St. James's Place Plc · LSE:STJ
St. James's Place — H1 2013 Earnings Presentation
84 slides from St. James's Place's earnings presentation, July 2013
Slide 1: St. James's Place Wealth Management July 2013
<p ST. JAMES’S PLACE WEALTH MANAGEMENT JULY 2013
Slide 2: Contents
Contents • Review of first half 2013 2 • Cash 14 • Strategy 22 • The Partnership 32 • Investment Management 39 • Appendices 53 • Our market 70 • Post RDR 77 1
Slide 3: Review of first half 2013
Co ST. JAMES’S PLACE WEALTH MANAGEMENT Review of first half 2013
Slide 4: New business and funds under management
New business • Total single investments of £3.5 billion – up 28% • Total new business on an APE basis of £426.5 million – up 21% • Our own business represents 88% of the total Funds under management • Net inflow of funds under management of £1.99 Billion – up 32% • Continue to retain 95% year on yea
Slide 5: Partnership and profits
Partnership • Partnership numbers 1,905 - up 6.5% Profits • EEV new business profit £152.4 million – up 26% • EEV operating profit £233.6 million – up 39% • IFRS operating profit £90.1 million – up 53% Other financials • EEV net asset value of 524.1 pence per share – up 26% • Underlying cash result
Slide 6: Record half year single investments
Record half year single investments 4 +28% +14% +1% 3.53 3 +60% £billion 2 -12% 1 0 2009 2010 2011 2012 2013 5
Slide 7: Record half year new business (APE)
Record half year new business (APE) 450 +21% 400 +5% 426.5 +15% 350 +44% 300 £million 250 -8% 200 150 100 50 0 2009 2010 2011 2012 2013 6
Slide 8: Consistent net inflow of funds under management
Consistent net inflow of funds under management +32% 2 +13% 1.99 +50% -8% £billion +25% 1 0 2009 2010 2011 2012 2013 7
Slide 9: Funds under management
Funds under management 20%p.a. compound growth over the last 10 years +15% 40 +22% 35 39.9 +26% +10% 30 25 +31% £billion 20 15 10 5 0 2009 2010 2011 2012 2013 30 June 8
Slide 10: Five strong years of Partner recruitment
Five strong years of Partner recruitment 2000 +6.5% +8% 1800 +6% 1,905 +6% Number of Partners 1600 +9% 1400 1200 1000 800 600 400 200 0 2009 2010 2011 2012 2013 30 June 9
Slide 11: Productivity (single investment per Partner)
Productivity (single investment per Partner) 4.5 +16% 4 +3% +5% 3.96 3.5 +28% 3 +2% £000s 2.5 2 1.5 1 0.5 0 2009 2010 2011 2012 2013 30 June* * Annualised 10
Slide 12: Record half year EEV new business profit
Record half year EEV new business profit 160 +26% 140 +27% 152.4 -6% 120 +65% £million 100 80 -6% 60 40 20 0 2009 2010 2011 2012 2013 11
Slide 13: Half year EEV operating profit
Half year EEV operating profit 250 +39% +13% 233.6 200 +60% -9% £million 150 -12% 100 50 0 2009 2010 2011 2012 2013 12
Slide 14: Half year growth in EEV Net Asset Value per share
Half year growth in EEV Net Asset Value per share 550 +26% 500 +8% 524.1 450 +9% 400 +24% 350 +22% Pence 300 250 200 150 100 50 0 2009 2010 2011 2012 2013 30 June 13
Slide 15: Cash
Co ST. JAMES’S PLACE WEALTH MANAGEMENT Cash
Slide 16: Post-tax cash arising from inforce business
Post-tax cash arising from inforce business 160 140 +18% 120 +18% +13% £ million 100 +24% 89.3* 80 -3% 60 40 20 0 2009 2010 2011 2012 2013 30 June * Plus one off additional £18.3 million 15
Slide 17: Return on inforce
Return on inforce • Where product structure uses penalties the business is cash neutral in first six years Year £billion • This relates to £12.2 billion of 2007 0.8 new business added in last six 2008 1.4 years which is not yet 2009 1.6 generating positive cash earnings* 2010 2.1 2011 2.2 • This amo
Slide 18: Post-tax cash result
Post-tax cash result 160 140 120 £ million 100 80 60 40 20 65.3 61.4 62.4 60.5 25.0 0 2009 2010 2011 2012 2013 30 June* Investment in new business * Plus one off additional £18.3 million 17
