REG - St. James's Place - Final Results
27/02/2025 07:00
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RNS Number : 6087Y St. James's Place PLC 27 February 2025
PRESS RELEASE
27 February 2025
DELIVERING STRONG FINANCIAL PERFORMANCE
St. James's Place plc (SJP) today issues its results for the year ended 31
December 2024:
Mark FitzPatrick, Chief Executive Officer, commented:
"I am pleased to report a strong financial performance for the Group, once
again demonstrating the power and quality of our advice-led model, and
the value that more than one million clients place in the trusted
relationships they enjoy with our advisers. Momentum in the business built as
the year unfolded, with sustained net inflows and strong investment returns
leading to record funds under management of £190.2 billion. This underpinned
an Underlying cash result of £447.2 million, an improvement of 14% on 2023
despite the short-term costs incurred during 2024 as we progress with the
implementation of our simple, comparable charging structure.
2024 was a busy year for SJP. We announced our redefined purpose and refreshed
strategy, which position us for further success. We ran our first ever
national brand campaign, and explored the power of financial advice through
our Real Life Advice research series and our client stories. Our Polaris funds
continued to be hugely popular, growing to become the UK's largest multi-asset
fund range less than two years after they were launched. We also made good
progress on each of our key programmes of work, in line with our plans and the
financial guidance we have previously given.
As we look forward, the work we are doing to enhance our business by
strengthening our core and building on our key strengths will ensure we
continue to capture the compelling market opportunity in UK wealth management.
The demand, and need, for financial advice is high, driven by systemic factors
which means this isn't going away. We are passionate about helping more people
to secure their financial futures through the power of advice, we are
leveraging our scale advantage, and we are seeking to deliver better outcomes
for all our stakeholders."
Financial and operating highlights
· Post-tax Underlying cash result of £447.2 million (2023: £392.4
million), up 14% year-on-year despite charge structure implementation costs
headwind
· Post-tax Underlying cash result basic earnings per share 82.0
pence (2023: 71.7 pence)
· IFRS profit after tax £398.4 million (2023: loss of £9.9
million)
· EEV net asset value per share £16.25 (31 December 2023: £14.11)
· Gross inflows of £18.4 billion (2023: £15.4 billion)
· Net inflows represented 2.6% of opening funds under management
(2023: 3.5%)
Shareholder returns
· Final dividend for 2024 of 12.00 pence per share (2023: 8.00
pence per share)
· Final share buy-back for 2024 of £92.6 million (2023: £nil)
· Full year shareholder distributions of £223.6 million (2023:
£130.3 million), equivalent to 50% of the Underlying cash result for 2024 and
in line with our shareholder return guidance
Other highlights
· We now have over 1 million clients
· Investment returns, net of all charges, represented 10.5% of
opening funds under management
· Good progress made across each of our key programmes of work, in
line with our plans and financial guidance
The details of the announcement are attached.
Enquiries:
Hugh Taylor, Director - Investor Relations Tel: 07818 075143
Angela Warburton, Director - External Communications Tel: 07912 281502
Brunswick Group: Tel: 020 7404 5959
Eilis Murphy Email: sjp@brunswickgroup.com (mailto:sjp@brunswickgroup.com)
Charles Pretzlik
2024 Full Year Results Presentation
Date: 27 February 2025
Webcast available on-demand from: 07:00 GMT
Live Q&A: 08:00 GMT
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Chair's report
Setting the foundations for future growth
2024 has been a year of change globally and for St. James's Place. Elections
in several democratic countries have led to changes in governments, and
uncertainty both before and after the events.
Change at St. James's Place has included the strengthening of the Executive
team, the historic ongoing service evidence review, making progress with the
implementation of our simple, comparable charging structure and the
commencement of a cost and efficiency programme. These projects are
significant in terms of scale and complexity and the Board has closely
monitored the good progress made in 2024. Notwithstanding the scale of change,
which the Chief Executive Officer covers in his report, the business has
performed well during the year. This demonstrates the strength of our
proposition and the requirement for financial advice.
The Board and governance
As I explain in more detail in the Report of the Group Nomination and
Governance Committee, succession planning remains an important focus for the
Board and in 2024, we have seen the appointment of a new Senior Independent
Director in Simon Fraser and a new Chief Financial Officer in Caroline
Waddington. Both have been welcome additions to the Board, bringing with them
a depth of experience and diversity of thought. Caroline was appointed
following Craig Gentle's decision to retire. Craig had been with
St. James's Place since 2016 and served as Chief Financial Officer since 1
January 2018. On behalf of the Board I would like to thank Craig for his
contribution, in particular his careful stewardship of the Group's finances,
whilst also wishing him the best for the future.
Emma Griffin and Lesley-Ann Nash have decided to step down from the Board
following the Annual General Meeting to pursue other opportunities and
I would like to express the Board's gratitude for their contributions
during their time on the Board. I am delighted to welcome Rooney Anand to the
Board, following his appointment as a Non-executive Director on 1 January
2025.
Succession planning is well underway and will take account of the impact of
the departure of Emma and Lesley-Ann on the balance of skills, experience and
diversity on the Board. Further detail on the work of the Group Nomination and
Governance Committee can be found in its report in the Annual Report and
Accounts 2024.
The Board's priorities and our strategy
The Board believes that St. James's Place has a significant opportunity in
the UK market given the current lack of advice available to many potential
clients. We will only maximise that opportunity if we serve our current
clients well and position the business to be attractive to these potential
new clients. The business review we conducted during the year therefore
focused on improving our proposition in terms of service, technology,
investment performance, culture and good governance. Client outcomes are the
focus of all we do and in this regard the Chief Executive Officer and his
much-strengthened Executive team have been making good progress. The Board
believes all stakeholders will benefit from these changes.
In redefining our purpose and refreshing our strategy, the Board has had an
opportunity to reflect on how our culture aligns with our vision of the
future. Recognising the importance of tone from the top, the Board has been
pleased to see how changes to the Executive team have positively reinforced
the values expected across the wider workforce. The Board continues to assess
and monitor culture both through the formal reporting it receives from
management and via its broader engagement with the workforce and other
stakeholders. Details on this are set out in the corporate governance report
in the Annual Report and Accounts 2024. Where we identify areas of concern,
the Board engages with management to ensure corrective action is taken.
Shareholder returns
As announced in February 2024, the Board expects that annual shareholder
returns will be set at 50% of the full year Underlying cash result for 2024,
2025 and 2026. This will comprise 18.00 pence per share in annual dividends
declared with the balance returned through share buy-backs. Shareholder
returns proposed by the Board for 2024 are in line with this guidance. Full
details can be found in the Chief Financial Officer's report.
Concluding remarks
I would like to express my thanks to my Board colleagues and management for
their support and hard work during 2024, and commend employees and our Partner
businesses for the strong performance achieved in a challenging year. I have
provided a high-level overview of some of the key areas of the Board's
activity in 2024 and would encourage you to read the corporate governance
report, which provides more detail. I look forward to welcoming shareholders
to this year's Annual General Meeting, which will be held on 13 May 2025.
Paul Manduca
Chair
26 February 2025
Chief Executive Officer's report
We have a clear path forward
I am pleased to report a strong year for the Group, once again demonstrating
the power and quality of our advice-led model and the value that over one
million clients place in the trusted relationships they enjoy with our
advisers.
Operating performance
2024 presented a mixed environment for UK consumers. Positively, we saw
headline inflation falling and Bank of England base rate cuts, increasing the
capacity for long-term investment for some individuals. However, this was
tempered by uncertainty in the UK, particularly in advance of the Autumn
Budget. There was also uncertainty in the US in the run up to their
elections, and subsequently in anticipation of the impact of the Trump
administration. In addition, pressures on disposable income persisted, with
mortgage costs rising for many households. Overall, this meant that consumer
confidence remained fragile.
Against this backdrop, and in a year which in many ways was challenging for
the business, we are very pleased with our business and financial performance.
Gross inflows for 2024 were £18.4 billion, up 20% on 2023, with momentum
building during the year. Retention of client funds under management (FUM)
remained strong at 94.5%, resulting in net inflows of £4.3 billion,
representing 2.6% of opening FUM.
Investment performance
Our investment management approach (IMA) continued to perform well for
clients, with our portfolios delivering strong returns that compared
favourably against peer groups, supporting great outcomes for our clients.
Our net investment return for 2024 represented over 10% of opening FUM, and
it's important to remember that is after all charges, including advice.
Our Polaris multi-asset fund range continued to be very successful. Polaris
packages our most sophisticated investment thinking in a simple structure for
clients looking to grow their wealth. It has been incredibly popular, and has
quickly grown to be the largest retail multi-asset range in the UK less than
two years after it was launched. It had over £60 billion invested across the
four risk-rated solutions at 31 December 2024, and Polaris 3 is now the
single largest fund in the country.
Strong investment returns in Polaris and our other funds, combined with
sustained net inflows, drove our FUM to a record £190.2 billion at the end of
the year, up 13% on 2023.
Financial performance
This operating and investment performance led to strong financial results. Our
Underlying cash result of £447.2 million is up 14% on 2023, reflecting growth
in FUM and the associated income. This increase is despite the significant
short-term costs incurred during 2024 as we progress with the implementation
of our simple, comparable charging structure, which I cover in more detail
later on. Excluding these costs, the Underlying cash result increased by 27%.
This performance reaffirms the strength, quality and resilience of our
advice-led business model.
Market opportunity
The market opportunity across all segments in UK wealth management is
compelling, with UK individuals having £3.3 trillion in liquid investable
assets, which is expected to grow at 7% per annum, compound, to 2030. In the
advised space we expect demand to only get stronger over time, driven by
systemic factors including the complexity of pension and taxation rules. Take
the 2024 Autumn Budget as an example - bringing pensions into scope for
inheritance tax purposes only adds to the complexity of estate planning,
driving the need for financial advice.
The advice and savings gaps in the UK continue to grow. We are playing our
part in closing them, using our industry leadership to champion financial
advice in the media, with policymakers and regulators. As part of this we are
proud to have increased our profile by running our first national brand
campaign that focused on invaluable personal advice.
We have also showcased the wide-ranging benefits that advice can have through
our client stories, some of which you can see throughout the Annual Report and
Accounts 2024, and our Real Life Advice research series. Alongside this, we
are working closely with the UK Government and the FCA on the opportunities
presented within the Advice Guidance Boundary Review (AGBR).
Our redefined purpose and refreshed strategy
In July we set out the results of our comprehensive business review. Whilst
our business continues to perform strongly throughout the cycle due to the
high quality advice our advisers provide to clients, we are not complacent.
We are evolving to position for further success, so we can capture the
fantastic market opportunity and continue to drive great outcomes for clients,
advisers and all stakeholders going forward.
Our strategic direction is underpinned by our redefined purpose: to empower
clients with invaluable advice to realise bolder ambitions. This is what
drives our 4,920 advisers across the Partnership, our employees and everyone
else in the SJP community. This is why we get up in the morning. We want to be
known as the home of invaluable advice.
Our refreshed strategy sees us leverage our great strengths, whilst making the
changes necessary to drive sustained growth, and to capture economies of scale
as we succeed. We are building a confident, high-performance culture that will
see SJP thrive for the benefit of all stakeholders.
The key components of our strategy, which will take us to 2030, are set out
in the Annual Report and Accounts 2024. In the near-term, we are focused on
strengthening our fundamentals by safely delivering our key programmes of
work: implementing our simple, comparable charging structure, completing our
historic ongoing service evidence review, and executing our cost
and efficiency programme.
All of this requires a period of heavy lifting, after which we will have more
capacity to focus on elevating and expanding our leading offering for clients
and advisers as we look to drive sustained growth over the long term.
However, where we have capacity within the business, alongside these key
programmes we are progressing with our other strategic initiatives. For
example, we're developing and trialling AI tools to support advisers
with administrative and technical queries, which will enhance efficiency. In
addition, our investment team is exploring options around a dedicated
passives proposition.
Progress with our key programmes
Simple, comparable charges
We continue to make good progress with the implementation of our simple,
comparable charging structure. We believe this will help to improve the
perception of SJP and the value of our proposition, making us more attractive
to potential clients and advisers.
We are well advanced with the IT infrastructure build necessary to deliver the
programme, and we are working through an extensive testing plan. Alongside
this, we are equipping our advisers with a comprehensive suite of tools and
materials to ensure they understand the impact of the new charging structure,
and can explain it to clients. We will shortly start to communicate the
changes to clients directly.
Though we still have a lot of heavy lifting to do to complete the project over
the next few months, we remain on track for it to be in place by the second
half of 2025, and for delivery to be on budget.
Historic ongoing service evidence review
We have progressed our review of historic client servicing records. We have
been building the infrastructure needed to collate and analyse these
efficiently and accurately, and validating evidence to correctly identify
servicing gaps across our client base.
We said from the outset that this is a very significant exercise that would
take the best part of two to three years to complete. We anticipate making
substantial headway during 2025.
We note the recent FCA statement on ongoing financial advice services and
appreciate the guidance it provides. We are focused on completing our
programme of work and will take into consideration the FCA's guidance as we
move through that programme. We remain confident in the adequacy of our
provision.
