NATIONAL FINANCIAL PARTNERS CORP - FORM 8-K - EX-99.2 - QUARTERLY FINANCIAL SUPPLEMENT FOR THE PERIOD ENDED DECEMBER 31, 2010

Attached files

file	filename
8-K - CURRENT REPORT - NATIONAL FINANCIAL PARTNERS CORP	form8k.htm
EX-99.1 - PRESS RELEASE, DATED FEBRUARY 8, 2011, OF NATIONAL FINANCIAL PARTNERS CORP. - NATIONAL FINANCIAL PARTNERS CORP	ex991.htm

Exhibit 99.2

Quarterly Financial Supplement

For the Period Ended December 31, 2010

(NYSE: NFP)

Investor Relations Contact:

Abbe F. Goldstein, CFA

(212) 301-4011

ir@nfp.com

TABLE OF CONTENTS		PAGE

Condensed Consolidated Statements of Operations and Other Financial Metrics for Quarterly Periods and Year-to-Date Periods		3
Condensed Statements of Operations and Other Financial Metrics for Quarterly Periods and Year-to-Date Periods - Corporate Client Group		4
Condensed Statements of Operations and Other Financial Metrics for Quarterly Periods and Year-to-Date Periods - Individual Client Group		5
Condensed Statements of Operations and Other Financial Metrics for Quarterly Periods and Year-to-Date Periods - Advisor Services Group		6
Condensed Statements of Operations, Adjusted EBITDA and Organic Revenue Growth for Quarterly Periods		7
Condensed Statements of Operations, Adjusted EBITDA and Organic Revenue Growth for Year-to-Date Periods		8
Historical Condensed Consolidated Statements of Operations and Other Financial Metrics for Year-to-Date Periods		9
Historical Condensed Statements of Operations and Other Financial Metrics for Year-to-Date Periods - Corporate Client Group		10
Historical Condensed Statements of Operations and Other Financial Metrics for Year-to-Date Periods - Individual Client Group		11
Historical Condensed Statements of Operations and Other Financial Metrics for Year-to-Date Periods - Advisor Services Group		12
Corporate Overview		13
Acquisition and Disposition Metrics for Quarterly and Year-to-Date Periods		14
Intangibles and Goodwill Data		15
Consolidated Statements of Financial Condition (Balance Sheet)		16
Consolidated Statements of Cash Flows for Quarterly and Year-to-Date Periods		17
Defined Terms		18

This Quarterly Financial Supplement (“QFS”) includes historical and forward-looking non-GAAP measures called cash earnings, cash earnings per diluted share, Adjusted EBITDA, adjusted income before management fees, management fees (excluding the accelerated vesting of certain RSUs), 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. Cash earnings is defined as net income excluding amortization of intangibles, depreciation, the after-tax impact of the impairment of goodwill and intangible assets, the after-tax impact of non-cash interest expense and the after-tax impact of certain non-recurring items. 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. Adjusted EBITDA is defined as net income excluding income tax expense, interest income, interest expense, gain on early extinguishment of debt, other, net, amortization of intangibles, depreciation, impairment of goodwill and intangible assets, (gain) loss on sale of businesses, the pre-tax impact of the accelerated vesting of certain RSUs and any change in estimated contingent consideration amounts recorded in accordance with purchase accounting that have been subsequently adjusted and recorded in the consolidated statement of operations. Adjusted EBITDA should not be viewed as a substitute for net income. Adjusted income before management fees is defined as income before management fees excluding corporate income. Adjusted income before management fees should not be viewed as a substitute for income from operations. Management fees (excluding accelerated vesting of certain RSUs) shows management fees without the one-time impact of the accelerated vesting of certain RSUs on September 17, 2010. Management fees (excluding the accelerated vesting of certain RSUs) should not be viewed as a substitute for management fees. A reconciliation of these non-GAAP measures to their GAAP counterparts is provided in this QFS, which is available on the Investor Relations section of the Company’s Web site at www.nfp.com.

This QFS contains statements 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, market and industry conditions, premium and commission rates, interest rates, contingencies, the direction or outcome of regulatory investigations and litigation, income taxes and the Company’s operations or strategy. These forward-looking statements are based on management’s current views with respect to future results. Forward-looking statements are based on beliefs and assumptions made by management using currently-available information, such as market and industry materials, experts’ reports and opinions, and current financial trends. These statements are only predictions and are not guarantees of future performance. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated by a forward-looking statement. These risks and uncertainties include, without limitation: (1) NFP’s ability, through its operating structure, to respond quickly to operational, financial or regulatory situations impacting its businesses; (2) the ability of the Company’s businesses to perform successfully following acquisition, including through cross-selling initiatives, and NFP’s ability to manage its business effectively and profitably through its principals and the Company’s reportable segments; (3) any losses that NFP may take with respect to dispositions, restructures or otherwise; (4) an economic environment that results in fewer sales of financial products or services; (5) the impact of the adoption or change in interpretation of certain accounting treatments or policies and changes in underlying assumptions relating to such treatments or policies, which may lead to adverse financial statement results; (6) NFP’s success in acquiring and retaining high-quality independent financial services businesses; (7) the effectiveness or financial impact of NFP’s incentive plans; (8) changes that adversely affect NFP’s ability to manage its indebtedness or capital structure, including changes in interest rates or credit market conditions; (9) adverse developments in the Company’s markets, such as those related to compensation agreements with insurance companies or activities within the life settlements industry, which could result in decreased sales of financial products or services; (10) NFP’s ability to operate effectively within the restrictive covenants of its credit facility; (11) adverse results or other consequences from litigation, arbitration, regulatory investigations or compliance initiatives, including those related to business practices, compensation agreements with insurance companies, policy rescissions or chargebacks, regulatory investigations or activities within the life settlements industry; (12) the impact of capital markets behavior, such as fluctuations in the price of NFP’s common stock, the dilutive impact of capital raising efforts or the impact of refinancing transactions; (13) the impact of legislation or regulations on NFP’s businesses, such as the possible adoption of exclusive federal regulation over interstate insurers, the uncertain impact of legislation regulating the financial services industry, such as the recent Dodd-Frank Wall Street Reform and Consumer Protection Act, the impact of newly-adopted healthcare legislation and resulting changes in business practices, or changes in regulations affecting the value or use of benefits programs, any of which may adversely affect the demand for or profitability of the Company’s services; (14) developments in the availability, pricing, design, tax treatment, or underwriting of insurance products, revisions in mortality tables by life expectancy underwriters or changes in the Company’s relationships with insurance companies; (15) changes in premiums and commission rates or the rates of other fees paid to the Company’s businesses; (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 settlements transactions; (17) the occurrence of adverse economic conditions or an adverse regulatory climate in New York, Florida or California; (18) the loss of services of key members of senior management; (19) the Company’s ability to compete against competitors with greater resources, such as those with greater name recognition; and (20) the Company’s ability to effect smooth succession planning.

Additional factors are set forth in NFP’s filings with the Securities and Exchange Commission (the “SEC”), including its Annual Report on Form 10-K for the year ended December 31, 2009, filed with the SEC on February 12, 2010, its Quarterly Report on Form 10-Q for the period ended March 31, 2010, filed with the SEC on May 10, 2010, and its Quarterly Report on Form 10-Q for the period ended June 30, 2010, filed with the SEC on August 4, 2010.

