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National Financial Partners Corp. has a market cap of $589.6 million; its shares were traded at around $13.85 with a P/E ratio of 6 and P/S ratio of 0.6. NFP is in the portfolios of Private Capital of Private Capital Management, Steven Cohen of SAC Capital Advisors, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:Income from operations decreased $15.5 million or 87.3% to $2.2 million for the three month period ended September 30, 2010 from $17.7 million for the three months ended September 30, 2009. This decline in third quarter of 2010 was due to the substantial increase in management fees primarily as a result of the accelerated vesting of certain restricted stock units (“RSUs”) of $13.4 million, and the accrual of $2.9 million relating to the Principal Incentive Plan (the “PIP”). In the third quarter of 2010, excluding the impact of the accelerated vesting of certain RSUs, the Company s income from operations declined due to the PIP accrual. Increases in revenue at the CCG and ASG, offset by a decline in revenue at the ICG due to dispositions also contributed to this fluctuation. In addition, compensation and non-compensation expense increased in the CCG and ASG, offset by corresponding decreases in the ICG. Net income benefited from slight declines in amortization and depreciation costs in the CCG and ICG.
Income from operations increased $605.6 million or 107.2% to $40.6 million for the nine month period ended September 30, 2010 from a loss of $(565.0) million for the nine months ended September 30, 2009. The increase in income from operations was driven by the significant decline in impairments from $612.2 million in the nine months ended September 30, 2009 to $2.9 million for the nine months ended September 30, 2010. The decline in impairments was driven by the significant impairment taken during the three months ended March 31, 2009 that reflected the incorporation of market data, including NFP s market value which had remained below net book value for a sustained period through March 31, 2009, the performance of the Company in the economic environment in late 2008 through 2009, and discount rates that were risk adjusted to reflect both company-specific and market-based credit spreads and other relevant market data. Among other significant factors, the market value in the prior year period reflected the stressed macroeconomic environment and its impact on the Company s sales. Excluding the impact of impairments, the Company s income from operations improved primarily due to increases in revenue at the CCG and ASG and an increase in gain on sale of businesses at the CCG, offset by decreases in revenue at the ICG, due to dispositions. Commission expense remained stable in the CCG and ICG, and the increases in commission payouts at the ASG were commensurate with the increase in revenue. In addition, compensation expense decreased in each of the three segments, but these declines were more than offset by increases in non-compensation expenses and management fees primarily as a result of the accelerated vesting of certain RSUs. Income from operations in the CCG and ICG also benefited from declines in amortization and depreciation costs.
In connection with its delivery of corporate benefits products and services, the CCG s clients range from businesses with employees in the single digits to businesses employing thousands, with a focus on middle-market businesses employing between 50 and 1,000 employees. In connection with its distribution of executive benefits products and services, the CCG actively works with Fortune 2000 companies, while also serving businesses employing between 200 and 2,000 employees. In the sale of bank-owned life insurance, the CCG targets community banks that hold between $100 million and $5 billion of assets.
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