Cost and efficiency programme
As we set out in July, we are evolving how we operate to align to our
refreshed strategy. To create the capacity to invest in our strategic
initiatives, as well as improve the Cash result, we have commenced our cost
and efficiency programme. Our ambition is to take around £100 million per
annum before tax out of our addressable cost base by 2027, and we are on track
to deliver this.
We are working to implement a range of operating efficiencies, including
changing our organisational design to ensure we have the right people in the
right places to support our strategic ambitions, simplifying our technology
estate, and optimising our procurement.
Summary
2024 has been a successful year for the business, which is testament to the
strength and quality of our advisers, employees and all those within the SJP
community. They have remained fully committed to driving great client outcomes
during a period of significant ongoing change in the business, and I thank
them for their continued efforts.
As we look forward, the work we are doing to enhance our business by
strengthening our core and building on our key strengths will ensure we
continue to capture the compelling market opportunity in UK wealth management.
The demand, and need, for financial advice is high, driven by systemic factors
which means this isn't going away. We are passionate about helping more
people to secure their financial futures through the power of advice, we are
leveraging our scale advantage, and we are seeking to deliver better outcomes
for all our stakeholders.
Mark FitzPatrick
Chief Executive Officer
26 February 2025
Chief Financial Officer's report
We are delivering strong financial results
I am delighted to present a strong set of financial results in my first
report as Chief Financial Officer.
Since joining the business in September 2024, I have been struck by the power
of our business model, and how it translates into fundamentally predictable
income. Clients truly value the trusted, personal relationship they build with
their adviser, as demonstrated by our high retention levels through what has
been a challenging time for the business. The advice we provide really is
invaluable in helping them navigate the ups, downs and complexities of their
lives. Having been a client with the same adviser for 27 years, I know this
first-hand.
Financial business model
I have also been struck by the simplicity of our financial business model.
When clients choose to invest with us our stock of funds under management
(FUM) grows. Our income is based on the value of FUM, and so attracting new
clients to invest with us, retaining the investments made by existing clients,
and positive investment performance are key to future growth in income and
hence returns.
Our primary profit drivers are annual product management charges on FUM. Under
our current charging structure, most of our investment bond and pension
business is not subject to these charges for the first six years after an
investment is made. We refer to FUM in this period as being in 'gestation'.
Gestation FUM at any point in time rolls out into mature FUM and so becomes
subject to annual product management charges over the following six years,
which provides a high degree of visibility to our future income growth.
We will be simplifying our charging structure by the second half of 2025.
This is an important change for the financial business model. From the point
of implementation, we will benefit from all charges applying from the day that
a new investment is made. We will not have to wait six years for new
investment bond and pension business to contribute recurring income to the
Cash result. In addition, we will continue to benefit from existing gestation
FUM at the point of transition maturing to make a positive contribution. The
dynamics of our new charging structure, together with the visibility of future
income growth from maturing FUM in gestation, build a powerful picture of how
our income can develop in the medium term - conscious, of course, of the
expected dip in profitability in 2025 and 2026 as we transition between
structures.
Combined with our focus on managing expenses, whether they are fixed in nature
or vary with FUM or business levels, this supports our ambition to double the
Underlying cash result over the period from 2023 to 2030.
Financial performance in 2024
As Mark has already set out in his Chief Executive Officer's report, our FUM
grew by 13% over the year to a record £190.2 billion. This increase in FUM
has driven an increase in the income we receive from it. Paired with
continued discipline in managing our costs, this has enabled us to deliver
IFRS profit after tax of £398.4 million (2023: loss of £9.9 million), and a
post-tax Underlying cash result of £447.2 million, up 14% year-on-year.
This is despite the short-term costs incurred during 2024 as we progress with
the implementation of our simple, comparable charging structure, which was
£59.5 million for the year post-tax (2023: £7.2 million). If these costs
are excluded, the Underlying cash result would be up 27% on 2023.
Simple, comparable charges
The implementation costs for 2024 were approximately £12 million post-tax
lower than we originally guided to in October 2023. These costs have been
deferred into 2025.
We expect the overall implementation costs for the project to be towards the
upper end of our original guidance range of £140 million to £160 million
pre-tax. It is important to note that this cost phasing change does not
impact our planned implementation timetable, which remains by the second half
of 2025.
Historic ongoing service evidence review
Mark has provided an update on this significant programme of work in his Chief
Executive Officer's report. From a financial perspective there is no change in
our estimate of the cost of the programme, and so we remain comfortable with
our provision.
Cost and efficiency programme
A key area of focus during the year has been our cost and efficiency
programme. We have an ambition to take around £100 million per annum before
tax out of our addressable cost base by 2027. We'll do this by operating more
effectively at scale, creating capacity to invest in our business to drive
further growth, underpinning a growing Cash result over time.
We are on track to deliver the programme by 2027, and in line with the
financial guidance provided in July 2024. For 2024 the cost and efficiency
programme has had no material impact on our results as the costs to achieve
the savings we have identified have, as expected, offset the savings achieved.
We anticipate this will also be the case for 2025, as the benefits we
realise, net of costs to achieve, are reinvested in the business to drive
future growth.
Financial position and solvency
Our IFRS consolidated statement of financial position contains policyholder
assets and liabilities. To understand the assets and liabilities that
shareholders can benefit from, these policyholder balances, along with
'accounting' balances such as deferred income (DIR) and deferred acquisition
costs (DAC), are removed in the Solvency II Net Assets Balance Sheet.
This balance sheet is straightforward, and demonstrates we are in a strong
financial position. It is analysed in section 2.2 of the financial review.
We take a prudent approach to managing the balance sheet and our capital
requirements. Given the simplicity of our business model, we manage solvency
by holding assets to match client unit-linked liabilities, and allow for a
management solvency buffer (MSB). At 31 December 2024 we held surplus assets
over the MSB of £892.2 million (31 December 2023: £603.5 million).
Capital allocation
I am fully committed to our capital allocation framework, which sets out our
disciplined approach to allocating our capital resources:
1. We will maintain a strong balance sheet, ensuring the safety of client
investments.
2. We will invest to drive organic growth, ensuring we have the necessary core
capabilities in the business.
3. We will deliver reliable annual shareholder returns, which are in line with
guidance.
4. We will return excess capital over and above what we need to invest
in the business at attractive returns.
We see being deliberate and disciplined in how we manage capital allocation as
critical to ensuring we have a well-invested business that drives returns and
creates sustained value for shareholders.
Shareholder returns
As announced in February 2024, the Board expects that annual shareholder
returns will be set at 50% of the full year Underlying cash result for 2024,
2025 and 2026. This will comprise 18.00 pence per share in annual dividends
declared with the balance returned through share buy-backs. The Board intends
to reassess its approach to shareholder distributions for 2027 and beyond at
the appropriate time.
Following the payment of a 6.00 pence per share interim dividend and a £32.9
million share buy-back programme in September, the Board are declaring a 12.00
pence per share final dividend, subject to shareholder approval at the AGM,
and a £92.6 million final share buy-back programme for 2024.
This will bring the total shareholder returns to £223.6 million for the
year, equivalent to 50% of the Underlying cash result.
Summary
We've had a successful year, which has translated into strong financial
results. We have grown our Underlying cash result by 14% despite short-term
cost headwinds as we implement our new charging structure. We have an
attractive and highly visible earnings profile, a robust balance sheet, and a
disciplined approach to capital allocation.
Caroline Waddington
Chief Financial Officer
26 February 2025
Summary financial information
Year ended Year ended
31 December 31 December
2024 2023
FUM-based metrics
Gross inflows (£'Billion) 18.4 15.4
Net inflows (£'Billion) 4.3 5.1
Total FUM (£'Billion) 190.2 168.2
Total FUM in gestation (£'Billion) 50.1 47.6
IFRS-based metrics
IFRS profit/(loss) after tax (£'Million) 398.4 (9.9)
IFRS profit/(loss) before shareholder tax (£'Million) 535.9 (4.5)
IFRS basic earnings per share (EPS) (Pence) 73.0 (1.8)
IFRS diluted EPS (Pence) 72.6 (1.8)
Dividend per share (Pence) 18.00 23.83
Cash result-based metrics
Controllable expenses (£'Million) 291.7 283.3
Underlying cash result (£'Million) 447.2 392.4
Cash result (£'Million) 447.2 68.7
Underlying cash result basic EPS (Pence) 82.0 71.7
Underlying cash result diluted EPS (Pence) 81.5 70.5
EEV-based metrics
EEV net asset value per share (£) 16.25 14.11
Solvency-based metrics
Management solvency buffer (£'Million) 548.4 529.5
Solvency ratio (Percentage) 193% 191%
The Cash result should not be confused with the IFRS consolidated statement of
cash flows, which is prepared in accordance with IAS 7.
Financial review
This financial review provides analysis of the Group's financial position and
performance.
It is split into the following sections:
Section 1
Funds under management (FUM)
1.1 FUM analysis
1.2 Gestation
Section 2
Performance measurement
2.1 International Financial Reporting Standards (IFRS)
2.2 Cash result
2.3 European Embedded Value (EEV)
Section 3
Solvency
Section 1
Funds under management
1.1 FUM analysis
During 2024 our advisers attracted £18.4 billion (2023: £15.4 billion) of
new client investments and client retention rates remained strong at 94.5%
(2023: 95.3%). As a result we generated £4.3 billion (2023: £5.1 billion)
of net inflows, once again demonstrating the strength of our advice-led
business model.
Our investment management approach has continued to work well for clients,
with our portfolios delivering strong returns that compare favourably against
peer groups. This, together with another year of net inflows, resulted in FUM
increasing by 13% to a record £190.2 billion (2023: £168.2 billion). Growth
in FUM provides our business with good visibility over future growth in
income and the creation of sustainable value for shareholders over time.
The following table shows how FUM evolved during 2024 and 2023. Investment
return is presented net of all charges.
2024 2023
Investment bond Pension UT/ISA and DFM Total Total
£'Billion £'Billion £'Billion £'Billion £'Billion
Opening FUM 35.99 87.32 44.89 168.20 148.37
Gross inflows 2.42 12.06 3.93 18.41 15.39
Net investment return 3.37 10.03 4.28 17.68 14.71
Regular income withdrawals and maturities (0.36) (3.92) - (4.28) (2.77)
Surrenders and part-surrenders (2.24) (3.51) (4.05) (9.80) (7.50)
Closing FUM 39.18 101.98 49.05 190.21 168.20
Net flows (0.18) 4.63 (0.12) 4.33 5.12
Implied surrender rate as a percentage of average FUM 6.0% 3.7% 8.6% 5.5% 4.7%
Included in the table above is:
· Rowan Dartington Group FUM of £3.49 billion at 31 December 2024
(31 December 2023: £3.43 billion), gross inflows of £0.24 billion for the
year (2023: £0.36 billion) and outflows of £0.24 billion (2023: £0.18
billion).
· SJP Asia FUM of £1.90 billion at 31 December 2024 (31 December
2023: £1.72 billion), gross inflows of £0.26 billion for the year (2023:
£0.21 billion) and outflows of £0.22 billion (2023: £0.15 billion).
The following table shows our sustained net inflows and the progression of FUM
over the past six years.
Year Opening FUM as at 1 January Net inflows Investment return Closing FUM as at 31 December
£'Billion £'Billion £'Billion £'Billion
2024 168.2 4.3 17.7 190.2
2023 148.4 5.1 14.7 168.2
2022 154.0 9.8 (15.4) 148.4
2021 129.3 11.0 13.7 154.0
2020 117.0 8.2 4.1 129.3
2019 95.6 9.0 12.4 117.0
The following table provides a geographical and investment-type analysis of
FUM at 31 December.
31 December 2024 31 December 2023
£'Billion Percentage £'Billion Percentage
of total of total
North American equities 74.9 39% 57.4 34%
Fixed income securities 31.6 17% 27.1 16%
European equities 24.3 13% 23.6 14%
Asia and Pacific equities 24.0 13% 20.5 12%
UK equities 16.0 8% 16.0 10%
Alternative investments 6.2 3% 10.5 6%
Cash 6.9 4% 7.2 4%
Other 5.0 2% 4.1 3%
Property 1.3 1% 1.8 1%
Total 190.2 100% 168.2 100%
1.2 Gestation
As explained in our financial business model in the Chief Financial Officer's
report, due to our current product structure for most investment bond and
pension business, there is a significant amount of FUM in 'gestation'. This
means it is not subject to annual product management charges, our key profit
driver. FUM rolls out of gestation into 'mature' FUM six years after initial
investment, at which point it becomes subject to annual product management
charges for the first time.
Approximately 54% of gross inflows for 2024, after initial charges, moved into
gestation FUM (2023: 54%).
The following table shows an analysis of FUM, after initial charges, split
between mature FUM that is contributing net income to the Cash result and FUM
in gestation which is not yet contributing. The value of both mature and
gestation FUM is impacted by investment return as well as net inflows.
