National Financial Partners Corp. ( NFP)

Q3 2011 Earnings Call

October 27, 2011 8:00 am ET

Executives

Abbe F. Goldstein – Senior Vice President, Investor Relations

Jessica M. Bibliowicz – Chairman, President and Chief Executive Officer

Douglas W. Hammond – Chief Operating Officer

Donna J. Blank – Chief Financial Officer and Executive Vice President

Analysts

Matt Rohrmann – KBW

David Burstein – Madison Valley Investment

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2011 NFP Conference Call. My name is Natasha and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will facilitate a question-and answer-session towards the end of this conference. (Operator Instructions)

I would now like to turn the call over to Mr. Abbe Goldstein. Please proceed.

Abbe F. Goldstein

Thank you, good morning everyone, and thank you for joining us on our third quarter 2011 earnings conference call. During this call, management may make certain statements regarding their expectations and projections for NFP, 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 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.

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. Forward-looking statements speak only as of the date on which they are made and NFP expressly disclaims any obligation to update or revise any forward-looking statements.

Our third quarter earnings conference call will be accompanied by a presentation that is available for download on the Investor Relations section of NFP's website 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 also available at the same website.

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

Jessica Bibliowicz

Great. Thanks, Abbe, and good morning everyone. Before I comment on our third quarter results, we would like to spend extend a warm welcome to Pat Baird, who just joined our Board of Directors. As the former CFO and CEO of AEGON USA, Pat brings tremendous industry leadership and experience. All of us on the board and the management team look forward to working closely with Pat.

During the third quarter, we continue to see strength in our Corporate Client and Advisor Services Group. Within the Individual Client Group strong trends continued for us in our wealth management business, the challenges in the life insurance market remained. We continue to execute on our balance capital allocation strategy, which includes strategic acquisitions, our share repurchase program and reinvestments in our existing businesses.

So far in 2011, cash consideration for acquisitions was approximately $49 million, which is consistent with the capital allocation we discussed for acquisitions. Our pipeline for acquisitions and sub-acquisitions continues to build and we remain focused on property and casualty transactions as well as building out regional hubs in our other recurring revenue businesses. As of September 30, 2011, we have repurchased a total of $28.6 million of NFP’s stock and had $21.4 million remaining on our buyback authorization.

Turning to Slide 8, you can see NFP’s three business segments and their percentage revenue contributions to the company in the third quarter of 2011. The Corporate Client Group represented 42% of total revenue with 5.3% organic growth. The Individual Client Group represented 33.7% of total revenue and organic revenue for this group declined 7.8%. Our Advisor Services Group represented the remaining 24.3% of total revenue with 19.7% organic growth.

Now turning to CCG on Slide 9, during the quarter our performance was strong, in spite of the challenges that remained in the general economic environment. With the expansion of our P&C platform, we’re introducing a revenue breakdown for CCGs three business lines; Corporate Benefits, Executive Benefits and P&C. Previously P&C was included within Corporate Benefits. Corporate Benefits generated 81.8% of CCGs revenue, Executive Benefits generated 9.4%, and P&C the remaining 8.8%.

For the nine-months of 2011, organic growth in CCG was 3.4% and we expect organic growth for the full year 2011 for CCG to be approximately 3% to 4%. CCGs adjusted EBITDA margin for the nine-months 2011 was 18.6% consistent with what we expect for the full year 2011 adjusted EBITDA margin.

Results for the Individual Client Group in the quarter were primarily driven by our life insurance business, which has been challenged by market conditions. We’re seeing activity in the life insurance marketplace particularly at the lower end of the market. Sales cycles in the high net worth market however continue to be long with uncertain outcome. Given the sluggish general economy, continued impact of last year’s temporary estate tax laws and consistent with our performance trends throughout the year, we expect that ICGs fourth quarter performance will be weaker than the fourth quarter of last year.

Our Wealth Management business, continue to have strong performance in the third quarter and represents 18.8% of ICGs revenue, an increase from 15.1% in the third quarter of 2010.

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