82 slides from St. James's Place's earnings presentation, February 2013
Slide 1: St. James's Place Wealth Management February 2013
ST. JAMES’S PLACE WEALTH MANAGEMENT FEBRUARY 2013
Slide 2: Contents
Contents Review of 2012 2 Strategy 15 Investment Management 30 Our Clients 44 Cash & Dividend Profile 56 Post RDR 63 Appendices 66 1
Slide 3: Review of 2012
) ST. JAMES’S PLACE WEALTH MANAGEMENT Review of 2012
Slide 4: New business and funds under management
New business • Total single investments of £5.88 billion – up 13% • Total new business on an APE basis of £743.3 million – up 16% • Our own business represents 86% of the total Funds under management • Net inflow of funds under management of £3.3 billion – up 4% • Continue to retain 95% year on year
Slide 5: Partnership, profits and other financials
Partnership • Partnership numbers 1,788 – up 8% Profits • EEV new business profit £276.8 million – up 13% • EEV operating profit £365.9 million – down 2% • IFRS operating profit £134.6 million – up 23% Other financials • EEV net asset value of 461 pence per share – up 20% • The cash result of £91.7
Slide 6: Record single investments
Record single investments 6 +13% +10% 5.88bn 5 +37% 4 +11% £ billion 3 2 1 0 2008 2009 2010 2011 2012 5
Slide 7: Record new business (APE)
Record new business (APE) 800 +16% 700 +10% 743.3 600 +32% 500 £ million 400 +5% 300 200 100 0 2008 2009 2010 2011 2012 6
Slide 8: Growing net inflow of funds under management
Growing net inflow of funds under management 3.5 +10% +4% +30% 3.35bn 2.8 +35% £ billion 2.1 1.4 0.7 0 2008 2009 2010 2011 2012 7
Slide 9: Funds under management
Funds under management 19% p.a. compound growth over the last 10 years +22% 35 +6% 34.8bn 30 +26% 25 +31% £ billion 20 15 10 5 0 2008 2009 2010 2011 2012 8
Slide 10: Five strong years of Partner recruitment
Five strong years of Partner recruitment 1800 +8% +6% 1600 +6% 1,788 +9% Number of Partners 1400 +7% 1200 1000 800 600 400 200 0 2008 2009 2010 2011 2012 9
Slide 11: Productivity (single investment per Partner)
Productivity (single investment per Partner) 3.75 +5% +28% +3% 3.25 3.42 2.75 +2% £ million 2.25 1.75 1.25 0.75 0.25 2008 2009 2010 2011 2012 10
Slide 12: Record EEV new business profit
Record EEV new business profit +13% 275 +13% 276.8 250 225 +40% 200 175 +26% £ million 150 125 100 75 50 25 0 2008 2009 2010 2011 2012 11
Slide 13: EEV operating profit
EEV operating profit 400 +12% -2% 350 +45% 365.9 300 250 +12% £ million 200 150 100 50 0 2008 2009 2010 2011 2012 12
Slide 14: Growth in EEV Net Asset Value per share
Growth in EEV Net Asset Value per share +20% 450 461 400 +9% +24% 350 300 +22% Pence 250 200 150 100 50 0 2008 2009 2010 2011 2012 13
Slide 15: Continual dividend growth
Continual dividend growth 11 +33% 10 10.64 9 +33% 8 7 +33% Pence 6 +18% +2% +2.5% 5 4 +16% 3 2 1 0 2006* 2007 2008 2009 2010 2011 2012 * Plus special dividend of 6.35 pence 14
Slide 16: Strategy
WEALTH MANAGEMENT Strategy
Slide 17: St. James's Place: Overview
St. James’s Place: Overview • Leading UK Wealth Management Company - Established 1991 - UK listed with market cap of c.£2.4 billion - In excess of £34 billion in FUM - Target market £50k to £5 million free investable assets • Differentiated business model - Provider and distributor - Own dedicated d
Slide 18: 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. SIP SERVICES 17
Slide 19: Global Investment Management Expertise
Global Investment Management Expertise Global Range of Investment Houses 18
