THE FOLLOWING DISCUSSION UPDATES THE MD&A CONTAINED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED IN 2007, AND THE TWO DISCUSSIONS SHOULD BE READ TOGETHER.

GENERAL

We are a diversified insurance agency, wholesale brokerage, programs and services organization with origins dating from 1939, headquartered in Daytona Beach and Tampa, Florida. We market and sell to our customers insurance products and services, primarily in the property and casualty, and employee benefits areas. As an agent and broker, we do not assume underwriting risks. Instead, we provide our customers with quality insurance contracts, as well as other targeted, customized risk management products and services.

Our commissions and fees revenue is comprised of commissions paid by insurance companies and fees paid directly by customers. Commission revenues generally represent a percentage of the policy premium paid by the 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 an 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. Beginning in 1986 and continuing through 1999, commission revenues were adversely influenced by a consistent decline in premium rates resulting from intense competition among property and casualty insurance companies for market share. This condition of a prevailing decline in premium rates, commonly referred to as a "soft market," generally resulted in flat to reduced commissions on renewal business. Additionally, in a "soft market" standard carriers generally become more aggressive in their underwriting "appetites" and underwrite risks that are traditionally placed with excess and surplus lines carriers, thereby negatively impacting our wholesale brokerage operations. The effect of this softness in rates on our commission revenues was somewhat offset by our acquisitions and net new business production. As a result of increasing "loss ratios" (the comparison of incurred losses plus adjustment expenses against earned premiums) of insurance companies through 1999, there was a general increase in premium rates beginning in the first quarter of 2000 and continuing into 2003. During 2003, the increases in premium rates began to moderate, and in certain lines of insurance, premium rates decreased. In 2004, as general premium rates continued to moderate, the insurance industry experienced the worst hurricane season since 1992 (when Hurricane Andrew hit south Florida). The insured losses from the 2004 hurricane season were absorbed relatively easily by the insurance industry and the general insurance premium rates continued to soften during 2005. During the third quarter of 2005, the insurance industry experienced the worst hurricane season ever recorded. As a result of the significant losses incurred by insurance carriers due to these hurricanes, the insurance premium rates in 2006 increased on coastal property, primarily in the southeastern region of the United States. In other regions of the United States, insurance premium rates generally declined during 2006. In addition to significant insurance pricing declines in the State of Florida, as discussed below in the "Florida Insurance Overview", insurance premium rates continued a gradual decline during 2007 and the first nine months of 2008 in most of the other regions of the United States. One industry segment that was hit especially hard during 2007 was the home-building industry in southern California, and, to a lesser extent, in Nevada, Arizona and Florida. We have a wholesale brokerage operation that focuses on placing property and casualty insurance products for that home-building segment and a program operation that places errors and omissions professional liability coverages for title agents. Both of these operations' revenues were negatively affected by these national economic trends in 2007 and throughout the first nine months of 2008. Additionally, the continuing "soft market" during 2008 has negatively impacted our other wholesale brokerage operations, primarily as a result of the movement of risks that are traditionally placed with excess and surplus lines carriers to standard carriers.

The volume of business from new and existing insured customers, fluctuations in insurable exposure units and changes in general economic and competitive conditions further affect our revenues. For example, the increasing costs of litigation settlements and awards have caused some customers to seek higher levels of insurance coverage. Conversely, general declines in economic activity could decrease the values of insurable exposure units. Historically, our revenues have continued to grow as a result of an intense focus on net new business growth and acquisitions. However, in 2007, substantial governmental involvement in the Florida insurance marketplace resulted in a substantial loss of revenues. We anticipate that results of operations will continue to be influenced by these competitive and economic conditions through the fourth quarter of 2008 and into 2009.

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 other aforementioned considerations for the prior year(s). Therefore, as an insurance company's loss ratio increases, the less profits are earned by that insurance company which will result in less profit-sharing contingent comissions for us. Over the last three years profit-sharing contingent commissions have averaged approximately 5.8% of the previous year's total commissions and fees revenue. Profit-sharing contingent commissions are primarily included in our total commissions and fees in the Consolidated Statements of Income in the year received. The term "core commissions and fees" excludes profit-sharing contingent commissions and therefore represents the revenues earned directly from specific insurance policies sold, and specific fee-based services rendered. Recently, six national insurance carriers announced the replacement of the current loss-ratio-based profit-sharing contingent commission calculation with a fixed-based methodology referred to as "Guaranteed Supplemental Commissions" ("GSCs"). Since these new GSCs are not subject to the uncertainty of loss ratios, they are accrued throughout the year based on actual premiums written. For the first nine months of 2008, $9.7 million of GSCs were earned, of which $3.2 million were earned for the three months ended September 30, 2008. For the first nine months of 2007, $5.0 million of GSCs were earned, of which $1.7 million were earned for the three months ended September 30, 2007.

