Transcript CIRENCESTER MANAGEMENT MEETING

ST. JAMES’S PLACE
WEALTH MANAGEMENT
DECEMBER 2008
0
Contents
Page No:
Current trading update
Strategy
The Partnership
Investment Management
Our clients
Our market
Analyst following
History & Board
Foundation
2
20
26
35
44
50
58
60
63
1
Current trading update
31 December 2008
2
Full Year Results 2008
Highlights:
• New Business (APE) of £419.0 million
• Total single investments of £3.1 billion
• Continued 95% retention of FUM
• FUM at £16.3 billion with net inflows
• Partnership numbers 1,340 up 7%
• EEV new business profit £123.5 million
• EEV operating profit at £204.3 million
• EEV net asset value of 232.4 pence
3
New business by quarter
£’m
APE (Annual premiums plus 10% of single premiums)
140
120
2006
100
2007
80
2008
60
115.7
97.8 98.7
122.0
113.2
101.9 101.9
91.5
103.1
96.4
85.1
69.4
40
20
2006 over 2005
2007 over 2006
2008 over 2007
Q1
+57%
+41%
+1%
Q2
Q3
+54%
+26%
+5%
+63%
+20%
+0%
Q4
+59%
+10%
-15%
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Investment new business by quarter
Single premiums
£’m
700
664.5 633.6
600
2006
500
2007
400
2008
300
528.6 507.7
432.3
578.4
476.0
461.3
444.7
593.5
512.2
449.0
200
100
0
Q1
2006 over 2005
2007 over 2006
2008 over 2007
+71%
+22%
-4%
Q2
+47%
+39%
-4%
Q3
+49%
+30%
-20%
Q4
+36%
+16%
-24%
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Pensions new business by quarter
Single premiums
£’m
350
300
2006
250
2007
200
2008
150
100
251.5
231.7
268.4
244.8
282.4 286.2 275.8
267.4
238.0
187.8
161.0
113.0
50
0
Q1
2006 over 2005
2007 over 2006
2008 over 2007
+83%
+105%
+9%
Q2
+78%
+52%
+10%
Q3
+106%
+27%
+19%
Q4
+147%
-4%
-3%
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Pensions new business by quarter
Regular premiums
£’m
30
26.9
25
2006
20
2007
15
2008
10
21.8
17.0 18.3
22.8
19.7
16.6 15.5
17.6
20.6 19.7
9.3
5
0
Q1
2006 over 2005
2007 over 2006
2008 over 2007
+31%
+83%
+7%
Q2
+80%
-10%
+37%
Q3
+132%
-7%
+48%
Q4
+93%
+18%
-4%
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Funds under management
16%p.a. compound growth over the last
5 years and 18%p.a. over 10 years
20
+18%
+25%
15
+29%
+20%
10
5
0
-10%
+34%
+47%
+24% +10% -6%
+31%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
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Fund flow information
£’bn
2008
2007
FUM at start
New money invested
Investment return
18.2
3.0
(3.6)
15.4
3.1
0.9
17.6
19.4
(0.4)
(0.3)
Surrenders / part surrenders
(0.9)
(0.9)
FUM at close
Implied surrender rate as %
of average FUM
16.3
18.2
5.2%
5.1%
Regular income withdrawals/
maturities
9
Analysis of life, pension & unit trust
pre-tax operating profit
£’m
2008
2007
123.5
150.9
- expected
80.5
77.7
- experience variance
16.9
16.2
- operating assumption changes
(0.9)
(2.8)
4.9
6.9
224.9
248.9
New business contribution
Profits from existing business
Investment income
Operating profit
10
Pre-tax EEV profit
£’m
2008
2007
Life & pension
Unit trust
Other operations
174.1
50.8
(20.6)
189.9
59.0
(4.2)
Total Operating profit
204.3
244.7
Investment variance
Economic changes
(320.6)
0.4
(14.5)
0.2
Pre-tax result
(115.9)
230.4
11
Dividend
Final dividend of 2.55 pence maintained
12
Analysis of adjusted post tax profit
£’m
Net annual management fee
Unwind of surrender penalties
New business strain
Establishment expenses
Investment income
Other
Underlying cash flow
One off
2008
2007
122.2
(44.4)
(10.0)
(72.2)
10.1
18.4
123.2
(44.6)
(7.7)
(67.3)
10.5
11.8
24.1
-
25.9
7.2
24.1
33.1
13
Analysis of underlying post tax cashflow
£’ m
2008
2007
Arising on in force business
Arising from new business
91.4
(67.3)
84.7
(58.8)
24.1
25.9
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Year end capital position
£’m
Life
Other
Regulated
Other
Total
88.8
260.0
Solvency position
Solvency net assets
151.9
19.3
Solvency requirement
41.1
14.6
Solvency ratio
370%
132%
15
Year end capital position
Other
Regulated
£’m
Life
Analysis of solvency net assets
UK Govt. gilts
Other Govt. backed debt
AAA rated money market funds
Bank balances
Fixed assets
Actuarial reserves
Other assets / liabilities
23.0
26.3
137.0
26.3
(32.2)
(28.5)
15.6
20.1
(16.4)
20.5
15.3
12.2
40.8
23.0
26.3
173.1
61.7
12.2
(32.2)
(4.1)
Solvency net assets
151.9
19.3
88.8
260.0
Adjustments to IFRS basis
256.3
(8.3)
-
248.0
IFRS net assets
408.2
11.0
88.8
508.0
Other
Total
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Group expenses
£’m
Paid from policy margins
Partner remuneration
Investment expenses
3rd party administration
Direct expenses
Other production related costs
Establishment expenses
Contribution from 3rd party product
sales
2008
2007
176.9
59.6
27.8
191.8
68.4
24.7
264.3
284.9
42.2
97.6
(13.1)
44.4
91.9
(14.4)
126.7
121.9
391.0
406.8
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Uniquely placed in growing market
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Proven growth record over longer term