Slide 20: The Growth Model
The Growth Model Target: 15-20% pa NEW BUSINESS CAPACITY PRODUCTIVITY Number of Partners New Business per Partner 19
Slide 21: Dedicated distribution – the Partnership
Dedicated distribution – the Partnership • High quality self-employed team of c.1800 advisors - 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 20
Slide 22: Growing number of Partners
Growing number of Partners 1800 +8% +6% 1600 +6% 1,788 +9% Number of Partners 1400 +7% 1200 1000 800 600 400 200 0 2008 2009 2010 2011 2012 21
Slide 23: Productivity (single investment per Partner)
Productivity (single investment per Partner) 3.75 +5% +28% +3% 3.25 3.42 2.75 +2% £ million 2.25 1.75 1.25 0.75 0.25 2008 2009 2010 2011 2012 22
Slide 24: Single premium gross investments
Single premium gross investments 6 £5.9 bn £5.2 bn 5 £4.7 bn 4 £3.4 bn £3.5 bn £ billion £3.1 bn 3 £2.6 bn 2 £1.6 bn £1.2 bn £0.98 bn 1 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 23
Slide 25: Funds under management
Funds under management 19% p.a. compound growth over the last 10 years +22% 35 34.8 30 +10% +26% Funds £ billion 25 +31% 20 +18% -10% +25% 15 +29% +20% 10 +34% 5 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 24
Slide 26: Geographic Distribution: Partners and Clients
Geographic Distribution 31 December 2012 Partners Clients 5% 6% 2% 2% 22% 23% 13% 14% 4% 4% 3% 4% 25% 22% 10% 10% Overseas Clients: 2% 15% 14% 25
Slide 27: Geographic Distribution: Partners and Funds
Geographic Distribution 31 December 2012 Partners Funds 5% 5% 2% 1% 22% 20% 13% 13% 4% 4% 3% 4% 25% 24% 10% 10% Overseas Clients: 3% 15% 17% 26
Slide 28: Geographic Distribution: Funds and New Funds
Geographic Distribution 31 December 2012 Funds New Funds 2012 5% 5% 1% 1% 20% 21% 13% 13% 3% 4% 3% 4% 24% 24% 10% 9% Overseas Clients: 3% Overseas Clients: 3% 17% 17% 27
Slide 29: Partners by age band
Partners by age band 31 December 2012 Existing Partners New Partners 55-65 65+ <35 65+ <35 3% 55-65 1% 12% 21% 6% 10% 35-45 35-45 28% 37% 45-55 45-55 42% 40% 28
Slide 30: Benefits of our own distribution
Benefits of our own distribution • New business and expenses are more predictable • Spread of production – no one adviser more than 1% of new business • Less exposed to market pressures • Greater control over quality of new business • Low lapse rates • Ability to build and maintain distribution led
Slide 31: Investment Management
) ST. JAMES’S PLACE WEALTH MANAGEMENT Investment Management
Slide 32: Our approach to investment management
Our approach to investment management INVESTMENT Input/Advice from COMMITTEE Stamford Associates ‘MANAGES THE MANAGERS’ Decisions: Appoint the Sets performance Risk management Change firm? Fund Managers objectives and strategy Change manager? No change? 31
Slide 33: 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 • Mo
Slide 34: 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 (UK) Previously Chief Investment Trustee Director of Now Govenors of Dulwich College, Pension Fund Trustees and Officer of the BBC Pension Pensions Trust
Slide 35: Growth Portfolios
Growth Portfolios DEFENSIVE PORTFOLIO CONSERVATIVE PORTFOLIO BALANCED PORTFOLIO Low risk Low to medium risk Medium risk • Aims to provide a positive return after charges over • Aims to provide steady growth for investments of at • Aims to provide growth for investments of at least a rolling five-yea
Slide 36: Growth Portfolios (cont.)
