National Financial Partners Announces First Quarter 2009 Results

Cash Earnings per Diluted Share of $0.44

NEW YORK, May 11 /PRNewswire-FirstCall/ --

Financial Highlights*
(Dollars in millions, 1Q 2009 1Q 2008 % Change
except per share data) ------- ------- --------

Revenue $217.0 $286.4 -24.2%
Gross Margin % 17.0% 17.3%
Net (loss) income (515.8) 8.5 NM
Net (loss) income per
diluted share (12.59) 0.21 NM
Cash earnings 18.1 24.1 -24.9%
Cash earnings per diluted share $0.44 $0.59 -25.4%
"Same store" revenue
growth/decline -20.6% 5.9%
Net "same store" revenue
growth/decline -16.7% 5.2%
"Same store" gross margin
growth/decline -22.9% -0.5%

* This summary includes financial measures not calculated based on
generally accepted accounting principles.

NM indicates amount not meaningful.

National Financial Partners Corp. (NYSE: NFP), a network of independent
financial advisors specializing in corporate and executive benefits, life
insurance and wealth transfer, and financial planning and investment advisory
services, today reported financial results for the first quarter ended March
31, 2009.

NFP reported a first quarter 2009 net loss of $515.8 million, or a loss of
$12.59 per diluted share, compared with net income of $8.5 million, or income
of $0.21 per diluted share, in the first quarter of 2008. The net loss during
the quarter reflected a $607.3 million pre-tax impairment of goodwill and
intangible assets. The impairment charge had no impact on the Company's
business operations, cash position or cash flow.

First quarter 2009 cash earnings was $18.1 million, or $0.44 per diluted
share, compared with $24.1 million, or $0.59 per diluted share, in the first
quarter of 2008. Cash earnings declined primarily as a result of a decline in
"same store" revenue offset in part by lower commissions and fees, operating,
management fees and general and administrative expenses.

Prior periods presented have been retrospectively adjusted for the adoption of
FASB Staff Position APB 14-1, "Accounting for Convertible Debt Instruments
That May Be Settled in Cash Upon Conversion (Including Partial Cash
Settlement)" ("FSP APB 14-1") on January 1, 2009. As of the first quarter of
2009, the Company modified its definition of cash earnings, a non-GAAP
measure, to adjust cash earnings for the after-tax impact of non-cash interest
expense. Prior periods have been modified on a comparable basis. All of
NFP's non-cash interest expense related to the adoption of FSP APB 14-1. Cash
earnings is now defined as net income excluding amortization of intangibles,
depreciation, the after-tax impact of the impairment of goodwill and
intangible assets and the after-tax impact of non-cash interest expense. A
full reconciliation of net income to cash earnings is provided in the attached
tables.

Jessica Bibliowicz, chairman, president and chief executive officer, said,
"While revenue declined somewhat at our benefits firms, the economic
environment had a greater impact on our life insurance firms, which accounted
for most of the 'same store' revenue decline in the quarter."

Ms. Bibliowicz continued, "NFP continues to focus on serving our clients while
reducing expenses and conserving cash. In the first quarter of 2009, lower
operating expenses, along with reduced commissions and management fees
expenses, allowed us to maintain a relatively stable gross margin percentage
quarter-over-quarter. In addition, in what is typically a seasonally weak
quarter in terms of cash flow, operating cash flow improved compared with the
prior year period."

Compared with the corresponding prior year period, "same store" gross margin
declined 22.9% in the first quarter of 2009. The decrease resulted from a
decline in revenue partially offset by lower expenses for firms included in
the "same store" calculation. "Same store" calculations generally encompass
firms that were owned by NFP for at least four full quarters at the beginning
of the first quarter of 2009. More detailed definitions and financial
information can be found in the Company's quarterly financial supplement,
which is available on the Company's Web site at www.nfp.com.

The impairment taken during the quarter reflected the stressed macroeconomic
environment and its impact on NFP's market value and revenue, particularly in
the life insurance area. On January 1, 2009, the Company adopted SFAS 157,
"Fair Value Measurement," for non-financial assets and liabilities, which
emphasizes market-based measurement, rather than entity-specific measurement,
in calculating reporting unit fair value. Among market-based measurements is
NFP's market value, which has remained below net book value for a sustained
period.