Forward-looking statements speak only as of the date on which they are made. NFP expressly disclaims any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

NATIONAL FINANCIAL PARTNERS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER FINANCIAL METRICS

FOR QUARTERLY PERIODS AND YEAR-TO-DATE PERIODS

(Unaudited - in thousands)

	For the Three Months Ended						For the Year-to-Date Period Ended
	December 31,			December 31,			December 31,			December 31,
	2010			2009			2010			2009
Revenue:
Commissions and fees	$	284,276		$	277,181		$	981,917		$	948,285

Operating expenses:
Commissions and fees		91,336			76,013			303,794			263,947
Compensation expense		65,110			68,879			256,181			268,335
Non-compensation expense		39,391			46,528			156,538			159,523
Management fees		52,308			58,865			161,958			146,181
Amortization of intangibles		8,211			8,806			33,013			36,551
Depreciation		3,095			8,857			12,123			19,242
Impairment of goodwill and intangible assets		—			6,231			2,901			618,465
(Gain) Loss on sale of business, net		(274	)		(244	)		(10,295	)		(2,096	)
Total operating expenses		259,177			273,935			916,213			1,510,148
Income (loss) from operations		25,099			3,246			65,704			(561,863	)

Non-operating income and expenses
Interest income		1,209			828			3,854			3,077
Interest expense		(4,084	)		(4,849	)		(18,533	)		(20,567	)
Gain on early extinguishment of debt		—			—			9,711			—
Other, net		2,787			472			8,303			11,583
Non-operating income and expenses, net		(88	)		(3,549	)		3,335			(5,907	)
Income (loss) before income taxes		25,011			(303	)		69,039			(567,770	)

Income tax expense (benefit)		9,742			(2,154	)		26,481			(74,384	)
Net income (loss)	$	15,269		$	1,851		$	42,558		$	(493,386	)

Cash Earnings Reconciliation
GAAP net income (loss)	$	15,269		$	1,851		$	42,558		$	(493,386	)
Amortization of intangibles		8,211			8,806			33,013			36,551
Depreciation		3,095			8,857			12,123			19,242
Impairment of goodwill and intangible assets		—			6,231			2,901			618,465
Tax benefit of impairment of goodwill and intangible assets		(15	)		(1,133	)		(1,147	)		(90,608	)
Non-cash interest, net of tax		802			1,559			5,094			6,814
Accelerated vesting of certain RSUs, net of tax		—			—			8,174			—
Gain on early extinguishment of debt, net of tax		—			—			(5,914	)		—
Cash earnings	$	27,362		$	26,171		$	96,802		$	97,078

Adjusted EBITDA Reconciliation
GAAP net income (loss)	$	15,269		$	1,851		$	42,558		$	(493,386	)
Income tax expense (benefit)		9,742			(2,154	)		26,481			(74,384	)
Interest income		(1,209	)		(828	)		(3,854	)		(3,077	)
Interest expense		4,084			4,849			18,533			20,567
Gain on early extinguishment of debt		—			—			(9,711	)		—
Other, net		(2,787	)		(472	)		(8,303	)		(11,583	)
Income (loss) from operations		25,099			3,246			65,704			(561,863	)
Amortization of intangibles		8,211			8,806			33,013			36,551
Depreciation		3,095			8,857			12,123			19,242
Impairment of goodwill and intangible assets		—			6,231			2,901			618,465
(Gain) Loss on sale of business, net		(274	)		(244	)		(10,295	)		(2,096	)
Accelerated vesting of certain RSUs		—			—			13,395			—
Adjusted EBITDA	$	36,131		$	26,896		$	116,841		$	110,299
Adjusted EBITDA as a % of revenue		12.7	%		9.7	%		11.9	%		11.6	%

Calculation of Management Fees %
Income (loss) from operations	$	25,099		$	3,246		$	65,704		$	(561,863	)
Basic management fees		44,746			48,074			129,512			130,211
Principal Incentive Plan (PIP) management fees		3,300			9,014			5,006			9,014
Stock-based compensation management fees		(26	)		936			4,790			2,145
Accelerated vesting of certain RSUs		—			—			13,395			—
Incentive and other management fees		4,288			841			9,255			4,811
Total management fees		52,308			58,865			161,958			146,181
Amortization of intangibles		8,211			8,806			33,013			36,551
Depreciation		3,095			8,857			12,123			19,242
Impairment of goodwill and intangible assets		—			6,231			2,901			618,465
(Gain) Loss on sale of business, net		(274	)		(244	)		(10,295	)		(2,096	)
Income before management fees		88,439			85,761			265,404			256,480
Corporate income		5,144			13,984			30,342			37,693
Adjusted income before management fees	$	93,583		$	99,745		$	295,746		$	294,173

Basic management fees as % of adjusted income before management fees		47.8	%		48.2	%		43.8	%		44.3	%

Total management fees as % of adjusted income before management fees		55.9	%		59.0	%		54.8	%		49.7	%

Total management fees (excluding Accelerated vesting of certain RSUs)	$	52,308		$	58,865		$	148,563		$	146,181

Total management fees (excluding Accelerated vesting of certain RSUs) as % of adjusted income before management fees		55.9	%		59.0	%		50.2	%		49.7	%

NATIONAL FINANCIAL PARTNERS CORP.

CONDENSED STATEMENTS OF OPERATIONS AND OTHER FINANCIAL METRICS FOR QUARTERLY PERIODS AND YEAR-TO-DATE PERIODS -

CORPORATE CLIENT GROUP

(Unaudited - in thousands)

	For the Three Months Ended						For the Year-to-Date Period Ended
	December 31,			December 31,			December 31,			December 31,
	2010			2009			2010			2009
Revenue:
Commissions and fees	$	108,483		$	106,971		$	387,855		$	379,980

Operating expenses:
Commissions and fees		11,067			8,588			36,989			34,397
Compensation expense		32,758			34,402			130,291			132,465
Non-compensation expense		18,390			21,804			75,180			75,823
Management fees		26,009			24,392			80,780			70,507
Amortization of intangibles		5,395			5,615			21,398			22,959
Depreciation		1,624			4,126			6,298			9,277
Impairment of goodwill and intangible assets		-			-			1,931			354,408
Loss (Gain) on sale of business, net		229			(123	)		(8,058	)		7
Total operating expenses		95,472			98,804			344,809			699,843
Income (loss) from operations	$	13,011		$	8,167		$	43,046		$	(319,863	)

Adjusted EBITDA Reconciliation
Income (loss) from operations	$	13,011		$	8,167		$	43,046		$	(319,863	)
Amortization of intangibles		5,395			5,615			21,398			22,959
Depreciation		1,624			4,126			6,298			9,277
Impairment of goodwill and intangible assets		-			-			1,931			354,408
Loss (Gain) on sale of business, net		229			(123	)		(8,058	)		7
Accelerated vesting of certain RSUs		-			-			7,394			-
Adjusted EBITDA	$	20,259		$	17,785		$	72,009		$	66,788
Adjusted EBITDA as a % of revenue		18.7	%		16.6	%		18.6	%		17.6	%

Calculation of Management Fees %
Income (loss) from operations	$	13,011		$	8,167		$	43,046		$	(319,863	)
Basic management fees		21,697			19,235			62,820			62,608
Principal Incentive Plan (PIP) management fees		1,085			2,041			1,939			2,041
Stock-based compensation management fees		15			611			2,750			1,581
Accelerated vesting of certain RSUs		-			-			7,394			-
Incentive and other management fees		3,212			2,505			5,877			4,277
Total management fees		26,009			24,392			80,780			70,507
Amortization of intangibles		5,395			5,615			21,398			22,959
Depreciation		1,624			4,126			6,298			9,277
Impairment of goodwill and intangible assets		-			-			1,931			354,408
Loss (Gain) on sale of business, net		229			(123	)		(8,058	)		7
Income before management fees		46,268			42,177			145,395			137,295
Corporate income		5,701			8,951			24,537			29,091
Adjusted income before management fees	$	51,969		$	51,128		$	169,932		$	166,386

Basic management fees as % of adjusted income before management fees		41.7	%		37.6	%		37.0	%		37.6	%

Total management fees as % of adjusted income before management fees		50.0	%		47.7	%		47.5	%		42.4	%

Total management fees (excluding Accelerated vesting of certain RSUs)	$	26,009		$	24,392		$	73,386		$	70,507

Total management fees (excluding Accelerated vesting of certain RSUs) as % of adjusted income before management fees		50.0	%		47.7	%		43.2	%		42.4	%

NATIONAL FINANCIAL PARTNERS CORP.