Growth Portfolios (cont.) MANAGED FUNDS PORTFOLIO ADVENTUROUS PORTFOLIO Medium risk Medium to high risk • Aims to provide capital growth for investments of • Aims to provide higher levels of capital growth for at least five years investments of at least ten years • Diversified across managers with d
Slide 37: Income Portfolios
Income Portfolios IMMEDIATE INCOME PORTFOLIO BALANCED INCOME PORTFOLIO DEFERRED INCOME PORTFOLIO Low to medium risk Medium risk Medium risk • Aims to generate a consistent level of income with • Aims to generate an attractive level of income with • Aims to generate a rising level of income some pote
Slide 38: Weighted 5-year Rolling Performance
Weighted 5-year Rolling Performance To 31 December 2012 (excluding Money Market & Alternative Assets) 100% 90% 80% 70% 70% 70% 71% 72% 73% 72% 60% 79% 86% 86% 88% 50% 40% 30% 20% 30% 30% 28% 27% 29% 28% 10% 12% 21% 14% 14% 0% 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 Below Peer Group Average
Slide 39: Weighted 10-year Rolling Performance
Weighted 10-year Rolling Performance To 31 December 2012 (excluding Money Market & Alternative Assets) 100% 90% 80% 70% 70% 79% 60% 83% 83% 83% 87% 87% 87% 87% 50% 98% 40% 30% 20% 30% 21% 10% 17% 17% 17% 13% 13% 13% 13% 2% 0% 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 Below Peer Group Average
Slide 40: Global Investment Management Expertise
Global Investment Management Expertise Global Range of Investment Houses 39
Slide 41: 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 42: Funds under management
Funds under management 19% p.a. compound growth over the last 10 years +22% 35 34.8 30 +10% +26% Funds £ billion 25 +31% 20 +18% -10% +25% 15 +29% +20% 10 +34% 5 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 41
Slide 43: Funds Under Management by Asset Class and Region
Funds Under Management: shown by Asset Class and Region 31 December 2012 Property 3% PABs/FABs UK 40% 3% Cash & Other Assets 5% European 14% International Far East US 19% 5% 11% 42
Slide 44: 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 43
Slide 45: Our Clients
WEALTH MANAGEMENT Our Clients
Slide 46: FUM by Value of Clients
FUM by Value of Clients 31 December 2012 FUM by Client Band <£50,000 11% £50,000 to 1/4 million >£1 million 40% 15% 1/2 million to 1 million 14% 1/4 million to 1/2 million 20% 45
Slide 47: New and Retained Clients by Age Band
New and Retained Clients by Age Band 31 December 2012 Existing Clients by Age Band New Clients by Age Band 70 + <30 30-40 70 + <30 19% 2% 8% 30-40 9% 14% 10% 65-70 65-70 10% 11% 40-50 40-50 26% 21% 60-65 60-65 10% 11% 55-60 50-55 55-60 50-55 11% 13% 12% 13% 46
Slide 48: What our clients think
What our clients think* • 73% of clients scored their overall satisfaction with St. James’s Place as 8 or more out of 10 • 25% of clients scored us 10 out of 10 • 76% of clients agree that we provide excellent service • 67% of clients rated 8 or more out of 10 for the way in which we communicate wit
Slide 49: Clients vote us Wealth Manager of the Year
Clients vote us Wealth Manager of the Year for the third time Best Private Client Asset Manager UK 48
Slide 50: Clients Service Standards Charter
Clients Service Standards Charter We will: • Fully understand our clients’ financial circumstances • Identify our clients’ goals and objectives • Liaise with other professionals and experts as needed • Formulate advice and make recommendations • Provide a full explanation of all our costs, charges a
