Updated from 2:21 p.m. EDT

Financial stocks hunkered down below the struggling broad indices Wednesday amid sinking names such as

Life Partners

(LPHI) - Get Report

.

Shares closed down 16.7% after the Texas-based firm predicted fiscal second-quarter earnings of 46 cents a share -- a giant leap from last year's 2-cent profit but 11 cents below the only analyst's estimate from Thomson Financial. Revenue was estimated at $17.7 million against the sole $20 million target. Shares of the company, which deals in the secondary life-insurance market, gave up $7.90 to $39.38.

Tax preparer

H&R Block

(HRB) - Get Report

slipped on word its subprime-mortgage lending unit, Option One, will axe about 575 more jobs as part of an expanded restructuring plan that will cost some $19 million in fiscal 2008 and should complete by year-end. The Kansas City, Mo., company had warned of this action in August; Option One announced 615 initial layoffs in May. H&R Block shares shed 0.9% to close at $19.64.

Elsewhere,

Franklin Resources

(BEN) - Get Report

posted a slight sequential decline in August assets under management to $617.9 million. That also represents a jump from last year's $505.6 million, but shares closed down 2.3% to $123.11.

Among the biggest price gainers was

MidWestOne Financial

(OSKY)

. Shares propelled 10.8% higher after agreeing to a stock-swap "merger of equals" with

ISB Financial

(ISBO)

. MidWestOne holders will get 0.95 shares of ISB stock for each of their MidWestOne shares. The deal should close in the first quarter of next year.

MidWestOne shares were up $1.83 to close at $18.82; ISB, which trades on the Pink Sheets, was down 7.3% to $25.50 in thin trading.

AmeriCredit

( ACF) jumped 9.9% to close at $18.79 after pricing a $1 billion offering of asset-backed securities under its Automobile Receivables Trust platform, which primarily includes subprime automobile loan contracts.

Education lender

First Marblehead

(FMD)

hiked its dividend by 10% to 0.275 cents per share, after which shares lifted by 5% to $36.68, and

optionsXpress

( OXPS) reported a 58% leap in daily average revenue trades in August vs. last year. Shares tacked on 6.4%.

And

National Financial Partners

(NFP)

agreed to buy insurer Pro Financial Services for $73 million. The New York-based insurance broker says the buyout represents $10 million in acquired base earnings and $12.5 million in target earnings. Shares rose $1.54, or 3.2%, to close at $50.38.

But, more broadly, the

NYSE

Financial Sector Index was down 0.3% and the KBW Bank Index was down 0.2%.