CONDENSED STATEMENTS OF OPERATIONS AND OTHER FINANCIAL METRICS FOR QUARTERLY PERIODS AND YEAR-TO-DATE PERIODS -

INDIVIDUAL CLIENT GROUP

(Unaudited - in thousands)

	For the Three Months Ended						For the Year-to-Date Period Ended
	December 31,			December 31,			December 31,			December 31,
	2010			2009			2010			2009
Revenue:
Commissions and fees	$	116,870		$	122,383		$	378,847		$	397,314

Operating expenses:
Commissions and fees		32,117			26,609			89,492			84,335
Compensation expense		28,573			30,825			110,543			119,829
Non-compensation expense		17,266			22,656			67,626			77,169
Management fees		26,299			34,473			81,178			75,674
Amortization of intangibles		2,816			3,191			11,615			13,592
Depreciation		1,113			4,413			4,458			8,885
Impairment of goodwill and intangible assets		-			6,231			970			264,057
(Gain) Loss on sale of business, net		(503	)		(121	)		(2,237	)		(2,103	)
Total operating expenses		107,681			128,277			363,645			641,438
Income (loss) from operations	$	9,189		$	(5,894	)	$	15,202		$	(244,124	)

Adjusted EBITDA Reconciliation
Income (loss) from operations	$	9,189		$	(5,894	)	$	15,202		$	(244,124	)
Amortization of intangibles		2,816			3,191			11,615			13,592
Depreciation		1,113			4,413			4,458			8,885
Impairment of goodwill and intangible assets		-			6,231			970			264,057
(Gain) Loss on sale of business, net		(503	)		(121	)		(2,237	)		(2,103	)
Accelerated vesting of certain RSUs		-			-			6,001			-
Adjusted EBITDA	$	12,615		$	7,820		$	36,009		$	40,307
Adjusted EBITDA as a % of revenue		10.8	%		6.4	%		9.5	%		10.1	%

Calculation of Management Fees %
Income (loss) from operations	$	9,189		$	(5,894	)	$	15,202		$	(244,124	)
Basic management fees		23,049			28,839			66,692			67,603
Principal Incentive Plan (PIP) management fees		2,215			6,973			3,067			6,973
Stock-based compensation management fees		(41	)		325			2,040			564
Accelerated vesting of certain RSUs		-			-			6,001			-
Incentive and other management fees		1,076			(1,664	)		3,378			534
Total management fees		26,299			34,473			81,178			75,674
Amortization of intangibles		2,816			3,191			11,615			13,592
Depreciation		1,113			4,413			4,458			8,885
Impairment of goodwill and intangible assets		-			6,231			970			264,057
(Gain) Loss on sale of business, net		(503	)		(121	)		(2,237	)		(2,103	)
Income before management fees		38,914			42,293			111,186			115,981
Corporate income		2,700			6,324			14,628			11,806
Adjusted income before management fees	$	41,614		$	48,617		$	125,814		$	127,787

Basic management fees as % of adjusted income before management fees		55.4	%		59.3	%		53.0	%		52.9	%

Total management fees as % of adjusted income before management fees		63.2	%		70.9	%		64.5	%		59.2	%

Total management fees (excluding Accelerated vesting of certain RSUs)	$	26,299		$	34,473		$	75,177		$	75,674

Total management fees (excluding Accelerated vesting of certain RSUs) as % of adjusted income before management fees		63.2	%		70.9	%		59.8	%		59.2	%

NATIONAL FINANCIAL PARTNERS CORP.

CONDENSED STATEMENTS OF OPERATIONS AND OTHER FINANCIAL METRICS FOR QUARTERLY PERIODS AND YEAR-TO-DATE PERIODS -

ADVISOR SERVICES GROUP

(Unaudited - in thousands)

	For the Three Months Ended						For the Year-to-Date Period Ended
	December 31,			December 31,			December 31,			December 31,
	2010			2009			2010			2009

Revenue:
Commissions and fees	$	58,923		$	47,827		$	215,215		$	170,991

Operating expenses:
Commissions and fees		48,152			40,816			177,313			145,215
Compensation expense		3,779			3,652			15,347			16,041
Non-compensation expense		3,735			2,068			13,732			6,531
Management fees		-			-			-			-
Amortization of intangibles		-			-			-			-
Depreciation		358			318			1,367			1,080
Impairment of goodwill and intangible assets		-			-			-			-
Loss on sale of business, net		-			-			-			-
Total operating expenses		56,024			46,854			207,759			168,867
Income (loss) from operations	$	2,899		$	973		$	7,456		$	2,124

Adjusted EBITDA Reconciliation
Income from operations	$	2,899		$	973		$	7,456		$	2,124
Amortization of intangibles		-			-			-			-
Depreciation		358			318			1,367			1,080
Impairment of goodwill and intangible assets		-			-			-			-
Loss on sale of business, net		-			-			-			-
Accelerated vesting of certain RSUs		-			-			-			-
Adjusted EBITDA	$	3,257		$	1,291		$	8,823		$	3,204
Adjusted EBITDA as a % of revenue		5.5	%		2.7	%		4.1	%		1.9	%

Calculation of Management Fees %
Income from operations	$	2,899		$	973		$	7,456		$	2,124
Basic management fees		-			-			-			-
Principal Incentive Plan (PIP) management fees		-			-			-			-
Stock-based compensation management fees		-			-			-			-
Accelerated vesting of certain RSUs		-			-			-			-
Incentive and other management fees		-			-			-			-
Total management fees		-			-			-			-
Amortization of intangibles		-			-			-			-
Depreciation		358			318			1,367			1,080
Impairment of goodwill and intangible assets		-			-			-			-
Loss on sale of business, net		-			-			-			-
Income before management fees		3,257			1,291			8,823			3,204
Corporate income (1)		(3,257	)		(1,291	)		(8,823	)		(3,204	)
Adjusted income before management fees	$	-		$	-		$	-		$	-

Basic management fees as % of adjusted income before management fees	NM			NM			NM			NM

Total management fees as % of adjusted income before management fees	NM			NM			NM			NM

Total management fees (excluding Accelerated vesting of certain RSUs)	$	-		$	-		$	-		$	-

Total management fees (excluding Accelerated vesting of certain RSUs) as % of adjusted income before management fees	NM			NM			NM			NM

NM indicates metric not meaningful

(1) Represents non-management fee generating income

NATIONAL FINANCIAL PARTNERS CORP.

CONDENSED STATEMENTS OF OPERATIONS, ADJUSTED EBITDA AND ORGANIC REVENUE GROWTH

FOR QUARTERLY PERIODS

(Unaudited - dollars in thousands)

	Corporate Client Group					Individual Client Group						Advisor Services Group				Total
	For the Three Months Ended					For the Three Months Ended						For the Three Months Ended				For the Three Months Ended
	December 31,		December 31,			December 31,			December 31,			December 31,		December 31,		December 31,			December 31,
	2010		2009			2010			2009			2010		2009		2010			2009
Revenue:
Commissions and fees	$	108,483	$	106,971		$	116,870		$	122,383		$	58,923	$	47,827	$	284,276		$	277,181

Operating expenses:
Commissions and fees		11,067		8,588			32,117			26,609			48,152		40,816		91,336			76,013
Compensation expense		32,758		34,402			28,573			30,825			3,779		3,652		65,110			68,879
Non-compensation expense		18,390		21,804			17,266			22,656			3,735		2,068		39,391			46,528
Management fees		26,009		24,392			26,299			34,473			—		—		52,308			58,865
Amortization of intangibles		5,395		5,615			2,816			3,191			—		—		8,211			8,806
Depreciation		1,624		4,126			1,113			4,413			358		318		3,095			8,857
Impairment of goodwill and intangible assets		—		—			—			6,231			—		—		—			6,231
Loss (Gain) on sale of business, net		229		(123	)		(503	)		(121	)		—		—		(274	)		(244	)
Total operating expenses		95,472		98,804			107,681			128,277			56,024		46,854		259,177			273,935
Income (loss) from operations	$	13,011	$	8,167		$	9,189		$	(5,894	)	$	2,899	$	973	$	25,099		$	3,246