Organic growth, not acquisitive
Niche market
Dedicated distributor with manufacturer margins
Positive reputation (wealth manager awards)
Successful investment approach
Not exposed to industry issues
Clear focus on business model
Longer term demographics are positive (with fewer
advisers)
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Outlook
• Respected and well positioned brand / business
• Loyal client base (Partners and investors)
• 3rd consecutive year of strong recruitment
• Opportunities for further growth in Partnership (RDR,
reputation, city redundancies)
• Investment Management Approach more resilient
• Strong solvency position
• Strong market for advice
• Economic uncertainty / stock market weakness
• But strong / early growth on market recovery
• Uniquely placed business
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Strategy
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St. James’s Place: overview
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UK wealth management company
FTSE 250 market cap c £1bn
Target mass affluent / high net worth market
UK centric
Dedicated distribution through our own wealth managers
Strong retention of clients and Partners
Focus on areas where management adds value
– Outsource administration
– Outsource investment management
– Joint ventures for non-core activities
Minimise shareholder financed overheads
£16.3bn funds under management and a further £1.5bn under advice
Charitable Foundation
Simple Group structure
21
Structure of St. James’s Place
LLOYDS
St. James’s Place
60%
100%
SJP GROUP
Wealth Management
Manufacturing
SJP Life and
Unit Trust
Companies
Distribution
SJP Partnership
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The growth model
Target
15 – 20% pa
New Business
CAPACITY
No of Partners
PRODUCTIVITY
New Business
Per Partner
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Our wealth management services
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Pensions
Investment
Estate protection
Estate creation
Inheritance tax
solutions
• ISAs
• Offshore bonds
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Mortgages
Employee benefits
Trust & Estate planning
Protection
General insurance
Annuities
Portfolio management
Banking
Stakeholder
Private medical
insurance
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What we don’t have
No with profits
No guaranteed annuity options
No solvency assets invested in equities
No final salary pension scheme
No longevity risk
No split level trusts
No derivative-based “precipice” funds
No mortgages / sub prime
No monoline reassurance
No hybrid debt
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The Partnership
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The Partnership
(Own dedicated distribution)
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High quality self-employed team of 1,340 advisers
Only experienced advisers: average 17 years
Bring existing client bases
High productivity – 2.5 x industry average
Average age of Partner – 48 years old
Male : Female – 90 : 10
Focus on higher value clients
Growth in specialisms
Stability (including retirees)
- 97% p.a. retention by value (APE)
- no single Partner represents over 1% of APE
Academy starting to bear fruit
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Number of Partners
Associate Partner
Partner
Double Partner +
1600
Number of Partners
1400
1200
1000
+10%
+9%
+8%
+7%
-2%
+2%
+1%
+2%
+5%
+8%
+7%
800
600
400
200
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
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Partners
Geographic Distribution
6%
Clients
7%
2%
2%
14%
3%
13%
3%
4%
3%
11%
11%
25%
15%
9%
22%
Overseas Clients: 3%
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Changing face of the Partnership
(APE)
2004
2008
£250-750k
14%
£50-250k
51%
£50-250k
44%
£250750k
33%
£750k+
2%
<£50k
33%
£750k+
8%
<£50k
15%
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Partners by Age Band
Existing Partners
65+
2%
New Partners
55-65 65+
0%
7%
<35
6%
55-65
22%
35-45
30%
45-55
40%
<35
20%
45-55
34%
35-45
39%
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The Academy
•First 8 academy members join the Partnership
•45 people currently training in the academy
•Average age 39
•Two additional intakes of 15 to 20 planned for 2009
•Refining process as we progress
•Successful event targeting city fall out/ other events
planned
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Benefits of our own distribution
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New business more predictable
Spread of production
Less exposed to market pressures
Greater control over quality of new business
Better retention of business
Our clients – cross selling opportunities
Control over brand
Can incentivise distribution
Strong client advocacy
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Why join SJP?