Position as at Mature FUM contributing to the Cash result Gestation FUM that will contribute to the Cash result in the future Total FUM
£'Billion £'Billion £'Billion
31 December 2024 140.1 50.1 190.2
31 December 2023 120.6 47.6 168.2
31 December 2022 102.9 45.5 148.4
31 December 2021 104.7 49.3 154.0
31 December 2020 85.9 43.4 129.3
We will be simplifying our charging structure by the second half of 2025.
Under the revised charging structure, new business will no longer enter a
period of gestation and the existing gestation FUM at the point of
implementation will gradually mature. After this point there will be no
further concept of gestation FUM. In the meantime, gestation FUM continues to
be a material store of shareholder value that will make a significant
contribution to the Cash result in the future.
The following table gives an indication, for illustrative purposes, of the way
in which gestation FUM could mature and start to contribute to the Cash result
over the next six years and beyond. Once it has all matured, it could
contribute a further £289.1 million per annum to net income from FUM and
hence the Underlying cash result, at no additional cost.
For simplicity the table assumes that FUM values remain unchanged, that there
are no surrenders, and that business is written at the start of the year.
Allowance has been made for the reduction in ongoing charges under our new
charging structure. Actual emergence in the Cash result will reflect the
varying business mix of the relevant cohort and business experience.
Year Cumulative gestation FUM maturity profile Gestation FUM future contribution to the post-tax Cash result
£'Billion £'Million
2025 6.5 45.2
2026 13.9 80.4
2027 22.3 128.8
2028 31.9 184.3
2029 40.8 235.8
2030 50.1 289.1
Section 2
Performance measurement
In line with statutory reporting requirements, we report profits assessed on
an IFRS basis. The presence of a significant life insurance company within
the Group means that, although we are an advice-led wealth manager in
substance with a simple business model, we apply IFRS accounting requirements
for insurance companies. These requirements lead to financial statements which
are more complex than those of a typical wealth manager and so our IFRS
results may not provide the simplest presentation for users who are trying to
understand our business.
Key examples of this include:
· Our IFRS consolidated statement of comprehensive income includes
policyholder tax balances which we are required to recognise as part of our
corporation tax arrangements. This means that our Group IFRS profit before tax
includes amounts charged to clients to meet policyholder tax expenses, which
are unrelated to the underlying performance of our business.
· Our IFRS consolidated statement of financial position includes
policyholder liabilities and the corresponding assets held to match them, and
so policyholder liabilities increase or decrease to match increases or
decreases experienced on these assets. This means that shareholders are not
exposed to any gains or losses on the £190.0 billion of policyholder assets
and liabilities recognised in our IFRS consolidated statement of financial
position, which represented over 97% of our IFRS total assets and liabilities
at 31 December 2024.
We therefore present our financial performance and position on three
different bases, using a range of alternative performance measures (APMs) to
supplement our IFRS reporting. These APMs strip out policyholder balances, and
remove items such as deferred acquisition costs (DAC) and deferred income
(DIR) to reflect Solvency II recognition requirements and to better match the
way in which cash emerges from the business. The three different bases, which
are consistent with those presented last year, are:
· International Financial Reporting Standards (IFRS)
· Cash result
· European Embedded Value (EEV)
APMs are not defined by the relevant financial reporting framework (which for
the Group is IFRS), but we use them to provide greater insight to the
financial performance, financial position and cash flows of the Group and the
way it is managed. The glossary of alternative performance measures (APMs)
included within the Annual Report and Accounts 2024 defines each APM used in
our financial review, explains why it is used and, if applicable, how the
measure can be reconciled to the IFRS consolidated financial statements. It
also sets out the rationale for any APM we have ceased to report during the
year.
2.1 International Financial Reporting Standards (IFRS)
To address the challenge of policyholder tax being included in the IFRS
results we focus on IFRS profit before shareholder tax, an APM, as our
pre-tax metric.
This is a profit measure based on IFRS which aims to remove the impact of
policyholder tax. The following table demonstrates the way in which IFRS
profit before shareholder tax is presented in the consolidated statement of
comprehensive income.
Year ended 31 December 2024 Year ended 31 December 2023
£'Million £'Million
IFRS profit before tax 1,049.1 439.6
Policyholder tax (513.2) (444.1)
IFRS profit/(loss) before shareholder tax 535.9 (4.5)
Shareholder tax (137.5) (5.4)
IFRS profit/(loss) after tax 398.4 (9.9)
However, in both the current and prior year IFRS profit/(loss) before
shareholder tax and IFRS profit/(loss) after tax have been reduced by another
nuance of life insurance tax which we refer to as policyholder tax asymmetry.
External market conditions during the year drive the movement in the tax
asymmetry balances. Net market gains during 2024 have resulted in a negative
policyholder tax asymmetry impact of £38.9 million (2023: negative impact of
£44.4 million).
Shareholder tax reflects the tax charge attributable to shareholders and is
closely related to the performance of the business. However, it can vary year
on year due to several factors: further detail is set out in Note 6 Income and
deferred taxes.
Change in APMs
In previous years, in addition to IFRS profit before shareholder tax we also
reported underlying profit as an APM in this section. This was calculated as
IFRS profit before shareholder tax, adjusted for the impact of movements in
DAC, DIR and the purchased value of in-force business (PVIF). We have retired
underlying profit as a separate APM for 2024 as we look to simplify our
reporting. The movement in DAC, DIR and PVIF is now presented as part of the
reconciliation between IFRS profit and the Cash result.
2.2 Cash result
The Cash result is used by the Board to assess and monitor the level of cash
profit generated by the business. It is presented net of tax, and is based on
IFRS with adjustments made to exclude policyholder balances and certain
non-cash items, such as DAC, DIR, deferred tax and equity-settled share-based
payment costs. Further details, including the full definition of the Cash
result, can be found in the glossary of APMs. Although the Cash result should
not be confused with the IAS 7 consolidated statement of cash flows, it
provides a helpful supplementary view of the way in which cash is generated
and emerges within the Group.
The following table shows an analysis of the Cash result using two different
measures:
· Underlying cash result
This measure represents the regular emergence of cash from the business,
excluding any items of a one-off nature and temporary timing differences.
· Cash result
This measure includes items of a one-off nature and temporary timing
differences.
Consolidated Cash result (presented post-tax)
Note Year ended 31 December 2024 Year ended 31 December 2023
In-force New business Total Total
£'Million £'Million £'Million £'Million
Net annual management fee 1 1,034.2 74.5 1,108.7 1,000.8
Reduction in fees in gestation period 1 (425.1) - (425.1) (401.6)
Net income from FUM 1 609.1 74.5 683.6 599.2
Margin arising from new business 2 - 117.4 117.4 104.5
Controllable expenses 3 (22.2) (269.5) (291.7) (283.3)
Asia - net investment 4 - (10.2) (10.2) (19.4)
DFM - net investment 4 - (2.4) (2.4) (6.4)
Regulatory fees and FSCS levy 5 (2.2) (19.3) (21.5) (23.1)
Shareholder interest 6 66.0 - 66.0 61.8
Tax relief from capital losses - - - 2.1
Charge structure implementation costs 7 - (59.5) (59.5) (7.2)
Miscellaneous 8 (34.5) - (34.5) (35.8)
Underlying cash result 616.2 (169.0) 447.2 392.4
Ongoing Service Evidence provision 9 - - - (323.7)
Cash result 616.2 (169.0) 447.2 68.7
The Underlying cash result of £447.2 million for 2024 (2023: £392.4 million)
is 14% higher than the prior year, driven by the increase in income received
from growing levels of FUM. In 2023 the Cash result was significantly impacted
by the establishment of the Ongoing Service Evidence provision, which meant
the result of £68.7 million was substantially lower than the Underlying cash
result. There have been no items recognised outside of the Underlying cash
result for 2024, meaning the Cash result and the Underlying cash result are
both £447.2 million.
Notes to the Cash result
1. Net income from FUM
The net annual management fee is the net manufacturing margin that the Group
retains from FUM after payment of the associated costs: for example, advice
fees paid to Partners, investment management fees paid to external fund
managers and the policy servicing tariff paid to our third-party
administration provider. Each product has standard fees, but they vary between
products. Overall post-tax margin on FUM reflects business mix but also the
different tax treatments, particularly life insurance tax on onshore
investment bond business.
As explained in our financial business model in the Chief Financial Officer's
report, our investment bond and pension business product structure means that
these products do not contribute to net Cash result, after the margin arising
from new business, during the first six years. This is known as the 'gestation
period' and is reflected in the reduction in fees in gestation period line.
We focus our explanatory analysis on the net income from FUM, which is the net
annual management fee after the reduction in fees in the gestation period.
This is the Cash result income from FUM that has reached maturity. As with net
annual management fees, the average rate can vary over time with business mix
and tax.
For 2024, our net income from FUM was £683.6 million (2023: £599.2 million),
an increase of 14%. This outcome is within our guided margin range of 0.54% to
0.56%, and reflects an increase in average mature FUM.
Our margin range is applicable to average mature FUM, excluding discretionary
fund management (DFM) and Asia FUM, in line with prior guidance. It is this
mature FUM that contributes to the net income from FUM figure and, at any
given time, it comprises all unit trust and ISA business, as well as
investment bond and pension business written more than six years ago.
Following the introduction of our new charging structure by the second half of
2025, our margin range will reduce to 0.43% to 0.45%. However, under this
charging structure new investment bond and pension business will no longer
enter a period of gestation. Once the remaining gestation FUM at the point of
implementation has matured over a six-year period there will be no further
gestation FUM, and so the margin will apply to all FUM.
Net income from Asia and DFM FUM is not included in this line, it is included
in the Asia - net investment and DFM - net investment lines.
2. Margin arising from new business
This is the net positive Cash result impact of new business in the year, as
initial charges levied on gross inflows exceed new-business-related expenses.
The majority of these expenses vary with new business levels, such as the
incremental third-party administration costs of setting up a new policy on
our back-office systems, and payments to Partners for the initial advice
provided to secure clients' investment. As a result, gross inflows are a key
driver of this margin.
However, the margin arising from new business also contains some fixed
expenses, and elements which do not vary exactly in line with gross inflows.
Therefore, whilst the margin arising from new business tends to move
directionally with the scale of gross inflows generated during the year, the
relationship between the two is not linear.
3. Controllable expenses
Controllable expenses are a key metric for the business. They are comprised of
expenses which do not vary with business volumes, including people, property
and technology expenses, and the costs associated with running our Academy.
Growth in controllable expenses has been contained to 5% on a pre-tax basis,
in line with guidance. This is equivalent to 3% increase on a post-tax basis
as presented in the Cash result, reflecting the corporation tax rate of 25%
being applicable for the whole of 2024.
Going forward we will seek to contain growth in controllable expenses to 5%
per annum, balancing disciplined expense management with the need to invest in
the business for the future.
This is before the positive impact of our cost and efficiency programme as set
out in July 2024, which will start to benefit the Cash result from 2027
onwards. Prior to 2027, the cost savings realised from the programme will be
offset by the costs to achieve those savings, and reinvestment in the business
to drive future growth.
4. Asia and DFM
These lines represent the net income from Asia and DFM FUM. They include the
Asia and DFM expenses set out in the reconciliation between expenses presented
separately on the face of the Cash result before tax and IFRS expenses.
We have continued to invest in developing our presence in Asia, as well as in
discretionary fund management via Rowan Dartington. Net investment in Asia
has reduced, reflecting the restructuring undertaken during the prior year.
Net investment in DFM has also reduced, due to continued focus on
disciplined expense control.
5. Regulatory fees and FSCS levy
The costs of operating in a regulated sector include regulatory fees and the
Financial Services Compensation Scheme (FSCS) levy. On a post-tax basis, these
are as follows:
Year ended 31 December 2024 Year ended 31 December 2023
£'Million £'Million
FSCS levy 9.1 10.0
Regulatory fees 12.4 13.1
Regulatory fees and FSCS levy 21.5 23.1
Our position as a market-leading provider of advice means we make a
substantial contribution to supporting the FSCS, thereby providing protection
for clients of other businesses in the sector that fail. The FSCS levy in 2024
and 2023 was below the level typically seen in recent years, as a result of
prior years surpluses that had built up within the FSCS scheme. We anticipate
a substantial increase in the levy for 2025.
6. Shareholder interest
This is the income accruing on investments and cash held for regulatory
purposes together with the interest received on the surplus capital held by
the Group. It is presented net of funding-related expenses, including interest
paid on borrowings and securitisation costs.
7. Charge structure implementation costs
We announced in October 2023 that we would be implementing our simple,
comparable charging structure by the second half of 2025. This will see us
disaggregate our charges into their component parts, supporting clients by
making it easier to compare charges for advice, investment management and
other services, on a component-by-component basis.
We continue to make good progress with this complex project. The
implementation costs for 2024 of £59.5 million post-tax were approximately
£12 million lower than we had originally guided to in October 2023. These
costs have been deferred into 2025. We expect the overall implementation costs
for the project to be towards the upper end of our original guidance range of
£140 million to £160 million pre-tax.