	For the Three Months Ended
	December 31,				December 31,
	2010				2009
Revenue
Corporate Client Group	$	108,483	38.2	%	$	106,971	38.5	%
Individual Client Group		116,870	41.1	%		122,383	44.2	%
Advisor Services Group		58,923	20.7	%		47,827	17.3	%
Consolidated	$	284,276	100.0	%	$	277,181	100.0	%

Adjusted EBITDA (1)
Corporate Client Group	$	20,259	56.1	%	$	17,785	66.1	%
Individual Client Group		12,615	34.9	%		7,820	29.1	%
Advisor Services Group		3,257	9.0	%		1,291	4.8	%
Consolidated	$	36,131	100.0	%	$	26,896	100.0	%

		For the Three Months Ended
		December 31,
		2010
Organic revenue growth
	Corporate Client Group	4.6%
	Individual Client Group	0.0%
	Advisor Services Group	32.9%
	Consolidated	8.6%

(1)

The reconciliation of Adjusted EBITDA per reportable segment does not include the following items, which are not allocated to any of the Company’s reportable segments: income tax expense, interest income, interest expense, gain on early extinguishment of debt and other, net. These items are included in the reconciliation of Adjusted EBITDA to net income on a consolidated basis.

NATIONAL FINANCIAL PARTNERS CORP.

CONDENSED STATEMENTS OF OPERATIONS, ADJUSTED EBITDA AND ORGANIC REVENUE GROWTH

FOR YEAR-TO-DATE PERIODS

(Unaudited - dollars in thousands)

	Corporate Client Group						Individual Client Group						Advisor Services Group				Total
	For the Year-to-Date Period Ended						For the Year-to-Date Period Ended						For the Year-to-Date Period Ended				For the Year-to-Date Period Ended
	December 31,			December 31,			December 31,			December 31,			December 31,		December 31,		December 31,			December 31,
	2010			2009			2010			2009			2010		2009		2010			2009
Revenue:
Commissions and fees	$	387,855		$	379,980		$	378,847		$	397,314		$	215,215	$	170,991	$	981,917		$	948,285

Operating expenses:
Commissions and fees		36,989			34,397			89,492			84,335			177,313		145,215		303,794			263,947
Compensation expense		130,291			132,465			110,543			119,829			15,347		16,041		256,181			268,335
Non-compensation expense		75,180			75,823			67,626			77,169			13,732		6,531		156,538			159,523
Management fees		80,780			70,507			81,178			75,674			—		—		161,958			146,181
Amortization of intangibles		21,398			22,959			11,615			13,592			—		—		33,013			36,551
Depreciation		6,298			9,277			4,458			8,885			1,367		1,080		12,123			19,242
Impairment of goodwill and intangible assets		1,931			354,408			970			264,057			—		—		2,901			618,465
(Gain) Loss on sale of business, net		(8,058	)		7			(2,237	)		(2,103	)		—		—		(10,295	)		(2,096	)
Total operating expenses		344,809			699,843			363,645			641,438			207,759		168,867		916,213			1,510,148
Income (loss) from operations	$	43,046		$	(319,863	)	$	15,202		$	(244,124	)	$	7,456	$	2,124	$	65,704		$	(561,863	)

	For the Year-to-Date Period Ended
	December 31,				December 31,
	2010				2009
Revenue
Corporate Client Group	$	387,855	39.5	%	$	379,980	40.1	%
Individual Client Group		378,847	38.6	%		397,314	41.9	%
Advisor Services Group		215,215	21.9	%		170,991	18.0	%
Consolidated	$	981,917	100.0	%	$	948,285	100.0	%

Adjusted EBITDA (1)
Corporate Client Group	$	72,009	61.6	%	$	66,788	60.6	%
Individual Client Group		36,009	30.8	%		40,307	36.5	%
Advisor Services Group		8,823	7.6	%		3,204	2.9	%
Consolidated	$	116,841	100.0	%	$	110,299	100.0	%

	For the Year-to-Date Period Ended
	December 31,
	2010

Organic revenue growth
Corporate Client Group		5.8	%
Individual Client Group		1.8	%
Advisor Services Group		17.7	%
Consolidated		6.9	%

(1)

NATIONAL FINANCIAL PARTNERS CORP.

HISTORICAL CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER FINANCIAL METRICS

FOR YEAR-TO-DATE PERIODS

(Unaudited - in thousands)

	For the Year-to-Date Period Ended
	December 31,			December 31,			December 31,			December 31,
	2010			2009			2008			2007
Revenue:
Commissions and fees	$	981,917		$	948,285		$	1,150,387		$	1,194,293

Operating expenses:
Commissions and fees		303,794			263,947			362,868			386,460
Compensation expense		256,181			268,335			291,753			261,717
Non-compensation expense		156,538			159,523			181,404			168,387
Management fees		161,958			146,181			170,683			211,825
Amortization of intangibles		33,013			36,551			39,194			34,303
Depreciation		12,123			19,242			13,371			11,010
Impairment of goodwill and intangible assets		2,901			618,465			41,257			7,877
(Gain) Loss on sale of business, net		(10,295	)		(2,096	)		(7,663	)		11,182
Total operating expenses		916,213			1,510,148			1,092,867			1,092,761
Income (loss) from operations		65,704			(561,863	)		57,520			101,532

Non-operating income and expenses
Interest income		3,854			3,077			4,854			7,920
Interest expense		(18,533	)		(20,567	)		(21,764	)		(18,620	)
Gain on early extinguishment of debt		9,711			—			—			—
Other, net		8,303			11,583			1,199			1,125
Non-operating income and expenses, net		3,335			(5,907	)		(15,711	)		(9,575	)
Income (loss) before income taxes		69,039			(567,770	)		41,809			91,957

Income tax expense (benefit)		26,481			(74,384	)		33,338			43,204
Net income (loss)	$	42,558		$	(493,386	)	$	8,471		$	48,753

Cash Earnings Reconciliation
GAAP net income (loss)	$	42,558		$	(493,386	)	$	8,471		$	48,753
Amortization of intangibles		33,013			36,551			39,194			34,303
Depreciation		12,123			19,242			13,371			11,010
Impairment of goodwill and intangible assets		2,901			618,465			41,257			7,877
Tax benefit of impairment of goodwill and intangible assets		(1,147	)		(90,608	)		(8,137	)		(1,899	)
Non-cash interest, net of tax		5,094			6,814			6,364			5,481
Accelerated vesting of certain RSUs, net of tax		8,174			—			—			—
Gain on early extinguishment of debt, net of tax		(5,914	)		—			—			—
Cash earnings	$	96,802		$	97,078		$	100,520		$	105,525
Management agreement buyout, net of tax		—			—			—			7,681
Cash earnings excluding management agreement buyout, net of tax	$	96,802		$	97,078		$	100,520		$	113,206

Adjusted EBITDA Reconciliation
GAAP net income (loss)	$	42,558		$	(493,386	)	$	8,471		$	48,753
Income tax expense (benefit)		26,481			(74,384	)		33,338			43,204
Interest income		(3,854	)		(3,077	)		(4,854	)		(7,920	)
Interest expense		18,533			20,567			21,764			18,620
Gain on early extinguishment of debt		(9,711	)		—			—			—
Other, net		(8,303	)		(11,583	)		(1,199	)		(1,125	)
Income (loss) from operations		65,704			(561,863	)		57,520			101,532
Amortization of intangibles		33,013			36,551			39,194			34,303
Depreciation		12,123			19,242			13,371			11,010
Impairment of goodwill and intangible assets		2,901			618,465			41,257			7,877
(Gain) Loss on sale of business, net		(10,295	)		(2,096	)		(7,663	)		11,182
Accelerated vesting of certain RSUs		13,395			—			—			—
Adjusted EBITDA	$	116,841		$	110,299		$	143,679		$	165,904
Adjusted EBITDA as a % of revenue		11.9	%		11.6	%		12.5	%		13.9	%