NFP and its bank group amended its credit facility on May 6, 2009 to expressly
exclude the impairment charge for the first quarter of 2009 from its debt
covenant calculations. No other terms of the credit facility were modified.
The first quarter 2009 consolidated leverage ratio (as defined in the amended
credit facility) was 2.7x, well below the maximum consolidated leverage ratio
allowable for the quarter of 3.5x. NFP did not borrow against its credit
facility during the first quarter of 2009. Since the end of the first quarter
of 2009, NFP has reduced the amount outstanding under its credit facility by
$8 million to $140 million.

First Quarter Results

Revenue decreased $69.4 million, or 24.2%, to $217.0 million in the first
quarter of 2009 from the prior year period. Components of the decrease
included:

-- a "same store" revenue decline of $42.0 million, or 20.6%, to
$161.9 million;
-- a decline of $13.7 million, or 20.3%, to $53.8 million from the
Company's Austin, Texas-based facility, which includes NFP
Insurance Services, Inc., a licensed insurance agency and marketing
organization, and NFP Securities, Inc., a registered broker-dealer;
and

-- a decrease of $10.5 million from dispositions.

These revenue decreases were offset in part by $3.2 million of revenue growth
from firms acquired subsequent to the start of the first quarter of 2008 as
well as adjustments for eliminations. Net "same store" revenue, which is
revenue less commissions and fees expense for firms included in the "same
store" calculation, declined 16.7% in the first quarter of 2009.

Gross margin before management fees was $59.4 million in the first quarter of
2009, a decrease of $26.9 million, or 31.2%, from the prior year period.
Gross margin, which includes management fees as a component of cost of
services, was $36.9 million in the first quarter of 2009, a decrease of $12.6
million, or 25.5%, from the prior year period.
As a percentage of revenue, first quarter gross margin declined only slightly
to 17.0% from 17.3% in the prior year period, despite the revenue decline. As
a percentage of revenue, higher operating expenses were partially offset by
lower variable costs, which include commissions and fees and management fees
expenses. In absolute terms, operating expenses declined 8.3% in the first
quarter of 2009 compared with the prior year period due to expense reduction
initiatives and dispositions partially offset by expenses from new firms.
Management fees as a percentage of gross margin before management fees was
37.9% in the first quarter of 2009 versus 42.6% a year ago due largely to
lower firm earnings.

General and administrative expense decreased $3.6 million, or 22.2%, to $12.6
million in the first quarter of 2009 compared with the prior year period. The
decrease was largely the result of previous headcount reductions and
management's continued efforts to reduce other expenses.

Operating cash flow, adjusted for a $14.4 million one-time cash outflow
related to an acquisition in the first quarter of 2008, increased by $42.8
million to ($1.6 million) in the first quarter of 2009. The improvement
reflected the lower payments to principals of owned firms for prior year
performance. In total, operating cash flow improved $57.2 million
quarter-over-quarter.

Excluding the impact of impairments, the tax rate was 51.3% in the first
quarter of 2009, higher than the typical combined federal and state tax rates
due to non-deductible expenses and interest and penalties related to FASB
Interpretation No. 48. The tax benefit from impairments was $88.1 million in
the first quarter of 2009.

Earnings Conference Call & Presentation

The Company will conduct its first quarter 2009 earnings conference call and
audio webcast on May 12, 2009, from 8:00 to 9:00 a.m. (ET). The conference
call will be available live via telephone and the Internet. To access the
call, dial (617) 614-4911 (when prompted, callers should provide the access
code "NFP"). The conference call and webcast will be accompanied by a
presentation. The presentation will be available for electronic download on
the Company's Web site approximately one hour before the conference call and
webcast is scheduled to begin. The presentation may also be viewed
automatically upon connecting to the webcast. To listen to the conference
call over the Internet, visit www.nfp.com/ir. The conference call will be
available for replay via telephone and Internet for a period of 90 days. To
listen to a replay of the conference call via telephone, dial (888) 286-8010.
The access code for the replay is 88309938. To access the replay of the
conference call over the Internet, visit the above-mentioned Web site.