8. Miscellaneous
This category represents the net cash flow of the business not covered in any
of the other categories. It includes Group contributions to the
St. James's Place Charitable Foundation, movements in the fair value of
renewal income assets and the remediation costs associated with client
complaints.
9. Ongoing Service Evidence provision
The Ongoing Service Evidence provision was established in 2023 following the
appointment of a skilled person and an assessment undertaken into the
evidencing and delivery of historic ongoing servicing, reflecting the
anticipated cost of refunding ongoing servicing charges, together with the
interest, and the administrative costs associated with completing the work.
For 2024 there is no change in our estimate of the cost of the programme, and
so we remain comfortable with our provision. Consequently, there is no impact
on the 2024 Cash result. More information can be found in Note 9 within the
IFRS consolidated financial statements.
Reconciliation of Cash result expenses to IFRS expenses
Whilst certain expenses are recognised in separate line items on the face of
the Cash result, expenses which vary with business volumes, such as payments
to Partners and third-party administration expenses, and expenses which relate
to investment in specific areas of the business such as DFM, are netted from
the relevant income lines rather than presented separately. In order to
reconcile to the IFRS expenses presented on the face of the consolidated
statement of comprehensive income, the expenses netted from income lines in
the Cash result need to be added in, as do certain IFRS expenses which by
definition are not included in the Cash result. In addition, all expenses need
to be converted from post-tax, as they are presented in the Cash result, to
pre-tax, as they are presented under IFRS.
Expenses presented on the face of the Cash result before and after tax are set
out below.
Year ended 31 December 2024 Year ended 31 December 2023
Before tax Tax rate After tax Before tax Tax rate After tax
£'Million Percentage £'Million £'Million Percentage £'Million
Controllable expenses 388.9 25.0% 291.7 370.4 23.5% 283.3
Regulatory fees and FSCS levy 28.7 25.0% 21.5 30.2 23.5% 23.1
Charge structure implementation costs 79.3 25.0% 59.5 9.4 23.5% 7.2
Total expenses presented separately 496.9 372.7 410.0 313.6
on the face of the Cash result
The total expenses presented separately on the face of the Cash result before
tax then reconcile to IFRS expenses as set out below.
Year ended 31 December 2024 Year ended 31 December 20231
£'Million £'Million
Total expenses presented separately on the face of the Cash result before tax 496.9 410.0
Expenses which vary with business volumes
Other performance costs 171.0 147.4
Payments to Partners 1,134.8 1,013.2
Investment expenses 115.7 96.9
Third-party administration 172.1 151.8
Other 63.4 513.3
Expenses relating to investment in specific areas of the business
Asia expenses 22.7 26.5
DFM expenses 27.4 33.3
Total expenses included in the Cash result 2,204.0 2,392.4
Reconciling items to IFRS expenses
Amortisation of DAC and PVIF, net of additions 21.3 35.5
Equity-settled share-based payment expenses 11.2 5.4
Insurance contract expenses presented elsewhere1 (1.1) (2.4)
Other1 1.3 2.4
Total IFRS Group expenses before tax 2,236.7 2,433.3
1 The 2023 comparatives have been represented to better reflect the nature
of the expenses.
Expenses which vary with business volumes
Other performance costs vary with the level of new business and the operating
profit performance of the business.
Payments to Partners, investment expenses and third-party administration costs
are met through charges to clients, and so any variation in them from changes
in the volumes of new business or the level of the stock markets does not
impact Group profitability significantly.
Each of these items is recognised within the most relevant line of the Cash
result, which is determined based on the nature of the expense. In most cases,
this is either the net annual management fee or margin arising from new
business lines.
Other expenses include the operating costs of acquired financial adviser
businesses, donations to the St. James's Place Charitable Foundation and
complaints costs. In 2023, they also included the cost of setting up the
Ongoing Service Evidence provision. These costs are recognised across
various lines in the Cash result.
Expenses relating to investment in specific areas of the business
Asia expenses and DFM expenses both reflect disciplined expense control during
the year, and for Asia the impact of restructuring undertaken during 2023.
In the Cash result, Asia and DFM expenses are presented net of the income they
generate in the Asia - net investment and DFM - net investment lines.
Reconciling items to IFRS expenses
DAC amortisation, net of additions, PVIF amortisation and equity-settled
share-based payment expenses are the primary expenses which are recognised
under IFRS but are excluded from the Cash result.
Expenses associated with insurance contract expenses are included in the Cash
result but are shown within the Insurance service expense rather than the
expenses line under IFRS 17.
Reconciliation of Cash result to IFRS profit before shareholder tax
The Cash result reconciles to IFRS profit before shareholder tax, as presented
in section 2.1, as follows:
Year ended Year ended
31 December 2024 31 December 2023
Before shareholder tax After tax Before shareholder tax After tax
£'Million £'Million £'Million £'Million
Underlying cash result 580.9 447.2 483.0 392.4
Ongoing Service Evidence provision - - (426.0) (323.7)
Cash result 580.9 447.2 57.0 68.7
Movements in DAC, DIR and PVIF 0.5 (0.1) 3.5 3.1
Impact of policyholder tax asymmetry (38.9) (38.9) (44.4) (44.4)
Equity-settled share-based payments (11.2) (11.2) (5.4) (5.4)
Impact of deferred tax - (9.0) - (24.9)
Other 4.6 10.4 (15.2) (7.0)
IFRS profit/(loss) 535.9 398.4 (4.5) (9.9)
Movements in DAC, DIR and PVIF are explained and analysed as follows:
IFRS requires certain upfront expenses incurred and income received to be
deferred. The deferred amounts are initially recognised on the statement of
financial position as a DAC asset and DIR liability, which are subsequently
amortised to the consolidated statement of comprehensive income over a future
period.
The impact of accounting for DAC, DIR and PVIF in the IFRS result is that
there is an accounting timing difference between the emergence of accounting
profits and actual cash flows. The following table presents the impact of
each of these items on profit before shareholder tax.
Year ended 31 December 2024 Year ended 31 December 2023
£'Million £'Million
Amortisation of DAC (63.4) (72.2)
DAC on new business for the year 45.2 39.9
Net impact of DAC (18.2) (32.3)
Amortisation of DIR 141.9 149.3
DIR on new business for the year (120.0) (110.3)
Net impact of DIR 21.9 39.0
Amortisation of PVIF (3.2) (3.2)
Movement in year 0.5 3.5
The simplification of our charging structure by the second half of 2025 will
see the removal of initial product fees, and as a result there will be
immaterial income being deferred from the point of implementation onwards.
Most of the existing DIR liability at that point will amortise over a period
of 6 years.
The impact of policyholder tax asymmetry is a temporary effect caused by
asymmetries between fund tax deductions and the policyholder tax due to HMRC.
Movement in the asymmetry can be significant in volatile markets.
Equity-settled share-based payments represent the expense associated with a
number of equity-settled share schemes across the Group.
The impact of deferred tax is the recognition in the Cash result of the
benefit from realising tax relief on various items including share options,
capital allowances and deferred expenses. These have already been recognised
under IFRS through the establishment of deferred tax assets. More information
can be found in Note 6 to the IFRS consolidated financial statements.
Other represents a number of other small items, including the removal of other
intangibles and the difference between the lease expense recognised under
IFRS 16 Leases and lease payments made.
Derivation of the Cash result
The Cash result is derived from the IFRS consolidated statement of financial
position in a two-stage process:
Stage 1: Solvency II Net Assets Balance Sheet
Firstly, the IFRS consolidated statement of financial position is adjusted for
a number of material balances that reflect policyholder interests in
unit-linked liabilities together with the underlying assets that are held to
match them. Secondly, it is adjusted for a number of non-cash 'accounting'
balances such as DIR, DAC and associated deferred tax. The result of these
adjustments is the Solvency II Net Assets Balance Sheet and the following
table shows the way in which it has been calculated at 31 December 2024.
31 December 2024 Note IFRS Balance Sheet Adjustment 1 Adjustment 2 Solvency II Net Assets Balance Sheet Solvency II Net Assets Balance Sheet: 2023
£'Million £'Million £'Million £'Million £'Million
Assets
Goodwill 1 23.3 - (23.3) - -
Deferred acquisition costs 2 286.2 - (286.2) - -
Intangible assets 1 15.5 - (15.5) - -
Property and equipment 3 134.0 - - 134.0 153.1
Investment property 892.3 (892.3) - - -
Deferred tax assets 4 2.7 - (2.6) 0.1 20.4
Investment in associates 21.9 - - 21.9 10.2
Reinsurance assets 14.9 - (4.2) 10.7 6.7
Other receivables 5 2,687.4 (816.7) (3.3) 1,867.4 2,147.3
Financial investments 6 182,320.2 (180,117.3) - 2,202.9 1,462.6
Derivative financial assets 2,812.8 (2,812.8) - - -
Cash and cash equivalents 6 5,663.9 (5,311.3) - 352.6 285.4
Total assets 194,875.1 (189,950.4) (335.1) 4,589.6 4,085.7
Liabilities
Borrowings 7 516.8 - - 516.8 251.4
Deferred tax liabilities 4 679.4 - 10.7 690.1 414.5
Insurance contract liabilities 518.6 (467.3) (37.0) 14.3 18.2
Deferred income 2 469.5 - (469.5) - -
Other provisions 8 460.3 - - 460.3 500.1
Other payables 3,9 2,144.3 (692.7) (6.2) 1,445.4 1,757.0
Investment contract benefits 141,038.8 (141,038.8) - - -
Derivative financial liabilities 3,052.1 (3,052.1) - - -
Net asset value attributable to unit holders 44,699.5 (44,699.5) - - -
Income tax liabilities 10 22.1 - - 22.1 11.5
Total liabilities 193,601.4 (189,950.4) (502.0) 3,149.0 2,952.7
Net assets 1,273.7 - 166.9 1,440.6 1,133.0
Adjustment 1 strips out the policyholder interest in unit-linked assets and
liabilities, to present solely shareholder-impacting balances.
Adjustment 2 removes items such as DAC, DIR, PVIF and their associated
deferred tax balances from the IFRS statement of financial position to bring
it in line with Solvency II recognition requirements.
Notes to the Solvency II Net Assets Balance Sheet
1. Goodwill and intangible assets
Goodwill represents the excess of the cost of an acquisition over the fair
value of the Group's share of the identifiable net assets of the acquired
entity at the date of acquisition. Goodwill is not amortised, but is reviewed
annually for impairment.
Intangible assets include computer software and the purchased value of
in-force business. This represents the present value of future profits that
are expected to emerge from insurance business acquired on business
combinations, calculated at the time of acquisition using best-estimate
assumptions. The balance is amortised over the anticipated lives of the
related insurance contracts.
Each of these items is excluded from the Solvency II Net Assets due to their
intangible nature.
2. Deferred acquisition costs and deferred income
IFRS requires certain upfront expenses incurred and income received to be
deferred. The deferred amounts are initially recognised on the IFRS
consolidated statement of financial position as a DAC asset and DIR
liability, which are subsequently amortised to the consolidated statement of
comprehensive income over a future period
They are each excluded from the Solvency II Net Assets due to their intangible
nature.
3. Property and equipment, and other payables
The property and equipment balance includes the right to use leased assets of
£103.9 million (2023: £118.5 million), together with fixtures, fittings and
office equipment of £28.4 million (2023: £32.1 million) and computer
equipment of £1.7 million (2023: £2.5 million).
The right to use leased assets has decreased year on year due to depreciation.
Lease liabilities of £107.2 million are recognised within the other payables
line (2023: £120.5 million).
4. Deferred tax assets and liabilities
Analysis of deferred tax assets and liabilities, including how they have moved
year on year, is set out in Note 6 Income and deferred taxes within the IFRS
consolidated financial statements.
5. Other receivables
Other receivables on the Solvency II Net Assets Balance Sheet have decreased
from £2,147.3 million at 31 December 2023 to £1,867.4 million at 31
December 2024, principally reflecting a decrease in short-term outstanding
market trade settlements in the unit-linked funds and consolidated unit
trusts. Other receivables on the IFRS balance sheet have decreased from
£2,997.4 million at 31 December 2023 to £2,687.4 million at
31 December 2024, additionally reflecting receivables within policyholder
funds.
Detailed breakdowns of other receivables can be found in Note 7 Other
receivables within the IFRS consolidated financial statements. Within other
receivables there are two items which merit further analysis:
Operational readiness prepayment asset
The operational readiness prepayment asset arose from the investment made into
our back-office infrastructure project, as we recognised Bluedoor development
costs as a prepayment. The asset stood at £256.3 million at 31 December 2024
(31 December 2023: £283.5 million). It has been amortising through the IFRS
statement of comprehensive income and the Cash result since 2017 and will
continue to do so over the remaining life of the contract, which at 31
December 2024 is nine years.
Business loans to Partners
Facilitating business loans to Partners is a key way in which we are able to
support growing Partner businesses. Such loans are principally used to enable
Partners to take over the businesses of retiring or downsizing Partners, and
this process has multi-stakeholder benefits:
· It supports the delivery of great outcomes for clients as they
receive continuity of service within the SJP ecosystem.