Calculation of Management Fees %
Income (loss) from operations	$	65,704		$	(561,863	)	$	57,520		$	101,532
Basic management fees		129,512			130,211			165,035			197,406
Principal Incentive Plan (PIP) management fees		5,006			9,014			—			—
Stock-based compensation management fees		4,790			2,145			1,858			895
Accelerated vesting of certain RSUs		13,395			—			—			—
Incentive and other management fees		9,255			4,811			3,790			13,524
Total management fees		161,958			146,181			170,683			211,825
Amortization of intangibles		33,013			36,551			39,194			34,303
Depreciation		12,123			19,242			13,371			11,010
Impairment of goodwill and intangible assets		2,901			618,465			41,257			7,877
(Gain) Loss on sale of business, net		(10,295	)		(2,096	)		(7,663	)		11,182
Income before management fees		265,404			256,480			314,362			377,729
Corporate income		30,342			37,693			41,556			36,252
Adjusted income before management fees	$	295,746		$	294,173		$	355,918		$	413,981

Basic management fees as % of adjusted income before management fees		43.8	%		44.3	%		46.4	%		47.7	%

Total management fees as % of adjusted income before management fees		54.8	%		49.7	%		48.0	%		51.2	%

Total management fees (excluding Accelerated vesting of certain RSUs)	$	148,563		$	146,181		$	170,683		$	211,825

Total management fees (excluding Accelerated vesting of certain RSUs) as % of adjusted income before management fees		50.2	%		49.7	%		48.0	%		51.2	%

NATIONAL FINANCIAL PARTNERS CORP.

HISTORICAL CONDENSED STATEMENTS OF OPERATIONS AND OTHER FINANCIAL METRICS

FOR YEAR-TO-DATE PERIODS - CORPORATE CLIENT GROUP

(Unaudited - in thousands)

	For the Year-to-Date Period Ended
	December 31,			December 31,			December 31,			December 31,
	2010			2009			2008			2007

Revenue:
Commissions and fees	$	387,855		$	379,980		$	404,973		$	360,760

Operating expenses:
Commissions and fees		36,989			34,397			44,964			53,842
Compensation expense		130,291			132,465			134,176			111,001
Non-compensation expense		75,180			75,823			77,065			59,581
Management fees		80,780			70,507			67,930			66,172
Amortization of intangibles		21,398			22,959			23,428			18,486
Depreciation		6,298			9,277			5,613			4,107
Impairment of goodwill and intangible assets		1,931			354,408			6,735			—
(Gain) Loss on sale of business, net		(8,058	)		7			(7,236	)		12,645
Total operating expenses		344,809			699,843			352,675			325,834
Income (loss) from operations		43,046			(319,863	)		52,298			34,926


Adjusted EBITDA Reconciliation
Income (loss) from operations	$	43,046		$	(319,863	)	$	52,298		$	34,926
Amortization of intangibles		21,398			22,959			23,428			18,486
Depreciation		6,298			9,277			5,613			4,107
Impairment of goodwill and intangible assets		1,931			354,408			6,735			—
(Gain) Loss on sale of business, net		(8,058	)		7			(7,236	)		12,645
Accelerated vesting of certain RSUs		7,394			—			—			—
Adjusted EBITDA	$	72,009		$	66,788		$	80,838		$	70,164
Adjusted EBITDA as a % of revenue		18.6	%		17.6	%		20.0	%		19.4	%

Calculation of Management Fees %
Income (loss) from operations	$	43,046		$	(319,863	)	$	52,298		$	34,926
Basic management fees		62,820			62,608			66,615			67,782
Principal Incentive Plan (PIP) management fees		1,939			2,041			—			—
Stock-based compensation management fees		2,750			1,581			1,272			577
Accelerated vesting of certain RSUs		7,394			—			—			—
Incentive and other management fees		5,877			4,277			43			(2,187	)
Total management fees		80,780			70,507			67,930			66,172
Amortization of intangibles		21,398			22,959			23,428			18,486
Depreciation		6,298			9,277			5,613			4,107
Impairment of goodwill and intangible assets		1,931			354,408			6,735			—
(Gain) Loss on sale of business, net		(8,058	)		7			(7,236	)		12,645
Income before management fees		145,395			137,295			148,768			136,336
Corporate income		24,537			29,091			25,175			19,403
Adjusted income before management fees	$	169,932		$	166,386		$	173,943		$	155,739

Basic management fees as % of adjusted income before management fees		37.0	%		37.6	%		38.3	%		43.5	%

Total management fees as % of adjusted income before management fees		47.5	%		42.4	%		39.1	%		42.5	%

Total management fees (excluding Accelerated vesting of certain RSUs)	$	73,386		$	70,507		$	67,930		$	66,172

Total management fees (excluding Accelerated vesting of certain RSUs) as % of adjusted income before management fees		43.2	%		42.4	%		39.1	%		42.5	%

NATIONAL FINANCIAL PARTNERS CORP.

HISTORICAL CONDENSED STATEMENTS OF OPERATIONS AND OTHER FINANCIAL METRICS

FOR YEAR-TO-DATE PERIODS - INDIVIDUAL CLIENT GROUP

(Unaudited - in thousands)

	For the Year-to-Date Period Ended
	December 31,			December 31,			December 31,			December 31,
	2010			2009			2008			2007
Revenue:
Commissions and fees	$	378,847		$	397,314		$	538,295		$	639,690

Operating expenses:
Commissions and fees		89,492			84,335			141,384			169,985
Compensation expense		110,543			119,829			134,933			128,722
Non-compensation expense		67,626			77,169			93,784			97,227
Management fees		81,178			75,674			102,753			145,653
Amortization of intangibles		11,615			13,592			15,766			15,817
Depreciation		4,458			8,885			6,883			6,120
Impairment of goodwill and intangible assets		970			264,057			34,522			7,877
Gain on sale of business, net		(2,237	)		(2,103	)		(427	)		(1,463	)
Total operating expenses		363,645			641,438			529,598			569,938
Income (loss) from operations	$	15,202		$	(244,124	)	$	8,697		$	69,752


Adjusted EBITDA Reconciliation
Income (loss) from operations	$	15,202		$	(244,124	)	$	8,697		$	69,752
Amortization of intangibles		11,615			13,592			15,766			15,817
Depreciation		4,458			8,885			6,883			6,120
Impairment of goodwill and intangible assets		970			264,057			34,522			7,877
Gain on sale of business, net		(2,237	)		(2,103	)		(427	)		(1,463	)
Accelerated vesting of certain RSUs		6,001			—			—			—
Adjusted EBITDA	$	36,009		$	40,307		$	65,441		$	98,103
Adjusted EBITDA as a % of revenue		9.5	%		10.1	%		12.2	%		15.3	%

Calculation of Management Fees %
Income from operations	$	15,202		$	(244,124	)	$	8,697		$	69,752
Basic management fees		66,692			67,603			98,420			129,624
Principal Incentive Plan (PIP) management fees		3,067			6,973			—			—
Stock-based compensation management fees		2,040			564			586			318
Accelerated vesting of certain RSUs		6,001			—			—			—
Incentive and other management fees		3,378			534			3,747			15,711
Total management fees		81,178			75,674			102,753			145,653
Amortization of intangibles		11,615			13,592			15,766			15,817
Depreciation		4,458			8,885			6,883			6,120
Impairment of goodwill and intangible assets		970			264,057			34,522			7,877
(Gain) Loss on sale of business, net		(2,237	)		(2,103	)		(427	)		(1,463	)
Income before management fees		111,186			115,981			168,194			243,756
Corporate income		14,628			11,806			13,781			14,486
Adjusted income before management fees	$	125,814		$	127,787		$	181,975		$	258,242

Basic management fees as % of adjusted income before management fees		53.0	%		52.9	%		54.1	%		50.2	%

Total management fees as % of adjusted income before management fees		64.5	%		59.2	%		56.5	%		56.4	%

Total management fees (excluding Accelerated vesting of certain RSUs)	$	75,177		$	75,674		$	102,753		$	145,653

Total management fees (excluding Accelerated vesting of certain RSUs) as % of adjusted income before management fees		59.8	%		59.2	%		56.5	%		56.4	%

NATIONAL FINANCIAL PARTNERS CORP.

