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SEC Letter

 May 31, 2005

 Mr. Jim B. Rosenberg

 Senior Assistant Chief Accountant

 Securities and Exchange Commission

 450 Fifth Street, N.W.

 Washington, D.C. 20549

Re:
Brooke Corporation

Form 10-K for the fiscal year ended December 31, 2004

Filed March 31, 2005

File No. 001-31698

 Dear Mr. Rosenberg:

 Thank you
for your letter dated May 12, 2005 with respect to your review of our financial statements and related disclosures contained in the above-referenced filing. The following comments are numbered to correspond to the comments in your May 12 letter. We
have included your comments in this letter prior to our response thereto. Brooke Corporation offers the following responses.

 Form 10-K for the fiscal year ended December 31, 2004

 Management’s Discussion and Analysis of Financial Condition and Results of Operations

 Non-GAAP Financial Measures, page 30

1. Your disclosure of non –GAAP financial measures includes presentations of recurring and non-recurring revenues, and recurring and non-recurring expenses.
The elimination of recurring items from the most comparable GAAP measure appears to have the effect of smoothing earnings. While the acceptability of a non-GAAP financial measure that eliminates recurring items from the most comparable GAAP measure
depends on all facts and circumstances, we do not believe that a non-GAAP measure that has the effect of smoothing earnings is appropriate. In addition, we note that the items you exclude have the following attributes.

•

there is a past pattern of these items occurring in each reporting period;

•

the financial impact of these items will not disappear or become immaterial in the future; and,

•

there is no unusual reason that the company can substantiate to identify the special nature of these items.

 These attributes raise significant questions about management’s
assertions as to the usefulness of this measure for investors and the appropriateness of its presentation in accordance with Item 10 of Regulation S-K. Please refer to “Frequently Asked Questions Regarding the Use of Non-GAAP Financial
Measures” on our website at www.sec.gov/divisions/corpfin/faqs/nongaapfaq.htm that we issued on June 13, 2003. Please revise your filing to remove all references to these measures or tell us how your disclosure complies with the Item 10 of
Regulation S-K.

 In response to comment number 1, we have deleted our
non-GAAP financial measures in their entirety. However, in an effort to enhance the disclosures provided to investors, we have included a narrative

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discussion of certain measurements that we believe investors will find helpful in monitoring exposures to certain risks associated with our business and
monitoring the implementation of certain of our business strategies.

 Key Measurements Used by Management

 At
present, our profitability is dependent in part on our ability to continue adding locations to our franchise network. As we grow, we believe that our profitability will become less dependent on the opening of new franchise locations and more
dependent on the operation of existing franchise locations. We measure our progress in becoming less dependent upon the opening of these new locations by monitoring the following:

•

the ratio of revenues from our existing business to expenses from our existing business;

•

revenues from franchise network expansion; and,

•

the ratio of gain on loan sales to net interest revenues.

 The ratio of revenues from our existing business to expenses from our existing business helps us identify operating losses we currently would experience
in the event that franchise locations are not added and the associated initial franchise fees are not recorded. We define “revenues from our existing business” as net franchise commissions, net interest income, net brokerage commissions
and net brokerage underwriting profits. These are the revenues that come from our existing franchise locations, our existing loans outstanding and our existing wholesale brokerage operations and are not dependent on the addition of new franchise
locations. We exclude initial franchise fees, seller consulting fees, gains on sales of businesses and gains on extinguishment of debt. Revenues from our existing business are generally considered by us to be those revenues that are reasonably
likely to be recorded in the next year regardless of whether new franchise locations are added. We define “expenses from our existing business” as the expenses that we believe we will continue to incur, even if we do not expand our
franchise network. Expenses from our existing business include payroll, other operating expenses and depreciation and amortization and are reasonably likely to be incurred in the next year regardless of whether new franchise locations are added. A
ratio of 100% would indicate that our existing business produces sufficient revenues to cover the expenses incurred in connection with our existing operations. Part of our operating strategy is to ultimately increase this ratio to 100%.

 Monitoring our revenues from franchise network expansion is also important
to us because our profitability currently is largely determined by our ability to add new franchise locations and to earn the associated initial franchise fees. “Revenues from franchise network expansion” are defined as initial franchise
fees, seller fees, gains on sales of businesses and gains on extinguishment of debt. We do not include gains on loan sales in revenues from franchise network expansion because we monitor these gains separately, as discussed below. A leveling or
declining amount of revenues from franchise network expansion could indicate that our overall profitability is leveling or declining.