· It makes SJP a great place for motivated, entrepreneurial
advisers to build high-quality businesses over the long-term.
· It helps to support the next generation of SJP advisers
· It retains advisers and clients which leads to retention of our
FUM, which in turn supports our financial results and thus shareholders.
In addition to recognising a strong business case for facilitating such
lending, we recognise too the fundamental strength and credit quality of
business loans to Partners. We have low impairment experience due to a number
of factors that help to mitigate the inherent credit risk in lending. These
include taking a cautious approach to Group credit decisions, with lending
secured against prudent business valuations. Demonstrating this, loan-to-value
(LTV) information is set out in the following table.
31 December 2024 31 December 2023
Aggregate LTV across the total Partner lending book 25% 29%
Weighted average LTV across the total Partner lending book 39% 42%
Proportion of the book where LTV is over 75% 5% 5%
Net exposure to loans where LTV is over 100% (£'Million) 7.2 6.7
If FUM were to decrease by 10%, the net exposure to loans where LTV is over
100% at 31 December 2024 would increase to £8.3 million (31 December 2023:
increase to £7.7 million).
Our credit experience also benefits from the repayment structure of business
loans to Partners. The Group collects advice charges from clients. Prior to
making the associated payment to Partners, we deduct loan capital and interest
payments from the amount due.
During the year we have continued to facilitate business loans to Partners and
have also repurchased a proportion of loans previously funded by third parties
which were guaranteed by the Group. For many of these loans we have conducted
an in-year onward placement of them into our non-recourse securitisation
facility, which is an interim step towards placing them fully off balance
sheet. Further information is provided in Note 7 Other receivables and Note 10
Borrowings and financial commitments.
31 December 2024 31 December 2023
£'Million £'Million
Total business loans to Partners 557.3 408.0
Split by funding type:
Business loans to Partners directly funded by the Group 386.6 340.8
Securitised business loans to Partners 170.7 67.2
6. Liquidity
Cash generated by the business is held in highly rated government securities,
AAA-rated money market funds and bank accounts. Although these are all highly
liquid, only the latter is classified as cash and cash equivalents on the
Solvency II Net Assets Balance Sheet. The total liquid assets held are as
follows.
31 December 2024 31 December 2023
£'Million £'Million
Fixed interest securities 8.6 8.2
Investment in Collective Investment Schemes (AAA-rated money market funds) 2,194.3 1,454.4
Financial investments 2,202.9 1,462.6
Cash and cash equivalents 352.6 285.4
Total liquid assets 2,555.5 1,748.0
The Group's primary source of net cash generation is product charges. In line
with profit generation, as most of our investment bond and pension business
enters a gestation period, there is no cash generated (apart from initial
charges) for the first six years of an investment. This means that the
amount of FUM that is contributing to the Cash result will increase year
on year as gestation FUM becomes mature and is subject to annual product
management charges. Unit trust and ISA business do not have a gestation
period, and so generate cash immediately from the point of investment.
Cash is used to invest in the business and to support returns to shareholders.
Our shareholder returns guidance is set such that appropriate cash is retained
in the business to support the investment needed to meet our future growth
aspirations.
7. Borrowings
The Group continues to pursue a strategy of diversifying and broadening its
access to debt finance. We have done this successfully over time, for example
via the creation and execution of our securitisation vehicle. For accounting
purposes we are obliged to disclose on our consolidated statement of financial
position the value of loan notes relating to the securitisation. However, as
the securitisation loan notes were secured only on the securitised portfolio
of business loans to Partners, they were non-recourse to the Group's other
assets. This means that the senior tranche of non-recourse securitisation
loan notes, whilst included within borrowing, is very different from the
Group's senior unsecured corporate borrowings, which are used to manage
working capital and fund investment in the business.
31 December 2024 31 December 2023
£'Million £'Million
Corporate borrowings: bank loans 250.0 50.0
Corporate borrowings: loan notes 138.3 151.1
Senior unsecured corporate borrowings 388.3 201.1
Senior tranche of non-recourse securitisation loan notes 128.5 50.3
Total borrowings 516.8 251.4
Senior unsecured corporate borrowing of £388.3 million at 31 December 2024
increased from £201.1 million at 31 December 2023. This principally reflects
the drawing of an additional £250.0 million bridging facility, offset by a
reduction in the amount drawn under our revolving credit facility. We have
committed to repay the £250.0 million bridging facility after the balance
sheet date. Further information is provided in Note 10 Borrowings and
financial commitments and Note 14 Events after the end of the reporting period
within the IFRS consolidated financial statements.
8. Other provisions
Further information on other provisions, including how the balance has moved
year on year, is set out in Note 9 Other provisions and contingent
liabilities within the IFRS consolidated financial statements.
9. Other payables
Other payables on the Solvency II Net Assets Balance Sheet have decreased from
£1,757.0 million at 31 December 2023 to £1,445.4 million at 31 December
2024, largely due to a decrease in short-term outstanding policy-related
settlements. Other payables on the IFRS balance sheet have decreased from
£2,388.1 million at 31 December 2023 to £2,144.3 million at 31 December
2024, additionally reflecting payables within policyholder funds.
Detailed breakdowns of other payables can be found in Note 8 Other payables
within the IFRS consolidated financial statements.
10. Income tax liabilities
The Group has an income tax liability of £22.1 million at 31 December 2024
(31 December 2023: £11.5 million). This is due to a current tax charge of
£349.3 million, tax paid in the year of £326.1 million and other impacts of
£12.6 million. Further detail is provided in Note 6 Income and deferred
taxes.
Stage 2: Movement in Solvency II Net Assets Balance Sheet
After the Solvency II Net Assets Balance Sheet has been determined, the second
stage in the derivation of the Cash result identifies a number of movements in
that balance sheet which do not represent cash flows for inclusion within the
Cash result. The following table explains how the overall Cash result
reconciles to the total movement.
Year ended 31 December 2024 Year ended 31 December 2023
£'Million £'Million
Opening Solvency II net assets 1,133.0 1,379.9
Dividend paid (76.8) (289.9)
Issue of share capital and exercise of options - 6.8
Consideration paid for own shares (9.5) (0.5)
Change in deferred tax (9.6) (24.9)
Impact of policyholder tax asymmetry (38.9) (44.4)
Reassurance recapture add-back - 39.8
Change in goodwill, intangibles and other non-cash movements 28.3 (2.5)
Share buy-back (33.1) -
Cash result 447.2 68.7
Closing Solvency II net assets 1,440.6 1,133.0
2.3 European Embedded Value (EEV)
Wealth management differs from most other businesses, in that the expected
shareholder income from client investment activity emerges over a long period
in the future. We therefore supplement the IFRS and Cash results by providing
additional disclosure on an EEV basis, which brings into account the net
present value of the expected future cash flows. We believe that a measure of
the total economic value of the Group's operating performance is useful to
investors.
As in previous reporting, our EEV continues to be calculated on a basis
determined in accordance with the EEV principles originally issued in May 2004
by the CFO Forum and supplemented both in October 2005 and, following the
introduction of Solvency II, in April 2016. Many of the principles and
practices underlying EEV are similar to the requirements of Solvency II, and
we have sought to align them as closely as possible.
For 2024 we have simplified the EEV information provided in this section.
Additional information, previously included within this section, can now be
found within the data book on our website
sjp.co.uk/full-year-results-2024-databook
(http://www.sjp.co.uk/full-year-results-2024-databook) .
The following table and accompanying notes summarise the profit/(loss) before
tax of the combined business.
Note Year ended 31 December 2024 Year ended 31 December 2023
£'Million £'Million
New business contribution 1 801.0 695.4
Profit from existing business
- unwind of the discount rate 2 580.8 506.0
- experience variance 3 (136.1) (11.3)
- operating assumption change 4 (20.8) 13.9
Investment income 32.5 30.3
Funds management EEV operating profit 1,257.4 1,234.3
Distribution business 5 (77.3) (68.3)
Other 6 (86.0) (125.0)
EEV operating profit before exceptional items 1,094.1 1,041.0
Exceptional item: Charge structure 7 (49.1) (2,506.6)
Exceptional item: Ongoing Service Evidence provision 8 - (426.0)
EEV operating profit/(loss) after exceptional items 1,045.0 (1,891.6)
Investment return variance 9 533.7 501.7
Economic assumption changes 10 23.5 2.5
EEV profit/(loss) before tax 1,602.2 (1,387.4)
Tax (390.5) 340.3
EEV profit/(loss) after tax 1,211.7 (1,047.1)
A reconciliation between EEV operating profit/(loss) before tax and IFRS
profit before tax is provided in Note 3 Segment reporting within the IFRS
consolidated financial statements.
Notes to the EEV result
1. The new business contribution for the year at £801.0 million (2023:
£695.4 million) was 15% higher than the prior year, predominantly reflecting
the increase in new business volumes.
2. The unwind of the discount rate for the year was higher at £580.8 million
(2023: £506.0 million), primarily reflecting a higher value of in-force
business.
3. The experience variance during the year was negative £136.1 million (2023:
negative £11.3 million), reflecting the adverse persistency experience in
the year.
4. The impact of operating assumption changes in the year was negative £20.8
million (2023: positive £13.9 million), driven by a small increase in
expenses assumed for the maintenance of in-force business under our new
charging structure, and minor changes to persistency assumptions. The impact
in 2023 reflected a small improvement to the persistency assumptions for our
offshore bond business.
5. The distribution business loss includes the positive gross margin arising
from advice income less payments to advisers, offset by the costs of
supporting the Partnership and building distribution capabilities in Asia. The
reported loss has increased year-on-year due to an increase in expenses
recognised in this part of the Group.
6. Other represents a number of miscellaneous items including development
expenditure, the costs of running our Academy and implementing our new
charging structure, as well as the cost of redress associated with client
complaints. It has decreased due to the decrease in complaints costs during
the year.
7. The exceptional item: charge structure recorded in the prior year reflected
the impact on the opening position of changes to our charging structure which
were announced during 2023. In 2024, the charge of £49.1 million reflects a
refinement to our modelling of the impact of these changes.
8. The exceptional item: Ongoing Service Evidence provision recorded in the
prior year reflected the impact of establishing a provision following a review
into the evidencing of historic ongoing servicing. The provision recognised
during 2023 remains appropriate.
9. The investment return variance reflects the capitalised impact on the
future annual management fees resulting from the difference between the actual
and assumed investment returns. Given the size of our FUM, a small difference
can result in a large positive or negative variance.
The typical investment return on our funds during the year was 11.9% after
charges, compared to the assumed investment return of 5.8%. This resulted in
an investment return variance of £533.7 million (2023: £501.7 million).
10. The positive economic assumption changes variance of £23.5 million
arising in the year (2023: £2.5 million) reflects an increase in real yields.
Analysis of the EEV result
The table below provides a summarised breakdown of the embedded value position
at the reporting dates.
31 December 2024 31 December 2023
Value of in-force business 7,401.9 6,606.1
Solvency II net assets 1,440.6 1,133.0
Total embedded value 8,842.5 7,739.1
31 December 2024 31 December 2023
£ £
Net asset value per share 16.25 14.11
The EEV result above reflects the specific terms and conditions of our
products. Our pension business is split between two portfolios. Our current
product, the Retirement Account, was launched in 2016 and incorporates both
pre-retirement and post-retirement phases of investment in the same product.
Earlier business was written in our separate Retirement Plan and Drawdown Plan
products, targeted at each of the two phases separately, and therefore has a
slightly shorter term and lower new business margin.
Our experience is that much of our Retirement Plan business converts into
Drawdown Plan business at retirement, but, in line with the EEV guidelines,
we are required to defer recognition of the additional value from the Drawdown
Plan until it crystallises. If instead we were to assess the future value of
Retirement Plan business (beyond the immediate contract boundary) in a more
holistic fashion, in line with Retirement Account business, this would result
in an increase of approximately £279.0 million to our embedded value at 31
December 2024 (31 December 2023: £250.0 million).
Section 3
Solvency
St. James's Place has a business model and risk appetite that result in
underlying assets being held that fully match our obligations to clients. Our
clients can access their investments 'on demand' and because the encashment
value is matched, movements in equity markets, currency markets, interest
rates, mortality, morbidity and longevity have very little impact on our
ability to meet liabilities. We also have a prudent approach to investing
shareholder funds and surplus assets in cash, AAA-rated money market funds and
highly rated government securities. The overall effect of the business model
and risk appetite is a resilient solvency position capable of enabling
liabilities to be met even during adverse market conditions.
Our Life businesses are subject to the Solvency II capital regime
introduced in 2016. Given the relative simplicity of our business compared to
many other organisations that fall within the scope of Solvency II, we have
continued to manage the solvency of the business on the basis of holding
assets to match client unit-linked liabilities plus a management solvency
buffer (MSB). This has ensured that not only can we meet client liabilities at
all times (beyond the Solvency II requirement of a '1-in-200-years' event),
but we also have a prudent level of protection against other risks to the
business. At the same time, we have ensured that the resulting capital held
meets with the requirements of the Solvency II regime, to which we are
ultimately accountable.