HISTORICAL CONDENSED STATEMENTS OF OPERATIONS AND OTHER FINANCIAL METRICS

FOR YEAR-TO-DATE PERIODS - ADVISOR SERVICES GROUP

(Unaudited - in thousands)

	For the Year-to-Date Period Ended
	December 31,			December 31,			December 31,			December 31,
	2010			2009			2008			2007

Revenue:
Commissions and fees	$	215,215		$	170,991		$	207,119		$	193,843

Operating expenses:
Commissions and fees		177,313			145,215			176,520			162,633
Compensation expense		15,347			16,041			22,644			21,994
Non-compensation expense		13,732			6,531			10,555			11,579
Management fees		—			—			—			—
Amortization of intangibles		—			—			—			—
Depreciation		1,367			1,080			875			783
Impairment of goodwill and intangible assets		—			—			—			—
Loss on sale of business, net		—			—			—			—
Total operating expenses		207,759			168,867			210,594			196,989
Income (loss) from operations	$	7,456		$	2,124		$	(3,475	)	$	(3,146	)

Adjusted EBITDA Reconciliation
Income (loss) from operations	$	7,456		$	2,124		$	(3,475	)	$	(3,146	)
Amortization of intangibles		—			—			—			—
Depreciation		1,367			1,080			875			783
Impairment of goodwill and intangible assets		—			—			—			—
Loss on sale of business, net		—			—			—			—
Accelerated vesting of certain RSUs		—			—			—			—
Adjusted EBITDA	$	8,823		$	3,204		$	(2,600	)	$	(2,363	)
Adjusted EBITDA as a % of revenue		4.1	%		1.9	%		-1.3	%		-1.2	%

Calculation of Management Fees %
Income from operations	$	7,456		$	2,124		$	(3,475	)	$	(3,146	)
Basic management fees		—			—			—			—
Principal Incentive Plan (PIP) management fees		—			—			—			—
Stock-based compensation management fees		—			—			—			—
Accelerated vesting of certain RSUs		—			—			—			—
Incentive and other management fees		—			—			—			—
Total management fees		—			—			—			—
Amortization of intangibles		—			—			—			—
Depreciation		1,367			1,080			875			783
Impairment of goodwill and intangible assets		—			—			—			—
Loss (Gain) on sale of business, net		—			—			—			—
Income (loss) before management fees		8,823			3,204			(2,600	)		(2,363	)
Corporate income (1)		(8,823	)		(3,204	)		2,600			2,363
Adjusted income before management fees	$	—		$	—		$	—		$	—

Basic management fees as % of adjusted income before management fees	NM			NM			NM			NM

Total management fees as % of adjusted income before management fees	NM			NM			NM			NM

Total management fees (excluding Accelerated vesting of certain RSUs)	$	—		$	—		$	—		$	—

Total management fees (excluding Accelerated vesting of certain RSUs) as % of adjusted income before management fees	NM			NM			NM			NM

NM indicates metric not meaningful

(1)	Represents non-management fee generating income

NATIONAL FINANCIAL PARTNERS CORP.

CORPORATE OVERVIEW

(Unaudited - dollars in thousands, except per share data)

	At or for the Three Months Ended						For the Years Ended
	December 31,			December 31,			December 31,			December 31,
	2010			2009			2010			2009
GAAP net income (loss)	$	15,269		$	1,851		$	42,558		$	(493,386	)
Amortization of intangibles		8,211			8,806			33,013			36,551
Depreciation		3,095			8,857			12,123			19,242
Impairment of goodwill and intangible assets		—			6,231			2,901			618,465
Tax benefit of impairment of goodwill and intangible assets		(15	)		(1,133	)		(1,147	)		(90,608	)
Non-cash interest, net of tax		802			1,559			5,094			6,814
Accelerated vesting RSUs, net of tax		—			—			8,174			—
Gain on debt, net of tax		—			—			(5,914	)		—
Cash earnings	$	27,362		$	26,171		$	96,802		$	97,078


GAAP net income (loss) per share - diluted	$	0.34		$	0.04		$	0.96		$	(12.02	)
Amortization of intangibles		0.18			0.20			0.75			0.87
Depreciation		0.07			0.21			0.27			0.46
Impairment of goodwill and intangible assets		—			0.14			0.07			14.78
Tax benefit of impairment of goodwill and intangible assets		—			(0.03	)		(0.03	)		(2.16	)
Non-cash interest, net of tax		0.02			0.04			0.12			0.16
Accelerated vesting RSUs, net of tax		—			—			0.19			—
Gain on debt, net of tax		—			—			(0.13	)		—
Impact of diluted shares on cash earnings not reflected in GAAP net loss per share - diluted (1)		—			—			-			0.23
Cash earnings per share - diluted (2)	$	0.60		$	0.61		$	2.19		$	2.32


Shares outstanding, beginning of period		43,574			41,201			41,363			39,753
Common shares issued for acquisitions during period		—			—			—			—
Common shares issued for contingent consideration and escrow during period		—			106			648			1,084
Common shares issued for stock-based awards during period		74			42			1,821			266
Common shares repurchased during period		(172	)		(23	)		(445	)		(91	)
Common shares issued under ongoing incentive program		—			—			—			—
Other		26			37			115			351
Shares outstanding, end of period		43,502			41,363			43,502			41,363

Weighted average common shares outstanding		43,654			41,363			42,634			40,908
Dilutive effect of contingent consideration and ongoing incentive payments		16			593			16			593
Dilutive effect of stock-based awards		1,386			1,147			1,484			343
Dilutive effect of escrow, stock subscriptions and other		3			6			2			(2	)
Dilutive effect of senior convertible notes		215			—			—			—
Weighted average common shares outstanding - diluted (1)		45,274			43,109			44,136			41,842

Debt to total capitalization		33.6	%		41.8	%		33.6	%		41.8	%

Total NFP owned businesses at period end		145			154			145			154

(1)

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 anti-dilutive effects of other items caused by a GAAP net loss position. However, in periods which the Company reports positive cash earnings with a GAAP net loss, the Company uses weighted average common shares outstanding – diluted to calculate cash earnings per share – diluted only.

(2)	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.

NATIONAL FINANCIAL PARTNERS CORP.