 We also measure our gains on sales of notes receivable as a percentage of net interest revenues. This ratio measures our success in decreasing the
relative amount of revenues recorded from gains on sales of notes receivables, which are non-cash revenues and are based on assumptions we make about discount rate, speed of prepayments and credit losses. Part of our operating strategy is to reduce
the ratio of gain on sales of notes receivable to net interest revenue and to emphasize net interest revenue as our primary source of earnings from our lending operations. We monitor this ratio as a way to measure our progress towards this operating
objective.

 Analysis by Segment, pages 32 – 43

 2. An objective of MD&A is to provide information about the quality and potential
variability of a company’s earnings and cash flow to facilitate investors’ determination of the likelihood that past performance is indicative of future performance. This disclosure should include a discussion of

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known trends and uncertainties. In particular, we noted insufficient explanations for the 2004 increase in gain on sale of business and initial franchise
fees for basic services, the 2004 decrease in commissions paid to franchisees as a percentage of commissions received from insurers and the 2004 decrease in participating interest expense as a percentage of interest income. Also, it is unclear to us
how the $1.4 million increase in policy fee income could relate primarily to Texas All Risk General Agency, which you acquired for $1 million. Please expand your MD&A to fully explain and quantify the factors underlying changes in these income
statement amounts for each period presented.

 2.A In response to
comment 2, we have expanded our explanation of the 2004 increase on gain on sale of businesses beginning on page 35 as follows:

 Gains on Sale of Businesses from Deferred Payments. Our business includes the buying and selling of insurance agencies, financial service
firms and funeral homes and occasionally holding them in inventory. When purchasing an agency, we typically defer a portion of the purchase price, at a low or zero interest rate, to encourage the seller to assist in the transition of the
agency to one of our franchisees. We carry our liability to the seller at a discount to the nominal amount we owe, to reflect the below-market interest rate. The carrying value of the agency reflects this discount. When we
sell an acquired business to a franchisee (typically on the same day it is acquired), we generally sell it for the full nominal price (i.e. before the discount) paid to the seller. When the sale price of the business exceeds the carrying
value, the amount in excess of the carrying value is recognized as a gain. Gains on sale resulting primarily from discounted interest rates increased $536,000, or 87%, to $1,153,000 in 2004 and increased $381,000, or 162%, to $617,000 in 2003.
Because we expect to purchase and sell more agencies in 2005 than in 2004, we expect the level of income recorded from this type of gain on sale of businesses to increase.

 We regularly negotiate below-market interest rates on the deferred portion of the purchase prices we pay sellers. We
consider these below market interest rates to be a regular source of income related to the buying and selling of businesses. Although we have a continuing obligation to pay the deferred portion of the purchase price when due, we are not obligated to
prepay the deferred portion of the purchase price or to otherwise diminish the benefit of the below-market interest rate upon which the reduced carrying value was based.

 The calculation of the reduced carrying value, and the resulting gain on sale of businesses, is made by calculating the
net present value of scheduled future payments to sellers at a current market interest rate. The following table provides information regarding the corresponding calculations:

 Calculation of Seller Discounts Based On Reduced Carrying Values

Beginning
Principal
Balance

Weighted
Average Rate

Weighted
Average
Maturity

Interest Rate
Used for Net
Present Value

Full Nominal
Purchase Price

Reduced
Carrying
Value

Gain on Sale
from Deferred
Payments

 2004

$
7,669,000

5.91%

807 days

 5.50% to 6.75%

$
8,221,000

$
7,411,000

$
810,000

 2003

2,316,000

5.59%

769 days

 5.50% to 8.27%

6,981,000

6,363,000

617,000

 2002

73,000

5.75%

840 days

5.75%

2,673,000

2,437,000

236,000

 Gains on
Debt Extinguishment. We negotiate to In the event that we reprepay the deferred portion of the purchase price to the seller before maturity for an amount less than our carrying value. We recognize the
difference between our carrying value and the amount repaid to the seller as a gain on debt extinguishment. This is another source of income from the deferred payments associated with the buying and selling of businesses. We recognize
these Ggains on extinguishment of debt are recognized immediately because Brooke Franchise has no continuing obligation is released by the seller from all remaining payment obligations.
Gains on extinguishment of debt resulting from prepayment of deferred balances were $439,000 in 2002, but were not material in 2003 and 2004. We have negotiated fewer prepayments in recent years primarily as the result of fewer suitable
alternatives for reinvestment of funds by sellers. We do not expect to record a material amount of gains on extinguishment of debt in 2005.

