses. Therefore, there was a net reduction in other operating
expenses of approximately $0.3 million with respect to offices in existence in
the second quarters of both 2009 and 2008.




Other
operating expenses for the six months ended June 30, 2009 increased $5.9
million, or 9.0%, over the same period in 2008. Other operating expenses as a
percentage of total revenue increased to 14.0% for the six months ended June 30,
2009, from 13.2% for the six months ended June 30, 2008. Acquisitions since
February 1, 2008 that resulted in stand-alone offices resulted in approximately
$3.8 million of increased other operating expenses. Therefore, there was a net
increase in other operating expenses of approximately $2.1 million with respect
to offices in existence in the first six months of both 2009 and 2008. Of this
increase, $2.1 million was the result of increased error and omission expenses
and reserves, while the remaining net costs were attributable to various other
expense categories.




Amortization




Amortization
expense for the second quarter of 2009 increased $1.1 million, or 9.9%, over the
second quarter of 2008. Amortization expense for the six months ended June 30,
2009 increased $2.4 million, or 10.6%, over the same period of 2008. These
increases are primarily due to the amortization of additional intangible assets
as the result of new acquisitions.




Depreciation




Depreciation
expense for the second quarter of 2009 of $3.3 million was essentially flat with
the second quarter of 2008. Depreciation expense for the six months ended June
30, 2009 increased $0.1 million, or 1.4%, over the same period of 2008. These
increases are primarily due to the purchase of new computers, related equipment
and software, and the depreciation associated with acquisitions completed since
February 1, 2008.




Interest
Expense




Interest
expense for the second quarter of 2009 decreased $0.1 million, or 3.0%, from the
same period in 2008. For the six months ended June 30, 2009, interest expense
increased $0.1 million, or 1.2%, over the same period in 2008. This increase is
primarily due to the additional $25.0 million of unsecured Series D Senior Notes
issued in the first quarter of 2008.


22




RESULTS
OF OPERATIONS - SEGMENT INFORMATION




As
discussed in Note 13 of the Notes to Condensed Consolidated Financial
Statements, we operate in four reportable segments: the Retail, Wholesale
Brokerage, National Programs and Services Divisions. On a divisional basis,
increases in amortization, depreciation and interest expenses are the result
of acquisitions within a given division in a particular year. Likewise,
other income in each division primarily reflects net gains on sales of customer
accounts and fixed assets. As such, in evaluating the operational efficiency of
a division, management places emphasis on the net internal growth rate of core
commissions and fees revenue, the gradual improvement of the ratio of employee
compensation and benefits to total revenues, and the gradual improvement of the
percentage of other operating expenses to total revenues.




The
internal growth rates for our core commissions and fees for the three months
ended June 30, 2009 and 2008, by divisional units are as follows (in thousands,
except percentages):


2009
                                                                                                                                                                            
                                                                                                                                                                            For
      the three months
                                                                                                                                                                              ended
      June 30,2009
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            2008
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            Total
      Net
                                                                                                                                                                              Change
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            Total
      Net
                                                                                                                                                                              Growth
      %
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            Less
                                                                                                                                                                              Acquisition
                                                                                                                                                                              Revenues
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            Internal
                                                                                                                                                                              Net
                                                                                                                                                                              Growth
      $
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            Internal
                                                                                                                                                                              Net
                                                                                                                                                                              Growth
      %Florida
      Retail
                                                                                                                                                                            
                                                                                                                                                                            $
                                                                                                                                                                            43,991
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            $
                                                                                                                                                                            45,334
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            $
                                                                                                                                                                            (1,343
                                                                                                                                                                            )
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            (3.0
                                                                                                                                                                            )%
                                                                                                                                                                            
                                                                                                                                                                            $
                                                                                                                                                                            2,536
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            $
                                                                                                                                                                            (3,879
                                                                                                                                                                            )
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            (8.6
                                                                                                                                                                            )%National
      Retail
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            78,857
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            73,603
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            5,254
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            7.1
                                                                                                                                                                            %
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            9,345
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            (4,091
                                                                                                                                                                            )
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            (5.6
                                                                                                                                                                            )%Western
      Retail
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            24,646
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            23,688
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            958
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            4.0
                                                                                                                                                                            %
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            4,467
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            (3,509
                                                                                                                                                                            )
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            (14.8
                                                                                                                                                                            )%Total
      Retail(1)
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            147,494
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            142,625
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            4,869
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            3.4
                                                                                                                                                                            %
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            16,348
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            (11,479
                                                                                                                                                                            )
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            (8.0
                                                                                                                                                                            )%Wholesale
      Brokerage
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            41,409
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            44,370
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            (2,961
                                                                                                                                                                            )
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            (6.7
                                                                                                                                                                            )%
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            364
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            (3,325
                                                                                                                                                                            )
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            (7.5
                                                                                                                                                                            )%Professional
      Programs
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            9,531
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            9,335
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            196
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            2.1
                                                                                                                                                                            %
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            —
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            196
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            2.1
                                                                                                                                                                            %Special
      Programs
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            31,096
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            27,412
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            3,684
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            13.4
                                                                                                                                                                            %
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            314
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            3,370
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            12.3
                                                                                                                                                                            %Total
      National Programs
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            40,627
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            36,747
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            3,880
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            10.6
                                                                                                                                                                            %
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            314
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            3,566
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            9.7
                                                                                                                                                                            %Services
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            8,259
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            7,982
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            277
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            3.5
                                                                                                                                                                            %
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            —
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            277
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            3.5
                                                                                                                                                                            %Total
      Core Commissions and Fees
                                                                                                                                                                            
                                                                                                                                                                            $
                                                                                                                                                                            237,789
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            $
                                                                                                                                                                            231,724
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            $
                                                                                                                                                                            6,065
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            2.6
                                                                                                                                                                            %
                                                                                                                                                                            
                                                                                                                                                                            $
                                                                                                                                                                            17,026
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            $
                                                                                                                                                                            (10,961
                                                                                                                                                                            )
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            (4.7
                                                                                                                                                                            )%




(1)
                The
      Retail segment includes commissions and fees reported in the “Other”
      column of the Segment Information in Note 13 which includes corporate and
      consolidation items.




The
reconciliation of the above internal growth schedule to the total Commissions
and Fees included in the Condensed Consolidated Statements of Income for the
three months ended June 30, 2009 and 2008 is as follows (in thousands, except
percentages):


For
      the three months
                                                  ended
      June 30,2009
                                                
                                                
                                                2008Total
      core commissions and fees
                                                
                                                $
                                                237,789
                                                
                                                
                                                $
                                                231,724Profit-sharing
      contingent commissions
                                                
                                                
                                                6,806
                                                
                                                
                                                
                                                5,412Divested
      business
                                                
                                                
                                                —
                                                
                                                
                                                
                                                1,699Total
      commission and fees
                                                
                                                $
                                                244,595
                                                
                                                
                                                $
                                                238,835 23




2008
                                                                                                                                                                                  
                                                                                                                                                                                  For
      the three months
                                                                                                                                                                                    ended
      June 30,2008
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  2007
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  Total
      Net
                                                                                                                                                                                    Change
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  Total
      Net
                                                                                                                                                                                    Growth
      %
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  Less
                                                                                                                                                                                    Acquisition
                                                                                                                                                                                    Revenues
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  Internal
                                                                                                                                                                                    Net
                                                                                                                                                                                    Growth
      $
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  Internal
                                                                                                                                                                                    Net
                                                                                                                                                                                    Growth
      %Florida
      Retail
                                                                                                                                                                                  
