Earnings rebounded at National Financial Partners in the second quarter as its aggressive acquisition plan helped offset the costs of an internal review in response to subpoenas from regulators.
Jessica Bibliowicz, the New York company's chairman and chief executive officer, said in a conference call Wednesday that the company had added $25.7 million to base annual earnings through 25 acquisitions this year. This is the biggest acquisition year for National Financial since its founding in 1998, she said.
During the quarter, National Financial bought nine companies with $13.2 million of aggregate base earnings. The quarter's purchases exceeded the $13 million minimum of acquired base earnings budgeted for the full year.
"The pipeline is healthy," Ms. Bibliowicz said. "The number of high-quality firms is indeed growing. That $13 million to $15 million number each year is a number that we are very comfortable with."
Including the acquisitions, revenue rose 35% in the quarter, to $204.8 million, compared with the year earlier. Net income, which slid in the first quarter, grew by 21.6% to $12.4 million, and cash earnings rose 22.8%, to $22.1 million.
The acquisitions helped offset a $2 million charge in the quarter to pay for an internal review. The nonrecurring expense is the same as the one taken in the first quarter for a review begun in response to six subpoenas last October from the New York Attorney General's office. The subpoenas were in connection with an investigation of whether the company asked insurers to give "fictitious or inflated quotes" to clients or that it misrepresented quotes to clients.
The review found no evidence to support an assertion of bid-rigging, the company said.
Mark C. Biderman, an executive vice president and chief financial officer, said that though National Financial cannot predict what is coming from the New York Attorney General's office or any other regulator, the company's expansion will not be affected.
"We are in a growth mode that has taken place for two years as we build up staff in accounting and internal audit and the like," he said.
In April, the purchase of Highland Capital Holding Corp., a life insurance brokerage, completed National Financial's largest deal. Highland added 21 brokerage offices and $6.1 million of base earnings to National Financial's network of companies distributing financial services products to high-net-worth investors.
Ms. Bibliowicz said that, since the Highland closing, her company has added five companies with $4.2 million of base earnings.
