Post on 23-Mar-2018
INTERIM RESULTS July 2017
DAVID BELLAMY Chief Executive
Agenda
New Business Update
Financial Performance
The Future
Q&A
Half-year results
‘It’s an understatement to say that it’s been a
very unusual and unprecedented six months with much
volatility, increasing uncertainty, political hostility
and a somewhat divided population’
‘Nevertheless, we are a resilient bunch… and a month
post Brexit, we are beginning to see some
order being restored.’
Half-year results
‘It’s an understatement to say that it’s been a
very unusual and unprecedented six months with much
volatility, increasing uncertainty, political hostility
and a somewhat divided population’
‘Nevertheless, we are a resilient bunch… and a month post
General Election, we are beginning to see some
order being restored.’
+35% +9% +9%
+21% +16%
+17%
+23%
+30%
£0bn
£2bn
£4bn
£6bn
£8bn
£10bn
£12bn
2010 2011 2012 2013 2014 2015 2016 2017 June
Gross Inflows
Up 30% at £6.9bn
+34% -11% +31%
+30% +10% +4%
+28%
+20% +14%
+17%
+40%
£0bn
£2bn
£4bn
£6bn
£8bn
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017June
Up 40% at £4.3bn
Net Inflows
Funds under management
+34% +20% +29% +25% +18% -10%
+31% +26% +6%
+22%
+27%
+17% +13%
+28%
+10%
£0bn
£10bn
£20bn
£30bn
£40bn
£50bn
£60bn
£70bn
£80bn
£90bn
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017June
83.0
Up £7.7bn at £83.0bn
1.6 1.7 1.6 1.9 1.9 1.9 2.0 2.1 2.1
2.3 2.3 2.5 2.5
2.8 2.8
3.3 3.2
3.7
Q1 Q2 Q3 Q4
2013 2014 2015 2016 2017
Gross Inflows by quarter (£bn)
2013 over 2012 +28% +22% +27% +11% 2014 over 2013 +15% +17% +19% +12% 2015 over 2014 +12% +17% +20% +20% 2016 over 2015 +16% +23% +21% +30% 2016 over 2017 +32% +29%
0.6 0.7
1.5 1.8
1.2
1.2
13 14 15 16 17 13 14 15 16 17 13 14 15 16 13 14 15 16
Life Pension UT/ISA
Gross Inflows by quarter & wrapper (£bn)
Q1 Q2 Q3 Q4
UTs & ISAs up 32%, Pensions up 33% and Bonds up 20% YTD
0.9 1.0 1.1
1.2 1.2 1.3 1.3 1.4 1.3 1.4
1.5 1.6
1.4
1.7 1.7
2.1 2.0
2.3
Q1 Q2 Q3 Q4
2013 2014 2015 2016 2017
Net Inflows by quarter (£bn)
2013 over 2012 +29% +26% +41% +9% 2014 over 2013 +26% +20% +23% +14% 2015 over 2014 +9% +14% +17% +17% 2016 over 2015 +3% +25% +12% +26% 2016 over 2017 +46% +35%
Funds under management
+34% +20% +29% +25% +18% -10%
+31% +26% +6%
+22%
+27%
+17% +13%
+28%
+10%
£0bn
£10bn
£20bn
£30bn
£40bn
£50bn
£60bn
£70bn
£80bn
£90bn
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017June
83.0
Up £7.7bn at £83.0bn
Drivers of growth
CAPACITY NUMBER OF ADVISERS
PRODUCTIVITY NEW BUSINESS PER ADVISER
NEW BUSINESS
Experienced recruitment
Asia
Academy
Next Generation
Discretionary Fund Management
Personal development
Broadening investment portfolio
SJP Money Management
Discretionary Fund Management
Technical Connection
Intergenerational Mortgage range
Number of Advisers
+10% +9%
+8% +6% +7%
+10% +13%
+10%
+10% +10% +3.7%
0
1000
2000
3000
4000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017June
Up 3.7% at 3,540 advisers
Drivers of growth
CAPACITY NUMBER OF ADVISERS
PRODUCTIVITY NEW BUSINESS PER ADVISER
NEW BUSINESS
Experienced recruitment
Asia
Academy
Next Generation
Discretionary Fund Management
Personal development
Broadening investment portfolio
SJP Money Management
Discretionary Fund Management
Technical Connection
Intergenerational Mortgage range
Adviser Productivity
+3% +0% +9%
+4% +6%
+7%
+19%
£1m
£2m
£3m
£4m
2010 2011 2012 2013 2014 2015 2016 2017 June
Gross inflows per adviser up 19%
Summary
• Gross inflows up 30%
• Net inflows up 40%
• Funds under management at £83 billion
ANDREW CROFT Chief Financial Officer
Agenda
• Cash
• EEV
• Dividend
• Solvency
Post-tax cash result
£’m H1 2017
H1 2016
Net annual management fee 297.8 235.7 +26%
Reduction in fees in gestation period (130.0) (86.9)
Net income from FUM 167.8 148.8
Margin arising from new business 59.4 20.5
Establishment expenses (73.6) (60.1)