Slide 19: Investment in new business
Investment in new business 30 June 2013 30 June 2012 Post-tax new business cost (£m) (25.0) (33.8) Post-tax EEV new business profit (£m) 121.7 94.8 Margin (% of manufactured APE) 35.7% 34.1% IRR (net of tax) 28.3% 21.0% Cash payback period 4 years 5 years As % of gross inflows of FUM 0.8% 1.3% 18
Slide 20: Post-tax cash result
Post-tax cash result 160 140 91.7 120 67 43% £ million 100 48.3 80 23.5 64.3* 60 40 20 0 2009 2010 2011 2012 2013 30 June Investment in new business * Plus one off additional £18.3 million 19
Slide 21: Unbroken dividend growth
Unbroken dividend growth +33% 11 10 9 +33% 8 7 +33% +50% Pence 6 +18% +2% +2.5% 6.38 5 +16% 4 3 2 1 0 2006 * 2007 2008 2009 2010 2011 2012 2013 Interim 20 * Plus special dividend of 6.35 pence
Slide 22: Outlook
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 21
Slide 23: Strategy
Co ST. JAMES’S PLACE WEALTH MANAGEMENT Strategy
Slide 24: St. James's Place: Overview
St. James’s Place: Overview • Leading UK Wealth Management Company – Established 1991 – UK listed with market cap of c. £3.0 billion – £39.9 billion in FUM – Target market £50k to £5 million free investable assets • Differentiated business model – Provider and distributor – Own dedicated distributio
Slide 25: Our products and services
Our products and services • Comprehensive range – of pension, investment and savings “wrappers” – of investment funds sourced from “whole of market” – access to “whole of market” choice of protection and annuities • Our focus – is our own products and funds (manufactured/EV) • Whilst avoiding – capi
Slide 26: Whole of Market approach
Whole of Market approach We take responsibility for the due diligence on all the products and companies we make available to our clients. 25
Slide 27: Global Investment Management Expertise
Global Investment Management Expertise 26
Slide 28: The Growth Model
The Growth Model Target: 15-20% pa NEW BUSINESS CAPACITY PRODUCTIVITY Number of Partners New business per Partner 27
Slide 29: Growing number of Partners
Growing number of Partners 2000 +6.5% +8% 1800 +6% 1,905 +6% Number of Partners 1600 +9% 1400 1200 1000 800 600 400 200 0 2009 2010 2011 2012 2013 30 June 28
Slide 30: Productivity (single investment per Partner)
Productivity (single investment per Partner) 4.5 +16% 4 +3% +5% 3.96 3.5 +28% 3 +2% £000s 2.5 2 1.5 1 0.5 0 2009 2010 2011 2012 2013 30 June* * Annualised 29
Slide 31: Single premium gross investments
Single premium gross investments 5.9 6 5.2 5 4.7 4 3.4 3.5 3.5 £ billion 3.1 3 2.6 2 1.6 0.98 1.2 1 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 30 June 30
Slide 32: Funds under management
Funds under management 18 % p.a. compound growth over the last 5 years and 20% p.a. over 10 years (as at June 2013) +15% 40 +22% 39.9 35 +6% 30 +26% Funds £ billion 25 +31% +18% 20 -10% +25% 15 +29% +20% 10 5 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 31
Slide 33: The Partnership
Co ST. JAMES’S PLACE WEALTH MANAGEMENT The Partnership
Slide 34: Dedicated distribution – the Partnership
Dedicated distribution – the Partnership • High quality self-employed team of c.1900 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 33
Slide 35: Geographic distribution June 2013
Geographic distribution 30 June 2013 34
Slide 36: Geographic distribution June 2013
Geographic distribution 30 June 2013 35
Slide 37: Geographic distribution June 2013
Geographic distribution 30 June 2013 36
Slide 38: Partners by age band
Partners by age band 30 June 2013 Existing Partners New Partners 65+ <35 55-65 65 <35 55-65 2% 7% 45-55 7% 0% 35-45 20% 18% 28% 32% 45-55 35-45 41% 45% 37
Slide 39: Benefits of our own distribution
