New Business & Financial Results - 2013. 1 PART ONE – Business Model Strategy 2 The Partnership 12...

New Business & Financial Results - 2013

1

PART ONE – Business Model

• Strategy 2

• The Partnership 12• The Academy 17• Investment Management

19• Our Clients 31• Our Market 37

• Cash & Dividend Profile 67• Our Shareholders

76• Analysts following 78

PART TWO – Financial Results

PART ONE

Business Model

2

Strategy

3

St. James’s Place: Overview

• Leading UK Wealth Management Company– Established 1991– UK listed with market cap of c. £4 billion– £44.3 billion in FUM– Target market £50k to £5 million free investable

assets

• Differentiated business model– Provider and distributor– Own dedicated distribution – the Partnership– Distinct investment management approach

• Well positioned to benefit from long-term market growth– Favourable demographic trend– Increasing tax burden

Global Investment Management Expertise

4

5

Whole of Market approachWe take responsibility for the due diligence on all the products and companies we

make available to our clients.

6

• Comprehensive range– of pension, investment and savings “wrappers”– of investment funds managed by global

investment managers– access to “whole of market” for third party

products and services e.g. protection and annuities

• Whilst avoiding– capital intensive products– guarantees and options – overly complex, fashionable or high risk

structures

Our products and services

7

The Growth Model

Target: 15-20% pa

NEW BUSINESS

CAPACITY Number of Partners

PRODUCTIVITY New business per

Partner

8

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2009 2010 2011 2012 2013

Num

ber o

f Par

tner

s

Growing number of Partners

+9%+6% +6%

+9.5%+8%

1,958

9

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

2009 2010 2011 2012 2013

£ m

illio

n

Productivity (single investment per Partner)

+2%

+28%

+3%

+12%+5%

3.83

10

1.21.6

2.63.4 3.1

3.5

4.75.2

5.9

7.2

0

1

2

3

4

5

6

7

8

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

£ bi

llion

Single premium gross investments

11

0

5

10

15

20

25

30

35

40

45

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Fund

s £ b

illio

n

Funds under management22 % p.a. compound growth over the last 5 years and 19% p.a. over last

10 years

+20%

+25%+29

%

+18%

-10%

+31%

+26% +6%

44.3+22%

+27%

12

The Partnership

13

Dedicated distribution – the Partnership

• High quality self-employed team of c.2000 advisers– Average age is 48– Above average productivity– 90%+ per annum retention rate

• Aim to grow Partner number by 5% to 7% per annum

• Aim to increase productivity each year

14

Geographic distribution31 December 2013

15

Partners by age band31 December 2013

Existing Partners

55-6519%

65+2%

<356% 35-45

31%

45-5542%

New Partners

45-5526%

55-658%

65+0%

<3520%

35-4546%

Total adviser numbers down 18%

16

18

The Academy

• 60 new students in 2013• 40 next generation

• Targeting another 50-60 this year• Anticipate c.50 to ‘graduate’ this year• Plus a new regional initiative in

Manchester

19

Investment Management

20

Our approach to investment management

THE INVESTME

NT COMMITT

EE

Appoint the Fund

Managers

Set performance

objectives

Risk management and strategy

Decisions: Change firm?

Change manager? No

change?

‘MANAGES THE MANAGERS’

‘INDEPENDENT EXPERTISE’

VivianBazalge

tte

SarahBates

PeterDunsco

mbe

WinRobbins

21

Stamford Associates Independent Investment Consultancy

Research Fund Manager Market

Analyse & identify talented managers

Gather intelligence

Access to Whole Market

Monitor Managers and

Portfolios

Qualitative and Quantitative

Number crunching

Monitor activity

Behavioural psychology

Workplace analysis

Advise Investment Committee

Focus on Future Outperformance

Recommend:

Potential changes

New managers

Global Investment Management Expertise

22

23

Growth Portfolios

24

Growth Portfolios (cont.)

25

Income Portfolios

26

0

5

10

15

20

25

30

35

40

45

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Fund

s £ b

illio

n

Funds under management22 % p.a. compound growth over the last 5 years and 19% p.a. over last

10 years

+20%

+25%+29

%

+18%

-10%

+31%

+26% +6%

44.3+22%

+27%

42%

23%38%

46%

26%17%

25% 23%

58%

77%62%

54%

74%83%

75% 77%89% 89%

11%11%0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013 2012 2011 2010 2009 2008 2007 2006 2005 2004

27

Below peer group average Above peer group average

Weighted 5-year Rolling Performanceto 31 December 2013 (excluding Money Market & Alternative Assets)

Past performance is not indicative of future performance. The value of an investment with St. James’s Place can fall as well as rise. You may get back less than the amount invested.