Reconciliation of Non-GAAP Measures

The Company analyzes its performance using non-GAAP measures called cash
earnings and cash earnings per diluted share, gross margin before management
fees and percentages or calculations using these measures. The Company
believes these non-GAAP measures provide additional meaningful methods of
evaluating certain aspects of the Company's operating performance from period
to period on a basis that may not be otherwise apparent under GAAP. As of the
first quarter of 2009, the Company modified its definition of cash earnings, a
non-GAAP measure, to adjust cash earnings for the after-tax impact of non-cash
interest expense. Prior periods have been modified on a comparable basis.
All of NFP's non-cash interest expense related to the adoption of FSP APB
14-1. Cash earnings is now defined as net income excluding amortization of
intangibles, depreciation, the after-tax impact of the impairment of goodwill
and intangible assets and the after-tax impact of non-cash interest expense.
Cash earnings per diluted share is calculated by dividing cash earnings by the
number of weighted average diluted shares outstanding for the period
indicated. Cash earnings and cash earnings per diluted share should not be
viewed as substitutes for net income and net income per diluted share,
respectively. Gross margin before management fees should not be viewed as a
substitute for gross margin. A full reconciliation of these non-GAAP measures
to their GAAP counterparts is provided in the Company's quarterly financial
supplement for the quarter ended March 31, 2009, which is available on the
Investor Relations section of the Company's Web site at www.nfp.com.

About National Financial Partners Corp.

Founded in 1998, NFP is a leading independent distributor of financial
services products to high net worth individuals and companies. NFP is
headquartered in New York and operates a distribution network of over 170
owned firms. For more information, please visit www.nfp.com.

