INTERIM RESULTS
July 2009
Mike Wilson
CHAIRMAN
David Bellamy
CHIEF EXECUTIVE
Andrew Croft
FINANCE DIRECTOR
MIKE WILSON
Chairman
Agenda
Introduction
MIKE WILSON
Business Update
DAVID BELLAMY
Financials
ANDREW CROFT
Outlook
DAVID BELLAMY
Q&A
DAVID BELLAMY
Chief Executive
Total new business by quarter
APE (Annual premiums plus 10% of single premiums)
2007
2006
2009
2008
116
98
99
94
122
92
113
109
102 102
103
96
85
69
Q1
2006 over 2005 +57%
2007 over 2006 +41%
2008 over 2007 +1%
2009 over 2008
-5%
Q2
Q3
Q4
+54%
+26%
+5%
-10%
+63%
+20%
+0%
+59%
+10%
-15%
Manufactured new business by quarter
APE (Annual premiums plus 10% of single premiums)
2007
2006
2008
2009
101 101
87
84
83
78
98
87
86
92
98
86
73
61
Q1
2006 over 2005 +65%
2007 over 2006 +44%
2008 over 2007
-3%
2009 over 2008
-1%
Q2
Q3
Q4
+57%
+29%
+0%
-3%
+75%
+19%
-2%
+63%
+7%
-13%
Investment new business by quarter
Single premiums
2006
2007
2009
2008
662
431
Q1
2006 over 2005 +71%
2007 over 2006 +22%
2008 over 2007
-4%
2009 over 2008 -15%
476
593
578
558
528 507
432
633
512
445
462
449
Q2
Q3
Q4
+47%
+39%
-4%
-12%
+50%
+30%
-20%
+36%
+16%
-24%
Pensions new business by quarter
Single premiums
2007
2006
2009
2008
280
232
252
248
282
269 270
286 277
267
239
188
161
113
Q1
2006 over 2005 +83%
2007 over 2006 +106%
2008 over 2007 +8%
2009 over 2008 +11%
Q2
+78%
+54%
+9%
+0%
Q3
+106%
+27%
+18%
Q4
+147%
-3%
-3%
Total new investments of over £1.5bn
Net inflows of £1bn
+25%
Funds Under Management (£bn)
16% p.a. compound growth over the last 5 years
and 18% p.a. over 10 years
+18%
-10% +3%
+25% 18.2
16.3 16.9
+29% 15.4
+20% 12.3
+34%
+24%
+10%
-6%
6.3
5.9
2001
2002
9.5
7.9
5.7
2000
2003
2004
2005
2006
2007
2008
HY
2009
Number of Partners
1,389
1,340
1,251
1,157
2006
2007
2008
HY 2009
Partnership Number First Half Growth
No.
3.7%
% Growth
3.2%
2.6%
1.9%
49
40
30
22
-0.3%
-3
2005
2006
2007
2008
Highest first half growth in absolute and relative terms for many years
2009
Summary
• Total APE of £203m (manufactured = 90%)
• New inflows of +25% to £1bn
• Partner numbers up 3.7%
ANDREW CROFT
Finance Director
Analysis of Operating Profit
£’m
2009
2008
New business contribution
Profits from existing business
61.3
65.3
37.6
9.0
1.6
2.4
111.9
(10.9)
101.0
51.4
1.0
4.0
121.7
(7.5)
114.2
–expected
–experience variance
–operating assumption changes
Investment income
Life & unit trust operating profit
Other
Operating profit
Margin
• Lower total new business
• Manufactured business 90% compared
with 84%
• Increased proportion of pension business
• Total direct expenses down 5% and
establishment costs down 2%
• Margin as percentage of APE increased to
30.2% (2008: 29.6%)
Analysis of Operating Profit
£’m
2009
2008
New business contribution
Profits from existing business
–expected
61.3
65.3
37.6
9.0
1.6
2.4
111.9
(10.9)
101.0
51.4
1.0
4.0
121.7
(7.5)
114.2
–experience variance
–operating assumption changes
Investment income
Life & unit trust operating profit
Other
Operating profit
Analysis of Operating Profit
£’m
2009
2008
New business contribution
Profits from existing business
–expected
–experience variance
61.3
65.3
37.6
9.0
1.6
2.4
111.9
(10.9)
101.0
51.4
1.0
4.0
121.7
(7.5)
114.2
–operating assumption changes
Investment income
Life & unit trust operating profit
Other
Operating profit
Analysis of Operating Profit
£’m
2009
2008
New business contribution
Profits from existing business
61.3
65.3
37.6
51.4
9.0
1.6
2.4
111.9
(10.9)
101.0
1.0
4.0
121.7
(7.5)
114.2
–expected
–experience variance
–operating assumption changes
Investment income
Life & unit trust operating profit
Other
Operating profit
Analysis of Operating Profit
£’m
2009
2008
New business contribution
Profits from existing business
61.3
65.3
37.6
51.4
9.0
1.6
2.4
111.9
(10.9)
101.0
1.0
4.0
121.7
(7.5)
114.2
–expected
–experience variance
–operating assumption changes
Investment income
Life & unit trust operating profit
Other
Operating profit
Analysis of Operating Profit
£’m
2009
2008
New business contribution
Profits from existing business
61.3
65.3
37.6
51.4
9.0
1.6
2.4
111.9
(10.9)
101.0
1.0
4.0
121.7
(7.5)
114.2
–expected
–experience variance
–operating assumption changes
Investment income
Life & unit trust operating profit
Other
Operating profit
Analysis of Pre-Tax Result
£’m
2009
2008
Operating profit
101.0
114.2
Investment variance
Economic assumption change
Pre-tax result
(63.2)