30%14% 14% 16% 17% 10% 10% 10% 10%

2%

70%86% 86% 84% 83% 90% 90% 90% 90%

98%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013 2012 2011 2010 2009 2008 2007 2006 2005 2004

28

Below peer group average Above peer group average

Weighted 10-year Rolling Performanceto 31 December 2013 (excluding Money Market & Alternative Assets)

Past performance is not indicative of future performance. The value of an investment with St. James’s Place can fall as well as rise. You may get back less than the amount invested.

29

Funds Under Management: shown by Asset Class and Region

31 December 2013

UK 30%

Property2% PABs / FABs

2% Cash & Other Assets 10%European

11%

US 19%

Far East 9%Fixed Interest

14%

Alternatives3%

30

Benefits of investment management approach

• No in-house managers, so no conflict of interest

• Benefit from Investment Committee experience & expertise

• Ability to appoint the best fund managers with wholesale purchasing power

• Continuous monitoring plus quarterly reviews

• Easy to change manager – reduced churn

• Free switching for clients

• Significantly improved retention of funds

31

Our Clients

32

Geographic distribution of our clients31 December 2013

420,000 clients

Male 53%

Female 47%

Average age 53

33

Clients and FUM Clients by value band31 December 2013

All clients All clients - FUM

£250k-£500k

7%

£1m+ 1%

<£50k54%

£50k- £250k36%

£500k-£1m 2%

£250k-£500k 21%

£1m+ 16%

<£50k9%

£50k- £250k38%

£500k-£1m 16%

34

New and retained clients by age band 31 December 2013

Existing clients by age band

New clients by age band

70+18%

<303% 30-40

9%

40-5026%

50-5513%

55-6011%

60-6510%

65-7010%

70+14%

<308% 30-40

10%

40-5019%50-55

13%55-6012%

60-6512%

65-7012%

35

What our clients think

The key findings were:

• 84%* of clients highly satisfied with their relationship with St. James’s Place – nearly a third scoring us 10 out of 10

• 88%** of clients ‘value’ a face-to-face relationship with their Partner

• 86%* of clients agreed that we provide excellent service

• 80%* of clients highly satisfied in the way in which we communicate with them

• 96%** of clients were likely to recommend St. James’s Place to others

• 81%* of clients would invest with St. James’s Place again if making that decision today* Scoring 8 or more out of 10. Ledbury Research – November/December 2013** Wealth Account Survey, January 2014

Award winning into 2014

36

37

Our Market

38

Our market

• The market is big

• Favourable demographics

• The tax burden is increasing

• UK high net worth individuals want face-to-face advice

• Limited access to advice as adviser numbers have reduced

Total adviser numbers down 18%

39

40

10,743,472

9,482,4009,108,8009,927,000 10,345,700

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

2014 2015 2016 2017 2018

Year

Num

ber o

f ind

ivid

uals

The SJP MarketplaceUK individuals with between £50k and £5m of liquid assets

Source: Datamonitor, 23 January 2014

41

2,0821,9821,885

1,717 1,797

0

500

1000

1500

2000

2500

2014 2015 2016 2017 2018Year

€ bi

llio

n

The SJP MarketplaceAmount of liquid assets held by UK individuals with between

£50k and £5m

Source: Datamonitor, 23 January 2014

42

UK Funds under managementFunds £billion

Private Clients£483

Property£142

Hedge£217

Corporate Pensions £1,597

Insurance Companies £994

Retail Clients £760

Private Equity£112

The City UK Fund Management report 2012 – figures relate to 31 December 2011.

Insurance & Corporate Pensions relate to institutional clients.