Forward-Looking Statements

This release contains certain statements relating to future results, which are
forward-looking statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. Forward-looking statements include, without
limitation, any statement that may project, indicate or imply future results,
events, performance or achievements, and may contain the words "anticipate,"
"expect," "intend," "plan," "believe," "estimate," "may," "project," "will,"
"continue" and similar expressions of a future or forward-looking nature.
Forward-looking statements may include discussions concerning revenue,
expenses, earnings, cash flow, impairments, losses, dividends, capital
structure, credit facilities, market and industry conditions, premium and
commission rates, interest rates, contingencies, the direction or outcome of
regulatory investigations and litigation, income taxes and NFP's operations or
strategy. These forward-looking statements are based on management's current
views with respect to future results, and are subject to risks and
uncertainties. Factors that could cause actual results to differ materially
from those contemplated by a forward-looking statement include: (1) NFP's
ability, through its operating structure, to respond quickly to regulatory,
operational or financial situations impacting its firms; (2) the Company's
ability to manage its business effectively and profitably through the
principals of its firms; (3) a recessionary economic environment, resulting in
fewer sales of financial products or services, including rising unemployment
which could impact group benefit sales based on reduced headcount, and the
availability of credit in connection with the purchase of such products or
services or consumer hesitancy in spending; (4) the occurrence of events or
circumstances that could be indicators of impairment to goodwill and
intangible assets which require the Company to test for impairment, and the
impact of any impairments that the Company may take; (5) the impact of the
adoption or modification of certain accounting treatments or policies and
changes in underlying assumptions, relating to, among other things,
impairments, which may lead to adverse financial results; (6) NFP's success in
acquiring and retaining high-quality independent financial services
distribution firms and various factors inhibiting the Company's ability to
acquire and retain firms; (7) the performance of the Company's firms following
acquisition; (8) changes in interest rates or general economic conditions and
credit market conditions, including changes that adversely affect NFP's
ability to access capital, such as the global credit crisis that began in 2007
and continues today; (9) adverse developments or volatility in the markets in
which the Company operates, resulting in fewer sales of financial products and
services, including those related to compensation agreements with insurance
companies and activities within the life settlements industry; (10) securities
and capital markets behavior, including fluctuations in price of NFP's common
stock, recent uncertainty in the U.S. financial markets or the dilutive impact
of any capital-raising efforts to finance operations or business strategy;
(11) any losses that NFP may take with respect to dispositions of firms or
otherwise; (12) the continued availability of borrowings and letters of credit
under NFP's credit facility; (13) adverse results or other consequences from
litigation, arbitration, regulatory investigations or internal compliance
initiatives, including those related to business practices, compensation
agreements with insurance companies and activities within the life settlements
industry; (14) uncertainty in the financial services, insurance and life
settlement industries arising from investigations into certain business
practices and subpoenas received from various governmental authorities and
related litigation; (15) the impact of legislation or regulations in
jurisdictions in which NFP's subsidiaries operate, including the possible
adoption of comprehensive and exclusive federal regulation over all interstate
insurers and the uncertain impact of proposals for legislation regulating the
financial services industry; (16) the reduction of the Company's revenue and
earnings due to the elimination or modification of compensation arrangements,
including contingent compensation arrangements and the adoption of internal
initiatives to enhance compensation transparency, including the transparency
of fees paid for life settlement transactions; (17) competition in the
business of providing financial services to high net worth individuals and
companies; (18) changes in laws, including the elimination or modification of
the federal estate tax, changes in the tax treatment of life insurance
products, or changes in regulations affecting the value or use of benefits
programs, such as government-sponsored insurance programs, which may adversely
affect the demand for or profitability of the Company's services; (19)
developments in the availability, pricing, design or underwriting of insurance
products, revisions in mortality tables by life expectancy underwriters or
changes in the Company's relationships with insurance companies; (20) changes
in premiums and commission rates and the rates of other fees paid to the
Company's firms, including life settlements and registered investment advisory
fees; (21) adverse results or other consequences from higher than anticipated
compliance costs, including those related to expenses arising from internal
reviews of business practices and regulatory investigations or those arising
from compliance with state or federal laws; (22) the occurrence of adverse
economic conditions or an adverse regulatory climate in New York, Florida or
California; (23) the loss of services of key members of senior management;
(24) the availability or adequacy of errors and omissions insurance or other
types of insurance coverage protection; and (25) the Company's ability to
effect smooth succession planning at its firms.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited-in thousands, except per share data)

Three Months Ended
March 31,
----------------
2009 2008
---- ----
Revenue:
Commissions and fees $216,981 $286,396

Cost of services:
Commissions and fees 62,401 96,280
Operating expenses (1) 95,191 103,839
Management fees 22,507 36,769
------ ------
Total cost of services 180,099 236,888
------ ------
Gross margin 36,882 49,508
------ ------

Corporate and other expenses:
General and administrative 12,633 16,183
Amortization of intangibles 9,594 9,751
Impairment of goodwill and intangible
assets 607,337 2,180
Depreciation 3,539 3,054
Loss (gain) on sale of subsidiaries 617 (6,624)
---- ------
Total corporate and other expenses 633,720 24,544
-------- ------
(Loss) income from operations (596,838) 24,964

Net interest and other (2) (3,491) (4,024)
-------- ------
(Loss) income before income taxes (600,329) 20,940

Income tax (benefit) expense (2) (84,530) 12,409
--------- ------
Net (loss) income (2) $(515,799) $8,531
========= ======

Earnings (loss) per share (2):
Basic $(12.59) $0.22
======= =====
Diluted $(12.59) $0.21
======= =====

Weighted average shares outstanding:
Basic 40,954 39,487
====== ======
Diluted 40,954 41,156
====== ======

(1) Excludes amortization and depreciation shown separately in
Corporate and other expenses.
(2) Prior periods presented have been retrospectively adjusted for
the adoption of FASB Staff Position APB 14-1, "Accounting for
Convertible Debt Instruments That May Be Settled in Cash Upon
Conversion (Including Partial Cash Settlement)" ("FSP APB 14-1")
on January 1, 2009.