ACQUISITION & DISPOSITION METRICS FOR QUARTERLY AND YEAR-TO-DATE PERIODS

(Unaudited - dollars in thousands)

	For the Three Months Ended
	December 31,		December 31,
	2010		2009
Number of acquisitions closed		1		2
Consideration:
Cash	$	514	$	—
Common stock		—		—
Other		—		—
Total consideration paid (1)	$	514	$	—
Target earnings of acquired firms	$	50	$	—
Base earnings of acquired firms	$	51	$	—

	For the Year-to-Date Period Ended
	December 31,		December 31,
	2010		2009
Number of acquisitions closed		4		3
Consideration:
Cash	$	776	$	279
Common stock		—		—
Other		—		186
Total consideration paid (1)	$	776	$	465
Target earnings of acquired firms	$	166	$	148
Base earnings of acquired firms	$	122	$	88

	For the Three Months Ended
	December 31,		December 31,
	2010		2009
Disposed businesses' performance metrics (2)
Revenue
Corporate Client Group	$	—	$	3,530
Individual Client Group		—		5,736
Advisor Services Group		—		—
Consolidated	$	—	$	9,266

Adjusted EBITDA
Corporate Client Group	$	—	$	563
Individual Client Group		—		260
Advisor Services Group		—		—
Consolidated	$	—	$	823

	For the Year-to-Date Period Ended
	December 31,		December 31,
	2010		2009
Disposed businesses
Acquired between 01/1999 - 12/2005
Corporate Client Group		3		5
Individual Client Group		9		28
Advisor Services Group		—		—
Consolidated		12		33

Acquired between 01/2006 - current
Corporate Client Group		—		—
Individual Client Group		—		1
Advisor Services Group		—		—
Consolidated		—		1

(1)	Total consideration paid may not sum sequentially due to post-closing adjustments made relating to prior period acquisitions. Total consideration includes amounts paid by both NFP and the principals for acquisitions and sub-acquisitions.

(2)	Represents revenue and Adjusted EBITDA for all firms disposed as of the period ended September 30, 2010 and for these firms for the prior periods. The reported figures may change in future periods as a result of the change in the set of firms disposed in future quarters.

NATIONAL FINANCIAL PARTNERS CORP.

INTANGIBLES AND GOODWILL DATA

(Unaudited - in thousands)

	At or for the Three Months Ended
	December 31,		December 31,
	2010		2009
Intangible Assets:
Book of business	$	84,964	$	104,669
Management contracts		237,401		258,456
Trade name		4,782		4,831
Institutional customer relationships		10,685		11,557
Goodwill		60,894		63,887
Total intangible assets and goodwill	$	398,726	$	443,400

Amortization Expense & Impairment Loss:
Book of business	$	4,737	$	5,102
Management contracts		3,256		9,342
Trade name		—		83
Institutional customer relationships		218		218
Goodwill		—		292
Total amortization expense & impairment loss	$	8,211	$	15,037

NATIONAL FINANCIAL PARTNERS CORP.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (BALANCE SHEET)

(Unaudited - in thousands)

	At
	December 31,			December 31,
	2010			2009
ASSETS
Current assets:
Cash and cash equivalents	$	128,830		$	55,994
Fiduciary funds - restricted relating to premium trust
accounts		82,647			75,931
Commissions, fees and premiums receivable, net		120,572			129,833
Due from principals and/or certain entities they own		7,981			14,075
Notes receivable, net		6,128			9,731
Deferred tax assets		13,865			14,283
Other current assets		17,442			14,435
Total current assets		377,465			314,282
Property and equipment, net		37,359			37,291
Deferred tax assets		5,836			5,820
Intangibles, net		337,833			379,513
Goodwill, net		60,894			63,887
Notes receivable, net		30,724			28,714
Other non-current assets		42,952			39,744
Total assets	$	893,063		$	869,251

LIABILITIES
Current liabilities:
Premiums payable to insurance carriers	$	83,091		$	77,941
Borrowings		—			40,000
Current portion of long term debt		12,500			—
Income taxes payable		—			6,325
Due to principals and/or certain entities they own		37,406			34,106
Accounts payable		36,213			24,337
Accrued liabilities		55,673			73,105
Total current liabilities		224,883			255,814
Long term debt		106,250			-
Deferred tax liabilities		1,552			4,380
Convertible senior notes		87,581			204,548
Other non-current liabilities		64,585			64,472
Total liabilities		484,851			529,214

STOCKHOLDERS' EQUITY
Preferred stock at par value		—			—
Common stock at par value		4,596			4,414
Additional paid-in capital		902,153			876,563
Accumulated deficit		(425,063	)		(438,109	)
Treasury stock		(73,458	)		(102,930	)
Accumulated other comprehensive (loss) income		(16	)		99
Total stockholders' equity		408,212			340,037
Total liabilities and stockholders' equity	$	893,063		$	869,251

NATIONAL FINANCIAL PARTNERS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR QUARTERLY AND YEAR-TO-DATE PERIODS

(Unaudited - in thousands)

	At or for the Three Months Ended						For the Year-to-Date Period Ended
	December 31,			December 31,			December 31,			December 31,
	2010			2009			2010			2009
Cash flow from operating activities:
Net income (loss)	$	15,269		$	1,851		$	42,558		$	(493,386	)

Adjustments to reconcile to net cash provided by (used in) operating activities:
Deferred taxes		1,774			(14,514	)		2,058			(101,514	)
Stock-based compensation		1,660			3,083			17,336			10,526
Impairment of goodwill and intangible assets		—			6,231			2,901			618,465
Amortization of intangibles		8,211			8,806			33,013			36,551
Depreciation		3,095			8,857			12,123			19,242
Accretion of senior convertible notes discount		1,260			2,781			8,287			11,073
(Gain) loss on sale of businesses		(274	)		(244	)		(10,295	)		(2,096	)
Loss on sublease		—			8,201			1,766			8,201
Bad debt expense		2,331			1,854			5,028			2,622
Gain on early extinguishment of debt		—			—			(9,711	)		—
Other, net		(1,967	)		—			(3,460	)		—

(Increase) decrease in operating assets:
Fiduciary funds - restricted relating to premium trust accounts		8,465			(93	)		(6,716	)		(822	)
Commissions, fees and premiums receivable, net		(21,712	)		(28,538	)		7,032			10,382
Due from principals and/or certain entities they own		6,406			7,906			4,567			4,516
Notes receivable, net - current		1,884			(2,570	)		3,603			(3,275	)
Other current assets		4,667			3,837			(2,990	)		3,441
Notes receivable, net - non-current		(323	)		3,988			(8,068	)		1,011
Other non-current assets		1,075			479			1,755			(1,353	)

Increase (decrease) in operating liabilities:
Premiums payable to insurance carriers		(13,265	)		(4,642	)		5,150			4,782
Income taxes payable		(123	)		6,325			2,351			6,314
Due to principals and/or certain entities they own		9,649			10,129			1,142			(11,943	)
Accounts payable		18,112			3,119			14,099			(4,006	)
Accrued liabilities		(5,456	)		19,672			(3,551	)		11,197
Other non-current liabilities		2,322			(5,692	)		(546	)		(6,108	)
Total adjustments		27,791			38,975			76,874			617,206
Net cash provided by operating activities		43,060			40,826			119,432			123,820

Cash flow from investing activities:
Proceeds from disposal of businesses		(3	)		5,109			5,670			16,106
Purchases of property and equipment, net		(3,092	)		(2,177	)		(12,376	)		(7,120	)
Proceeds from (payments for) acquired firms, net of cash		(356	)		—			305			1,233
Payments for contingent consideration		(2,518	)		(1,448	)		(13,302	)		(4,287	)
Change in restricted cash		—			(10,000	)		10,000			(10,000	)
Net cash (used in) provided by investing activities		(5,969	)		(8,516	)		(9,703	)		(4,068	)

Cash flow from financing activities:
Repayments of borrowings		—			(35,000	)		(40,000	)		(108,000	)
Proceeds from long term debt		—			—			125,000			—
Repayment of long term debt		(3,125	)		—			(6,250	)		—
Long term debt costs		(94	)		—			(4,017	)		—
Proceeds from issuance of senior convertible notes		—			—			125,000			—
Senior convertible notes issuance costs		6			—			(4,123	)		—
Repayment of senior convertible notes		—			—			(219,650	)		—
Senior convertible notes tender offer costs		—			—			(800	)		—
Purchase of call options		—			—			(33,913	)		—
Sale of warrants		—			—			21,025			—
Proceeds from stock-based awards, including tax benefit		119			(1,236	)		3,010			(3,955	)
Shares cancelled to pay withholding taxes		(51	)		(164	)		(2,107	)		(374	)
Payments for treasury stock repurchase		—			—			—			—
Dividends paid		(1	)		—			(68	)		(50	)
Net cash used in (provided by) financing activities		(3,146	)		(36,400	)		(36,893	)		(112,379	)
Net increase (decrease) in cash and cash equivalents		33,945			(4,090	)		72,836			7,373
Cash and cash equivalents, beginning of period		94,885			60,084			55,994			48,621
Cash and cash equivalents, end of the period	$	128,830		$	55,994		$	128,830		$	55,994

Supplemental disclosures of cash flow information
Cash paid for income taxes	$	1,103		$	5,719		$	27,203		$	23,729
Cash paid for interest	$	3,503		$	854		$	6,784		$	6,625

NATIONAL FINANCIAL PARTNERS CORP.