                                                                                                                                                                                  $
                                                                                                                                                                                  45,806
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  $
                                                                                                                                                                                  50,858
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  $
                                                                                                                                                                                  (5,052
                                                                                                                                                                                  )
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  (9.9
                                                                                                                                                                                  )%
                                                                                                                                                                                  
                                                                                                                                                                                  $
                                                                                                                                                                                  2,827
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  $
                                                                                                                                                                                  (7,879
                                                                                                                                                                                  )
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  (15.5
                                                                                                                                                                                  )%National
      Retail
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  73,920
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  63,847
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  10,073
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  15.8
                                                                                                                                                                                  %
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  14,393
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  (4,320
                                                                                                                                                                                  )
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  (6.8
                                                                                                                                                                                  )%Western
      Retail
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  24,588
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  23,898
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  690
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  2.9
                                                                                                                                                                                  %
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  3,587
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  (2,897
                                                                                                                                                                                  )
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  (12.1
                                                                                                                                                                                  )%Total
      Retail(1)
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  144,314
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  138,603
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  5,711
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  4.1
                                                                                                                                                                                  %
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  20,807
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  (15,096
                                                                                                                                                                                  )
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  (10.9
                                                                                                                                                                                  )%Wholesale
      Brokerage
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  44,362
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  45,369
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  (1,007
                                                                                                                                                                                  )
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  (2.2
                                                                                                                                                                                  )%
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  5,294
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  (6,301
                                                                                                                                                                                  )
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  (13.9
                                                                                                                                                                                  )%Professional
      Programs
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  9,353
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  9,080
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  273
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  3.0
                                                                                                                                                                                  %
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  —
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  273
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  3.0
                                                                                                                                                                                  %Special
      Programs
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  27,412
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  22,599
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  4,813
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  21.3
                                                                                                                                                                                  %
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  147
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  4,666
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  20.6
                                                                                                                                                                                  %Total
      National Programs
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  36,765
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  31,679
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  5,086
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  16.1
                                                                                                                                                                                  %
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  147
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  4,939
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  15.6
                                                                                                                                                                                  %Services
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  7,982
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  9,184
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  (1,202
                                                                                                                                                                                  )
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  (13.1
                                                                                                                                                                                  )%
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  —
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  (1,202
                                                                                                                                                                                  )
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  (13.1
                                                                                                                                                                                  )%Total
      Core Commissions and Fees
                                                                                                                                                                                  
                                                                                                                                                                                  $
                                                                                                                                                                                  233,423
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  $
                                                                                                                                                                                  224,835
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  $
                                                                                                                                                                                  8,588
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  3.8
                                                                                                                                                                                  %
                                                                                                                                                                                  
                                                                                                                                                                                  $
                                                                                                                                                                                  26,248
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  $
                                                                                                                                                                                  (17,660
                                                                                                                                                                                  )
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  (7.9
                                                                                                                                                                                  )%




(1)
                The
      Retail segment includes commissions and fees reported in the “Other”
      column of the Segment Information in Note 13 which includes corporate and
      consolidation items.




The
reconciliation of the above internal growth schedule to the total Commissions
and Fees included in the Condensed Consolidated Statements of Income for the
three months ended June 30, 2008 and 2007 is as follows (in thousands, except
percentages):


For
      the three months
                                              ended
      June 30,2008
                                            
                                            
                                            2007Total
      core commissions and fees
                                            
                                            $
                                            233,423
                                            
                                            
                                            $
                                            224,835Profit-sharing
      contingent commissions
                                            
                                            
                                            5,412
                                            
                                            
                                            
                                            2,746Divested
      business
                                            
                                            
                                            —
                                            
                                            
                                            
                                            2,895Total
      commission and fees
                                            
                                            $
                                            238,835
                                            
                                            
                                            $
                                            230,476 24




The
internal growth rates for our core commissions and fees for the six months ended
June 30, 2009 and 2008, by divisional units are as follows (in thousands, except
percentages):


2009
                                                                                                                                                                                      
                                                                                                                                                                                      For
      the six months
                                                                                                                                                                                        ended
      June 30,2009
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      2008
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      Total
      Net
                                                                                                                                                                                        Change
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      Total
      Net
                                                                                                                                                                                        Growth
      %
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      Less
                                                                                                                                                                                        Acquisition
                                                                                                                                                                                        Revenues
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      Internal
                                                                                                                                                                                        Net
                                                                                                                                                                                        Growth
      $
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      Internal
                                                                                                                                                                                        Net
                                                                                                                                                                                        Growth
      %Florida
      Retail
                                                                                                                                                                                      
                                                                                                                                                                                      $
                                                                                                                                                                                      84,122
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      $
                                                                                                                                                                                      86,561
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      $
                                                                                                                                                                                      (2,439
                                                                                                                                                                                      )
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      (2.8
                                                                                                                                                                                      )%
                                                                                                                                                                                      
                                                                                                                                                                                      $
                                                                                                                                                                                      6,203
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      $
                                                                                                                                                                                      (8,642
                                                                                                                                                                                      )
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      (10.0
                                                                                                                                                                                      )%National
      Retail
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      156,384
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      143,759
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      12,625
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      8.8
                                                                                                                                                                                      %
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      20,788
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      (8,163
                                                                                                                                                                                      )
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      (5.7
                                                                                                                                                                                      )%Western
      Retail
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      49,939
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      44,775
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      5,164
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      11.5
                                                                                                                                                                                      %
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      12,033
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      (6,869
                                                                                                                                                                                      )
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      (15.3
                                                                                                                                                                                      )%Total
      Retail(1)
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      290,445
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      275,095
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      15,350
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      5.6
                                                                                                                                                                                      %
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      39,024
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      (23,674
                                                                                                                                                                                      )
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      (8.6
                                                                                                                                                                                      )%Wholesale
      Brokerage
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      75,871
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      81,248
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      (5,377
                                                                                                                                                                                      )
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      (6.6
                                                                                                                                                                                      )%
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      1,082
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      (6,459
                                                                                                                                                                                      )
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      (7.9
                                                                                                                                                                                      )%Professional
      Programs
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      20,103
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      19,580
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      523
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      2.7
                                                                                                                                                                                      %
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      —
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      523
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      2.7
                                                                                                                                                                                      %Special
      Programs
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      69,064
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      55,212
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      13,852
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      25.1
                                                                                                                                                                                      %
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      314
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      13,538
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      24.5
                                                                                                                                                                                      %Total
      National Programs
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      89,167
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      74,792
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      14,375
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      19.2
                                                                                                                                                                                      %
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      314
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      14,061
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      18.8
                                                                                                                                                                                      %Services
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      16,344
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      15,915
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      429
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      2.7
                                                                                                                                                                                      %
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      —
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      429
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      2.7
                                                                                                                                                                                      %Total
      Core Commissions and Fees
                                                                                                                                                                                      
                                                                                                                                                                                      $
                                                                                                                                                                                      471,827
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      $
                                                                                                                                                                                      447,050
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      $
                                                                                                                                                                                      24,777
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      5.5
                                                                                                                                                                                      %
                                                                                                                                                                                      
                                                                                                                                                                                      $
                                                                                                                                                                                      40,420
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      $
                                                                                                                                                                                      (15,643
                                                                                                                                                                                      )
                                                                                                                                                                                      
                                                                                                                                                                                      
                                                                                                                                                                                      (3.5
                                                                                                                                                                                      )%




(1)
                The
      Retail segment includes commissions and fees reported in the “Other”
      column of the Segment Information in Note 13 which includes corporate and
      consolidation items.