CALCULATION OF GROSS MARGIN
(Unaudited-in thousands, except per share data)

Three Months Ended
March 31,
-----------------
2009 2008
---- ----

Revenue $216,981 $286,396
Cost of services:
Commissions and fees 62,401 96,280
Operating expenses (1) 95,191 103,839
------ -------
Gross margin before management fees 59,389 86,277
Management fees 22,507 36,769
------ ------
Gross margin $36,882 $49,508
======= =======
Gross margin as a percentage of revenue 17.0% 17.3%
Gross margin before management fees as a
percentage of revenue 27.4% 30.1%
Management fees, as a percentage of gross
margin before management fees 37.9% 42.6%

RECONCILIATION OF NET INCOME TO CASH EARNINGS
(Unaudited-in thousands, except per share data)

Three Months Ended
March 31,
-----------------
2009 2008
---- ----

GAAP net (loss) income (2) $(515,799) $8,531
Amortization of intangibles 9,594 9,751
Depreciation 3,539 3,054
Impairment of goodwill and intangible assets 607,337 2,180
Tax benefit of impairment of goodwill and
intangible assets (88,146) (852)
Non-cash interest, net of tax (2) 1,557 1,474
----- -----
Cash earnings (3) $18,082 $24,138

GAAP net (loss) income per share - diluted (2) $(12.59) $0.21
Amortization of intangibles 0.23 0.24
Depreciation 0.09 0.07
Impairment of goodwill and intangible assets 14.73 0.05
Tax benefit of impairment of goodwill and
intangible assets (2.14) (0.02)
Non-cash interest, net of tax (2) 0.04 0.04
Impact of diluted shares on cash earnings not
reflected in GAAP net loss per share -
diluted (4) 0.08 -
---- ----
Cash earnings per share - diluted (5) $0.44 $0.59

(1) Excludes amortization and depreciation shown separately in Corporate
and other expenses.
(2) Prior periods presented have been retrospectively adjusted for the
adoption of FSP APB 14-1 on January 1, 2009.
(3) As of the first quarter of 2009, the Company modified its definition
of cash earnings, a non-GAAP measure, to adjust cash earnings for the
after-tax impact of non-cash interest expense. Prior periods have
been modified on a comparable basis. All of NFP's non-cash interest
expense related to the adoption of FSP APB 14-1. Cash earnings is
now defined as net income excluding amortization of intangibles,
depreciation, the after-tax impact of the impairment of goodwill and
intangible assets and the after-tax impact of non-cash interest
expense.
(4) For periods where the Company generated a GAAP net loss, weighted
average common shares outstanding - diluted was used to calculate
cash earnings per share - diluted only. To calculate GAAP net loss
per share, weighted average common shares outstanding - diluted is
the same as weighted average common shares outstanding - basic due
to the antidilutive effects of other items caused by a GAAP net loss
position.
(5) The sum of the per-share components of cash earnings per share -
diluted may not agree to cash earnings per share - diluted, due to
rounding.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited-in thousands)

March 31, December 31,
2009 2008
---- ----
ASSETS
Current assets:
Cash and cash equivalents $42,319 $48,621
Cash, cash equivalents and securities
purchased under resale agreements in
premium trust accounts 71,321 75,109
Commissions, fees and premiums
receivable, net 107,506 140,758
Due from principals and/or certain
entities they own 15,022 16,329
Notes receivable, net 7,747 6,496
Deferred tax assets 9,351 9,435
Other current assets 18,008 19,284
------ ------
Total current assets 271,274 316,032
Property and equipment, net 49,498 51,683
Deferred tax assets (1) 109,661 24,889
Intangibles, net 427,090 462,123
Goodwill, net 52,532 635,693
Notes receivable, net 33,507 23,683
Other non-current assets (1) 28,804 28,018
------ ------
Total assets (1) $972,366 $1,542,121
======== ==========