Slide 51: 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 50
Slide 52: The SJP Market Place: number of individuals
The SJP Market Place UK individuals with between £100k and £5m of net worth held 14 12,644,000 11,429,000 11,871,000 Number of Individuals 12 10,615,000 10 (million) 8 6 4 2 0 2012 2013 2014 2015 Year Source: Ledbury Research 51
Slide 53: The SJP Market Place: net worth held
The SJP Market Place Amount of net worth held by UK individuals with between £100k and £5m 4,050bn 4,000 3,811bn 3,424bn 3,653bn 3,500 3,000 2,500 £ billion 2,000 1,500 1,000 500 0 2012 2013 2014 2015 Year Source: Ledbury Research 52
Slide 54: 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 Societies Association) • Mutual lenders and deposit takers £250 bn (30/06/12 - Building Societies Association) • Bank deposits £696 bn (N
Slide 55: 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
Slide 56: 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 57: Cash & Dividends Profile
) ST. JAMES’S PLACE WEALTH MANAGEMENT Cash & Dividends Profile
Slide 58: Underlying post-tax cash arising from inforce business
Underlying post-tax cash arising from inforce business 160 +18% 140 +18% 152.2 120 +24% 100 +8% -3% £ million 80 60 40 20 0 2008 2009 2010 2011 2012 57
Slide 59: Return on inforce
Return on inforce • Where product structure uses penalties the business is cash neutral in first six years • This relates to £11.3 billion Year £ Billion of new business added in 2007 1.6 last six years which is not 2008 1.4 yet generating positive 2009 1.6 cash earnings* 2010 2.1 2011 2.2 • This am
Slide 60: Underlying post-tax cash result
Underlying post-tax cash result 160 140 120 100 £ million 80 60 40 67.3 65.3 61.4 62.4 60.5 20 0 2008 2009 2010 2011 2012 Investment in new business 59
Slide 61: Investment in new business
Investment in new business 2012 2011 Post-tax new business cost (£m) (60.5) (62.4) Post-tax EEV new business profit (£m) 218.3 191.1 Margin (% of APE) 37.2% 38.3% IRR (net of tax) 22.5% 20.6% Cash payback period 4 Years 5 Years As % of gross inflows of FUM 1.1% 1.2% 60
Slide 62: Underlying net post-tax cash result
Underlying net post-tax cash result 160 140 91.7 120 67.0 100 48.3 £ million 80 24.1 23.5 60 40 20 0 2008 2009 2010 2011 2012 Investment in new business 61
Slide 63: Continual dividend growth
Continual dividend growth 11 +33% 10 10.64 9 +33% 8 7 +33% 6 Pence +18% +2% +2.5% 5 4 +16% 3 2 1 0 2006* 2007 2008 2009 2010 2011 2012 * Plus special dividend of 6.35 pence 62
Slide 64: Post RDR
WEALTH MANAGEMENT Post RDR
Slide 65: 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 66: Basic comparison with other options
Basic comparison with other options Advice Platform Asset management Total Bps Direct to customer platform 0 50-75 75 125 -150 ‘Traditional’ IFA/platform combination 60-80 25-50 75 160 -205 St. James’s Place Bundled 160 -190 Source: Barclays research, company data 65
Slide 67: Appendices
WEALTH MANAGEMENT Appendices
Slide 68: Total new business by quarter
Total new business by quarter APE (Annual premiums plus 10% of single premiums) 223.8 £m 220 201.3 200 178.9 2009 180 165.6 159.3 2010 160 156.7 152.6 153.9 152.7 152.8 2011 140 136.5 133.2 133.3 2012 120 109.2 104.6 100 93.8 80 60 Q1 Q2 Q3 Q4 2009 over 2008 -5% -10% +3% +38% 2010 over 2009 +42% +46
Slide 69: Single investments by quarter
Single investments by quarter 1787.2 £m 1800 1600 1445.1 1501.1 1400 1288.3 1276.2 1263.4 1331.2 1255.7 1253.1 1206.0 2009 1200 1115.0 1104.5 1084.7 2010 1000 827.6 834.8 2011 800 711.1 2012 600 400 200 0 Q1 Q2 Q3 Q4 2009 over 2008 -6% -8% +12% +51% 2010 over 2009 +57% +54% +32% +16% 2011 over 2010