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. In each of the past three years, fee revenues have increased as a percentage of our total commissions and fees, from 13.6% in 2005 to 14.3% in 2007.

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 in accordance with applicable law. Investment income also includes gains and losses realized from the sale of investments. In 2007, we sold our investment in Rock-Tenn Company which we had owned for over 25 years, for a net gain of $18.7 million.

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.

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. As such, Citizens charged insurance rates that were higher than those prevailing in the 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 caused by these storms, property insurance rates generally increased in 2006. To counter the increased property insurance rates, the State of Florida caused Citizens to essentially reduce its property insurance rates by half beginning in January 2007. By state law, Citizens has guaranteed its rates through January 1, 2010. As a result, Citizens became the most competitive risk-bearer on commercial habitational coastal property exposures, such as condominiums, apartments, and certain assisted living facilities. Additionally, Citizens became the only insurance market for certain homeowners' policies throughout Florida. By the end of 2007, Citizens was the largest single underwriter of coastal property in Florida.

Because Citizens became the principal direct competitor of the risk-bearers that participate in our Florida Intracoastal Underwriters ("FIU") condominium program and the excess and surplus lines insurers that are represented by our wholesale brokerage operations offering property coverages such as our Hull & Company subsidiary, these programs and operations lost significant amounts of revenue to Citizens during 2007. Citizens' impact on our Florida Retail Division was less pronounced because to our Retail Division offices, Citizens simply became another risk-bearer with which to write business, although at slightly lower commission rates and with more onerous requirements for placing coverage. In 2008, the insurance rates charged by Citizens have so far been, and are expected to continue to be, similar to the 2007 rates and therefore, the sequential year impact of Citizens' rates on our results may not be as significant as they were in 2007. Even though the Citizens' rates may be flat, however, the property insurance premium rates charged by the excess and surplus lines carriers with which our wholesale brokerage operations do business continue to decline, which in turn continues to have a significant negative impact on our wholesale brokerage operations.

In the second half of 2007, the standard insurance companies started to become more competitive in the casualty (liability) business, including workers' compensation business. The rates in the Florida casualty market began to drop as much as 20%-25% compared with 2006 rates. These competitive rates are likely to continue throughout the remainder of 2008 and into 2009.

Company Overview - Third Quarter of 2008

For the third quarter of 2008, our total core commissions and fees decreased $11.0 million, or 5.1%, primarily because of the continued "soft" insurance marketplace in the United States, governmental involvement in the Florida insurance marketplace and the negative impact of the economy on the home-building industry. Offsetting the negative internal revenue growth was an active quarter of 9 acquisitions (as well as several book of business purchases) with estimated annual revenues of $17.6 million, which contributed to the $30.9 million of total core commissions and fees related to acquisitions that had no comparable operations in the same period of 2007.

Acquisitions

During the third quarter of 2008, we acquired the assets and assumed certain liabilities of eight insurance intermediary operations, the stock of one insurance intermediary and several books of business (customer accounts). The aggregate purchase price was $39.5 million, including $32.4 million of net cash payments, the issuance of $0.5 million in notes payable and the assumption of $6.6 million of liabilities. These acquisitions had estimated aggregate annualized revenues of $17.6 million.

During the second quarter of 2008, we acquired the assets and assumed certain liabilities of 12 insurance intermediary operations (inadvertly reported as 13 in our Form 10-Q for the quarter ended June 30, 2008) and several books of business (customer accounts). The aggregate purchase price was $115.0 million, including $111.2 million of net cash payments, the issuance of $2.7 million in notes payable and the assumption of $1.1 million of liabilities. These acquisitions had estimated aggregate annualized revenues of $47.5 million.

During the first quarter of 2008, we acquired the assets and assumed certain liabilities of eight insurance intermediary operations, the stock of one insurance intermediary and several books of business (customer accounts). The aggregate purchase price was $79.4 million, including $71.5 million of net cash payments, the issuance of $2.0 million in notes payable and the assumption of $5.9 million of liabilities. These acquisitions had estimated aggregate annualized revenues of $30.2 million.