LIABILITIES
Current liabilities:
Premiums payable to insurance carriers $72,122 $73,159
Borrowings 148,000 148,000
Income taxes payable (1) 1,231 11
Deferred tax liabilities 3 -
Due to principals and/or certain
entities they own 9,863 38,791
Accounts payable 23,893 28,513
Dividends payable - -
Accrued liabilities 36,636 54,380
------ ------
Total current liabilities (1) 291,748 342,854
Deferred tax liabilities (1) 116,142 119,400
Convertible senior notes (1) 196,200 193,475
Other non-current liabilities 60,832 62,874
------ ------
Total liabilities (1) 664,922 718,603
------- -------

STOCKHOLDERS' EQUITY
Preferred stock at par value - -
Common stock at par value 4,406 4,388
Additional paid-in capital (1) 879,331 881,458
Retained (deficit) earnings (1) (418,672) 97,178
Accumulated other comprehensive income (91) (50)
Treasury stock (157,530) (159,456)
-------- --------
Total stockholders' equity (1) 307,444 823,518
------- -------
Total liabilities and
stockholders' equity (1) $972,366 $1,542,121
======== ==========

(1) Prior periods presented have been retrospectively adjusted for the
adoption of FSP APB 14-1 on January 1, 2009.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited-in thousands)

Three Months Ended
March 31,
--------------
2009 2008
---- ----
Cash flow from operating activities
Net (loss) income (1) $(515,799) $8,531

Adjustments to reconcile to net cash used in
operating activities:
Deferred taxes (88,048) 148
Stock-based compensation 2,488 3,203
Impairment of goodwill and intangible assets 607,337 2,180
Amortization of intangibles 9,594 9,751
Depreciation 3,539 3,054
Accretion of senior convertible notes discount (1) 2,725 2,557
Loss (gain) on sale of subsidiaries 617 (6,624)
Other, net - -

(Increase) decrease in operating assets:
Cash, cash equivalents and securities
purchased under resale agreements in premium
trust accounts 3,788 3,074
Commissions, fees and premiums receivable, net 31,637 25,780
Due from principals and/or certain entities they own 1,307 (179)
Notes receivable, net - current (1,251) (565)
Other current assets (1) 1,289 (195)
Notes receivable, net - non-current (6,955) (7,755)
Other non-current assets (1) (355) (15,656)

Increase (decrease) in operating liabilities:
Premiums payable to insurance carriers (1,037) (5,244)
Income taxes payable (1) 1,220 1,013
Due to principals and/or certain entities they own (29,216) (51,292)
Accounts payable (4,639) (9,429)
Accrued liabilities (1) (16,307) (29,180)
Other non-current liabilities (1) (3,500) 8,017
------ -----
Total adjustments 514,233 (67,342)
------- -------
Net cash used in operating activities (1,566) (58,811)

Cash flow from investing activities:
Proceeds from disposal of subsidiaries 2,100 20,878
Purchases of property and equipment, net (1,604) (13,007)
Payments for acquired firms, net of cash, and
contingent consideration (2,257) (30,054)
------ -------
Net cash used in investing activities (1,761) (22,183)

Cash flow from financing activities:
Repayments of borrowings - (54,000)
Proceeds from borrowings - 102,000
Proceeds from stock-based awards, including
tax benefit (2,777) 2,600
Shares cancelled to pay withholding taxes (147) (626)
Payments for treasury stock repurchase - (9,328)
Dividends paid (51) (8,171)
---- ------
Net cash (used in) provided by financing activities (2,975) 32,475
------ ------
Net decrease in cash and cash equivalents (6,302) (48,519)
Cash and cash equivalents, beginning of period 48,621 114,182
------ -------
Cash and cash equivalents, end of the period $42,319 $65,663
======= =======

Supplemental disclosures of cash flow information
Cash paid for income taxes $3,372 $7,502
Cash paid for interest $2,385 $3,229

(1) Prior periods presented have been retrospectively adjusted for the
adoption of FSP APB 14-1 on January 1, 2009.

SOURCE National Financial Partners Corp.

Investor Relations: Marc Gordon, National Financial Partners, +1-212-301-4033,
ir@nfp.com, or Media Relations: Barbara Willis, National Financial Partners,
+1-212-301-1039, communications@nfp.com