Operational development expenses (6.2) (5.6)
Regulatory fees (3.2) (3.0)
FSCS levy (16.0) (13.6)
Shareholder interest 5.7 4.7
Utilisation of capital losses 9.3 7.0
Miscellaneous (4.2) 4.4
Operating cash result 139.0 103.1
Net annual management fee drivers
• Average annual management fee
• New funds under management
• Investment returns on FUM
Post-tax cash result
£’m H1 2017
H1 2016
Net annual management fee 297.8 235.7 +26%
Reduction in fees in gestation period (130.0) (86.9)
Net income from FUM 167.8 148.8
Margin arising from new business 59.4 20.5
Establishment expenses (73.6) (60.1)
Operational development expenses (6.2) (5.6)
Regulatory fees (3.2) (3.0)
FSCS levy (16.0) (13.6)
Shareholder interest 5.7 4.7
Utilisation of capital losses 9.3 7.0
Miscellaneous (4.2) 4.4
Operating cash result 139.0 103.1
FUM in gestation period
• c£26.8 billion of new business
added in last six years, which is
not yet generating positive cash
earnings
• c.£206 million of post tax cash
earnings per annum in future
• c.£1.1bn of FUM emerging
from gestation in H2
Year
2011 £1.1bn
2012 £2.9bn
2013 £4.0bn
2014 £4.3bn
2015 £5.2bn
2016 £6.1bn
2017 HY £3.2bn
Total £26.8bn
Post-tax cash result
£’m H1 2017
H1 2016
Net annual management fee 297.8 235.7 +26%
Reduction in fees in gestation period (130.0) (86.9)
Net income from FUM 167.8 148.8
Margin arising from new business 59.4 20.5
Establishment expenses (73.6) (60.1)
Operational development expenses (6.2) (5.6)
Regulatory fees (3.2) (3.0)
FSCS levy (16.0) (13.6)
Shareholder interest 5.7 4.7
Utilisation of capital losses 9.3 7.0
Miscellaneous (4.2) 4.4
Operating cash result 139.0 103.1
Establishment Expenses
• Additional office space
• Impact of the higher level of gross and net inflow
Post-tax cash result
£’m H1 2017
H1 2016
Net annual management fee 297.8 235.7 +26%
Reduction in fees in gestation period (130.0) (86.9)
Net income from FUM 167.8 148.8
Margin arising from new business 59.4 20.5
Establishment expenses (73.6) (60.1)
Operational development expenses (6.2) (5.6)
Regulatory fees (3.2) (3.0)
FSCS levy (16.0) (13.6)
Shareholder interest 5.7 4.7
Utilisation of capital losses 9.3 7.0
Miscellaneous (4.2) 4.4
Operating cash result 139.0 103.1 +35%
£’m H1 2017
H1 2016
Academy (3.3) (2.8)
Asia (7.5) (3.2)
DFM (2.8) (1.2)
Strategic development costs (2.3) (1.5)
(15.9) (8.7)
Investments
£’m H1 2017
H1 2016
Operating cash result 139.0 103.1 +35%
Investments (15.9) (8.7)
Underlying cash result 123.1 94.4 +30%
Back office infrastructure development (8.2) (8.4)
Variance (3.6) (3.5)
Cash result 111.3 82.5 +35%
Post-tax cash result
£’m H1 2017
H1 2016
New business contribution 343.0 228.9 +50%
Unwind of the discount rate 102.8 98.8
Experience variance 17.8 1.7
Operating assumption changes - -
Investment income 3.3 2.9
Fund management business EEV operating profit 466.9 332.3
Investments & back-office infrastructure (23.5) (17.6)
Distribution (20.7) (17.5)
Share options & NI (15.9) (7.5)
Other (9.5) (5.7)
Operating profit 397.3 284.0
EEV operating profit
New business contribution
• Initial margin less initial costs
• Future annual management fees less maintenance costs
• Lower maintenance costs x duration
• Bluedoor financial benefits emerging via EEV but cash still
to follow in future years
£’m H1 2017
H1 2016
New business contribution 343.0 228.9 +50%
Unwind of the discount rate 102.8 98.8
Experience variance 17.8 1.7
Operating assumption changes - -
Investment income 3.3 2.9
Fund management business EEV operating profit 466.9 332.3
Investments & back-office infrastructure (23.5) (17.6)
Distribution (20.7) (17.5)
Share options & NI (15.9) (7.5)
Other (9.5) (5.7)
Operating profit 397.3 284.0 +40%
EEV operating profit
£’m H1 2017
H1 2016
Operating profit 397.3 284.0 +40%
Investment variance 214.1 168.8
Economic assumption change 11.5 (10.1)
Pre-tax profit 622.9 442.7 +41%