During the third quarter of 2007, we acquired the assets and assumed certain liabilities of 16 insurance intermediary operations and several books of business (customer accounts). The aggregate purchase price was $41.4 million, including $33.4 million of net cash payments, the issuance of $0.9 million in notes payable and the assumption of $7.1 million of liabilities. These acquisitions had estimated aggregate annualized revenues of $22.4 million.

During the second quarter of 2007, we acquired the assets and assumed certain liabilities of two insurance intermediary operations, the stock of one insurance intermediary and several books of business (customer accounts). The aggregate purchase price was $68.7 million, including $68.2 million of net cash payments, and the assumption of $0.5 million of liabilities. These acquisitions had estimated aggregate annualized revenues of $22.9 million.

During the first quarter of 2007, we acquired the assets and assumed certain liabilities of seven insurance intermediary operations, the stock of two insurance intermediaries and several books of business (customer accounts). The aggregate purchase price was $53.4 million, including $42.6 million of net cash payments, the issuance of $4.0 million in notes payable and the assumption of $6.8 million of liabilities. These acquisitions had estimated aggregate annualized revenues of $25.5 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, reserves for litigation and derivative interests. 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, 2007 on file with the Securities and Exchange Commission for additional information regarding our critical and significant accounting policies.

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

Financial information relating to our Condensed Consolidated Financial Results for the three and nine months ended September 30, 2008 and 2007 is as follows (in thousands, except percentages):

                                 For the three months                            For the nine months
                                  ended September 30,                            ended September 30,
                                                          %                                                %
                          2008           2007          Change           2008             2007           Change
REVENUES
Commissions and fees    $ 234,036      $ 216,546            8.1 %    $   684,640      $   645,778            6.0 %
Profit-sharing
contingent
commissions                 9,730          8,875            9.6 %         51,489           55,678           (7.5 )%
Investment income           1,228          3,286          (62.6 )%         5,136           27,855          (81.6 )%
Other income, net           2,035          8,577          (76.3 )%         4,199           13,130          (68.0 )%
Total revenues            247,029        237,284            4.1 %        745,464          742,441            0.4 %

EXPENSES
Employee compensation
and benefits              122,172        110,491           10.6 %        363,873          333,937            9.0 %
Non-cash stock-based
compensation                1,819          1,491           22.0 %          5,563            4,327           28.6 %
Other operating
expenses                   36,405         32,928           10.6 %        101,993           96,409            5.8 %
Amortization               12,281         10,331           18.9 %         34,789           29,798           16.7 %
Depreciation                3,391          3,213            5.5 %          9,929            9,492            4.6 %
Interest                    3,867          3,395           13.9 %         11,045           10,445            5.7 %
Total expenses            179,935        161,849           11.2 %        527,192          484,408            8.8 %

Income before income
taxes                      67,094         75,435          (11.1 )%       218,272          258,033          (15.4 )%

Income taxes               26,501         29,219           (9.3 )%        85,521          100,078          (14.5 )%

NET INCOME              $  40,593      $  46,216          (12.2 )%   $   132,751      $   157,955          (16.0 )%

Net internal growth
rate - core
commissions and fees         (5.1 )%        (3.0 )%                         (5.8 )%          (1.9 )%
Employee compensation
and benefits ratio           49.5 %         46.6 %                          48.8 %           45.0 %
Other operating
expenses ratio               14.7 %         13.9 %                          13.7 %           13.0 %

Capital expenditures    $   2,921      $   4,848                     $    11,115      $    24,848
Total assets at
September 30,                                                        $ 2,107,301      $ 1,915,359

Commissions and Fees

Commissions and fees, including profit-sharing contingent commissions, for the third quarter of 2008 increased $18.3 million, or 8.1%, over the same period in 2007. Profit-sharing contingent commissions for the third quarter of 2008 increased $0.9 million over the third quarter of 2007, to $9.7 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 third quarter of 2008 increased $19.9 million on a net basis, of which approximately $30.9 million represents core commissions and fees from acquisitions that had no comparable operations in the same period of 2007. After divested business of $2.4 million, the remaining net decrease of $11.0 million represents net lost business, which reflects a (5.1)% internal growth rate for core commissions and fees.