For the year ended 31 December 2024 we reviewed the level of our MSB for the
Life businesses, and chose to maintain it at £355.0 million (31 December
2023: £355.0 million). The Group's overall Solvency II net assets position,
MSB, and management solvency ratios are as follows:
31 December 2024
Life 1 Other regulated Other 1,2 Total 31 December
2023
£'Million £'Million £'Million £'Million £'Million
Solvency II net assets 419.9 408.8 611.9 1,440.6 1,133.0
MSB 355.0 193.4 - 548.4 529.5
Management solvency ratio 118% 211% - - -
1 After payment of year-end intra-Group dividend.
2 Before payment of the Group final dividend.
Solvency II Balance Sheet
Analysis of the Solvency II position split by regulated and non-regulated
entities and Solvency II sensitivities, previously included within this
section, can now be found within the data book on our website
sjp.co.uk/full-year-results-2024-databook
(http://www.sjp.co.uk/full-year-results-2024-databook) .
Risk and control management
Conscious risk management
As the leading advice-led wealth manager in the UK, the Group remains
steadfast in its commitment to providing exceptional service and delivering
long-term value to its clients.
Central to this commitment is embedding a strong risk culture across the
organisation, underpinned by a robust approach to compliance, governance and
control, and client-centricity.
A risk-aware culture across all levels of the organisation is essential to
achieving the organisation's objectives. This culture, which prioritises
client outcomes and safe business growth, will ensure that risk management is
an integral part of the approach to delivering value for clients and
maintaining SJP's reputation as a trusted adviser with the market and its
regulators.
The business activities of the Group and the industry within which it operates
expose it to a wide variety of inherent risks and opportunities. The Group
aims to understand its risks and opportunities, and to consciously manage
them. Effective risk management strategies are applied, so that material risks
are identified and managed within the agreed risk appetite. When assessing
risks and deciding on the appropriate responses, the potential impacts are
considered for key stakeholders: clients, advisers, shareholders, regulators,
employees and society.
Over the next few years SJP will further invest in and strengthen the risk
management and internal control framework. This will include leveraging data
and technology developments for managing risk and implementing enhanced
control assurance and testing capability.
Risk appetite
The Board sets its appetite for managing risk in the context of the Group's
strategic objectives. These choices are set out in the Group risk appetite
statement, which is reviewed at least annually by senior risk owners, the
Group Executive Committee, and the Group Risk Committee before being approved
by the Board. The Group risk appetite statement also provides a mechanism to
record the key individuals within the Group who are ultimately accountable for
managing particular risks.
The Group risk appetite statement includes a risk appetite scale ranging from
no appetite for taking risks at all, through to acceptance of risk. Risk
appetite may change over time, sometimes rapidly as economic and business
environment conditions change, and therefore the statement is an evolving
document.
A comprehensive suite of key risk indicators (KRIs) is incorporated into
regular risk reporting, alongside qualitative information, to enable the
Group Risk Committee, on behalf of the Board, to monitor the Group's
risk profile.
Risk management and internal control framework
The internal control environment is built upon a risk and control conscious
culture and organisational assignment of responsibility. The first line
business is responsible and accountable for risk management, with oversight
and challenge by second line risk and compliance functions, and independent
assurance from the third line internal audit function.
The risk management and internal control framework is a combination of
processes and systems by which the Group identifies, assesses, measures,
manages, and monitors the risks that may impact the successful delivery of its
strategic objectives and its ability to meet obligations towards clients,
regulators and other key stakeholders.
The Board, through the Group Risk Committee, takes an active role in
overseeing the risk management and control framework, for which it is
responsible. To this end the Board assesses its principal and emerging risks,
which are considered in regular reporting and summarised annually in the
Group's own risk and solvency assessment processes (ORSA and ICARA). Further
information on this is provided opposite.
The Board has overall responsibility for ensuring that management maintains
comprehensive systems of internal control for managing its principal and
emerging risks. On behalf of the Board, the Group Audit Committee takes
responsibility for assessing the effectiveness of the Group's risk management
and internal control frameworks, covering all material financial, operational,
compliance and reporting controls for the Group and its individual entities.
It does this by overseeing the review of risk and control self-assessments
(RCSAs) and monitoring the effectiveness of the risk management and internal
control framework throughout the year through the quarterly updates provided
by management to the Committee, and annual executive-level attestations. The
risk management and internal control frameworks have been in place for the
year under review and up to the date of approval of the Annual Report
and Accounts 2024.
The Board receives regular reports from the Group Risk Committee and Group
Audit Committee and approves key aspects of the Group's risk management and
internal control framework including the risk appetite statement and Group
ORSA.
Own risk and solvency assessment (ORSA)
SJP Group is classified as an insurance group and a key part of the regulatory
requirements include a consistent approach to risk management across the
Group, supported by the production of an annual ORSA.
The ORSA process follows an annual cycle, which applies comprehensive risk
assessments to the business's activity, and ensures the Group is resilient to
stresses in both the short term and over a five-year period.
The ORSA assists decision-making by bringing together the following and is
particularly useful in assessing viability, as it involves a comprehensive
assessment of risks and capital requirements for the business:
· Strategic planning
· Risk appetite consideration
· Risk identification and management
· Capital planning and management
The ORSA continues to evolve and further strengthen risk management processes
throughout the Group.
The Solvency Capital Requirement for insurers allows for at least a
'1-in-200-year' risk event over a one-year time horizon. In addition, a range
of stresses and scenario testing are used to help provide insight into the
ability to maintain regulatory capital in such conditions. This assists us
when considering the calculations and allocation of risk capital to all major
risks in the Group, and the adequacy of capital positions.
In calibrating the level of stresses and scenarios used, consideration is
given to factors or events that impact on the income from funds under
management such as market movements, retention of clients or ability to
attract new clients. Factors which impact costs, such as inflation,
non-inflationary expense increases, and operational event-related losses
are also considered. A range of severities is considered, including more
extreme scenarios. The scenarios are used to assess both the immediate impact
of an event and the impact over the longer term (in the wake of an event).
Assessments are completed based on a standard set of factors as well as more
current/topical or emerging risk exposures affecting the Group or financial
services more generally.
Recovery and exit planning
In view of the introduction of solvent exit planning requirements by the PRA
we have continued to review and refine our approach to recovery and exit
planning through the year, including alignment to our broader risk management
framework and operational resilience processes.
Current risk environment
Operational risks
SJP expects to implement its simple, comparable charging structure by the
second half of 2025 and in the lead up to this, SJP will be communicating
and engaging with clients to ensure they understand how their charges will
change. This change enhances SJP's proposition for clients and reflects the
Group's commitment to improving client outcomes. SJP believes that these
efforts will yield significant long-term benefits for both clients and the
business. While the new charging structure is expected to be implemented by
the second half of 2025, foundational systems development to support this
initiative was undertaken in 2024. Recognising the risks inherent in a project
of this scale, oversight and change management practices aligned with the
level of change are maintained within a robust governance framework.
At half year, SJP announced a redefined purpose and refreshed strategy. As the
implementation of the new organisational model is progressed to support the
delivery of the strategy and take costs out of the addressable cost base,
people risks will be heightened. SJP is sensitive to the risks and is focused
on managing impacts to people, whilst maintaining operational and financial
resilience through the implementation of the new model and delivery of the SJP
strategy.
Whilst SJP consistently aims to achieve good outcomes for clients, the Group
experienced higher levels of complaints than usual during 2023. These
complaints were principally in connection with the delivery of historic
ongoing advice. This prompted the Group's historic ongoing service evidence
review, a key programme of work which kicked off in 2024 to review the
historic servicing records for all clients who have been charged for ongoing
advice since the start of 2018. In February 2024 the Group announced a
provision, recognised in the 2023 year-end financial statements, for the
estimated cost of providing refunds to clients where the evidence of ongoing
advice delivery fell below an acceptable standard. There has been no change
in the estimated cost of the programme during 2024, and hence the Group
remains comfortable with the provision.
Changes have been implemented to ensure more consistent, centralised evidence
of the activities of the Partnership with clients, which reduces the risk of
clients not receiving ongoing advice of value to them. Where there is not
adequate evidence of ongoing advice being provided, ongoing advice charges are
switched off.
Claims management companies (CMCs) have continued to be interested in the
Group. Alongside existing advice standards and checking processes, several
actions have been taken to embed the Consumer Duty, enhance evidential
standards for ongoing advice, switch off ongoing advice charges for clients
who haven't received ongoing advice, and strengthen adviser oversight and
complaint handling processes. All these help to further manage the risk, and
mitigate the potential level of complaints over the medium to long term.
Whilst the volume of complaints received during 2024 has been much higher than
usual, there has been a significant reduction in the average number of
complaints received per month in the second half of 2024 relative to the first
half.
This is a positive trend which we to expect to continue. We also note that
from 1 April 2025, CMCs will be required to pay a case fee for all cases
brought forward to the Financial Ombudsman Service (FOS). We expect this to
result in fewer spurious complaints as CMCs will have some financially
exposure where complaints are referred to the FOS.
Macroeconomic/political
Inflation has reduced in 2024 from the high levels seen in recent years,
although following the Autumn Budget it is expected to remain above the UK
Government's target of 2% over the next few years, which could further impact
on the cost of living and put pressure on expenses. The Autumn Budget made a
variety of changes to taxation, and the impact of the tax changes on clients
could result in reduced capacity or desire to save into certain products.
SJP's advisers, through ongoing financial advice and a broad product/
investment range, can support clients in managing their financial affairs,
help manage the effects of inflation on the standard of living they are aiming
for in retirement, and remain tax-efficient in their savings as the tax
landscape changes.
There remains potential for global geopolitical tensions to escalate, which
could have relevance to the Group through impacts on financial markets and
through heightened cyber risk.
The Group's business model has demonstrated resilience to macroeconomic
factors through 2024. For clients, SJP's advisers are well placed to advise
them on the benefits of taking a long-term view and investing or continuing to
invest.
Regulatory change
SJP actively engages with the regulators and makes improvements to meet
evolving and higher industry standards and expectations for financial advisers
and investment intermediaries to help reduce and prevent the risks of serious
harm to clients.
Regulatory change is a constant and, amongst the significant regulatory
changes, the FCA reinforces the need for firms to embed the Consumer Duty
regulation. Accordingly, it remains a priority to continue to embed the Duty
and to improve activity to monitor and assess clients' outcomes.
Property fund closure
In line with industry peers managing property funds, SJP announced the
decision to wind down the Property Unit Trust and remove the Property Life and
Pension fund options. Due to low investor sentiment towards property and
market-wide challenges experienced by property funds, it was not feasible to
continue to offer the fund. Work is underway to focus on operational
processes to implement the change and clients' money has started to
be returned to them. This process is expected to take up to two years as we
are prioritising delivering fair value to clients, which is less likely to be
achieved over a compressed timeframe.
Sustainability and climate change
The information on the actions being taken to support the transition to a more
sustainable economy can be found in the our responsible business section.
Sustainability and specifically climate-related risks are identified and
assessed through the suite of Group risk policies, framework, processes and
scoring methodologies as outlined throughout this section. Sustainability and
climate change are cross-cutting risks that primarily drive market-related
risk to investments as transition risks could threaten asset valuations;
reputational risks associated with greenwashing accusations which could harm
the Group's ability to attract and retain clients, reducing fee income; and
regulatory risk as compliance with climate-related requirements can carry a
high implementation cost. These could amplify the following principal risks to
the business: client proposition, financial, strategy and change, regulatory
and legislative (see our responsible business section in the Annual Report and
Accounts 2024 for more detail).
The Group's approach to managing climate-driven market risk is similar to how
other drivers of market-related investment risk are managed, through our
investment management approach (IMA), whereby work is undertaken with fund
managers to ensure they take account of climate risks whilst seeking to
deliver returns for clients in line with their risk appetite.
Similarly to help mitigate reputational and regulatory risks, minimum
standards are set for fund managers in relation to compliance and integration
of ESG risks in decision-making.
Physical climate-related risks (acute or chronic) are assessed to ensure and
enhance the Group's operational resilience. However, given the nature of SJP's
operations, physical risks to the business are considered low. Climate-related
opportunities, and the applicable timeframes assessed for each risk and
opportunity are outlined in the our responsible business section in the Annual
Report and Accounts 2024.
Principal risks and uncertainties
Whilst the risk landscape evolved over the course of the year, the inherent
principal risk areas that the business faces remain largely consistent with
the previous year and are set out in the tables on the following pages,
together with further information on the key risk components, and examples of
material controls and processes through which these are aimed to be mitigated.
Reputational damage and impacts to clients, the firm, or other stakeholders
and the environment are a likely consequence of any of the principal risks
materialising.
Principal risk and business priority
Example risk components
Risk description Example mitigation/material controls
Advice and conduct Quality, suitable advice, or service to clients is not provided. • Advisers deliver poor-quality or unsuitable advice. • Licensing programme which supports the quality of advice and service
from advisers.
• Failure to evidence the provision of good-quality service and advice.
• Technical support helplines for advisers.
• Increasing complaint volumes.
• Partner financial reviews.