(10.4)
27.4
(175.7)
(0.5)
(62.0)
Investment Variance
• Continued falls in world stock markets in first
six months
• FTSE 100
• MSCI (£)
• S&P 500 (£)
4%
7%
10%
• Actual return more than 6% below
assumed rate of positive growth of 2%
• The negative variance will reverse as and
when markets recover
Analysis of Pre-Tax Result
£’m
2009
2008
Operating profit
101.0
114.2
Investment variance
Economic assumption change
Pre-tax result
(63.2)
(10.4)
27.4
(175.7)
(0.5)
(62.0)
Analysis of Pre-Tax Result
£’m
2009
2008
Operating profit
101.0
114.2
Investment variance
Economic assumption change
Pre-tax result
(63.2)
(10.4)
27.4
(175.7)
(0.5)
(62.0)
Net Asset Value per Share
Net asset value
234.3p
Capital Position
• Total group solvency assets at 30 June 2009
are £248.6 million (2008: £251.8 million)
• Solvency remains strong
• Investment policy for solvency assets
continues to be prudent
• Solvency II
Analysis of Adjusted Post Tax Cashflow
£’m
2009
2008
Net annual management fee
56.4
66.4
(20.4)
(27.3)
36.0
39.1
(5.5)
(6.5)
(35.3)
(35.7)
Investment income
2.0
4.9
Miscellaneous
3.4
10.4
Underlying cash flow
0.6
12.2
Unwind of surrender penalties
Loss/profit arising
on new business
Establishment expenses
-8%
Miscellaneous
• Reduction in ability to fully group relieve
taxable losses (c. £4.0 million)
• Increase in actuarial reserves from the stock
market fall and economic basis changes
(c. £3.0 million)
• Lower income from third party product sales
(c. £1.0 million)
Dividend
Interim dividend
Maintained at 1.84 pence
IFRS Result
2009
2008
Profit before shareholder tax
20.0m
32.8m
Profit after shareholder tax
16.0m
22.2m
Net asset value per share
107.8p
97.1p
Summary
• Manufactured proportion at 90%
• Establishment expenses 2% below last year
• Positive experience variance
• Robust operating profit
• Strong solvency position
Resilient Performance
DAVID BELLAMY
Chief Executive
Interim Results
• Another resilient performance
• Strong net inflows
• Exceptional retention
• Excellent recruitment
• Robust operating profit
Retail Distribution Review
• We support the sense of direction
• Raising standards – working with the Partnership
• Status Disclosure – another view
• Removing Provider / Product bias
– further consultation
• Better placed than most
• A change of government?
• Further tax changes (CGT, Income,
VAT, Inheritance)
• Further opportunities
• Very experienced leadership team
Partnership Number First Half Growth
No.
3.7%
% Growth
3.2%
2.6%
1.9%
49
40
30
22
-0.3%
-3
2005
2006
2007
2008
Highest first half growth in absolute and relative terms for many years
2009
Partnership
• Strong recruitment momentum
• Infrastructure development
• Further segmentation
• Streamline business approach
Investment Management Approach
• Attracted over £10bn in last 5 years
• New Fund Managers
St. James’s Place UK & General Progressive Fund
Fund Manager Changes September 2009
John Wood
• 19 years’ industry
experience
• John joined JOHCM in
October 2005 from Newton
Investment Management
Peg McGetrick
• Co-Founder and Managing
Partner of Liberty Square Asset
Management
• Prior to this Peg was a partner at
Grantham, Mayo, Van Otterloo
and Company where she headed
the International Active Equity
Division
St. James’s Place Greater European Progressive Fund
Stuart Mitchell
• 19 years’ industry experience
• John joined JOHCM in October
2005 from Newton Investment
Management
• Joined J O Hambro Investment
Management in 1998 and was
made a Director and appointed
the role of Head of Specialist
Equities
• Stuart Mitchell founded S.W.
Mitchell Capital (SWM) in April
2005
Kenneth A. Broekaert
• Vice President and Portfolio
Manager of European equities at
Burgundy Asset Management
• Ken joined Burgundy in April
2003, having previously worked
at The Boston Consulting Group
Investment Management Approach
• Attracted over £10bn in last 5 years
• New Fund Managers
• Further evolution
• Capital accumulation, preservation and decumulation
• Broaden fund classes
• Not exclusively long only equities
• More structured portfolios
• Regular and active reviews
• Building on success of IMA
Looking Forward
• Our target group is growing
• They are more concerned than ever about ‘Tax’
• They are more concerned than ever about their wealth
• The Adviser population is shrinking
• 200,000(+) down to 50,000(ish)
• “Trust” is in short supply