Benefits of our own distribution • New business and expenses are more predictable • Spread of production • Less exposed to market pressures • Greater control over quality of new business • Ability to build and maintain distribution led culture • Better retention of business • Ability to build strong
Slide 40: Investment Management
Co ST. JAMES’S PLACE WEALTH MANAGEMENT Investment Management
Slide 41: Our approach to investment management
Our approach to investment management INVESTMENT Input/Advice from COMMITTEE Stamford Associates ‘MANAGES THE MANAGERS’ Decisions: Appoint the Set performance Risk management Change firm? Fund Managers objectives and strategy Change manager? No change? 40
Slide 42: Stamford Associates Independent Investment Consultancy
Stamford Associates Independent Investment Consultancy Research Fund Monitor Managers Advise Investment Manager Market and Portfolios Committee Access to Qualitative and Focus on Future Whole Market Quantitative Outperformance Analyse & identify talented Number crunching Recommend: managers Monitor
Slide 43: Independent guidance and expertise
Independent guidance and expertise Vivian Bazalgette, Sarah Bates Peter Dunscombe Win Robbins Chairman / / Vice Chairman of the Chairman of Stena Line Previously Chief Investment Trustee director of Now Governors of Dulwich (UK) Pension Fund Officer of the BBC Pension Pensions Trust. College, a memb
Slide 44: Global Investment Management Expertise
Global Investment Management Expertise 43
Slide 45: Growth Portfolios
ST. JAMES’S PLACE WwW 1H MANAGEMENT Growth Portfolios CONSERVATIVE PORTFOLIO DEFENSIVE PORTFOLIO BALANCED PORTFOLIO Low risk + Aims to provide a positive return after charges over a rolling five-year period + Invests primarily in bonds, equities and alternative assets + Offers resilience to signific
Slide 46: Growth Portfolios (cont.)
Growth Portfolios (cont.) 45
Slide 47: Income Portfolios
ST. JAMES’S PLACE WEALTH MANAGEMENT Income Portfolios IMMEDIATE INCOME PORTFOLIO Low to medium risk Aims to generate a consistent level of income with some potential for capital growth * Aims to avoid large fluctuations in value, although fluctuations will occur Predominantly invest in bonds, mostly
Slide 48: Weighted 5 year Rolling Performance
Weighted 5 year Rolling Performance to 30 June 2013 (excluding Money Market & Alternative Assets) 100% 90% 80% 59% 53% 70% 61% 70% 60% 78% 76% 86% 90% 91% 90% 50% 40% 30% 41% 47% 20% 39% 30% 10% 22% 24% 14% 10% 9% 10% 0% 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Below peer group average Abov
Slide 49: Weighted 10 year Rolling Performance
Weighted 10 year Rolling Performance to 30 June 2013 (excluding Money Market & Alternative Assets) 100% 90% 80% 70% 64% 60% 86% 86% 86% 90% 92% 92% 89% 50% 98% 98% 40% 30% 20% 36% 10% 14% 14% 14% 10% 8% 8% 11% 0% 2% 2% 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Below peer group average Above
Slide 50: Benefits of investment management approach
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
Slide 51: Funds under management
Funds under management 18 % p.a. compound growth over the last 5 years and 20% p.a. over 10 years (as at June 2013) +15% 40 +22% 39.9 35 +6% 30 +26% Funds £ billion 25 +31% +18% 20 -10% +25% 15 +29% +20% 10 5 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 50
Slide 52: Funds Under Management by Asset Class and Region
Funds Under Management: shown by Asset Class and Region 30 June 2013 Property Alternatives 2% PABs / FABs Cash & 3% 2% Other assets UK 34% 7% European 13% US 18% International 11% Far East 10% 51
Slide 53: Summary
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 52
Slide 54: Appendices
Co ST. JAMES’S PLACE WEALTH MANAGEMENT Appendices
Slide 55: Total new business by quarter