The
reconciliation of the above internal growth schedule to the total Commissions
and Fees included in the Condensed Consolidated Statements of Income for the six
months ended June 30, 2009 and 2008 is as follows (in thousands, except
percentages):


For
      the six months
                                              ended
      June 30,2009
                                            
                                            
                                            2008Total
      core commissions and fees
                                            
                                            $
                                            471,827
                                            
                                            
                                            $
                                            447,050Profit-sharing
      contingent commissions
                                            
                                            
                                            36,732
                                            
                                            
                                            
                                            41,759Divested
      business
                                            
                                            
                                            —
                                            
                                            
                                            
                                            3,554Total
      commission and fees
                                            
                                            $
                                            508,559
                                            
                                            
                                            $
                                            492,363
  25




2008
                                                                                                                                                                          
                                                                                                                                                                          For
      the six months
                                                                                                                                                                            ended
      June 30,2008
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          2007
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          Total
      Net
                                                                                                                                                                            Change
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          Total
      Net
                                                                                                                                                                            Growth
      %
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          Less
                                                                                                                                                                            Acquisition
                                                                                                                                                                            Revenues
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          Internal
                                                                                                                                                                            Net
                                                                                                                                                                            Growth
      $
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          Internal
                                                                                                                                                                            Net
                                                                                                                                                                            Growth
      %Florida
      Retail
                                                                                                                                                                          
                                                                                                                                                                          $
                                                                                                                                                                          87,441
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          $
                                                                                                                                                                          94,749
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          $
                                                                                                                                                                          (7,308
                                                                                                                                                                          )
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (7.7
                                                                                                                                                                          )%
                                                                                                                                                                          
                                                                                                                                                                          $
                                                                                                                                                                          3,748
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          $
                                                                                                                                                                          (11,056
                                                                                                                                                                          )
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (11.7
                                                                                                                                                                          )%National
      Retail
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          144,605
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          115,548
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          29,057
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          25.1
                                                                                                                                                                          %
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          34,235
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (5,178
                                                                                                                                                                          )
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (4.5
                                                                                                                                                                          )%Western
      Retail
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          46,292
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          46,324
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (32
                                                                                                                                                                          )
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (0.1
                                                                                                                                                                          )%
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          3,849
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (3,881
                                                                                                                                                                          )
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (8.4
                                                                                                                                                                          )%Total
      Retail(1)
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          278,338
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          256,621
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          21,717
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          8.5
                                                                                                                                                                          %
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          41,832
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (20,115
                                                                                                                                                                          )
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (7.8
                                                                                                                                                                          )%Wholesale
      Brokerage
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          81,401
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          82,636
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (1,235
                                                                                                                                                                          )
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (1.5
                                                                                                                                                                          )%
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          10,273
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (11,508
                                                                                                                                                                          )
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (13.9
                                                                                                                                                                          )%Professional
      Programs
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          19,738
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          19,518
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          220
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          1.1
                                                                                                                                                                          %
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          —
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          220
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          1.1
                                                                                                                                                                          %Special
      Programs
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          55,212
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          47,083
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          8,129
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          17.3
                                                                                                                                                                          %
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          278
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          7,851
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          16.7
                                                                                                                                                                          %Total
      National Programs
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          74,950
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          66,601
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          8,349
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          12.5
                                                                                                                                                                          %
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          278
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          8,071
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          12.1
                                                                                                                                                                          %Services
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          15,915
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          18,138
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (2,223
                                                                                                                                                                          )
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (12.3
                                                                                                                                                                          )%
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          —
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (2,223
                                                                                                                                                                          )
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (12.3
                                                                                                                                                                          )%Total
      Core Commissions and Fees
                                                                                                                                                                          
                                                                                                                                                                          $
                                                                                                                                                                          450,604
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          $
                                                                                                                                                                          423,996
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          $
                                                                                                                                                                          26,608
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          6.3
                                                                                                                                                                          %
                                                                                                                                                                          
                                                                                                                                                                          $
                                                                                                                                                                          52,383
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          $
                                                                                                                                                                          (25,775
                                                                                                                                                                          )
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (6.1
                                                                                                                                                                          )%




(1)
                The
      Retail segment includes commissions and fees reported in the “Other”
      column of the Segment Information in Note 13 which includes corporate and
      consolidation items.




The
reconciliation of the above internal growth schedule to the total Commissions
and Fees included in the Condensed Consolidated Statements of Income for the six
months ended June 30, 2008 and 2007 is as follows (in thousands, except
percentages):


For
      the six months
                                                    ended
      June 30,2008
                                                  
                                                  
                                                  2007Total
      core commissions and fees
                                                  
                                                  $
                                                  450,604
                                                  
                                                  
                                                  $
                                                  423,996Profit-sharing
      contingent commissions
                                                  
                                                  
                                                  41,759
                                                  
                                                  
                                                  
                                                  46,803Divested
      business
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  5,236Total
      commission and fees
                                                  
                                                  $
                                                  492,363
                                                  
                                                  
                                                  $
                                                  476,035 26




Retail
Division




The
Retail Division provides a broad range of insurance products and services to
commercial, public and quasi-public, professional and individual insured
customers. More than 96.1% of the Retail Division’s commissions and fees
revenues are commission-based. Since the majority of our operating expenses do
not change as premiums fluctuate, we believe that most of any fluctuation in the
commissions net of related compensation that we receive will be reflected in our
pre-tax income.




Financial
information relating to Brown & Brown’s Retail Division for the three and
six months ended June 30, 2009 and 2008 is as follows (in thousands, except
percentages):


For
      the three months
                  ended
      June 30,
                
                
                For
      the six months
                  ended
      June 30,2009
                
                
                2008
                
                
                %
                  Change
                
                
                2009
                
                
                2008
                
                
                %
                  ChangeREVENUESCommissions
      and fees
                
                $
                147,041
                
                
                $
                143,880
                
                
                
                2.2
                %
                
                $
                289,722
                
                
                $
                277,690
                
                
                
                4.3
                %Profit-sharing
      contingent commissions
                
                
                1,264
                
                
                
                1,981
                
                
                
                (36.2
                )%
                
                
                17,434
                
                
                
                23,909
                
                
                
                (27.1
                )%Investment
      income
                
                
                88
                
                
                
                558
                
                
                
                (84.2
                )%
                
                
                152
                
                
                
                749
                
                
                
                (79.7
                )%Other
      income (loss), net
                
                
                720
                
                
                
                824
                
                
                
                (12.6
                )%
                
                
                (145
                )
                
                
                2,108
                
                
                
                (106.9
                )%Total
      revenues
                
                
                149,113
                
                
                
                147,243
                
                
                
                1.3
                %
                
                
                307,163
                
                
                
                304,456
                
                
                
                0.9
                %EXPENSESEmployee
      compensation and benefits
                
                
                73,980
                
                
                
                72,200
                
                
                
                2.5
                %
                
                
                150,560
                
                
                
                144,357
                
                
                
                4.3
                %Non-cash
      stock-based compensation
                
                
                1,179
                
                
                
                904
                
                
                
                30.4
                %
                
                
                2,369
                
                
                
                1,819
                
                
                
                30.2
                %Other
      operating expenses
                
                
                25,053
                
                
                
                23,615
                
                
                
                6.1
                %
                
                
                49,794
                
                
                
                46,415
                
                
                
                7.3
                %Amortization
                
                
                7,543
                
                
                
                6,457
                
                
                
                16.8
                %
                
                
                14,975
                
                
                
                12,675
                
                
                
                18.1
                %Depreciation
                
                
                1,517
                
                
                
                1,499
                
                
                
                1.2
                %
                
                
                3,061
                
                
                
                2,959
                
                
                
                3.4
                %Interest
                
                
                7,988
                
                
                
                7,248
                
                
                
