National Financial Partners' CEO Discusses Q4 2011 - Earnings Call Transcript

National Financial Partners Corp. ( NFP)

Q4 2011 Earnings Call

February 8, 2012 8:30 am ET


Jessica Bibliowicz – Chairman, President, Chief Executive Officer

Donna Blank – Executive Vice President, Chief Financial Officer

Doug Hammond – Chief Operating Officer

Abbe Goldstein – Senior Vice President, Investor Relations and Corporate Communications


Mark Finkelstein – Evercore Partners

Matt Rohrmann - KBW



Good day ladies and gentlemen and welcome to the Fourth Quarter 2011 National Financial Partners Earnings conference call. My name is Chanelle and I’ll be your operator for today. At this time, all participants are in listen-only mode. Later we will conduct a question and answer session. If at any time you require operator assistance, please press star followed by zero and we will be happy to assist you. As a reminder, this call is being recorded for replay purposes.

I would now like to turn the conference over to Ms. Abbe Goldstein, Senior Vice President, Investor Relations and Corporate Communications.

Abbe Goldstein

Thank you. Good morning everyone and thank you for joining us on our fourth 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 fourth 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 available at the same website.

At this time, I would now 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. 2011 was a solid year for NFP and we accomplished a great deal. Our revenue grew to more than a billion dollars, driven by organic growth and acquisitions. Adjusted EBITDA grew by 8% and we expanded our margin. We saw particular strength in the corporate client and advisor services groups where we generated growth in revenue and adjusted EBITDA. In the individual client group, strong positive trends continued in our wealth management business but we faced market challenges in life insurance. Despite a decline in our life insurance revenue, adjusted EBITDA and margins expanded.

In 2011, we continued to generate strong cash flow and executed on our balanced capital allocation strategy. We invested approximately 50 million of cash for acquisitions in 2011. All of the deals, which are recurring revenue businesses, were in the corporate client group.

In May 2011, we put in place a $50 million share repurchase program, and as of February 6, 2012, we completed the buyback program. In addition, NFP has continued to make investments to enhance our leadership position in our core markets of benefits, insurance and wealth management.

Our strategy in 2012 is to continue to build shareholder value by delivering the highest quality client service, expanding our offerings, maintaining our financial flexibility, and growing recurring revenue and profitability. To this end, we will continue to pursue strategic acquisitions that complement our existing businesses, especially in property and casualty, corporate benefits, and wealth management. With these transactions, we will seek to grow and strengthen our client offerings and the NFP brand by adding management strength and diversification of products and geographies.

2011 demonstrated NFP’s ability to once again be a competitive acquirer of attractive businesses. Our acquisition focus is to complement our existing core operations and facilitate current and future regional consolidation. In July 2011, we acquired Lapre Scali, which has since been consolidated with NFP P&C, operating under a single structure and brand.

In September 2011, we acquired DA Financial, a leading provider of benefits, insurance and wealth management services which is now our NFP-branded presence in the San Francisco Bay area.

In January 2012, we purchased AGS Benefits, a benefits brokerage firm in the New York metro area and Boston. Simultaneously, we bought out the management contract of NFP Dreyfuss & Birke and combined it with AGS Benefits. These businesses together establish a major NFP-branded benefits presence in New York.

These acquisitions are consistent with our strategy of purchasing highly successful diversified businesses with strong management to grow NFP’s scale and value proposition as well as increase recurring revenues.

Turning to Slide 8 and looking ahead for 2012, we plan to continue to execute on our balanced capital allocation strategy. We expect to use approximately 80 million of cash for acquisitions in 2012. We intend to allocate approximately 20 million of the 80 million to buy out the economics of certain businesses that we already own. These management contract buyouts increase our share of the earnings in our best performing businesses and allow us to more seamlessly consolidate our operations and realize more of the benefits of our scale. In this context, we maintain economic alignment and appropriate growth incentives for our key managers and employees.

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