Total new business by quarter APE (Annual premiums plus 10% of single premiums) £m 240 227.3 223.8 220 199.2 201.3 200 178.9 2010 180 165.6 156.7 159.3 2011 160 152.6 153.9 152.7 152.8 136.5 2012 140 133.3 2013 120 100 80 60 Q1 Q2 Q3 Q4 2010 over 2009 +42% +46% +30% +15% 2011 over 2010 +18% +12% +13
Slide 56: Single investments by quarter
Single investments by quarter £m 2000 1927.0 1787.2 1800 1601.4 1600 1445.1 1501.1 1400 1288.3 1255.7 1276.2 1263.4 1331.2 1253.1 2010 1206.0 1200 1115.0 1104.5 2011 1000 2012 800 2013 600 400 200 0 Q1 Q2 Q3 Q4 2010 over 2009 +57% +54% +32% +16% 2011 over 2010 +16% +13% +14% -4% 2012 over 2011 -3% +
Slide 57: Pensions: single investments by quarter
Pensions: single investments by quarter 729.5 £m 750 700 650 619.3 580.9 600 558.5 556.9 550 521.6 495.8 479.6 474.5 2010 500 450 410.0 417.2 2011 400 378.4 371.4 370.2 2012 350 300 2013 250 200 150 100 50 0 Q1 Q2 Q3 Q4 2010 over 2009 +35% +38% +32% +20% 2011 over 2010 +8% +29% +28% +19% 2012 over 2
Slide 58: Investments: new business by quarter
Investments: new business by quarter £m 1400 1307.7 1300 1200 1100 1020.5 1057.7 965.6 942.6 1000 904.8 878.3 2010 900 835.9 788.9 774.3 800 736.6 734.1 734.3 2011 710.1 700 2012 600 2013 500 400 300 200 100 0 Q1 Q2 Q3 Q4 2010 over 2009 +71% +62% +32% +13% 2011 over 2010 +19% +7% +7% -16% 2012 over
Slide 59: Fund flow information
Fund flow information £ billion 30 June 2013 30 June 2012 FUM at start 34.8 28.5 New money invested 3.3 2.7 Investment return (Stock market fall) 3.2 0.9 41.3 32.1 Regular income withdrawals/maturities (0.4) (0.4) Surrenders/part surrenders (1.0) (0.8) FUM at close 39.9 30.9 Net inflow of FUM 1.99bn
Slide 60: Analysis of EEV life, pension & unit trust pre-tax operating profit
Analysis of EEV life, pension & unit trust pre-tax operating profit £ million 30 June 2013 30 June 2012 New business contribution 152.4 120.6 Profits from existing business – expected 56.5 48.9 – experience variance 39.3 3.7 – operating assumption charges - - Investment income 1.7 1.4 Operating prof
Slide 61: Pre-tax EEV profit
Pre-tax EEV profit £ million 30 June 2013 30 June 2012 Life, pension & unit trust 249.9 174.6 Distribution (2.1) 2.0 Other operations (14.2) (8.8) Total operating profit 233.6 167.8 Investment variance 209.5 54.9 Economic changes 1.5 (2.2) Pre-tax result 444.6 220.5 60
Slide 62: EEV Net Asset Value per share
EEV Net Asset Value per share Pence 30 June 2013 30 June 2012 NAV per share 524.1 414.6 61
Slide 63: Pre-tax IFRS profit
Pre-tax IFRS profit £ million 30 June 2013 30 June 2012 Life 81.1 52.6 Unit Trust 25.3 13.1 Distribution (2.1) 2.0 Other operations (14.2) (8.8) Profit before shareholder tax 90.1 58.9 62
Slide 64: Capital position as at June 2013
Capital position as at 30 June 2013 Other £ million Life regulated Other Total Solvency position Solvency net assets 221.5 34.9 206.3 462.7 Solvency requirement 47.9 16.3 Solvency ratio 462% 214% 63
Slide 65: Group expenses
Group expenses £ million 30 June 2013 30 June 2012 Paid from policy margins Partner remuneration 177.7 141.5 Investment expenses 49.5 43.4 3rd party administration 17.7 13.7 244.9 198.6 Direct expenses Other production related costs 32.4 27.7 Establishment expenses 56.0 49.6 Regulatory levy 5.4 5.6
Slide 66: Award winning into 2013
Co ST. JAMES’S PLACE WEALTH MANAGEMENT Award winning into 2013 #” UK Stock Market Awards 2012 ) & CITY OF LONDON WEALTH MANAGEMENT COMPANY OF THE YEAR Best financial adviser 2011/12 FT WINNER UK Wealth Manager of the Year St. James’s Place Wealth Management BRITAINS MOST oO a ES Y ; wealthadviser bs
Slide 67: Geographic distribution of client FUM
Geographic distribution of client FUM 30 June 2013 66
Slide 68: FUM by value of clients
FUM by value of clients 30 June 2013 FUM by Client Band < £50,000 £50,000 to ¼ million 10% 39% > £1 million 16% ½ million to 1 million 15% ¼ million to ½ million 20% 67