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Such gains on debt extinguishment are not considered extraordinary income because they are considered a part of our normal business
operations.

 Gains on Sale of Businesses –
Company-owned Stores In 2004, a subsidiary of Brooke Franchise acquired the stock or business assets of six auto insurance agencies for purchase prices totaling $8,258,000. We originally planned to operate these agencies as company-owned stores.
If we expect to own and operate businesses for more than one year, we treat such transactions under purchase accounting principles, including booking intangible assets and recognizing the related amortization expense. By contrast, agencies purchased
with the intent to resell them to our franchisees (usually within one year) are carried at cost as business inventory, without the booking of intangible assets.

 The subsidiary paid initial franchise fees to Brooke Franchise totaling $3,142,000. These franchise fees were equal to
those paid by unaffiliated franchisees but were eliminated when the subsidiary's results were consolidated with those of Brooke Franchise.

 After completing the conversion of these agencies, we decided to sell them to franchisees for a total of $11,847,000, producing a gain on sale of
businesses of $4,270,000. The carrying value of the six agencies at the time of the sale was equal to the original purchase prices less the amortization expense recognized during the holding period less the discount on below market interest rate
notes on the deferred portion of the purchase price owed the original business sellers. Below are the components of the gain:

 Aggregate Sale Price

$
11,847,000

 Less:

 Original purchase price

($8,258,000
)

 Amortization expense

($354,000
)

 Discount on below market interest rate note

($327,000
)

 Gain on sale of businesses

$
4,270,000

 Had we accounted
for these transactions as agencies held in inventory for resale to franchisees, we would have recognized initial franchise fees and a gain from the below market deferred payments and would not have recognized amortization expense during 2004. For
this reason, we believe that the sale of these agencies is essentially equivalent to holding these agencies as business inventory and selling them to franchisees.

 In the future, we do not expect to purchase businesses for resale to franchisees if the holding period exceeds one year.
Therefore, recording income from the sale of these six agencies as gain on sale of businesses was an anomaly, and we expect the income from similar future transactions will be recorded primarily as initial franchise fees.

 To a limited extent, we acquire businesses and hold them for a period
of time. If these businesses are subsequently sold for a price greater than their carrying value, then we recognize a gain on sale of business. Unlike businesses held in inventory for resale, if we expect to hold businesses for a period of time
before selling, then we treat the transactions as acquisitions and we apply purchase accounting methods, including booking and amortizing the intangible assets. In 2004, we acquired the stock or business assets of six auto insurance agencies for
purchase prices totaling $8,258,000 with a carrying value of $7,931,000 and subsequently sold these six agencies during 2004 for a total of $11,847,000. We originally intended to hold these six agencies for a longer period of time and, therefore, we
recorded intangible assets and the related amortization expenses in respect of such agencies in 2004. When we sold each of these agencies, the purchase price that we charged to the franchisee buyer included both the price that we paid for the
agencies, and the approximate amount of initial franchise fees that we would have charged if instead we had sold these agencies to one of our franchisees immediately after purchasing these agencies. The gain on sale that resulted from our sales of
these six agencies primarily resulted from the recapture of amortization expenses (which amounted to $354,000) and the difference between our original aggregate purchase price for the agencies and the ultimate aggregate sales price (which amounted
to $3,589,000).

 4

 Further, supplemental information regarding the gain on sale recorded by the Company with respect to company-owned
stores is included in the following table summarizing the six auto insurance agency transactions:

 Purchase
Date

Purchase
Price

Seller Discount

Amortization
From
Purchase
Date

Carrying
Value

Sales Price

Sales Date

Gain on Sale
Recorded

Initial
Franchise
Fees
(Basic)

Initial
Franchise
Fees (BAP)

 1/30/2004

$
1,675,000

$
 98,000

$
 94,000

$
1,483,000

$
2,308,000

8/30/2004

$
 825,000

$
 25,000

$
 551,000

 2/27/2004

633,000

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