• Whistleblowing and investigations.
• Oversight processes in respect of the advice provided to clients
delivered by Business. Assurance, Field Risk, Advice Guidance and Compliance
Monitoring teams.
• Evidence of ongoing servicing of clients and charge switch-off process
where ongoing advice has not been provided.
• Client complaint handling process and reporting.
Client proposition The product proposition fails to meet the needs, objectives and expectations • Investments provide poor returns relative to their benchmarks and/or do • Monitoring of asset allocations across portfolios to consider whether
of clients. This includes poor relative investment performance and poor not deliver expected client outcomes. they are performing as expected in working towards long-term objectives.
product design.
• Range of solutions does not align with the product and service • Monitoring funds against their objectives, mindful of an appropriate
requirements of current and potential future clients. level of investment risk.
• Failure to meet client expectations of a sustainable business, not least • Ongoing assessment of value delivered by funds and portfolios versus
in respect of climate change and responsible investing. their objectives.
• Where necessary, fund managers are changed in the most effective way
possible.
• Continuous review and development of the range of services offered to
clients.
• Engagement with fund managers around principles of responsible
investment.
Financial The business's finances are not effectively managed. • Failure to meet client liabilities. • Policyholder liabilities are fully matched.
• Investment/market risk. • The Group maintains liquidity facilities with banks which are available
on short notice if required to meet liquidity needs.
• Liquidity risk.
• Excess assets appropriately invested in high-quality, high-liquidity
• Credit risk. cash and cash equivalents.
• Solvency/capital risk. • Strict lending criteria applied. Use of securitisation structures to
manage exposure to Partner loans.
• Expense risk.
• Monitoring and management of subsidiaries' solvency to minimise
• Finance operations and financial reporting risk. Group interdependency.
• Setting and monitoring budgets.
• Financial control policy, application and monitoring.
• Budget and expense management and monitoring.
Partner proposition The proposition solution fails to meet the needs, objectives and expectations • Failure to attract new members to the Partnership. • Focus on providing a market-leading Partner proposition.
of current and potential future advisers.
• Failure to retain advisers. • Adequately skilled and resourced population of supporting field
managers.
• Failure to increase adviser productivity.
• Market-leading support to Partners' businesses.
• Available technology falls short of client and adviser expectations and
fails to support growth objective. • Reliable systems and administration support.
• The Academy does not adequately support growth of the Partnership. • Expanding the Academy capacity and supporting recruits through the
Academy and beyond.
People SJP is unable to attract, retain and organise the right people to run the • Failure to attract and retain personnel with key skills. • Competitive total reward packages and effective performance management
business.
processes.
• Failure to manage colleague performance effectively to meet objectives.
• Succession planning and talent management.
• Key person dependencies.
• Employee wellbeing is supported through various initiatives, benefits
• Failure to create an inclusive and diverse business. and services.
• Poor employee wellbeing or corporate culture. • Monitoring of employee engagement and satisfaction.
• Culture of supporting social value is eroded. • Corporate incentives to encourage social value engagement, including
matching of employee charitable giving to the SJP Charitable Foundation.
• Whistleblowing hotline.
Regulatory and legislative Current, changing or new regulatory and legislative expectations are not met. • Failure to prevent financial crime, money laundering, bribery and • Financial crime prevention.
corruption, market abuse.
• Fraud awareness programme.
• Internal or external fraud.
• Data protection measures including policies, governance & impact
• Failure to protect the confidentiality, integrity and availability of assessments, and awareness programmes. Clearly defined accountabilities and
data. delegated authorities across the business.
• Failure to comply with changing regulation or respond to changes in • Fostering of positive regulatory relationships.
regulatory expectations.
• Established governance and reporting processes, including incident
• Inadequate internal controls. escalations and breach reporting.
• Extensive reviews over control environment and product governance.
Security and resilience SJP fails to adequately secure its physical assets, systems and/or sensitive • Core system failure. • Business continuity planning for SJP and its key suppliers, and
information, or to deliver critical business services to its clients.
strengthening operational resilience capabilities by undertaking robust
• Disruption in key business services to clients. identification, assessment and testing of important business services.
• Failure to protect against cyber attack. • Clear cyber strategy and mandatory 'Cyber Essentials Plus' accreditation
for Partner practices or use of an SJP 'Device as a Service' solution.
• Corporate, Partnership or third-party information security and cyber
risks. • Identification, communication, and response planning for a cyber event.
• Data leakage detection technology, incident reporting and systems.
Strategy and change Failure to deliver change effectively and in line with the agreed strategy. • Risk that change initiatives fail to achieve the expected strategic • Robust change governance and change management practices, including
contributions, outcomes and benefits. oversight, structured methodologies and testing.
• Risk that change initiatives exceed budget, timelines, or fail to meet • Project sponsorship and change governance.
quality commitments.
• Transformation prioritisation, planning and oversight.
• Unnecessary delays/errors caused by failures in change delivery.
• Change budget and resource planning and management.
• Failure to meet commitments to net zero.
• Risk, assumption, issue and dependency management.
• Data protection impact assessments.
• Establishing appropriate interim emission targets using a data-driven
approach to ensure feasibility.
Third parties Third-party outsourcers' activities impact performance and risk management. • Operational failures by material outsourcers. • Ongoing third-party monitoring and governance, including assessment of
operational resilience.
• Failure of critical services. Significant outsourced areas include:
• Due diligence on contractual agreements and SLAs.
- investment administration
• Review of exit planning, operational resilience and business continuity
- fund management plans.
- custody
- policy administration
- cloud services
Emerging risks
Emerging risks are identified through many activities: conversations and
workshops with stakeholders and governance forums throughout the business,
reviewing academic papers, attending industry events and other horizon
scanning by the Group Risk team.
The purpose of monitoring and reporting emerging risks is to give assurance
that the Group is well positioned to manage the novel developing or rapidly
changing risks to its future strategy. The Group Risk Committee reviewed
emerging risks during 2024. Examples of emerging risks include:
· Cyber security risk - Cyber attacks that result in loss of
customer data, financial assets, and damage to reputation.
· Climate change risk - The risks associated with climate change
and the need to transition to net zero by 2050 will have physical, legal, and
regulatory consequences.
· Regulatory change risk - SJP is subject to conduct and
prudential regulation in the UK by the PRA and FCA and in the
other jurisdictions in which it operates.
· Geopolitical risk - Political instability, trade wars, and other
geopolitical events can disrupt markets, reduce investment returns, and
increase operating costs.
· Artificial intelligence risk - The use of artificial intelligence
(AI) can improve efficiency and profitability but can also create risks
associated with data privacy, algorithmic bias, and regulatory compliance.
· Demographic shift risk - Ageing population and demographic shifts
can impact the demand for SJP services, requiring the need for innovative
product solutions and a more advanced digital proposition.
· Energy crisis/blackout risk - Greater reliance on legacy nuclear
plants and new renewable sources is highlighting a disparity between the
UK's supply and demand of energy.
Viability statement
How viability is assessed
The business considers five-year financial forecasts when developing its
strategy. These incorporate the budget for the next financial year and four
further years of forecasts based on reasonable central assumptions around the
development of business drivers.
At the core of assessing viability is understanding how different principal
risks could materialise. Risks are considered which might present either in
isolation or in combination and which could result in acute shocks to the
business or long-term underperformance against forecast(ed) business drivers.
A five-year time horizon is considered sufficiently long to assess potential
impacts and aim to ensure that the business remains viable, noting that
identified management actions could also be taken to restore the business's
prospects.
When considering how the principal risks previously described might affect
the business, impacts on the following key financial drivers are considered:
· reduction in client and Partner retention
· reduction in new business relative to forecasts
· market stresses
· increases in expenses
· direct losses through operational risk events.
Stress and scenario testing on these key financial drivers is carried out,
alongside operational risk assessments. To provide comfort over viability over
the next five years, the scenarios and assessments look at events which would
be extreme, whilst still remaining plausible. The analysis contained in the
most recent ORSA demonstrated that the Group is resilient.
As an example, a scenario considered in the most recent ORSA included a severe
fall in new business volumes in year one of the projection, followed by no
subsequent growth in new business; a large immediate lapse across all lines of
business; and 0% investment growth over five years. Even in this extreme
scenario, the Group maintained capital well above the regulatory capital
requirements.
For adverse stresses and scenarios there would be impacts on profitability,
and depending on the severity of the scenario the Group would review and
implement recovery actions which aim to protect and/or restore the Group's
finances.
Conclusion
In accordance with the UK Corporate Governance Code (Provision 31), the
Directors have assessed the Group's current financial position and prospects
over the next five-year period and have a reasonable expectation that the
Group will be able to continue in operation and meet its liabilities as they
fall due. The Directors believe that the Group's risk planning, management
processes and culture allow for a robust and risk-conscious environment.
Consolidated statement of comprehensive income
Note Year ended Year ended
31 December 31 December
2024 2023
£'Million £'Million
Fee and commission income 4 3,163.9 2,788.9
Expenses (2,236.7) (2,433.3)
Investment return 5 22,785.3 16,197.6
Movement in investment contract benefits 5 (22,688.5) (16,130.9)
Insurance revenue 25.2 25.3
Insurance service expenses (21.8) (24.5)
Net reinsurance expense (3.1) (5.0)
Insurance service result 0.3 (4.2)
Net insurance finance income/(expense) 2.7 (10.0)
Finance income 58.5 48.8
Finance costs (36.4) (17.3)
Profit before tax 1,049.1 439.6
Tax attributable to policyholders' returns 6 (513.2) (444.1)
Profit/(loss) before tax attributable to shareholders' returns 535.9 (4.5)
Total tax charge 6 (650.7) (449.5)
Less: tax attributable to policyholders' returns 6 513.2 444.1
Tax attributable to shareholders' returns 6 (137.5) (5.4)
Profit/(loss) and total comprehensive income for the year 398.4 (9.9)
Profit attributable to non-controlling interests - 0.2
Profit/(loss) attributable to equity shareholders 398.4 (10.1)
Profit/(loss) and total comprehensive income for the year 398.4 (9.9)
Note Pence Pence
Basic earnings per share 12 73.0 (1.8)
Diluted earnings per share 12 72.6 (1.8)
The results relate to continuing operations.
Consolidated statement of changes in equity
Note Equity attributable to owners of the Parent Company Non-controlling interests Total
equity
Share capital Share premium Shares in trust reserve Total
Capital redemption reserve Misc. reserves Retained earnings
£'Million £'Million £'Million £'Million £'Million £'Million £'Million £'Million £'Million
At 1 January 2023 81.6 227.8 - (4.1) 2.5 963.8 1,271.6 0.2 1,271.8
(Loss)/profit and total comprehensive income for the year - - - - (10.1) (10.1) 0.2 (9.9)
-
Dividends 12 - - - - - (289.6) (289.6) (0.3) (289.9)
Exercise of options 12 0.7 6.1 - - - - 6.8 - 6.8
Consideration paid for own shares 12 - - - (0.5) - - (0.5) - (0.5)
Issue of treasury shares in respect of share schemes - - 3.9 - (3.9) - - -
-
Retained earnings credit in respect of share option charges - - - - - 5.4 5.4 - 5.4
Retained earnings debit arising on disposal of subsidiary - - - - (0.2) (0.2) - (0.2)
-
At 31 December 2023 82.3 233.9 - (0.7) 2.5 665.4 983.4 0.1 983.5
Profit and total comprehensive income for the year - - - -
- 398.4 398.4 - 398.4
Dividends 12 - - - - - (76.6) (76.6) (0.2) (76.8)
Shares repurchased in the buy-back programme 12
(0.7) - 0.7 - - (33.1) (33.1) - (33.1)
Consideration paid for own shares 12
- - - (9.5) - - (9.5) - (9.5)
Retained earnings credit in respect of share option charges
- - - - - 11.2 11.2 - 11.2
At 31 December 2024 81.6 233.9 0.7 (10.2) 2.5 965.3 1,273.8 (0.1) 1,273.7
The number of shares held in the shares in trust reserve is given in Note 12
Share capital, earnings per share and dividends.
Miscellaneous reserves represent other non-distributable reserves.