2013 Rank

2012

Rank

CompanyAUM end

2012 (£bn)

Change v 2011 (£bn)

Share (of top

40)

1st 2nd Coutts 51.7 1.9 (4%) 10.9%

2nd 1st Barclays 50.2 0.4 (1%) 10.6%

3rd 6th St. James’s Place Wealth Management 44.3* 9.5 (27%)* 7.3%*

4th 3rd UBS Wealth Management 27.0 0.8 (3%) 5.7%

5th 8th Brewin Dolphin Limited 26.0 2.0 (8%) 5.5%

6th 7th Hargreaves Lansdown 25.8 1.8 (8%) 5.4%

7th 4th HSBC 24.7 0.6 (3%) 5.2%

8th 8th Rathbones 16.7 1.9 (13%) 3.5%

9th - Citi Private Bank 15.3 - 3.2%

10th 10th Lloyds TSB Private Bank 13.9 1.3 (10%) 2.9%

14th 14th JP Morgan Private Bank 11.5 1.8 (19%) 2.4%

27th 25th Towry 4.8 0.3 (6%) 1.0%

Top 10 Companies 286.2 17.0 (6%) 60%

Top 40 Companies 457.9 40.4 (9%) -

Private Asset & Wealth ManagersTop 10 and selected others

43Source: 2013 PAM Directory

*31/12/2013

44

Asia

The Opportunity

•Singapore, Hong Kong and Shanghai

•Henley Group has 50 advisers with 4,000 clients and £430 million FUM

•Estimated 120,000 UK ex-pats with £12 billion of investible wealth (£100k each)

•Project to grow to over £20 billion by 2020

•Our investment proposition and relationship based approach is well suited to this market

45

Partner Survey 2013 – Source of new business/markets

• 81% existing clients and referrals

• 7% introducers

• 12% new clients from other sources

• 27% of Partners experienced less competition in 2013

• 39% acquired new clients due to decline of high street advice (banks)

The SJP Opportunity

• ISAs

– Cash– Stocks & shares

• Building Society (Mutual Lender) deposits

• National Savings and Investment (NS&I) deposits

• Bank deposits

• Mutual funds

£220 bn (Sept 2013 – HMRC)

£223 bn (Sept 2013 – HMRC)

£258 bn (Nov 2013 – Building

Societies Association)

£105 bn (Nov 2013 – Building

Societies Association)

£864 bn (Nov 2013 – Building Societies Association)

£763 bn (Nov 2013 – IMA)

46

47

Advice

Initial advice fee

% of initial investment

ORHourly rate (£)

Tiered fee based on amount invested + VAT

Rate may depend on seniority of adviser

Ongoing advice fee

% of Funds Under Management

ORHourly rate (£)

Tiered fee based on fund value

Rate may depend on seniority of adviser

Administration fee

% of Funds Under Management

ORPrescribed fees (£)

Amount based on fund value

Amount may depend on activity

Platform / Admin

Annual charge (%) Tiered fee based on fund value

Account fee (£) Amount will depend on platform provider

Transaction chargePrescribed fees

OR% of transaction

Amount per transaction

Tiered fee based on transaction size

Insurance Company

Wrapper charges Amount based on fund value

Administration fee Amount will depend on insurance company

Fund Management

Annual Management charges (%)

Amount based on value of funds under management

Additional Miscellaneous Costs

Amount based on value of funds under management

The fees a client may have to consider when trying to compare advice and products based on publicly available information for a variety of firms and providers.

The advice market – transparent?

Advisory/Discretionary Managers

Total bps

St. James’s Place (20yr holding period)

195

Hargreaves PMS 210


219

Raymond James 226

Brewin Dolphin Discretionary (fee only)

231

Rathbones Discretionary 278

Towry (6yr holding period) 305


312

Killik & Co Discretionary 318

Barclays Wealth (3yr holding period)

322

Towry (3yr holding period) 330

Investec PMS 349

Coutts (20yr holding period) 350


Advisory/Discretionary Charge Comparison

48

Total Investment £85k

UT/ISA £35k Pension £50k

Source: Numis

Advisory/Discretionary managers

Total bps

Raymond James 180


195

Rathbones Discretionary 203

Hargreaves PMS 210


229

Brewin Dolphin Discretionary (fee only)

231




Investec PMS 275

Barclays Wealth (20yr holding period)

275

Towry (6yr & 20yr holding period) 282/299

Killik & Co Discretionary 318

Advisory/Discretionary Charge Comparison

49

Total Investment £212k

UT £100kISA £12k

Pension £100k

Source: Numis

50

Summary

• Established and respected business

• Experienced and stable management team

• Experienced and stable advisory team – ‘The Partnership’

