National Financial Partners CEO Presents At Citi Financial Services Conference (Transcript)

National Financial Partners Corp ( NFP)

Citi Financial Services Conference

March 8, 2012, 2:45 p.m. ET


Jessica Bibliowicz - Chairman, President & Chief Executive Officer

Donna Blank - Chief Financial Officer


Unidentified Analyst


Jessica Bibliowicz

I will give you a quick introduction to the company, and hopefully, we’ll have an interesting Q&A at the end of it. So let me first walk through all the disclaimers so you guys know that everything here is on the up and up.

But first, just a very quick description of who we are as a company. NFP is a leading distributor of insurance benefits and wealth management products. We are only a distributor. We do not actually manufacture products or take any risk.

We’ve actually built the company by acquiring independent providers of these services and also through organic growth of these companies once they’re part of NFP. One of the critical founding mandates of NFP is that we are open architecture. We actually aren’t associated with any products, but we actually search the marketplace to make sure that we’re giving conflict-free advice to our clients.

We run the business in three segments. Our largest is our Corporate Client Group where we serve corporations, particularly in the world of benefits and 401(k), property and casualty executive benefits. Our second largest segment is our Individual Client Group, which is where our wealth management and life insurance capabilities live. And then our third, smaller but growing, segment is our Advisor Services Group, which is our broker dealer and our registered investment advisor. And when you look at NFP as a company, you can see that in a lot of categories, we really kind of stand out among the crowd.

We are the eighth largest global insurance broker in the world. That’s kind of interesting because we only have businesses in the U.S. and Canada, so even though our stock will move when Greece moves, and we don’t know exactly why that correlation exists, but I think you all understand that dilemma.

We’re the fourth largest provider of executive benefits. Our broker dealer is a top-ten broker dealer. And when you open up Barons, when they talk about firms that the best wealth managers in the country, we actually do very well in those surveys as well. So a company that’s really been growing and is a consolidated company and has achieved lots of awards.

2011, I think Keith alluded to this, was a very strong year for NFP. It was the year that we really returned to acquisitions in our business and we saw very strong growth. Our overall revenue growth was 3.2% and our organic growth was 2.3%.

Our Corporate Client Group had a 3.6% growth rate. That’s organic, no acquisitions. And I think that’s pretty impressive particularly when you think about the type of economy that we’ve endured.

Our Advisor Services Group had a very strong 16% revenue growth. The only category that really has declined was the Individual Client Group, and that was driven mostly by challenges I’ll talk about in a minute in the life insurance division.

Our EBITDA grew by 8%. Our adjusted EBITDA grew by 8%. And I think very importantly, we are a strong cash flow company and we executed a very strong balance capital allocation program. We deployed $50 million of our cash towards acquisitions, which we do all in cash. And we deployed another $50 million to a successful buyback of NFP stock, which we completed in February.

Just to kind of drill down a little bit more to our three categories, as I mentioned, the Corporate Client Group is our largest. That’s about 41% of our revenues. 81% of that is in what we call our health and welfare businesses, so corporate benefits and the like. That business has grown for us significantly. At this time it’s actually been positively impacted by Healthcare Reform because there’s so much dialog around it and because of our services infrastructure, we can really help companies navigate through it.

We do look at that area closely and think about long term risks. And one of the things we really focus on in that business is making sure that we are diversifying the business that we do with our corporate clients. And most of our business is middle market, and so they really do look to us to provide a multitude of services. That’s where you’ll see 401(k), group life, group disability. And in 2011, we did a large acquisition of a P&C firm to help us diversify there as well. And where about 9% of that business is executive benefits, which is deferred compensation, disability, and the like.

The Individual Client Group actually has three kind of interesting components to it. 50% of the revenue, that’s about 34%, 35% of our business and I’ll show you in a little while that really has changed dramatically over the life of NFP. That was the core of the business. And as Keith said, that has really been a big transition for us.

50% of the revenue in there is what we would call wholesale life brokerage where agents come to us and basically execute their life insurance business. That’s – 32% of that category is retail where our agents are dealing directly with the high net worth clients. And the remainder, the 17%, the 18% is in our wealth management business, work we’re fee-based advisors. And that business has grown very successfully for us. But the most stressed part of that category and frankly of the company has been the significant clients in very high end life insurance sales.

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