                10.2
                %
                
                
                16,511
                
                
                
                13,579
                
                
                
                21.6
                %Total
      expenses
                
                
                117,260
                
                
                
                111,923
                
                
                
                4.8
                %
                
                
                237,270
                
                
                
                221,804
                
                
                
                7.0
                %Income
      before income taxes
                
                $
                31,853
                
                
                $
                35,320
                
                
                
                (9.8
                )%
                
                $
                69,893
                
                
                $
                82,652
                
                
                
                (15.4
                )%Net
      internal growth rate – core commissions and fees
                
                
                (8.0
                )%
                
                
                (10.9
                )%
                
                
                
                
                
                
                (8.6
                )%
                
                
                (7.8
                )%Employee
      compensation and benefits ratio
                
                
                49.6
                %
                
                
                49.0
                %
                
                
                
                
                
                
                49.0
                %
                
                
                47.4
                %Other
      operating expenses ratio
                
                
                16.8
                %
                
                
                16.0
                %
                
                
                
                
                
                
                16.2
                %
                
                
                15.2
                %Capital
      expenditures
                
                $
                955
                
                
                $
                989
                
                
                
                
                
                
                $
                2,101
                
                
                $
                2,157Total
      assets at June 30, 2009 and 2008
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                1,739,230
                
                
                $
                1,582,866




The
Retail Division’s total revenues during the three months ended June 30, 2009
increased 1.3%, or $1.9 million, over the same period in 2008, to $149.1
million. Profit-sharing contingent commissions for the second quarter of 2009
decreased $0.7 million, or 36.2%, from the second quarter of 2008. Of the $3.2
million net increase in commissions and fees, (i) an increase of approximately
$16.4 million related to the core commissions and fees from acquisitions that
had no comparable revenues in the same period of 2008; (ii) a decrease of $1.7
million related to commissions and fees recorded in the second quarter of 2008
from business divested during 2009; and (iii) the remaining net decrease of
$11.5 million is primarily due to net lost business. The Retail Division’s
internal growth rate for core commissions and fees was (8.0)% for the second
quarter of 2009 and was driven primarily by a combination of reduced insurable
exposure units resulting from a slowing economy, as well as a continuation of
declining insurance property rates, although declining at a slower rate than the
previous quarter.




Income
before income taxes for the three months ended June 30, 2009 decreased 9.8%, or
$3.5 million from the same period in 2008, to $31.9 million. This decrease is
primarily due to net lost business, less profit-sharing contingent commission
revenues, and less investment and other income.


27




The
Retail Division’s total revenues during the six months ended June 30, 2009
increased 0.9%, or $2.7 million, to $307.2 million. Profit-sharing contingent
commissions for the six months ended June 30, 2009, decreased $6.5 million, from
the same period in 2008. Of the $12.0 million net increase in commissions and
fees, (i) an increase of approximately $39.0 million related to the core
commissions and fees from acquisitions that had no comparable revenues in the
same period of 2008; (ii) a decrease of $3.2 million related to commissions and
fees recorded in the six months ended June 30, 2008 from business divested
during 2009; and (iii) the remaining net decrease of $23.8 million is primarily
due to net lost business in core commissions and fees. The Retail Division’s
internal growth rate for core commissions and fees was (8.6)% for the six months
ended June 30, 2009 and was driven primarily by a combination of reduced
insurable exposure units resulting from a slowing economy, as well as a
continuation of declining insurance property rates, although declining at a
slower rate than the previous year.




Income
before income taxes for the six months ended June 30, 2009 decreased 15.4%, or
$12.8 million, to $69.9 million. This decrease is primarily due to net lost
business, less profit-sharing contingent commission revenues, and less
investment and other income.




Wholesale
Brokerage Division




The
Wholesale Brokerage Division markets and sells excess and surplus commercial and
personal lines insurance and reinsurance, primarily through independent agents
and brokers. Like the Retail and National Programs Divisions, the Wholesale
Brokerage Division’s revenues are primarily commission-based.




Financial
information relating to our Wholesale Brokerage Division for the three and six
months ended June 30, 2009 and 2008 is as follows (in thousands, except
percentages):


For
      the three months
                  ended
      June 30,
                
                
                For
      the six months
                  ended
      June 30,2009
                
                
                2008
                
                
                %
                  Change
                
                
                2009
                
                
                2008
                
                
                %
                  ChangeREVENUESCommissions
      and fees
                
                $
                41,409
                
                
                $
                44,362
                
                
                
                (6.7
                )%
                
                $
                75,871
                
                
                $
                81,401
                
                
                
                (6.8
                )%Profit-sharing
      contingent commissions
                
                
                2,784
                
                
                
                1,467
                
                
                
                89.8
                %
                
                
                7,154
                
                
                
                10,136
                
                
                
                (29.4
                )%Investment
      income
                
                
                18
                
                
                
                365
                
                
                
                (95.1
                )%
                
                
                47
                
                
                
                824
                
                
                
                (94.3
                )%Other
      income, net
                
                
                249
                
                
                
                154
                
                
                
                61.7
                %
                
                
                369
                
                
                
                321
                
                
                
                15.0
                %Total
      revenues
                
                
                44,460
                
                
                
                46,348
                
                
                
                (4.1
                )%
                
                
                83,441
                
                
                
                92,682
                
                
                
                (10.0
                )%EXPENSESEmployee
      compensation and benefits
                
                
                20,958
                
                
                
                22,648
                
                
                
                (7.5
                )%
                
                
                41,465
                
                
                
                45,539
                
                
                
                (8.9
                )%Non-cash
      stock-based compensation
                
                
                248
                
                
                
                200
                
                
                
                24.0
                %
                
                
                501
                
                
                
                397
                
                
                
                26.2
                %Other
      operating expenses
                
                
                7,849
                
                
                
                8,709
                
                
                
                (9.9
                )%
                
                
                15,905
                
                
                
                16,686
                
                
                
                (4.7
                )%Amortization
                
                
                2,558
                
                
                
                2,535
                
                
                
                0.9
                %
                
                
                5,117
                
                
                
                5,033
                
                
                
                1.7
                %Depreciation
                
                
                720
                
                
                
                706
                
                
                
                2.0
                %
                
                
                1,436
                
                
                
                1,444
                
                
                
                (0.6
                )%Interest
                
                
                3,548
                
                
                
                4,516
                
                
                
                (21.4
                )%
                
                
                7,449
                
                
                
                9,313
                
                
                
                (20.0
                )%Total
      expenses
                
                
                35,881
                
                
                
                39,314
                
                
                
                (8.7
                )%
                
                
                71,873
                
                
                
                78,412
                
                
                
                (8.3
                )%Income
      before income taxes
                
                $
                8,579
                
                
                $
                7,034
                
                
                
                22.0
                %
                
                $
                11,568
                
                
                $
                14,270
                
                
                
                (18.9
                )%Net
      internal growth rate – core commissions and fees
                
                
                (7.5
                )%
                
                
                (13.9
                )%
                
                
                
                
                
                
                (7.9
                )%
                
                
                (13.9
                )%Employee
      compensation and benefits ratio
                
                
                47.1
                %
                
                
                48.9
                %
                
                
                
                
                
                
                49.7
                %
                
                
                49.1
                %Other
      operating expenses ratio
                
                
                17.7
                %
                
                
                18.8
                %
                
                
                
                
                
                
                19.1
                %
                
                
                18.0
                %Capital
      expenditures
                
                $
                840
                
                
                $
                2,016
                
                
                
                
                
                
                $
                1,884
                
                
                $
                3,262Total
      assets at June 30, 2009 and 2008
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                654,210
                
                
                $
                683,470


28




The
Wholesale Brokerage Division’s total revenues for the three months ended June
30, 2009 decreased 4.1%, or $1.9 million, from the same period in 2008, to $44.5
million. Profit-sharing contingent commissions for the second quarter of 2009
increased $1.3 million over the same quarter of 2008. Of the $3.0 million net
decrease in commissions and fees, (i) an increase of approximately $0.3 million
related to core commissions and fees from acquisitions that had no comparable
revenues in the same period of 2008; and (ii) the remaining net decrease of $3.3
million is primarily due to net lost business in core commissions and fees. As
such, the Wholesale Brokerage Division’s internal growth rate for core
commissions and fees was (7.5)% for the second quarter of 2009. The majority of
the net lost business was attributable to a $1.9 million impact of primarily the
decreasing property rates and reduced insurable exposure units in Florida, and a
$ 1.2 million impact of the slowing residential home-builders’ market on one of
our Wholesale Brokerage operations that focuses on that industry in the
southwestern region of the United States.