EEV operating profit
pence H1 2017
H1 2016
NAV per share 976.7 791.9 +23%
NAV per share
Dividends
• Interim dividend up 25% to 15.41p
• Anticipate increasing the full year dividend by a similar amount
• H1 dividend represents c. 70% of underlying H1 cash result
• Dividend policy unchanged
Solvency
• Solvency managed to ensure assets held are in excess of:
Client liabilities
+
Management Solvency Buffer
• Our approach more cautious than SII position since no credit for VIF
• Standard formula used to calculate SII SCR – no transitionals,
matching or volatility adjustments
£’m 30 June 2017
31 Dec 2016
Net assets in excess of client liabilities (A) 622.6 530.0
Management solvency buffer (B) (437.0) (437.0)
Net assets in excess of MSB 185.6 93.0
Combined Life Company Solvency Position
Dividend history
+18% +2% +2.5% +33% +33%
+33%
+50%
+40%
+20%
+18%
+25%
0p
5p
10p
15p
20p
25p
30p
35p
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 H1 2017
Compound growth of c.25% per annum
DAVID BELLAMY Chief Executive
Our approach to Investment Management
Appoints the
fund managers
Decisions:
Change firm?
Change manager?
No change?
‘MANAGES THE MANAGERS’
Peter Dunscombe
‘INDEPENDENT EXPERTISE’
THE INVESTMENT COMMITTEE
Win Robbins
Davina Curling
Steven Daniels
Sets
performance
objectives
Risk
management
and strategy
28 8 36 69 36 funds Asset
classes
exclusive
strategies
lead fund
managers
fund
houses
Our approach to Investment Management
2.6
3.9
5.3 4.9
7.5
3.5
4.6
5.8
1.9 1.9
3.2
4.5
5.5
1.9
3.2
4.5
0%
1%
2%
3%
4%
5%
6%
7%
8%
Defensive Conservative Balanced Managed Adventurous ImmediateIncome
BalancedIncome
DeferredIncome
SJP Portfolio ARC Sectors
SJP vs ARC Peer Group
Source: FE Analytics, Asset Risk Consultants (ARC) Private Client Indices and SJP internal data. Data to 30 June 2017
Year to 30 June 2017
3.9
6.6
8.2
11.4 11.8
7.3 8.5
10.1
4.3 4.3
6.5
8.3 9.6
4.3
6.5
8.3
0%
2%
4%
6%
8%
10%
12%
14%
Defensive Conservative Balanced Managed Adventurous ImmediateIncome
BalancedIncome
DeferredIncome
SJP Portfolio ARC Sectors
SJP vs ARC Peer Group
Source: FE Analytics, Asset Risk Consultants (ARC) Private Client Indices and SJP internal data. Data to 30 June 2017
Five years to 30 June 2017
ARC Private Client Indices – Contributors
5%
2%
15%
22%
13% 4% 4%
22% 9% Overseas Partners:
4%
The St. James’s Place Partnership
• 2,394 Partner businesses
• Circa 20 years average industry experience
• 1,700 employees
• 5,000 Partner support staff
(3,540 qualified advisers)
The St. James’s Place Academy
100 expected to graduate this year
88 new entrants so far in 2017 (vs. 75 in 2016)
Average age under 40
87% hold degrees
23% are women
Partnership development
Business
Acquisition Transition
Business
Processing Establishment Development Risk
Marketing Private
Clients
Technical
Support
Business sale
& purchase Technology
Training &
Development
Business
Assurance
PARTNER PRACTICE
FCA’s Assessing Suitability Review
FCA’s Assessing Suitability Review – Market Results
Suitable 93.1%
FCA’s Assessing Suitability Review – Market Results
Acceptable 52.9%
Acceptable 39.5%
Technology
• UK tax code is now some 20,000 pages long
• Has trebled since 1997
• FCA Handbook ‘if printed out stands more than 6 feet tall’
Sources: City AM: “Our bulging tax code is holding Britain back: Politicians must fix this” March 2015, Financial Times: “Financial regulator says new rules will have to consider Brexit” November 2016
Increasing Complexity
FSCS Levy
Increasing Complexity
Shifting Sands of Pension Legislation
Lifetime Allowance Annual Allowance
2006 Pension Simplification (A-Day)
Introduction of the Lifetime Allowance (rising to £1.8m by 2010)
£1,500,000 £215,000
2007 £1,600,000 £225,000
2008 Announcement that LTA would freeze at 2010 levels for next 5 years £1,650,000 £235,000
2009 £1,750,000 £245,000