Slide 70: Pensions: single investments by quarter
Pensions: single investments by quarter £m 750 729.5 700 650 600 558.5 556.9 550 521.6 495.8 2009 500 479.6 474.5 450 410.0 417.2 2010 400 378.4 371.4 370.2 346.7 2011 350 300 280.1 269.7 280.1 2012 250 200 150 100 50 0 Q1 Q2 Q3 Q4 2009 over 2008 +11% +0% -1% +30% 2010 over 2009 +35% +38% +32% +20%
Slide 71: Pensions: regular investments by quarter
Pensions: regular investments by quarter £m 45 43.9 40 35 34.1 35 2009 30.2 30 2010 26.7 26.3 25 23.3 22.1 21.8 22.4 23.2 22.1 2011 20.7 19.4 20 18.4 17.4 2012 15.8 15 10 5 0 Q1 Q2 Q3 Q4 2009 over 2008 +1% -19% -31% -2% 2010 over 2009 -5% +22% +31% +14% 2011 over 2010 +34% +13% +8% +19% 2012 over 20
Slide 72: Fund flow information
Fund flow information £ billion 2012 2011 FUM at start 28.5 27.0 New money invested 5.6 5.2 Investment return 3.0 (1.8) 37.1 30.4 Regular income withdrawals/maturities (0.7) (0.5) Surrenders/part surrenders (1.6) (1.4) FUM at close 34.8 28.5 Implied surrender rate as % of average FUM 4.9% 5.2% 71
Slide 73: Analysis of EEV life, pension & unit trust pre-tax operating profit
Analysis of EEV life, pension & unit trust pre-tax operating profit £ million 2012 2011 New business contribution 276.8 246.0 Profits from existing business - expected 96.0 91.2 - experience variance 4.6 38.1 - operating assumption changes (4.3) 0.6 Investment income 3.4 2.8 Operating profit 376.5 3
Slide 74: Pre-tax EEV profit
Pre-tax EEV profit £ million 2012 2011 Life, pension & unit trust 376.5 378.7 Distribution 5.3 6.1 Other operations (15.9) (13.3) Total operating profit 365.9 371.5 Investment variance 190.4 (180.4) Economic changes (3.7) ( 0.3) Pre-tax result 552.6 190.8 73
Slide 75: EEV Net Asset Value per share
EEV Net Asset Value per share Pence 2012 2011 NAV per share 461.0 385.0 74
Slide 76: Pre-tax IFRS profit
Pre-tax IFRS profit £ million 2012 2011 Life 111.7 89.1 Unit trust 33.5 27.8 Distribution 5.3 6.1 Other operations (15.9) (13.3) Profit before shareholder tax 134.6 109.7 75
Slide 77: IFRS Net Asset Value per share
IFRS Net Asset Value per share Pence 2012 2011 NAV per share 150.4 137.5 76
Slide 78: Capital position as at 31 December 2012
Capital position as at 31 December 2012 Other £ million Life Regulated Other Total Solvency position Solvency net assets 199.1 29.4 175.0 403.5 Solvency requirement 43.8 14.0 Solvency ratio 455% 210% 77
Slide 79: Group expenses
Group expenses £ million 2012 2011 Paid from policy margins Partner remuneration 307.0 276.7 Investment expenses 89.4 92.5 3rd party administration 32.6 33.5 429.0 402.7 Direct expenses Other production related costs 59.5 54.5 Establishment expenses 102.4 95.0 FSA/FSCS 12.0 8.0 Development costs 10.
Slide 80: Our Shareholders
Our Shareholders 1. LBG 57.4% 2. M&G 5.3% 3. Baillie Gifford 4.1% 4. Threadneedle 2.8% 5. Kames Capital 2.5% 6. Allianz Global 1.6% 7. AXA Framlington 1.6% 8. Legal & General 1.5% 9. Franklin Templeton 1.0% 10. Norges Bank 1.0% As at 30 January 2013 79
Slide 81: Analyst following
Analyst following • Alan Devlin - Barclays Capital • David McCann - Numis • Chris Esson - Credit Suisse • Marcus Barnard - Oriel Securities • Oliver Steel - Deutsche Bank • Barrie Cornes - Panmure Gordon • Colin Simpson - Goldman Sachs • Stuart Duncan - Peel Hunt • Kevin Ryan - Investec • Gordon Ait
Slide 82: February 2013
February 2013