Income
before income taxes for the three months ended June 30, 2009 increased 22.0%, or
$1.5 million from the same period in 2008, to $8.6 million, primarily due to the
increased profit-sharing contingent commissions, a $1.7 million reduction in
employee compensation and a $0.9 million reduction in other operating
expenses.




The
Wholesale Brokerage Division’s total revenues for the six months ended June 30,
2009 decreased 10.0%, or $9.2 million, to $83.4 million from the same period in
2008. Profit-sharing contingent commissions for the six months ended June 30,
2009 decreased $3.0 million from the same period in 2008. Of the $5.5 million
decrease in commissions and fees, (i) an increase of approximately $1.1 million
related to core commissions and fees from acquisitions that had no comparable
revenues in the same period of 2008; (ii) a decrease of $0.1 million related to
commissions and fees recorded in the six months ended June 30, 2008 from
business divested during 2009; and (iii) the remaining net decrease of $6.5
million is primarily due to net lost business in core commissions and fees. As
such, the Wholesale Brokerage Division’s internal growth rate for core
commissions and fees was (7.9)% for the six months ended June 30, 2008. The
majority of the net lost business was attributable to a $3.3 million impact of
primarily the decreasing property rates and reduced insurable exposure units in
Florida, and a $ 2.1 million impact of the slowing residential home-builders’
market on one of our Wholesale Brokerage operations that focuses on that
industry in the southwestern region of the United States. Our Wholesale
Brokerage operations in other parts of the country are being negatively affected
by a combination of declining premium rates and increased competition from the
standard lines carriers.




Income
before income taxes for the six months ended June 30, 2009 decreased 18.9%, or
$2.7 million, to $11.6 million from the same period in 2008, primarily due to
net lost business and a decrease in profit-sharing contingent commissions.
However, the revenue reduction was somewhat offset by $4.1 million lower
employee compensation and benefit cost and $0.8 million in lower other operating
costs.


29




National
Programs Division




The
National Programs Division is comprised of two units: Professional Programs,
which provides professional liability and related package products for certain
professionals delivered through nationwide networks of independent agents; and
Special Programs, which markets targeted products and services designated for
specific industries, trade groups, governmental entities and market niches. Like
the Retail and Wholesale Brokerage Divisions, the National Programs Division’s
revenues are primarily commission-based.




Financial
information relating to our National Programs Division for the three and six
months ended June 30, 2009 and 2008 is as follows (in thousands, except
percentages):


For
      the three months
                            ended
      June 30,
                          
                          
                          For
      the six months
                            ended
      June 30,2009
                          
                          
                          2008
                          
                          
                          %
                            Change
                          
                          
                          2009
                          
                          
                          2008
                          
                          
                          %
                            ChangeREVENUESCommissions
      and fees
                          
                          $
                          40,627
                          
                          
                          $
                          36,765
                          
                          
                          
                          10.5
                          %
                          
                          $
                          89,167
                          
                          
                          $
                          74,950
                          
                          
                          
                          19.0
                          %Profit-sharing
      contingent commissions
                          
                          
                          2,758
                          
                          
                          
                          1,964
                          
                          
                          
                          40.4
                          %
                          
                          
                          12,144
                          
                          
                          
                          7,714
                          
                          
                          
                          57.4
                          %Investment
      income
                          
                          
                          1
                          
                          
                          
                          77
                          
                          
                          
                          (98.7
                          )%
                          
                          
                          2
                          
                          
                          
                          186
                          
                          
                          
                          (98.9
                          )%Other
      income, net
                          
                          
                          6
                          
                          
                          
                          25
                          
                          
                          
                          (76.0
                          )%
                          
                          
                          —
                          
                          
                          
                          51
                          
                          
                          NMF
                          %Total
      revenues
                          
                          
                          43,392
                          
                          
                          
                          38,831
                          
                          
                          
                          11.7
                          %
                          
                          
                          101,313
                          
                          
                          
                          82,901
                          
                          
                          
                          22.2
                          %EXPENSESEmployee
      compensation and benefits
                          
                          
                          17,438
                          
                          
                          
                          15,962
                          
                          
                          
                          9.2
                          %
                          
                          
                          37,060
                          
                          
                          
                          32,551
                          
                          
                          
                          13.9
                          %Non-cash
      stock-based compensation
                          
                          
                          260
                          
                          
                          
                          202
                          
                          
                          
                          28.7
                          %
                          
                          
                          513
                          
                          
                          
                          402
                          
                          
                          
                          27.6
                          %Other
      operating expenses
                          
                          
                          6,061
                          
                          
                          
                          6,921
                          
                          
                          
                          (12.4
                          )%
                          
                          
                          13,315
                          
                          
                          
                          13,133
                          
                          
                          
                          1.4
                          %Amortization
                          
                          
                          2,293
                          
                          
                          
                          2,275
                          
                          
                          
                          0.8
                          %
                          
                          
                          4,562
                          
                          
                          
                          4,550
                          
                          
                          
                          0.3
                          %Depreciation
                          
                          
                          664
                          
                          
                          
                          681
                          
                          
                          
                          (2.5
                          )%
                          
                          
                          1,324
                          
                          
                          
                          1,322
                          
                          
                          
                          0.2
                          %Interest
                          
                          
                          1,392
                          
                          
                          
                          1,939
                          
                          
                          
                          (28.2
                          )%
                          
                          
                          2,861
                          
                          
                          
                          4,056
                          
                          
                          
                          (29.5
                          )%Total
      expenses
                          
                          
                          28,108
                          
                          
                          
                          27,980
                          
                          
                          
                          0.5
                          %
                          
                          
                          59,635
                          
                          
                          
                          56,014
                          
                          
                          
                          6.5
                          %Income
      before income taxes
                          
                          $
                          15,284
                          
                          
                          $
                          10,851
                          
                          
                          
                          40.9
                          %
                          
                          $
                          41,678
                          
                          
                          $
                          26,887
                          
                          
                          
                          55.0
                          %Net
      internal growth rate – core commissions and fees
                          
                          
                          9.7
                          %
                          
                          
                          (15.6
                          )%
                          
                          
                          
                          
                          
                          
                          18.8
                          %
                          
                          
                          12.1
                          %Employee
      compensation and benefits ratio
                          
                          
                          40.2
                          %
                          
                          
                          41.1
                          %
                          
                          
                          
                          
                          
                          
                          36.6
                          %
                          
                          
                          39.3
                          %Other
      operating expenses ratio
                          
                          
                          14.0
                          %
                          
                          
                          17.8
                          %
                          
                          
                          
                          
                          