Commissions and fees, including profit-sharing contingent commissions, for the nine months ended September 30, 2008 increased $34.7 million, or 4.9%, over the same period in 2007. For the nine months ended September 30, 2008, profit-sharing contingent commissions decreased $4.2 million from the comparable period in 2007, to $51.5 million. Core commissions and fees revenue for the first nine months of 2008 increased $46.5 million on a net basis, of which approximately $83.3 million of the total increase represents core commissions and fees from acquisitions that had no comparable operations in the same period of 2007. After divested business of $7.7 million, the remaining $36.8 million represents net lost business, which reflects a (5.8)% internal growth rate for core commissions and fees.

Investment Income

Investment income for the three months ended September 30, 2008 decreased $2.1 million, or 62.6%, from the same period in 2007. This decrease was primarily due to a reduction in invested funds as a result of increased acquisition activity, as well as lower investment yields. Investment income for the nine months ended September 30, 2008 decreased $22.7 million, or 81.6%, from the same period in 2007. This decrease is primarily due to the sale of our investment in Rock-Tenn Company which we had owned for over 25 years, for a net gain of approximately $18.7 million in 2007. The remaining net decrease of $4.0 million was primarily due to a reduction in invested funds as a result of increased acquisition activity, as well as lower investment yields.

Other Income, net

Other income for the three months ended September 30, 2008 decreased $6.5 million, or 76.3%, from the same period in 2007. Other income for the nine months ended September 30, 2008 decreased $8.9 million, or 68.0%, from the same period in 2007. 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 third quarter of 2008 increased $11.7 million, or 10.6%, over the same period in 2007. This increase is primarily related to the addition of new employees from acquisitions completed since August 1, 2007. Employee compensation and benefits as a percentage of total revenue increased to 49.5% for the third quarter of 2008, from 46.6% for the third quarter of 2007. This increase in the expense percentage represents approximately $11.7 million in net additional costs, of which $13.4 million relates to acquisitions that had no comparable operations in the same period of 2007. Therefore, excluding the impact of acquisitions of stand-alone offices, there was a net reduction of $1.7 million in employee compensation and benefits primarily related to lower producer commissions and accrued bonuses.

Employee compensation and benefits for the nine months ended September 30, 2008 increased $29.9 million, or 9.0%, over the same period in 2007. This increase is primarily related to the addition of new employees from acquisitions completed during 2007 and 2008. Employee compensation and benefits as a percentage of total revenue increased to 48.8% for the nine months ended September 30, 2008, from 45.0 % for the nine months ended September 30, 2007. Excluding the impact of the gain on the sale of our Rock-Tenn Company stock in 2007, employee compensation and benefits as a percentage of total revenues increased to 48.8% from 46.1% for the nine months ended September 30, 2007. This increase in the expense percentage represents approximately $29.9 million in net additional costs, of which $36.0 million relates to acquisitions that were stand-alone offices and that had no comparable operations in the same period of 2007. Therefore, excluding the impact of acquisitions of stand-alone offices, there was a net reduction of $6.0 million in employee compensation and benefits primarily related to lower producer commissions and accrued bonuses.

Non-Cash Stock-Based Compensation

Non-cash stock-based compensation for the three months ended September 30, 2008 increased approximately $0.3 million, or 22.0%, over the same period in 2007. For the entire year of 2008, we expect the total non-cash stock-based compensation expense to be approximately $7.5 million to $8.0 million, as compared with the total cost of $5.7 million in 2007. The increased annual estimated cost primarily relates to new grants of performance stock and incentive stock options issued in February 2008.

Other Operating Expenses

Other operating expenses for the third quarter of 2008 increased $3.5 million, or 10.6%, over the same period in 2007. Other operating expenses as a percentage of total revenue increased to 14.7% for the third quarter of 2008, from 13.9% for the third quarter of 2007. Acquisitions since August 1, 2007 that resulted in stand-alone offices accounted for approximately $3.8 million of the 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 third quarters of both 2008 and 2007.

Other operating expenses for the nine months ended September 30, 2008 increased $5.6 million, or 5.8%, over the same period in 2007. Other operating expenses as a percentage of total revenue increased to 13.7% for the nine months ended September 30, 2008, from 13.0% for the nine months ended September 30, 2007. Excluding the impact of the gain on the sale of our Rock-Tenn Company stock in 2007, other operating expenses as a percentage of total revenues increased to 13.7% from 13.3% for the nine months ended September 30, 2007. Acquisitions since February 1, 2007 that resulted in stand-alone offices accounted for approximately $9.4 million of the increased other operating expenses. Therefore, there was a net reduction in other operating expenses of approximately $3.8 . . .