Slide 69: New and retained clients by age band
New and retained clients by age band 30 June 2013 Existing clients by age band New clients by age band <30 70+ <30 70+ 2% 30-40 12% 10% 30-40 17% 13% 10% 65-70 65-70 10% 10% 40-50 60-65 60-65 26% 10% 11% 40-50 55-60 55-60 23% 50-55 11% 50-55 10% 12% 13% 68
Slide 70: Our clients
Our clients Client survey carried out by Ledbury Research The key findings were: • SJP client satisfaction has impressed in absolute terms against previous research (2010) despite the backdrop of volatile investment markets • 82% of clients scored their overall satisfaction with SJP as 8 or more out
Slide 71: Our market
Co ST. JAMES’S PLACE WEALTH MANAGEMENT Our market
Slide 72: Our market
Our market • The market is big • Favourable demographics • The tax burden is increasing • UK high net worth individuals want face-to-face advice 71
Slide 73: The SJP Marketplace
The SJP Marketplace UK individuals with between €50k and €5m of liquid assets 10,000,000 9,403,000 8,562,000 7,601,000 Number of individuals 8,000,000 7,008,000 6,000,000 4,000,000 2,000,000 0 2011 2012 Year 2013 2014 Source: Datamonitor European Wealth Markets Database 2010 72
Slide 74: The SJP Marketplace
The SJP Marketplace Amount of liquid assets held by UK individuals with between €50k and €5m 2000 1,715 1,557 1500 1,376 1,264 € billion 1000 500 0 2011 2012 Year 2013 2014 Source: Datamonitor European Wealth Markets Database 2010 73
Slide 75: The SJP Opportunity
The SJP Opportunity • ISAs – Cash £200 bn (Sept 2012 – HMRC) – Stocks & shares £190 bn (Sept 2012 – HMRC) • Building Society deposits £215 bn (30/06/12 – Building Socs Assoc.) • Mutual lenders and deposit takers £250 bn (30/06/12 – Building Socs Assoc.) • Bank deposits £696 bn (Nov 2012 – British Ba
Slide 76: The SJP Opportunity
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. (Club VITA survey) • Almost 1
Slide 77: The SJP Opportunity
The SJP Opportunity • More than 10 million people in the UK today can expect to live to see their 100th birthday. (DWP December 2010) • Nearly a fifth of people alive now in the UK will survive until they are at least 100. (DWP December 2010) • There isn’t going to be enough money for all these idle
Slide 78: Post RDR
Co ST. JAMES’S PLACE WEALTH MANAGEMENT Post RDR
Slide 79: The advice market – transparent but not simple
The advice market – transparent …. but not simple The table illustrates 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. % of initial investment Tiered fee based on amount invested + VAT In
Slide 80: Basic comparison with other options
Basic comparison with other options Advice Platform Asset management Total Direct to customer platform 0 50-75 75 125-150 75 Traditional’ IFA/platform combination 60-80 25-50 160-205 St. James’s Place Bundled 160-190 Source: Barclays research, company data. All bps. 79
Slide 81: Adviser numbers down 20%
Co ST. JAMES’S PLACE WEALTH MANAGEMENT Adviser numbers down 20% TYPE OF ADVISER FSA ESTIMATES 31 DEC 2011 a——— FSA FIGURES 31 DEC 2012 Financial advisers 25,616 20,453 Bank advisers 8,658 4,809 Wealth managers/ stockbrokers 4,043 3,718 38,317 28,980
Slide 82: Our shareholders
Our shareholders 1. Lloyds Banking Group 21.5% 2. Baillie Gifford 5.9% 3. Ameriprise Financial (Threadneedle) 5.2% 4. Schroder 5.0% 5. Prudential (M&G) 4.3% 6. AXA Framlington 3.3% 7. Wellington 3.0% 8. Kames Capital 2.9% 9. Legal & General 2.6% 10. BlackRock (BGI) 1.9% As at 28 June 2013 81
Slide 83: Analysts following
Analysts following • Alan Devlin - Barclays Capital • Jon Hocking - Morgan Stanley • Matthew Preston - Berenberg • Ben Bathurst - Nomura • Andrew Sinclair - BoA Merrill Lynch • David McCann - Numis • Chris Esson - Credit Suisse • Marcus Barnard - Oriel Securities • Oliver Steel - Deutsche Bank • Bar
Slide 84: July 2013
July 2013