•Brand recognition for preferential, trusted advice
•Guarantee
•Unique exit /retirement options
•Meritocracy
•Client service focus (SJP culture)
•Financial and regulatory stability of principle
•Investment management approach
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Investment Management
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Investment management approach
Investment Committee
Stamford
Associates
(Consultants)
Select, monitor and change
investment houses
19 investment management houses
(select individual managers)
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External investment managers
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Core managers – managed funds
– AXA Framlington
– GAM
– Invesco Perpetual
– Jupiter
– Newton
– Polaris
– Schroder Investment Management
– Taube Hodson Stonex Partners
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Specialist managers
– Aberdeen (Far East, Ethical)
– BGI (Alternative Assets)
– Insight (Tracker)
– Invesco Perpetual (Corporate Bond)
– Invista (Commercial Property)
– Oldfield / Thornburg (High Octane)
– Reed Connor Birdwell (North American)
– RWC Partners (UK Growth)
– State Street (Cash)
– S W Mitchell (Continental European)
– Wellington (Gilts & International Bond)
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Advantages of investment approach
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No in-house investment managers – no conflict of
interest
Selection of managers (“best of breed”) – wholesale
purchasing power
Spread - 8 core balanced funds with different styles
Use only genuinely “active” managers
Monitoring - continuous analysis plus quarterly
presentations
Changing managers
– ease of change
– improved persistency
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The role of Stamfords
• Stamfords work with the Investment Committee to
help achieve superior investment results over time.
• They provide:
– Dedicated research and advice
– Manager research & assessment
– Regular monitoring of managers
– Regular portfolio analysis
– Advice on changing managers
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Funds under management
16%p.a. compound growth over the last
5 years and 18%p.a. over 10 years
20
+18%
+25%
15
+29%
+20%
10
5
0
-10%
+34%
+47%
+24% +10% -6%
+31%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
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Funds Under Management: Shown by Asset Class and Region
Property
4%
PABs/FABs
3%
Cash and Other Assets
14%
European
18%
UK
38%
US
9%
International
4%
Far East
10%
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Relative investment performance of funds
under management – 1 year
1st
58%
49%
47%
45%
46%
49%
57%
55%
61%
2nd
73%
3rd
14%
28%
22%
13%
11%
34%
38%
39%
23%
4th
12%
7%
15%
15%
16%
10%
10%
20%
14%
2007
12%
2006
2006
1%
5%
4%
2008
2008
24%
23%
9%
15%
8%
3%
2005
2005
2004
2004
2003
2003
2002
2002
2001
2001
6%
8%
2000
2000
1999
1999
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Relative investment performance of funds
under management – rolling 5 year
1st
2nd
67%
67%
68%
80%
79%
65%
61%
63%
10%
5%
76%
3rd
13%
13%
15%
19%
4th
15%
16%
9%
12%
2008
2008
12%
8%
8%
8%
2007
2007
4%
2006
2006
14%
2%
4%
2005
2005
20%
3%
2%
2004
2004
8%
8%
10%
8%
2003
2003
2002
2002
13%
2001
2001
17%
2000
2000
43
Our clients
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Our clients
• 82,000 wealth management clients
• Average age: 60
• Average funds under management: £180k
• Average duration as SJP client: 7.4 years
• Strong clients advocacy
• Clients vote us Wealth Manager of the
Year
45
Geographic Distribution of Client FUM
5%
1%
12%
3%
4%
18%
10%
24%
Overseas Clients 4%
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FUM by Value of Clients
Fum by Client Band
<£50k
18%
£50k to
£1/4m
40%
>£1m
14%
£1/2 to £1m
11%
£1/4m to
£1/2m
17%
47
New and Retained Clients by Age Band
Existing Clients by Age Band
70+
14%
New Clients by Age Band
<30
3%
70+
10%
30-40
20%
65-70
6%
<30
8%
30-40
17%
65-70
7%
60-65
11%
60-65
10%
55-60
10%
40-50
26%
50-55
10%
55-60
12%
40-50
25%
50-55
11%
48
Clients vote us Wealth Manager of Year
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Our market
50
Our market
• The market is big
• Favourable demographics
• The tax burden is increasing
• UK high net worth individuals want
face to face advice
