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ST. JAMES’S PLACE WEALTH MANAGEMENT

ST. JAMES’S PLACE WEALTH MANAGEMENT. DECEMBER 2008. Current trading update Strategy The Partnership Investment Management Our clients Our market Analyst following History & Board Foundation. Page No: 2 20 26 35 44 50 58 60 63. Contents.

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ST. JAMES’S PLACE WEALTH MANAGEMENT

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  1. ST. JAMES’S PLACE WEALTH MANAGEMENT DECEMBER 2008

  2. Current trading update Strategy The Partnership Investment Management Our clients Our market Analyst following History & Board Foundation Page No: 2 20 26 35 44 50 58 60 63 Contents

  3. Current trading update31 December 2008

  4. 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

  5. New business by quarter APE (Annual premiums plus 10% of single premiums) £’m 2006 2007 2008 2006 over 2005 +57% +54% +63% +59% 2007 over 2006 +41% +26% +20% +10% 2008 over 2007 +1% +5% +0% -15%

  6. Investment new business by quarter Single premiums £’m 2006 2007 2008 2006 over 2005 +71% +47% +49% +36% 2007 over 2006 +22% +39% +30% +16% 2008 over 2007 -4% -4% -20% -24%

  7. Pensions new business by quarter Single premiums £’m 2006 2007 2008 2006 over 2005 +83% +78% +106% +147% 2007 over 2006 +105% +52% +27% -4% 2008 over 2007 +9% +10% +19% -3%

  8. Pensions new business by quarter Regular premiums £’m 2006 2007 2008 2006 over 2005 +31% +80% +132% +93% 2007 over 2006 +83% -10% -7% +18% 2008 over 2007 +7% +37% +48% -4%

  9. Funds under management 16%p.a. compound growth over the last 5 years and 18%p.a. over 10 years +18% -10% +25% +29% Funds £’bn +20% +34% +10% +24% -6% +47% +31%

  10. Fund flow information £’bn 2008 2007 FUM at start 18.2 15.4 New money invested 3.0 3.1 Investment return (3.6) 0.9 17.6 19.4 Regular income withdrawals/ maturities (0.4) (0.3) Surrenders / part surrenders (0.9) (0.9) FUM at close 16.3 18.2 Implied surrender rate as % of average FUM 5.2% 5.1%

  11. Analysis of life, pension & unit trustpre-tax operating profit £’m 2008 2007

  12. Life & pension 174.1 189.9 Unit trust 50.8 59.0 Other operations (20.6) (4.2) Total Operating profit 204.3 244.7 Investment variance (320.6) (14.5) Economic changes 0.4 0.2 Pre-tax result (115.9) 230.4 Pre-tax EEV profit £’m 2008 2007

  13. Final dividend of 2.55 pence maintained Dividend

  14. Analysis of adjusted post tax profit Net annual management fee 122.2 123.2 Unwind of surrender penalties (44.4) (44.6) New business strain (10.0) (7.7) Establishment expenses (72.2) (67.3) Investment income 10.1 10.5 Other 18.4 11.8 Underlying cash flow 24.1 25.9 One off - 7.2 24.1 33.1 £’m 2008 2007

  15. Analysis of underlying post tax cashflow £’ m 2008 2007 Arising on in force business 91.4 84.7 Arising from new business (67.3) (58.8) 24.1 25.9

  16. Year end capital position Other Regulated Total Other £’m Life Solvency position Solvency net assets 151.9 19.3 88.8 260.0 Solvency requirement 41.1 14.6 Solvency ratio 370% 132%

  17. Year end capital position Other Regulated £’m Life Total Other Analysis of solvency net assets UK Govt. gilts 23.0 - - 23.0 Other Govt. backed debt 26.3 - - 26.3 AAA rated money market funds 137.0 15.6 20.5 173.1 Bank balances 26.3 20.1 15.3 61.7 Fixed assets - - 12.2 12.2 Actuarial reserves (32.2) - - (32.2) Other assets / liabilities (28.5) (16.4) 40.8 (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

  18. Group expenses £’m 2008 2007

  19. Uniquely placed in growing market • 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)

  20. 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

  21. Strategy

  22. St. James’s Place: overview • 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

  23. Structure of St. James’s Place LLOYDS St. James’s Place 60% 100% SJP GROUP Wealth Management Manufacturing Distribution SJP Life and Unit Trust Companies SJP Partnership

  24. The growth model Target 15 – 20% pa New Business CAPACITY No of Partners PRODUCTIVITY New Business Per Partner

  25. Pensions Investment Estate protection Estate creation Inheritance tax solutions ISAs Offshore bonds Mortgages Employee benefits Trust & Estate planning Protection General insurance Annuities Portfolio management Banking Stakeholder Private medical insurance Our wealth management services

  26. 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

  27. The Partnership

  28. The Partnership (Own dedicated distribution) • 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

  29. Number of Partners +7% +8% +5% +7% +2% +2% +1% -2% +8% +9% +10% Number of Partners

  30. PartnersClients Geographic Distribution 6% 7% 2% 2% 24% 23% 14% 13% 3% 3% 4% 3% 11% 15% 25% 22% 11% 9% Overseas Clients: 3%

  31. Changing face of the Partnership (APE) 2004 2008

  32. Partners by Age Band

  33. 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

  34. Benefits of our own distribution • 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

  35. 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

  36. Investment Management

  37. Investment management approach Investment Committee Stamford Associates (Consultants) Select, monitor and change investment houses 19 investment management houses (select individual managers)

  38. External investment managers • Core managers – managed funds • AXA Framlington • GAM • Invesco Perpetual • Jupiter • Newton • Polaris • Schroder Investment Management • Taube Hodson Stonex Partners • 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)

  39. Advantages of investment approach • 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

  40. 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

  41. Funds under management 16%p.a. compound growth over the last 5 years and 18%p.a. over 10 years +18% -10% +25% +29% Funds £’bn +20% +34% +10% +24% -6% +47% +31%

  42. Funds Under Management: Shown by Asset Class and Region

  43. 1st 2nd 3rd 4th Relative investment performance of funds under management – 1 year 45% 46% 58% 47% 49% 49% 55% 57% 61% 73% 14% 28% 22% 13% 11% 34% 38% 39% 23% 7% 12% 15% 10% 24% 23% 1% 5% 15% 10% 20% 16% 15% 9% 14% 12% 8% 8% 6% 4% 3% 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 2008 2006 2005 2004 2003 2002 2001 2000 1999

  44. 1st 2nd 3rd 4th Relative investment performance of funds under management – rolling 5 year 2008 2007 2006 2005 2004 2003 2002 2001 2000

  45. Our clients

  46. 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

  47. Geographic Distribution of Client FUM 5% 1% 19% 12% 3% 4% 18% 24% 10% Overseas Clients 4%

  48. FUM by Value of Clients

  49. New and Retained Clients by Age Band

  50. Clients vote us Wealth Manager of Year

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