National Financial Partners Corporation ( NFP)

Q2 2011 Earnings Call

August 2, 2011 8:00 am ET

Executives

Abbe Goldstein - SVP of IR and Corporate Communications

Jessica Bibliowicz - CEO

Doug Hammond - COO

Donna Blank - CFO

Analysts

Matt Rohrmann - KBW

Ed Spehar - BofA Merrill Lynch

Robert Roell - PioneerPath Capital

Teague Sanders - Citi

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the second quarter 2011 NFP earnings conference call. (Operator Instructions) I would now like to turn the presentation over to your host for today's call, Ms. Abbe Goldstein, Senior Vice President of Investor Relations and Corporate Communications.

Abbe Goldstein

Thank you. Good morning, everyone, and thank you for joining us on our second quarter 2011 earnings conference call.

During this call, management may make certain statements regarding their expectations and projections for NFP relating to future results and events, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current views with respect to future results and events and are subject to risks and uncertainties that could cause actual results and events to differ materially from those contemplated by a forward-looking statement. Forward-looking statements speak only as of the date on which they are made.

NFP expressly disclaims any obligation to update or revise any forward-looking statement whether as a result of new information, future events or otherwise. We refer you to the risk factors described in NFP's filings with the SEC such as NFP's Annual Report on Form 10-K for the year ended December 31, 2010.

Our second quarter earnings conference call will be accompanied by a presentation that is available for electronic download on NFP's website at nfp.com/ir or upon connecting to the audio webcast of this call at the same website.

A reconciliation of the non-GAAP measures discussed on this call can be found in the presentation or in the quarterly financial supplement, which is available on the Investor Relations section of NFP's website.

At this time, I'd like now like to turn the call over to our CEO, Jessica Bibliowicz, and her presentation starts on Slide 7.

Jessica Bibliowicz

Good morning, everyone. We are proud to have recently been recognized as the eighth top global insurance broker by Best Review. Our scale and growth have been supported by continuing solid performance in the Corporate Client Group and Advisor Services Group as well as in Wealth Management.

For the quarter, we reported organic revenue growth of approximately 2%, while our adjusted EBITDA grew approximately 14% and our adjusted EBITDA margins expanded.

We remain committed to our balance capital allocation strategy that focuses on strategic acquisitions, reinvestments in our existing businesses and our share repurchase program.

In keeping with our strategy to increase the stability of our earnings and diversify our offerings, particularly in property and casualty, we closed the acquisition of Lapre Scali. This acquisition brings us experienced leadership and consolidation expertise.

In May, we announced authorization to repurchase up to $50 million of our stock. As of July 29th, we have repurchased 15.6 million of our stock and have 34.4 million remaining in buyback authorization.

Turning to Slide 8, you can see NFP's three business segments and their percentage revenue contribution to the company in the second quarter 2011. The Corporate Client Group represented 39% of total revenue with 5.6% organic growth. The Individual Client Group represented 34% of total revenue. Organic revenue in Individual Client Group declined 10.3%. Our Advisor Services Group represented the remaining 26% of total revenue with 17.1% organic growth.

Now turning to CCG on Slide 9, during the quarter our performance was strong in a challenging economic environment. Corporate benefits generated about 90% of CCG's revenue and executive benefits generated the remaining 10%. With the expansion of our NFP-P&C platform starting in the third quarter, we will break out the percentage of revenue attributable to NFP-P&C within CCG, which will include results from Lapre Scali.

For the first six months of 2011, organic growth in CCG was 4% and we expect organic growth on an ongoing basis for CCG to be approximately 3% to 4%. We also expect adjusted EBITDA margins in CCG to be generally consistent with last year.

Results for the Individual Client Group in the quarter were primarily driven by our life insurance business, which has been challenged by market conditions. Although, we are seeing activity in our life insurance pipeline, sales cycles continue to be long and outcomes remain uncertain.

Our wealth management business continued to have strong performance in the second quarter and now represents 19% of ICG's revenue, an increase from 15% in the second quarter of 2010. Growth in wealth management was driven by market performance, client retention and client acquisition.

Turning to the Advisor Services Group, we saw revenue growth and margin expansions. We remained focus on recruiting, as we continue to see opportunity, because of Advisor's in transition in the market. In the near term, we expect organic growth for ASG to be between 13% and 15%. For full year 2011, we expect adjusted EBITDA margins to be approximately 4.5% depending upon conditions in the financial markets.

Turning to Slide 10, a key focus of ours over the last several years has been to enhance the stability of our revenues and earnings. While the Corporate Client Group represents the biggest component of our recurring revenue, all three of our business segments include recurring revenue components. In the second quarter 2011, recurring revenue accounted for 62% of total revenue, an increase from 58% in the second quarter of 2010.

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