• Proven track record of growth

• Resilient in tough markets

• Favourable demographics

• Award winning performance

PART TWO

Financial Results

51

123.7

143.4

122.1

141.3143.9

167.1

138.5134.4136.7

163.7

144.6

192.2

170.6

203.3

179.9

209.1

60

80

100

120

140

160

180

200

220

Q1 Q2 Q3 Q4

2010

2011

2012

2013

2010 over 2009 +48% +46% +28% +15%

2011 over 2010 +16% +17% +13% -5%

2012 over 2011 -5% -2% +4% +43%

2013 over 2012 +25% +24% +24% +9%

Total new business by quarterAPE (Annual premiums plus 10% of single premiums)

£m

52

New business

• Total single investments of £7.2 billion – up 22%• SJP new business on an APE basis of £762.9 million – up

20%• Our own business represents 88% of the total

Funds under management

• Net inflow of funds under management of £4.3 Billion – up 28%

• Continue to retain 95% year on year• Funds under management of £44.3 billion – up 27% over

the year

53

Partnership

• Partnership numbers 1,958 - up 9.5%

Profits

• EEV new business profit £327.2 million – up 18%• EEV operating profit £462.7 million – up 26%• IFRS operating profit before shareholder tax

£190.7 million – up 42%

Other financials

• EEV net asset value of 575.3 pence per share – up 25%

• Total cash result of £168.8 million – up 84%• Full year dividend of 15.96 pence – up 50%

54

0

1

2

3

4

5

6

7

8

2009 2010 2011 2012 2013

£billion

Record single investments

+26%

+13%+11%

7.2

+22%

55

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2009 2010 2011 2012 2013

£billion

Consistent net inflow of funds under management

+31%

+26%

+4%+10% 4.3

+28%

56

0

5

10

15

20

25

30

35

40

45

2009 2010 2011 2012 2013

£bill

ion

Funds under management22%p.a. compound growth over the last 5 years

44.3

+31%

+26%

+10%

+22%

+27%

57

Fund flow information

£ billion 31 Dec 2013 31 Dec 2012

FUM at start 34.8 28.5New money invested 6.8 5.6Investment return (Stock market fall) 5.2 3.0

46.8 37.1

Regular income withdrawals/maturities (0.7) (0.7)Surrenders/part surrenders (1.8) (1.6)FUM at close 44.3 34.8

Net inflow of FUM 4.30bn 3.35bn

Implied surrender rate as % of 4.7% 4.9%average FUM

58

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2009 2010 2011 2012 2013

Num

ber o

f Par

tner

s

Five strong years of Partner recruitment

+9%+6% +6%

+9.5%+8%

1,958

59

0

0.5

1

1.5

2

2.5

3

3.5

4

2009 2010 2011 2012 2013

£million

Productivity (single investment per Partner)

+2%

+28%

+3%

+12%+5%

3.83

60

0

50

100

150

200

250

300

350

2009 2010 2011 2012 2013

£million

Record EEV new business profit

+26%

+40%

+13%

+16%

+13%327.2

61

Analysis of EEV life, pension & unit trust pre-tax operating profit

£ million 31 Dec 2013 31 Dec 2012

New business contribution 327.2 276.8

Profits from existing business– expected 112.1

96.0– experience variance 47.4

4.6– operating assumption charges 4.6

(4.3)

Investment income 5.2 3.4

Operating profit 496.5 376.5

62

Pre-tax EEV profit

£ million 31 Dec 2013 31 Dec 2012

Life, pension & unit trust 496.5 376.5

Distribution (6.1) 5.3Other operations (27.7) (15.9)

Total operating profit 462.7 365.9

Investment variance 344.2 190.4Economic changes 10.6 (3.7)

Pre-tax result 817.5 552.6

63

0

100

200

300

400

500

2009 2010 2011 2012 2013

£million

2013 EEV operating profit

+12%

+45%

+12%

+26%

-2% 462.7

64

Pre-tax IFRS profit before shareholder tax

£ million 31 Dec 2013 31 Dec 2012

Life 170.6 111.7

Unit Trust 53.9 33.5

Distribution (6.1) 5.3

Other operations (27.7) (15.9)