                          
                          13.1
                          %
                          
                          
                          15.8
                          %Capital
      expenditures
                          
                          $
                          1,110
                          
                          
                          $
                          972
                          
                          
                          
                          
                          
                          
                          $
                          2,193
                          
                          
                          $
                          1,368Total
      assets at June 30, 2009 and 2008
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          $
                          644,934
                          
                          
                          $
                          564,174




Total
revenues for National Programs for the three months ended June 30, 2009
increased 11.7%, or $4.6 million, over the same period in 2008, to $43.4
million. Profit-sharing contingent commissions for the second quarter of 2009
increased $0.8 million over the second quarter of 2008. Of the $3.9 million net
increase in commissions and fees, (i) an increase of approximately $0.3 million
related to core commissions and fees from acquisitions that had no comparable
revenues in the same period of 2008; and (ii) the remaining net increase of
approximately $3.6 million is primarily due to net new business. Therefore, the
National Programs Division’s internal growth rate for core commissions and fees
was 9.7% for the three months ended June 30, 2009. The Professional Programs
Unit within the National Programs Division had a 2.1% internal growth rate due
to continued stabilizing professional liability rates. Additionally, the Special
Programs Unit had a 12.3% internal growth rate, primarily due to approximately
$3.3 million of net new business generated by our Proctor Financial Services
subsidiary and to the approximately $0.5 million net increase in core
commissions and fees in our condominium program at our Florida Intracoastal
Underwriters (“FIU”) subsidiary.




Income
before income taxes for the three months ended June 30, 2009 increased 40.9%, or
$4.4 million, over the same period in 2008, to $15.3 million. This increase is
primarily due to net new business and an increase in profit-sharing contingent
commissions.


30




Total
revenues for National Programs for the six months ended June 30, 2009 increased
22.2%, or $18.4 million, to $101.3 million. Profit-sharing contingent
commissions for the six months ended June 30, 2009 increased $4.4 million over
the same period in 2008. Of the $14.2 million net increase in commissions and
fees; (i) an increase of approximately $0.3 million related to core commissions
and fees from acquisitions that had no comparable revenues in the same period of
2008; (ii) a decrease of $0.2 million related to commissions and fees recorded
in the six months ended June 30, 2008 from business divested during 2009; and
(iii) the remaining net increase of approximately $14.1 million is primarily due
to net new business. Therefore, the National Programs Division’s internal growth
rate for core commissions and fees was 18.8%. The Professional Programs Unit
within the National Programs Division had a 2.7% internal growth rate due to
stabilizing professional liability rates. Additionally, the Special Programs
Unit had a 24.5% internal growth rate, primarily due to; (i) approximately $13.8
million of net new business generated by our Proctor Financial Services
subsidiary, most of which will be non-recurring; and (ii) approximately $0.7
million net increase in core commissions and fees in our FIU
subsidiary.




Income
before income taxes for the six months ended June 30, 2009 increased 55.0%, or
$14.8 million, to $41.7 million, over the same period in 2008. This increase is
primarily due to net new business generated by our Proctor Financial Services
subsidiary.




Services
Division




The
Services Division provides insurance-related services, including third-party
claims administration and comprehensive medical utilization management services
in both the workers’ compensation and all-lines liability areas, as well as
Medicare set-aside services. Unlike our other segments, approximately 98% of the
Services Division’s 2008 commissions and fees revenue is generated from fees,
which are not significantly affected by fluctuations in general insurance
premiums.




Financial
information relating to our Services Division for the three and six months ended
June 30, 2009 and 2008 is as follows (in thousands, except
percentages):


For
      the three months
                    ended
      June 30,
                  
                  
                  For
      the six months
                    ended
      June 30,2009
                  
                  
                  2008
                  
                  
                  %
                    Change
                  
                  
                  2009
                  
                  
                  2008
                  
                  
                  %
                    ChangeREVENUESCommissions
      and fees
                  
                  $
                  8,259
                  
                  
                  $
                  7,982
                  
                  
                  
                  3.5
                  %
                  
                  $
                  16,344
                  
                  
                  $
                  15,915
                  
                  
                  
                  2.7
                  %Profit-sharing
      contingentcommissions
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  %
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  %Investment
      income
                  
                  
                  6
                  
                  
                  
                  (6
                  )
                  
                  
                  (200.0
                  )%
                  
                  
                  12
                  
                  
                  
                  (1
                  )
                  
                  NMF
                  %Other
      income (loss), net
                  
                  
                  (1
                  )
                  
                  
                  (3
                  )
                  
                  
                  (66.7
                  )%
                  
                  
                  (1
                  )
                  
                  
                  (3
                  )
                  
                  
                  (66.7
                  )%Total
      revenues
                  
                  
                  8,264
                  
                  
                  
                  7,973
                  
                  
                  
                  3.6
                  %
                  
                  
                  16,355
                  
                  
                  
                  15,911
                  
                  
                  
                  2.8
                  %EXPENSESEmployee
      compensation and benefits
                  
                  
                  4,687
                  
                  
                  
                  4,482
                  
                  
                  
                  4.6
                  %
                  
                  
                  9,454
                  
                  
                  
                  9,037
                  
                  
                  
                  4.6
                  %Non-cash
      stock-based compensation
                  
                  
                  41
                  
                  
                  
                  35
                  
                  
                  
                  17.1
                  %
                  
                  
                  82
                  
                  
                  
                  70
                  
                  
                  
                  17.1
                  %Other
      operating expenses
                  
                  
                  1,263
                  
                  
                  
                  1,263
                  
                  
                  
                  —
                  %
                  
                  
                  2,416
                  
                  
                  
                  2,414
                  
                  
                  
                  0.1
                  %Amortization
                  
                  
                  116
                  
                  
                  
                  116
                  
                  
                  
                  —
                  %
                  
                  
                  231
                  
                  
                  
                  231
                  
                  
                  
                  —
                  %Depreciation
                  
                  
                  88
                  
                  
                  
                  108
                  
                  
                  
                  (18.5
                  )%
                  
                  
                  188
                  
                  
                  
                  220
                  
                  
                  
                  (14.5
                  )%Interest
                  
                  
                  166
                  
                  
                  
                  172
                  
                  
                  
                  (3.5
                  )%
                  
                  
                  359
                  
                  
                  
                  366
                  
                  
                  
                  (1.9
                  )%Total
      expenses
                  
                  
                  6,361
                  
                  
                  
                  6,176
                  
                  
                  
                  3.0
                  %
                  
                  
                  12,730
                  
                  
                  
                  12,338
                  
                  
                  
                  3.2
                  %Income
      before income taxes
                  
                  $
                  1,903
                  
                  
                  $
                  1,797
                  
                  
                  
                  5.9
                  %
                  
                  $
                  3,625
                  
                  
                  $
                  3,573
                  
                  
                  
                  1.5
                  %Net
      internal growth rate – core commissions and fees
                  
                  
                  3.5
                  %
                  
                  
                  (13.1
                  )%
                  
                  
                  
                  
                  
                  
                  2.7
                  %
                  
                  
                  (12.3
                  )%Employee
      compensation and benefits ratio
                  
                  
                  56.7
                  %
                  
                  
                  56.2
                  %
                  
                  
                  
                  
                  
                  
                  57.8
                  %
                  
                  
                  56.8
                  %Other
      operating expenses ratio
                  
                  
                  15.3
                  %
                  
                  
                  15.8
                  %
                  
                  
                  
                  
                  
                  
                  14.8
                  %
                  
                  
                  15.2
                  %Capital
      expenditures
                  
                  $
                  80
                  
                  
                  $
                  71
                  
                  
                  
                  
                  
                  
                  $
                  87
                  
                  
                  $
                  126Total
      assets at June 30, 2009 and 2008
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  45,582
                  
                  
                  $
                  43,022


31




The
Services Division’s total revenues for the three months ended June 30, 2009
increased 3.6%, or $0.3 million, from the same period in 2008, to $8.3 million.
Core commissions and fees reflect an internal growth rate of 3.5% for the second
quarter of 2009, primarily due to net new business.