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The SJP Market Place
UK Individuals with between €50k and €3m of liquid assets
12,000,000
9,927,622
10,000,000
9,256,186
9,109,602
8,734,968
Number of Individuals
8,533,210
8,732,890
8,396,304
8,276,309
2008
2009
7,876,102
8,000,000
6,772,000
6,000,000
4,000,000
2,000,000
2003
2004
2005
2006
2007
Year
2010
2011
2012
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Source: Datamonitor Global Wealth Model
The SJP Marketplace
Amount of liquid assets held by UK individuals with between €50k and €3m
2,500
€1,967bn
2,000
€1,818bn
€1,670bn
€1,637bn
2006
2007
€1,700bn
€1,545bn
1,500
€1,603bn
€1,597bn
2008
2009
€1,351bn
€bn
€1,201bn
1,000
500
2003
2004
2005
Year
2010
2011
2012
53
Source: Datamonitor Global Wealth Model
The SJP Opportunity
• £78bn held in Stocks & Shares ISAs
(HMRC as at 5/4/2008)
• Around £10bn new money into
Stocks & Shares ISAs in 2008
(IMA Dec 2008 Data and ABI End Q3 data extrapolated)
• SJP £0.5bn – around 5% share
54
The SJP Opportunity
• £163bn in cash ISAs
(Building Society Association December 2008)
– Low interest rates
– Can be transferred
• Average interest rate on instant access
accounts 0.81%
(Bank of England, 4 Feb 2009)
“savers have lost an estimated £27 billion in income since December
2007, when Bank rate stood at 5.5%”
(The Times, 3 Feb 2009)
55
The SJP Opportunity
• Pensions
– 52% of open defined benefit schemes expect
to close to new members within 5 years
National
Association of Pension Funds, 23 January 2009
– More than 59% of UK workers are not
confident that they will have enough
money during retirement
– Almost 1.7m are relying on property to
fund their retirement
Club VITA survey
USwitch
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The SJP opportunity
The average UK high net worth … is particularly focused on tax
optimisation and his financing needs, and has a markedly lower
knowledge of financial products than his European counterparts.
Face to face relationship management is very important to him,
and he is reliant on recommendations from someone he knows in
choosing his wealth manager.
Datamonitor – Wealth Management in the UK, 2008
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Analyst following
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Analyst following
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Craig Bourke
Roman Cizdyn
Rakshit Ranjan
Raghu Hariharan
Colin Simpson
James Pearce
Blair Stewart
Barrie Cornes
Eamonn Flanagan
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Blue Oak Capital Ltd
Blue Oar Securities
Clear Capital
Fox-Pitt Kelton
Goldman Sachs
JPMorgan Cazenove
Merrill Lynch
Panmure Gordon
Shore Capital
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History & Board
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History
1992 Management team left Allied Dunbar Assurance, UK’s largest
unit-linked assurer (now part of Zurich Financial Services)
J. Rothschild Assurance Group launched
(backed by Scottish Amicable and Lord
Rothschild)
1997 J. Rothschild Assurance Group reversed into
St. James’s Place Capital plc (listed on London
Stock Exchange)
2000 HBOS acquired 60% interest in St. James’s Place
J. Rothschild Assurance Group rebranded
St. James’s Place
2009 Lloyds Banking Group assume holding as part of HBOS
transaction
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Board of directors
Chairman
Mike Wilson
Executive directors
David Bellamy (CEO)
Andrew Croft
Ian Gascoigne
David Lamb
Non executive
directors
Sarah Bates
Steve Colsell (Lloyds)
Jo Dawson (Lloyds)
Derek Netherton
Mike Power
Michael Sorkin
Roger Walsom
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Foundation
63
St. James’s Place Foundation
• Foundation established in 1992 based on simple belief that those
of us who have should give to those who have less or who suffer
in some way
• Supporting the Foundation is a key cornerstone for the SJP
culture
• Every employee and Partner is encouraged to take part in, and
contribute towards fund raising events
• Over 80% of the community make monthly payments by deed of
covenant
• Company matches funds raised
• In 2008 raised £2.5 million in a record year
• Major grants made to Children’s Trust, Help the Hospice,
Teenager Cancer Trust and Hope & Homes
• Hundreds of small grants are made each year
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24 February 2009
65