Profit before shareholder tax 190.7 134.6

65

Capital position as at 31 December 2013 Other

£ million Life regulated Other Total

Solvency position

Solvency net assets 384.2 38.9 184.5 507.6

Solvency requirement 49.3 17.1

Solvency ratio 576% 227%

66

Group expenses

£ million 31 Dec 2013 31 Dec 2012Paid from policy marginsPartner remuneration 407.1 307.0Investment expenses 101.8 89.4Third party administration 37.7 32.6

546.6 429.6Direct expensesOther new business related costs 69.0 59.5Establishment expenses 113.4 100.2Academy costs 2.7 1.9Other development costs 8.5 4.6Back office infrastructure costs 5.0 -Regulatory fees 11.6 12.0Regulatory change costs 3.1 6.0Contribution from third party product sales (20.4) (21.4)

192.9 162.8 739.5 591.8

67

Cash& Dividend Profile

68

0

20

40

60

80

100

120

140

160

180

200

2009 2010 2011 2012 2013

£ m

illion

Underlying post-tax cash arising from inforce business

-3%+15%

+23%

188.2+15%

+30%

144.5125.4

102.388.8

Return on inforce

• Where product structure uses penalties the business is cash neutral in first six years

69

• This relates to £13.2 billion of new business added in last six years which is not yet generating positive cash earnings*

• This amounts to £102 million of post-tax cash earnings per annum in future*

*Ignores stock net movements and outflows

Year £billion

2008 1.4

2009 1.6

2010 2.1

2011 2.2

2012 2.4

2013 3.5

Total 13.2*

71

0

1

2

3

4

5

6

7

8

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

£ bi

llion

Underlying post-tax cash result

New investments with surrender penalties

£1.6bn

£3.4bn £3.5bn

£5.2bn

£7.2bn

£1.2bn

£2.6bn£3.1bn

£4.7bn

£5.9bn

71

65.3 61.4 62.4 60.5 48.30

20

40

60

80

100

120

140

160

180

200

2009 2010 2011 2012 2013

£ m

illion


Investment in new business

72

Post-tax new business cost (£m)*

Post-tax EEV new business profit (£m)

Margin (% of manufactured APE)

IRR (net of tax)

Cash payback period

As % of gross inflows of FUM

31 Dec 2013 31 Dec 2012

(52.3) (60.5)

261.8 218.3

42.9% 43.4%

28.4% 22.5%

4 years 4 years

0.8% 1.1%


*2013 – includes negative £4 million variance

73

23.540.9

63.084.0

139.9

0

20

40

60

80

100

120

140

160

180

200

2009 2010 2011 2012 2013

£ m

illion


+67%


74

0

2

4

6

8

10

12

14

16

2006 2007 2008 2009 2010 2011 2012 2013

Penc

e

Continual dividend growth

+16%

+18%

+2%+33%

+2.5%

+33%

+33%

*

15.96

+50%

75

Outlook

• Familiar and well respected brand/business

• Loyal client base (Partners and investors)• Consistent strong recruitment• Resilient Investment Management

Approach• Strong solvency position• Strong market for advice• Favourable market place• Uniquely placed business

76

Our Shareholders

77

Our shareholders

1. Threadneedle 5.28%

2. Baillie Gifford 4.99%3. M&G 4.07%4. Kames Capital

3.68%5. AXA Framlington 3.41%6. Legal & General 3.09%7. Schroder 2.74%8. Old Mutual 2.67%9. BlackRock (BGI) 2.24%10. Wellington 1.90%As at 30 December 2013

78

Analysts following

79

Analyst following

• Alan Devlin - Barclays Capital

• Matthew Preston - Berenberg

• Andrew Sinclair - BoA Merrill Lynch

• Chris Esson - Credit Suisse

• Oliver Steel - Deutsche Bank

• Ravi Tanna - Goldman Sachs

• Ashik Musaddi - JP Morgan Cazenove

• Greig Paterson - KBW

• Neil Welch - Macquarie

• Jon Hocking - Morgan Stanley

• Ben Bathurst - Nomura

• David McCann - Numis

• Marcus Barnard - Oriel Securities

• Barrie Cornes - Panmure Gordon

• Stuart Duncan - Peel Hunt

• Paul De’ath - RBC Capital Markets

• Eamon Flanagan - Shore Capital

28 February 2013

New Business & Financial Results - 2013. 1 PART ONE – Business Model Strategy 2 The Partnership 12...

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Transcript of New Business & Financial Results - 2013. 1 PART ONE – Business Model Strategy 2 The Partnership 12...