2010 Announcement of a reduction in the LTA for 2012 and introduction of carry forward £1,800,000 £255,000
2011 Requirement to annuitise at 75 abolished
Reduction in annual allowance
£1,800,000 £50,000
2012 Auto-Enrolment Starts
Reduction in lifetime allowance
£1,500,000 £50,000
2013 £1,500,000 £50,000
2014 Pensions Freedoms Announced
Further reduction in annual & lifetime allowances
£1,250,000 £40,000
2015 Freedom & Choice Regime begins
Further consultations on tax relief
Pension Input Period Rules Change
£1,250,000 £40,000
2016 Annual Allowance Tapering for higher earners £1,000,000 £40,000 reducing to
£10,000
2017 Money Purchase Annual Allowance reduced from £10,000 to £4,000 £1,000,000 £40,000 reducing to
£10,000
Increasing Complexity
ISA
Lifetime ISA
Junior ISA
Help to Buy ISA
Innovative ISA
Inheritance ISA
Flexible ISA
Increasing Complexity
Consistent Delivery
• Our investment approach
• The St. James’s Place Partnership
• The support they have behind them
• The environment we work in
The SJP Marketplace
UK individuals with between £50k and £5m
of investable wealth
Amount of investable wealth held by UK
individuals with more than £50k but <£5m
BREXIT
• UK domestic business
• Limited overseas exposure
• Unaffected directly by trade
agreements
AMMS & MIFID II
AMMS & MIFID II
No new authorisations required
Already negotiate largely institutional
fund fees
90bps
43bps
Average cost in the market* Average cost at SJP
* Source: FCA Asset Management Market Study Interim Report
The Value of Advice
Would recommend
96%
Satisfaction with level of
Partner contact
92%
Value for money
98%
Overall satisfaction
94%
The value of Financial Advice
‘This report demonstrates the very real value of financial advice
for the consumer.’
‘…those who take advice are likely to accumulate more
financial and pension wealth, supported by increased saving and
investing in equity assets, while those in retirement are likely to
have more income, particularly at older ages.’
‘…advisers are good value for money – the benefits of advice
outweigh any costs associated with it.’
Need for Advice
Technology
BLUEDOOR
PRIVATE CLIENTS
Other Initiatives
PRIVATE BANK ING PANEL C ASH MANAG EMENT
£0.0bn
£0.2bn
£0.4bn
£0.6bn
£0.8bn
£1.0bn
£1.2bn
£1.4bn
£1.6bn
£1.8bn
£2.0bn
2015 2016 2017 June
Rowan Dartington
Over 12 months - Funds under Management up 35%
- Investment Executives up 21%
£1.57bn
£1.84bn
51
86
102 110
2014 2015 2016 2017 (as at end of June)
Asia – Number of Advisers
£482m
£659m
£814m
2015 2016 2017 (as at end of June)
Asia – Funds Under Management
+37%
+24%
Summary of Results
• Gross inflows up 30%
• Net inflows up 40%
• Adviser numbers up 3.7%
• Funds under Management at £83bn
• Embedded value operating profit up 40%
• IFRS profit before tax up 32%
• Underlying cash result up 30%
• Interim dividend up 25%
Appendices
£’m H1 2017
H1 2016
Underlying cash result 123.1 94.4 +30%
Share option cost (13.0) (7.5)
Deferred tax impacts (14.6) (12.4)
Back office infrastructure (8.2) (8.4)
Other (3.9) (7.0)
Underlying post-tax profit 83.4 59.1 +41%
DAC/DIR/PVIF
- Amortisation 17.4 (2.6)
- Tax rate change - -
- New Business (38.9) (8.1)
IFRS post-tax profit 61.9 48.4 +28%
Cash result to IFRS reconciliation
£’m H1 2017
H1 2016
Funds management business IFRS operating profit 175.9 122.1 +44%
Investments and back-office infrastructure (23.5) (17.6)
Distribution (20.7) (17.5)
Share options & NI (15.9) (7.5)
Other (9.5) (5.7)
Underlying pre-tax profit 106.3 73.8 +44%
IFRS underlying pre-tax profit
Solvency II position
£’m Life
Other
Group
June 2017
Group
Dec 2016
Solvency II net assets 622.6 424.3 1,046.9 1,070.0
Value of in-force 2,996.6 2,996.6 2,707.9
Risk margin (855.2) (855.2) (779.2)
Own funds (A) 2,764.0 424.3 3,188.3 2,998.7
Solvency capital requirement (B) (2,157.3) (63.1) (2,220.4) (2,046.5)
Solvency II free assets 606.7 361.2 967.9 952.2
Solvency ratio (A/B) 144% 147%