February 10, 2009 / 11:26 PM / 10 years ago

UPDATE 2-National Financial Partners Q4 cash profit tops Street

* Q4 cash earnings $0.70/shr vs estimate of $0.62

* Gross margin up 1.7 basis points sequentially at 19.2 pct

* Q4 net loss $0.26/shr, hurt by charge

* Q4 rev falls 16 pct to $299.3 mln (Recasts; adds details, analyst comments, background)

By Anurag Kotoky

BANGALORE, Feb 10 (Reuters) - Life insurance distributor National Financial Partners NFP.N posted a quarterly cash profit that beat market estimates, helped by a sequential growth in gross margin.

The company posted a net loss of $10.7 million, compared with a profit of $19.3 million a year earlier. The fourth-quarter loss included a goodwill impairment charge of $31 million.

But the company’s quarterly cash profit, which excludes amortization of intangibles, depreciation, and charges, exceeded market estimates.

Though the overall operating environment still remains very challenging, and organic growth was significantly negative, the company managed to come out better than expectations in terms of earnings on improved margins, Jukka Lipponen, an analyst with Keefe, Bruyette & Woods told Reuters.

However, with employment taking a hit in the fourth quarter, payroll growth at the company has suffered, Lipponen said.

Payroll growth is likely to be negative in the first and second quarter as well, the analyst added.

Same-store revenue fell 17 percent to $228.9 million for the fourth quarter, the company, headed by Jessica Bibliowicz — the daughter of former Citigroup Inc (C.N) CEO Sandy Weill — said.

“It is very difficult (to improve sales) given the volatility and other macro factors, particularly in the life insurance business in the overall market... it will put pressure on their top-line,” said Lipponen.

National Financial, a distributor of financial services products to wealthy consumers, has been battling weak sales over the last few quarters. The company’s problems have been compounded by the possibility that it may breach its debt covenants.

In November, financial publication Barron’s said insurance agents who have sold their practices to National Financial fear the company could run out of cash in 2009, as life insurance sales at the firm’s established agencies had declined heavily.

If the company’s fundamentals face further deterioration, the company is in the risk of violating one of its debt covenants, Lipponen, who has an “market perform” rating on the company’s stock, said.

In December, National Financial said its lenders had amended its covenants to a certain extent that “provides for greater flexibility with respect to the maximum consolidated leverage ratio.”

Shares of the New York-based company closed at $2.12 Tuesday on the New York Stock Exchange. They have shed 93 percent of their value in the past 52 weeks. (Editing by Pratish Narayanan)

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