DEFINED TERMS

Accelerated Vesting of certain RSUs:	Portion of Total Management Fees attributed to accelerated vesting of approximately 1.5 million RSUs granted to certain principals. The accelerated vesting occurred on September 17, 2010.

Adjusted EBITDA:	Net income excluding income tax expense, interest income, interest expense, gain on early extinguishment of debt, other, net, amortization of intangibles, depreciation, impairment of goodwill and intangible assets, (gain) loss on sale of businesses, pre-tax impact of the accelerated vesting of certain RSUs and any change in estimated contingent consideration amounts recorded in accordance with purchase accounting that have been subsequently adjusted and recorded in the consolidated statement of operations.

Adjusted Income (Loss) before Management Fees:	Income before management fees excluding corporate income.

Base Earnings of Acquired Firms:	Represents the cumulative preferred portion of Target Earnings of Acquired Firms that NFP capitalizes at the time of acquisition of a firm.

Basic Management Fees:	Represents the expense incurred for payments made or amounts owed to NFP principals and/or certain entities they own based on the financial performance of the firms they manage. Basic management fees largely consist of: firm earnings in excess of base earnings up to target earnings, plus a portion of the earnings in excess of target earnings in accordance with the ratio of base earnings to target earnings.

Basic Management Fees Percentage:	Basic Management Fees as a percentage of gross margin before management fees.

Cash Earnings:	Net income excluding amortization of intangibles, depreciation, the after-tax impact of the impairment of goodwill and intangible assets, the after-tax impact of non-cash interest expense and the after-tax impact of certain non-recurring items.

Cash Earnings per Share - Diluted:	Represents Cash Earnings divided by weighted average diluted shares outstanding.

Common Shares Issued for Acquisitions:	Represents the portion of consideration paid in the form of shares of NFP common stock for acquisitions closed during the period presented.

Common Shares Issued for Contingent Consideration and Escrow:	Represents the portion held in escrow or contingent consideration paid in the form of shares of NFP common stock during the period presented.

Common Shares Issued for Stock-Based Awards:	Represents the number of shares of NFP common stock issued under NFP's various Stock Incentive Plans during the period presented.

Common Shares Issued under Ongoing Incentive Program:	Represents the number of shares of NFP common stock issued under NFP's ongoing incentive program.

Common Shares Repurchased:	Represents shares of NFP common stock repurchased during the period, whether in an open market transaction or privately from a firm principal or other stockholder.

Corporate Income:	The allocation of corporate revenue and expenses to businesses where management fees are earned on a standalone basis. Since the Advisor Services Group is primarily comprised of NFPSI, an entity for which no management fees are paid, and earnings are not being shared with principals, all revenue and expenses from the Advisor Services Group are considered a component of Corporate Income.

Debt to Total Capitalization:	Calculated as debt outstanding at the end of the period divided by the sum of debt outstanding and total stockholders' equity at the end of the same period.

Incentive and Other Management Fees:	Largely represents the portion of management fees expense due to accruals for certain performance-based incentive amounts payable under NFP’s ongoing incentive plan, BIP plan (business incentive plan) and other management fee amounts due to principals.

NATIONAL FINANCIAL PARTNERS CORP.

DEFINED TERMS

Income (Loss) before Management Fees:	The Company defines income before management fees as income from operations excluding management fees, amortization, depreciation, impairment of intangible assets and the (gain) loss on sale of businesses. Income before management fees is a metric management utilizes in its evaluation of the profitability of an NFP-owned business before principals receive participation in the earnings.

Intangible Assets - Book of Business:	A portion of the purchase price of acquisitions made by NFP is allocated to book of business. The amount allocated to this component is largely determined by the amount of recurring revenue of the acquired firm. The book of business is amortized on a straight-line basis over a ten-year period.

Intangible Assets - Goodwill:	The residual amount of the purchase price not allocated to book of business, management contracts and trade name is allocated to goodwill. In accordance with GAAP, goodwill and intangible assets deemed to have indefinite lives are not amortized but are reviewed annually (or more frequently if impairment indicators arise) for impairment. Goodwill amortization after January 1, 2002 is entirely related to impairment losses or firms that NFP disposed.

Intangible Assets - Institutional Customer Relationships:	A portion of the purchase price of an acquisition made by NFP is allocated to institutional customer relationships. The value of the asset is derived from recurring revenue generated from these institutional customers in place at the time of the acquisition, net of an allocation of expenses and is assumed to decrease over the life of the asset due to the attrition of the institutional relationships acquired. Institutional customer relationships are amortized on a straight-line basis over an eighteen-year period.

Intangible Assets - Management Contracts:	A portion of the purchase price of acquisitions made by NFP is allocated to management contracts. The amount allocated to this component is largely determined by the amount of non-recurring revenue of the acquired firm as well as an assumption for the lost production of the principal(s) of the firm at retirement. The management contract is amortized on a straight-line basis over a twenty-five year period.

Intangible Assets - Trade Name:	NFP generally allocates approximately 1% of the purchase price of an acquisition to trade name, which is determined to have an indefinite life and, therefore, is not amortized.

Management Fees Percentage (Basic, Total, Total (excluding accelerated vesting of RSUs)):	Applicable management Fees as a percentage of adjusted income before management fees.

Organic Revenue Growth:	The Company uses organic revenue growth as a comparable revenue measurement for future periods. The Company excludes the first twelve months of revenue generated from new acquisitions and the revenue derived from businesses fully disposed of in each period presented. With respect to Sub-Acquisitions, the Company establishes an internal revenue generation expectation (the “acquired revenue”) of a new Sub-Acquisition. During the first twelve months immediately following the Sub-Acquisition, the Company reduces the acquired revenue amount from the actual revenue generated by the Sub-Acquisition and includes the revenue growth above or below acquired revenue within the organic growth percentage. With respect to situations where a significant portion of a business' assets have been disposed, the Company reduces the prior year’s comparable revenue proportionally to the percentage of assets that have been disposed to facilitate an equitable organic growth comparison.

Principal Incentive Plan (PIP) Management Fees:	Represents the expense incurred due to accruals for certain performance-based incentive amounts payable under NFP’s Principal Incentive Plan (PIP).

Stock-based Compensation Management Fees:	Represents the portion of management fee expense for stock awards issued to NFP’s principals.

Sub-Acquisitions:	A transaction in which an existing NFP-owned business acquires a new entity or book of business.

Target Earnings of Acquired Firms:	Represents the target business’s annual earnings, before interest, taxes, depreciation and amortization, and adjusted for expenses that will not continue post-acquisition, such as compensation to former owners who become principals (“Target EBITDA”). The target business’s Target EBITDA is considered “target earnings,” typically two times “base earnings.”

Total Management Fees:	Represents the payments made to NFP principals and/or certain entities they own based on the financial performance of the firms they manage. Management Fees include: Basic Management Fees, Principal Incentive Plan (PIP) Management Fees, Stock-based Compensation Management Fees, Accelerated vesting of certain RSUs and Incentive and Other Management Fees.

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NATIONAL FINANCIAL PARTNERS CORP Reports