Income
before income taxes for the three months ended June 30, 2009 increased 5.9%, or
$0.1 million, from the same period in 2008 to $1.9 million, primarily due to net
new business.




The
Services Division’s total revenues for the six months ended June 30, 2009
increased 2.8%, or $0.4 million, to $16.4 million from the same period in 2008.
Core commissions and fees reflect an internal growth rate of 2.7% for the six
months ended June 30, 2009, primarily due to net new business.




Income
before income taxes for the six months ended June 30, 2009 increased 1.5%, or
$0.1 million, to $3.6 million from the same period in 2008 primarily due to net
new business.




Other




As
discussed in Note 13 of the Notes to Condensed Consolidated Financial
Statements, the “Other” column in the Segment Information table includes any
income and expenses not allocated to reportable segments, and corporate-related
items, including the inter-company interest expense charged to the reporting
segment.




LIQUIDITY
AND CAPITAL RESOURCES




Our
cash and cash equivalents of $190.0 million at June 30, 2009 reflected an
increase of $111.5 million over the $78.5 million balance at December 31, 2008.
For the six-month period ended June 30, 2009, $185.0 million of cash was
provided from operating activities. Also during this period, $38.8 million of
cash was used for acquisitions, $6.3 million was used for additions to fixed
assets, $8.3 million was used for payments on long-term debt and $21.2 million
was used for payment of dividends.




Our
ratio of current assets to current liabilities (the “current ratio”) was 1.12
and 1.00 at June 30, 2009 and December 31, 2008, respectively.




Contractual
Cash Obligations




As
of June 30, 2009, our contractual cash obligations were as follows:


Payments
      Due by Period(in
      thousands)
                  
                  Total
                  
                  
                  Less
      Than
                    1
      Year
                  
                  
                  1-3
      Years
                  
                  
                  4-5
      Years
                  
                  
                  After
      5
                    YearsLong-term
      debt
                  
                  $
                  254,295
                  
                  
                  $
                  4,006
                  
                  
                  $
                  100,289
                  
                  
                  $
                  —
                  
                  
                  $
                  150,000Capital
      lease obligations
                  
                  
                  9
                  
                  
                  
                  9
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —Other
      long-term liabilities
                  
                  
                  15,223
                  
                  
                  
                  9,481
                  
                  
                  
                  3,698
                  
                  
                  
                  752
                  
                  
                  
                  1,292Operating
      leases
                  
                  
                  97,203
                  
                  
                  
                  27,154
                  
                  
                  
                  37,892
                  
                  
                  
                  18,915
                  
                  
                  
                  13,242Interest
      obligations
                  
                  
                  61,029
                  
                  
                  
                  14,461
                  
                  
                  
                  24,409
                  
                  
                  
                  17,675
                  
                  
                  
                  4,484Unrecognized
      tax benefits
                  
                  
                  429
                  
                  
                  
                  —
                  
                  
                  
                  429
                  
                  
                  
                  —
                  
                  
                  
                  —Maximum
      future acquisition contingency payments
                  
                  
                  199,409
                  
                  
                  
                  72,457
                  
                  
                  
                  124,113
                  
                  
                  
                  2,839
                  
                  
                  
                  —Total
      contractual cash obligations
                  
                  $
                  627,597
                  
                  
                  $
                  127,568
                  
                  
                  $
                  290,830
                  
                  
                  $
                  40,181
                  
                  
                  $
                  169,018
 32




In
2004, we completed a private placement of $200.0 million of unsecured senior
notes (the “Notes”). The $200.0 million is divided into two series: Series A,
for $100.0 million due in 2011 and bearing interest at 5.57% per year; and
Series B, for $100.0 million due in 2014 and bearing interest at 6.08% per year.
The closing on the Series B Notes occurred on July 15, 2004. The closing on the
Series A Notes occurred on September 15, 2004. Brown & Brown used the
proceeds from the Notes for general corporate purposes, including acquisitions
and repayment of existing debt. As of June 30, 2009 and December 31, 2008 there
was an outstanding balance of $200.0 million on the Notes.




On
December 22, 2006, we entered into a Master Shelf and Note Purchase Agreement
(the “Master Agreement”) with a national insurance company (the “Purchaser”).
The Purchaser also purchased Notes issued by the Company in 2004. The Master
Agreement provides for a $200.0 million private uncommitted “shelf” facility for
the issuance of senior unsecured notes over a three-year period, with interest
rates that may be fixed or floating and with such maturity dates, not to exceed
ten years, as the parties may determine. The Master Agreement includes various
covenants, limitations and events of default similar to the Notes issued in
2004. The initial issuance of notes under the Master Agreement occurred on
December 22, 2006, through the issuance of $25.0 million in Series C Senior
Notes due December 22, 2016, with a fixed interest rate of 5.66% per annum. On
February 1, 2008 we issued $25.0 million in Series D Senior Notes due January
15, 2015 with a fixed interest rate of 5.37% per annum. As of June 30, 2009 and
December 31, 2008 there was an outstanding balance of $50.0 million under the
Master Agreement.




On
June 12, 2008, the Company entered into an Amended and
Restated Revolving Loan Agreement (the “Loan Agreement”) with a national
banking institution that was dated as of June 3, 2008, amending and
restating the existing Revolving Loan Agreement dated September 29, 2003,
as amended (the “Revolving Agreement”), in order to increase the lending
commitment to $50.0 million (subject to potential increases up to $100.0
million) and to extend the maturity date from December 20, 2011 to
June 3, 2013. The Revolving Agreement initially provided for a revolving
credit facility in the maximum principal amount of $75.0 million. After a series
of amendments that provided covenant exceptions for the notes issued or to be
issued under the Master Agreement and relaxed or deleted certain other
covenants, the maximum principal amount was reduced to $20.0 million. The
calculation of interest and fees is generally based on the Company’s quarterly
ratio of funded debt to earnings before interest, taxes,
depreciation, amortization, and non-cash stock-based compensation. Interest
is charged at a rate equal to 0.50% to 1.00% above the London Interbank Offering
Rate (“LIBOR”) or 1.00% below the base rate, each as more fully defined in the
Loan Agreement. Fees include an upfront fee, an availability fee of 0.10% to
0.20%, and a letter of credit usage fee of 0.50% to 1.00%. The Loan Agreement
contains various covenants, limitations, and events of default customary for
similar facilities for similar borrowers. The 90-day LIBOR was 0.595% and 1.43%
as of June 30, 2009 and December 31, 2008, respectively. There were no
borrowings against this facility at June 30, 2009 or December 31,
2008.


33




All
three of these outstanding credit agreements require us to maintain certain
financial ratios and comply with certain other covenants. We were in compliance
with all such covenants as of June 30, 2009 and December 31, 2008.




Neither
we nor our subsidiaries has ever incurred off-balance sheet obligations through
the use of, or investment in, off-balance sheet derivative financial instruments
or structured finance or special purpose entities organized as corporations,
partnerships or limited liability companies or trusts.




We
believe that our existing cash, cash equivalents, short-term investment
portfolio and funds generated from operations, together with our Master
Agreement and Loan Agreement described above, will be sufficient to satisfy our
normal liquidity needs through at least the next 12 months. Additionally, we
believe that funds generated from future operations will be sufficient to
satisfy our normal liquidity needs, including the required annual principal
payments on our long-term debt.




