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With operating net income of 40 cents per share for the first quarter of 2014, Brown & Brown Inc. (BRO - Snapshot Report) missed the Zacks Consensus Estimate for the third time in a row. Earnings fell short of the estimate by a couple of cents.

However, results improved 11% from 36 cents per share earned in the year-ago quarter.

The year-over-year improvement was primarily driven by solid performance across all business divisions.

Including adjustment for acquisition earn-outs of 2 cents, and margin impact of Beecher Carlson large accounts, Brown & Brown reported net income of 36 cents per share, decreasing 12.2% year over year.

Behind the Headlines

Total revenue amounted to $363.6 million in the quarter, missing the Zacks Consensus Estimate of $373 million. The results also improved 8.5% year over year driven by higher commissions and fees and other income. Organic revenue growth was 3.9% in the reported quarter.

Among the four business divisions of the company, Wholesale Brokerage and Services exhibited higher organic revenue growth rates of 11.8% and 4.9% respectively, whereas organic growth rate at Retail Divisions increased 0.2%. National Programs climbed 1.6%.

Investment income continued to witness a decline, plunging 50% year over year.

Total expense increased 17.5% year over year to $276.8 million. Operating total expense (excluding effects of acquisitions) increased 4.5% to $243.1 million

Pretax income decreased 12.8% from the prior-year quarter to $86.8 million.

Financial Update

Brown & Brown exited the first quarter of 2014 with cash and cash equivalents of approximately $502.9 million, improving 11% from 2013 end.

Long-term debt of the company stood at $480 million at the end of 2013, up 26% from the 2013-end level.

Share Repurchase Update

In Feb 2014, the board of directors of Brown & Brown authorized the company to repurchase upto $25 million worth of shares.

Brown & Brown paid a quarterly cash dividend of 10 cents per share on Feb 19, 2014 to the shareholders of record as of Feb 5.

Zacks Rank

Brown & Brown presently carries a Zacks Rank #4 (Sell).

Performance of Other Insurance Brokers

Arthur J Gallagher & Co. (AJG - Snapshot Report) reported first-quarter 2014 operating net earnings of 39 cents a share that outperformed the Zacks Consensus Estimate by 52%. However, results steered ahead of the prior-year quarter number by 22%.

Better-ranked insurance brokers Marsh & McLennan Companies, Inc. (MMC - Analyst Report) and Erie Indemnity Company (ERIE - Snapshot Report) are scheduled to release their quarterly results on May 2. Both these stocks sport a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for Marsh & McLennan is currently pegged at 81 cents, while the same for Erie Indemnity is 78 cents.

Read the Full Research Report on MMC
Read the Full Research Report on AJG
Read the Full Research Report on ERIE
Read the Full Research Report on BRO

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