UPDATE 3-National Financial tumbles as July-Aug revenue falls

(Adds company comments, updates share movement) By Supantha Mukherjee

BANGALORE, Sept 24 (Reuters) - National Financial Partners Corp (NFP.N) said revenue in the first two months of the third quarter fell, hurt by turbulent credit markets and tougher underwriting in the high net worth old-age life market, sending its shares down as much as 24 percent.

The life insurance distributor said total revenue for the months of July, August fell 7 percent, same-store revenue dropped about 10 percent during the period, while operating expenses rose about 11 percent.

The earnings are going to be way short of what the estimates were, said Keefe, Bruyette & Woods analyst Jukka Lipponen, adding that: "I expected the organic growth picture to be very challenging but the results are coming in even worse."

The company said it usually gets the largest portion of its quarterly revenue and earnings in the third month of a quarter, but was unsure whether third-quarter results will conform to this historical pattern.

"I believe that September could actually be worse than the first two months," Lipponen said.

The ongoing economic and credit market turmoil, consumer uncertainty impacting transactions in process with American International Group Inc (AIG.N), and the decision to lengthen mortality tables by a life expectancy underwriter could impact future results, the company said.

Earlier this month, 21st Services, a life expectancy underwriter, said it will increase life expectancy estimates in its mortality tables relative to its life expectancy determinations.

An increase in life expectancy estimate will decrease the value of the insurance policies that the third parties would be willing to pay, thereby hurting commissions earned by companies like National Financial.

The lengthening of mortality tables brings uncertainty to the market, a company spokesperson said. "Until the market adjusts to the changes in mortality, it is unclear what the impact to revenue would be."

It is another headwind for revenue growth and it is going to keep some buyers from purchasing life insurance until the pricing models are adjusted, analyst Lipponen said.

The environment is going to remain challenging, Lipponen, said, adding that the general economic conditions is also affecting other parts of the company's businesses like executive benefits business.

Shares of the company fell $5.03 to $18.08 in afternoon trade on the New York Stock Exchange. The stock, which was among the top percentage losers, had touched a low of $17.64 earlier. (Editing by Himani Sarkar, Dinesh Nair and Deepak Kannan)