Historically,
much of our cash has been used for acquisitions. If additional acquisition
opportunities should become available that exceed our current cash flow, we
believe that given our relatively low debt-to-total-capitalization ratio, we
might have the ability to raise additional capital through either the private or
public debt or equity markets.




In
addition, we currently have a shelf registration statement with the SEC
registering the potential sale of an indeterminate amount of debt and equity
securities in the future, from time to time, to augment our liquidity and
capital resources.




ITEM 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK




Market
risk is the potential loss arising from adverse changes in market rates and
prices, such as interest rates and equity prices. We are exposed to market risk
through our investments, revolving credit line and term loan
agreements.




Our
invested assets are held as cash and cash equivalents, restricted cash and
investments, available-for-sale marketable equity securities, non-marketable
equity securities and certificates of deposit. These investments are subject to
interest rate risk and equity price risk. The fair values of our cash and cash
equivalents, restricted cash and investments, and certificates of
deposit at June 30, 2009 and December 31, 2008 approximated their
respective carrying values due to their short-term duration and therefore such
market risk is not considered to be material.




We
do not actively invest or trade in equity securities. In addition, we generally
dispose of any significant equity securities received in conjunction with an
acquisition shortly after the acquisition date.


34




ITEM 4. CONTROLS AND
PROCEDURES




Evaluation
of Disclosure Controls and Procedures




We
carried out an evaluation (the “Evaluation”) required by Rules 13a-15 and
15d-15 under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), under the supervision and with the participation of our Chief Executive
Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of our
disclosure controls and procedures as defined in Rule 13a-15 and 15d-15
under the Exchange Act (“Disclosure Controls”) as of June 30, 2009. Based on the
Evaluation, our CEO and CFO concluded that the design and operation of our
Disclosure Controls were effective to ensure that information required to be
disclosed by us in reports that we file or submit under the Exchange Act is (i)
recorded processed, summarized and reported within the time periods specified in
SEC rules and forms and (ii) accumulated and communicated to our senior
management including our CEO and CFO, to allow timely decisions regarding
required disclosures.




Changes
in Internal Controls




There
has not been any change in our internal control over financial reporting
identified in connection with the Evaluation that occurred during the quarter
ended June 30, 2009 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.




Inherent
Limitations of Internal Control Over Financial Reporting




Our
management, including our CEO and CFO, does not expect that our Disclosure
Controls and internal controls will prevent all error and all fraud. A control
system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met.
Further, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the Company have been detected. These
inherent limitations include the realities that judgments in decision-making can
be faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the
control.




The
design of any system of controls also is based in part upon certain assumptions
about the likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all potential future
conditions; over time, a control may become inadequate because of changes in
conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be
detected.




CEO
and CFO Certifications




Exhibits
31.1 and 31.2 are the Certifications of the CEO and the CFO, respectively. The
Certifications are supplied in accordance with Section 302 of the
Sarbanes-Oxley Act of 2002 (the “Section 302 Certifications”). This Item
4 of this Report is the information concerning the Evaluation referred to
in the Section 302 Certifications and this information should be read in
conjunction with the Section 302 Certifications for a more complete
understanding of the topics presented.




PART
II




ITEM 1. LEGAL
PROCEEDINGS




In
Item 3 of Part I of the Company’s Annual Report on Form 10-K for its fiscal year
ending December 31, 2008, certain information concerning certain legal
proceedings and other matters was disclosed. Such information was current as of
the date of filing. During the Company’s fiscal quarter ending June 30, 2009, no
new legal proceedings, or material developments with respect to existing legal
proceedings, occurred which require disclosure in this Quarterly Report on Form
10-Q.




ITEM 1A. RISK
FACTORS




There
were no material changes in the risk factors previously disclosed in Item 1A,
“Risk Factors” included in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2008.


35




ITEM
4. SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS




The
Company’s Annual Meeting of Shareholders was held on April 29, 2009. At the
meeting, two matters were submitted to a vote of security holders. Set forth
below are the voting results for each of these matters.


1.
              Election
      of twelve directors.




For
                  
                  WithheldJ.
      Hyatt Brown
                  
                  123,213,932
                  
                  10,994,233Samuel
      P. Bell, III
                  
                  131,701,416
                  
                  2,506,749Hugh
      M. Brown
                  
                  133,469,472
                  
                  738,693J.
      Powell Brown
                  
                  131,729,736
                  
                  2,478,429Bradley
      Currey, Jr.
                  
                  131,617,607
                  
                  2,590,558Jim
      W. Henderson
                  
                  131,739,233
                  
                  2,468,932Theodore
      J. Hoepner
                  
                  131,611,552
                  
                  2,596,613Toni
      Jennings
                  
                  133,474,593
                  
                  733,572Wendell
      S. Reilly
                  
                  133,493,055
                  
                  715,110John
      R. Riedman
                  
                  123,277,270
                  
                  10,930,895Jan
      E. Smith
                  
                  131,815,864
                  
                  2,392,301Chilton
      D. Varner
                  
                  133,476,664
                  
                  731,501




2.
                  Ratification
      of the appointment of Deloitte & Touche LLP as Brown & Brown,
      Inc.’s independent registered public accountants for the fiscal year
      ending December 31,
2009




For
                                    
                                    Against
                                    
                                    Abstain134,023,506
                                    
                                    97,369
                                    
                                    87,295




ITEM 5.  OTHER INFORMATION
 
 As
previously disclosed in the Company's Current Report on Form 8-K filed on May 5,
2009, in connection with J. Hyatt Brown's retirement effective July 1, 2009 from
the position of Chief Executive Officer of the Company, the Company's Board of
Directors agreed with Mr. Brown to amend his employment agreement effective July
1, 2009 to remove all provisions relating to a “change in control” of the
Company, including a requirement that Mr. Brown be paid certain amounts in
the event of the termination of his employment or the occurrence of certain
other “adverse consequences” following a change in control of the
Company.
  On August
10, 2009, the Company and Mr. Brown executed this new employment agreement,
which memorializes the removal of all provisions relating to a “change in
control” of the Company.  This employment agreement is attached as
Exhibit 10.1 to thisQuarterly Report on Form
10-Q.
 ITEM 6.
EXHIBITS




The
following exhibits are filed as a part of this Report:


3.1
                  Articles
      of Amendment to Articles of Incorporation (adopted April 24, 2003)
      (incorporated by reference to Exhibit 3a to Form 10-Q for the quarter
      ended June 30, 2003), and Amended and Restated Articles of Incorporation
      (incorporated by reference to Exhibit 3a to Form 10-Q for the quarter
      ended June 30, 1999).3.2
                  Bylaws
      (incorporated by reference to Exhibit 3b to Form 10-K for the year ended
      December 31, 2002).10.1
                  Employment
      Agreement with J. Hyatt Brown, dated and effective as of July 1,
      2009.31.1
                  Rule
      13a-14(a)/15d-14(a) Certification by the Chief Executive Officer of the
      Registrant.31.2
                  Rule
      13a-14(a)/15d-14(a) Certification by the Chief Financial Officer of the
      Registrant.32.1
                  Section
      1350 Certification by the Chief Executive Officer of the
      Registrant.32.2
                  Section
      1350 Certification by the Chief Financial Officer of the
      Registrant.
  36




SIGNATURE




Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.


BROWN
      & BROWN, INC./s/
      CORY T. WALKERDate:
      August 10, 2009
                Cory
      T. WalkerSr.
      Vice President, Chief Financial Officer and Treasurer(duly
      authorized officer, principal financial officer and principal accounting
      officer)
    37