Brown & Brown Inc, a top U.S. insurance broker, posted a marginal rise in second-quarter profit, beating analysts' estimates by a cent, on a 2 percent increase in commissions and fee revenue.
The company also said it continues to evaluate acquisition opportunities.
The company, whose property and casualty segment represents about 85 percent of its total business, said commission and fees rose about 2 percent to $244.6 million.
Apart from the rise in fees and commissions, the results were weak as overall growth fell below expectations, Stifel Nicolaus analyst Meyer Shields said.
To the extent that they beat us on revenues, that came from contingent commissions rather than core commissions, which is likely to be viewed as lower quality, Shields said by phone.
Contingent commissions are bonuses paid to the company by insurance companies reflecting either the growth or the profitability of the premium volume placed by the broker.
The insurance brokerage industry helps commercial clients find insurance coverage for a wide range of risks. However, a number of companies are looking to chase growth through deals as a softening market for most insurance lines nips at their revenue base.
Chief Operating Officer Jim Henderson said the company continued to evaluate acquisition prospects and the temporary pause in deal closings was in part due to the current economic environment.
Analyst Shields said he would expect a few deals through the balance of the year, with more surfacing next year, generally with companies between $1 million and $5 million in annual revenues. He has a sell rating on the shares of Brown & Brown.
RBC Capital Markets analyst Mark Dwelle said if the overall economy improves, insurance pricing could see a rebound later this year or early next year. He has a sector perform rating on the stock.
The company earned $40.7 million, or 29 cents a share, for the period, compared with $40.4 million, or 29 cents a share, a year earlier.
Second-quarter revenue at the middle-market broker was $246.4 million.
Analysts, on average, were looking for a profit of 28 cents a share, excluding items, on revenue of $250.2 million, according to Reuters Estimates.
Shares of the Florida-based company closed at $19.32 Monday on the New York Stock Exchange. They traded as high as $24.25 last September. (Editing by Deepak Kannan, Vinu Pilakkott)