Consolidated statement of financial position
Note As at As at
31 December 31 December
2024 2023
£'Million £'Million
Assets
Goodwill 23.3 33.6
Deferred acquisition costs 286.2 304.4
Intangible assets 15.5 36.0
Property and equipment, including leased assets 134.0 153.1
Investment property 892.3 1,110.3
Deferred tax assets 6 2.7 36.5
Investment in associates 21.9 10.2
Reinsurance assets 14.9 13.0
Other receivables 7 2,687.4 2,997.4
Financial investments 182,320.2 157,973.7
Derivative financial assets 2,812.8 3,420.6
Cash and cash equivalents 5,663.9 6,204.3
Total assets 194,875.1 172,293.1
Liabilities
Borrowings 10 516.8 251.4
Deferred tax liabilities 6 679.4 411.7
Insurance contract liabilities 518.6 496.0
Deferred income 469.5 491.5
Other provisions 9 460.3 500.1
Other payables 8 2,144.3 2,388.1
Investment contract benefits 141,038.8 123,149.8
Derivative financial liabilities 3,052.1 3,073.0
Net asset value attributable to unit holders 44,699.5 40,536.5
Income tax liabilities 22.1 11.5
Total liabilities 193,601.4 171,309.6
Net assets 1,273.7 983.5
Shareholders' equity
Share capital 12 81.6 82.3
Share premium 233.9 233.9
Capital redemption reserve 12 0.7 -
Shares in trust reserve (10.2) (0.7)
Miscellaneous reserves 2.5 2.5
Retained earnings 965.3 665.4
Equity attributable to owners of the Parent Company 1,273.8 983.4
Non-controlling interests (0.1) 0.1
Total equity 1,273.7 983.5
Pence Pence
Net assets per share 234.1 179.3
Consolidated statement of cash flows
Note Year ended Year ended
31 December 31 December
2024 20231
£'Million £'Million
Cash flows from operating activities
Cash (used in)/generated from operations1 11 (528.5) 53.4
Interest received1 236.6 168.6
Interest paid (36.4) (17.3)
Income taxes paid 6 (326.1) (179.4)
Contingent consideration paid (1.3) (6.7)
Net cash (outflow)/inflow from operating activities (655.7) 18.6
Cash flows from investing activities
Payments for property and equipment (3.6) (11.2)
Payment of software development costs (5.1) (10.9)
Payments for acquisition of subsidiaries and other business combinations, (5.4)
net of cash acquired
-
Payments for associates (8.3) (8.8)
Proceeds from sale of shares in subsidiaries and other business combinations, 1.1
net of cash disposed
-
Net cash outflow from investing activities (17.0) (35.2)
Cash flows from financing activities
Proceeds from the issue of share capital and exercise of options - 6.8
Shares repurchased in the share buy-back programme 12 (33.1) -
Consideration paid for own shares (9.5) (0.5)
Proceeds from borrowings 10 473.8 233.1
Repayment of borrowings 10 (208.1) (144.8)
Principal elements of lease payments (14.0) (14.2)
Dividends paid to Company's shareholders 12 (76.6) (289.6)
Dividends paid to non-controlling interests in subsidiaries (0.2) (0.3)
Net cash inflow/(outflow) from financing activities 132.3 (209.5)
Net decrease in cash and cash equivalents (540.4) (226.1)
Cash and cash equivalents at 1 January 6,204.3 6,432.8
Effects of exchange rate changes on cash and cash equivalents - (2.4)
Cash and cash equivalents at 31 December 5,663.9 6,204.3
1 Restated to reclassify £60.6 million of money market fund interest from
cash generated from operations to interest received, which had been
misclassified.
Notes to the consolidated financial statements under International Financial
Reporting Standards
1. Accounting policies
The Group financial statements consolidate those of the Company and its
subsidiaries (together referred to as the Group).
The Group financial statements have been prepared in accordance with
UK-adopted International Accounting Standards and with the requirements of the
Companies Act 2006 as applicable to companies reporting under those standards.
As at 31 December 2024, the following relevant new and amended standards,
which the Group adopted as of 1 January 2024, have been applied:
· Amendments to IAS 1 Presentation of Financial Statements -
Non-current liabilities with covenants.
New and amended accounting standards not yet effective
As at 31 December 2024, the following new and amended standards, which are
relevant to the Group but have not been applied in the financial statements,
were in issue but are not yet effective. All of the below are yet to be
endorsed by the UK Endorsement Board.
· Amendments to the classification and measurement of Financial
Instruments - Amendments to IFRS 9 Financial Instruments and IFRS 7 Financial
Instruments: Disclosures.
· IFRS 18 Presentation and Disclosure in Financial Statements.
The Group is currently assessing the impact that the adoption of the above
standards and amendments will have on the Group's results reported within the
financial statements. The only one expected to have a significant impact on
the Group's financial statements is IFRS 18 Presentation and Disclosure in
Financial Statements. Further information on this standard is given below.
IFRS 18 Presentation and Disclosure in Financial Statements
The IASB issued IFRS 18 Presentation and Disclosure in Financial Statements on
9 April 2024 which will replace IAS 1. IFRS 18 introduces three sets of new
requirements to improve companies' reporting of financial performance and
gives investors better basis for analysing and comparing companies:
· improved comparability in the statement of comprehensive income.
· enhanced transparency of management defined performance measures.
· more useful grouping of information in the financial statements.
Management are currently assessing the impacts of adopting the new standard
however it is only expected to have an impact on the presentation and
disclosure of the financial statements and is not expected to have an impact
on recognition and measurement. The effective date of the standard is 1
January 2027.
Basis of preparation
The going concern basis has been adopted in preparing these financial
statements.
The Group's business activities, together with the factors likely to affect
its future development, performance and position, are set out in the Chief
Executive Officer's report and the Chief Financial Officer's report. The
financial performance and financial position of the Group are described in the
financial review.
As shown in section 3 of the financial review, the Group's capital position
remains strong and well in excess of regulatory requirements. In addition, it
has continued to operate within its external banking covenants. In addition,
the Fitch rating remains at A+ for SJPUK (A at SJP PLC level). Further, the
long-term nature of the business results in considerable positive cash flows
arising from existing business.
The Board has considered the challenging macroeconomic and geopolitical
conditions which continued during 2024, noting that the business continued to
be successful in this environment. Notwithstanding these challenges, gross
inflows for 2024 were £18.4 billion, up 20% on 2023, with momentum building
during the year. Retention of client funds under management remained strong at
94.5% resulting in net inflows of £4.3 billion. These factors along with the
performance of our key outsource providers, monitored through our ongoing
oversight, supports its view that the business will continue to remain
operationally resilient.
The Board has also considered a profitability forecast including base case
scenario and severe but plausible downside scenarios. In modelling these
scenarios, the Group has considered its liquidity, cash and IFRS results. The
downside scenarios are severe but plausible and would still leave the Group
with positive cash result and IFRS profit.
As a result of its review, the Board believes that the Group will continue to
operate, with neither the intention nor the necessity of liquidation, ceasing
trading or seeking protection from creditors pursuant to laws or regulations,
for a period of at least 12 months from the date of approval of the Group
financial statements.
The financial statements are presented in pounds Sterling rounded to the
nearest one hundred thousand pounds. They are prepared on a historical cost
basis, except for assets classified as investment property and financial
assets and liabilities at fair value through profit and loss.
The preparation of the financial statements in conformity with IFRSs requires
management to make judgements, estimates and assumptions that affect the
application of policies and reported amounts of assets and liabilities, income
and expenses. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis of making judgements
about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the year in which the
estimate is revised if the revision affects only that year, or in the year of
the revision and future years, if the revision affects both current and future
years.
Judgements made by management in the application of IFRSs that have material
effect on the financial statements and estimates with a significant risk of
material adjustment in the next year are discussed in Note 2.
The financial statements are prepared in accordance with the Companies Act
2006 as applicable to companies reporting under IFRS, and the accounting
policies set out below have been applied consistently to all years presented
in these consolidated financial statements.
Other accounting policies
The other accounting policies used by the Group in preparing the results are
consistent with those applied in preparing the statutory accounts for the year
ended 31 December 2023.
Alternative performance measures
Within the financial statements, a number of alternative performance measures
(APMs) are disclosed. An APM is a measure of financial performance, financial
position or cash flows which is not defined by the relevant financial
reporting framework, which for the Group is International Financial Reporting
Standards as adopted by the UK Endorsement Board. APMs are used to provide
greater insight into the performance of the Group and the way it is managed by
the Directors. A definition of each of the APMs is included in the glossary of
alternative performance measures section, which explains why it is used and,
where applicable, explains how the measure can be reconciled to the IFRS
financial statements.
2. Critical accounting estimates and judgements in applying accounting
policies
Estimates
Critical accounting estimates are those which give rise to a significant risk
of material adjustment to the balances recognised in the financial statements
within the next 12 months. The Group's critical accounting estimates
relate to:
· determining the value of insurance contract liabilities and
reinsurance assets.
· determining the fair value of investment property.
· determining the fair value of Level 3 fixed income securities and
equities.
· determining the value of the Ongoing Service Evidence provision.
· determining the value of the complaints provision.
Estimates are also applied in calculating other assets of the financial
statements, including determining the value of deferred tax assets, investment
contract benefits, the operational readiness prepayment and other provisions.
Determining the value of insurance contract liabilities and reinsurance assets
In accordance with IFRS 17, the Group has used the following assumptions in
the calculation of insurance contract liabilities and reinsurance assets:
· the assumed rate of investment return, which is based on current
risk-free swap rates.
· the mortality and morbidity rates, which are based on the results
of an investigation of experience during the year.
· the level of expenses, which for the year under review is based
on actual expenses in 2024 and expected rates in 2025 and over the long term.
· the lapse assumption, which is set based on an investigation of
experience during the year.
· the risk adjustment, which is determined using a cost of capital
approach with a 3% charge (2023: 3%). There has been no change during the
year.
Determining the fair value of investment property
In accordance with IAS 40, the Group initially recognises investment
properties at cost, and subsequently remeasures its portfolio to fair value in
the statement of financial position. Fair value is determined at least monthly
by professional external valuers. It is based on anticipated market values for
the properties in accordance with the guidance issued by the Royal Institution
of Chartered Surveyors (RICS), being the estimated amount that would be
received from a sale of the assets in an orderly transaction between market
participants.
The valuation of investment property is inherently subjective as it requires,
among other factors, assumptions to be made regarding the ability of existing
tenants to meet their rental obligations over the entire life of their leases,
the estimation of the expected rental income into the future, the assessment
of a property's potential to remain as an attractive technical configuration
to existing and prospective tenants in a changing market and a judgement on
the attractiveness of a building, its location and the surrounding
environment. Wherever appropriate, sustainability and environmental matters
are an integral part of the valuation approach. In a valuation context,
sustainability encompasses a wide range of physical, social, environmental and
economic factors that can affect value. The range of issues includes key
environmental risks, such as flooding, energy efficiency and climate, as well
as design, configuration, accessibility, legislation, management and fiscal
considerations - and, additionally, current and historical land use. As such,
investment properties are classified as Level 3 in the IFRS 13 fair value
hierarchy because they are valued using techniques which are not based on
observable inputs.
During the year, SJP announced the decision to wind down the Property Unit
Trust and remove the Property Life and Pension fund options. The process of
determining the fair value of investment property remains unchanged.
Determining the fair value of Level 3 fixed income securities and equities
In accordance with IFRS 9, the Group elects to classify its portfolio of
policyholder fixed income securities at fair value through profit and loss to
match the accounting for policyholder liabilities. Its portfolio of equities
is required to be held at fair value through profit and loss. As a result, all
fixed income securities and equities are held at fair value, with the best
evidence of the fair value at initial recognition typically being the
transaction price, i.e. the fair value of the consideration given or received.
A number of investments are held in private credit and private equity assets,
which are recognised within fixed income securities and within equities,
respectively, on the consolidated statement of financial position. The fair
value of these assets is determined following a monthly valuation process
which uses two different valuation models and includes verification by
professional external valuers. The models use suitable market comparatives and
an estimate of future cash flows expected to flow from the issuing entity.
The valuations are inherently subjective as they require a number of
assumptions to be made, such as determining which entities provide suitable
market comparatives and their relevant performance metrics (for example
earnings before interest, tax, depreciation and amortisation), determining
appropriate discount rates and cash flow forecasts to use in models, the
weighting to apply to each valuation methodology, and the point in the range
of valuations to select as the fair value. As the inputs to the valuation
models are unobservable, the investments in private credit and private equity
assets are classified as Level 3 in the IFRS 13 fair value hierarchy.
Determining the value of the Ongoing Service Evidence provision
The Group has committed to review the sub-population of clients that has been
charged for ongoing advice services since the start of 2018 but where the
evidence of delivery falls below the acceptable standard. Where the standard
of evidence is deemed by the Group to be marginal the Group will invite
clients to join the review (the 'Opt-In population'), but where the standard
of evidence is deemed to be poor the Group will include clients in the review
unless instructed otherwise (the 'Opt-Out population').
In accordance with IAS 37, and reflecting an initial assessment of a
statistically credible representative cohort of clients undertaken by a
skilled person, the Group has quantified the Ongoing Service Evidence
provision as the best estimate of the amount necessary to settle the present
obligation, taking into account the associated risks and uncertainties.
The period for the review has been determined by the Group to commence from
2018 following an assessment of the regulatory regime in force during this
period and the requirement to retain evidence of delivery for this period of
time.
Key estimates and assumptions in assessing the estimated value are:
· extrapolation from a representative cohort - that the initial
assessment, of a statistically credible representative cohort of client
records, can be extrapolated to the wider review population.
· Opt-In response rate - the response rate by clients to an
invitation, taking into account industry experience.
· administration costs - that in-house historic experience and
wider market experience of similar exercises can be used to estimate the cost
to fulfil the exercise.
Further details of the provision, including sensitivity analysis, are set out
in Note 9.
Determining the value of the complaints provision
In accordance with IAS 37 the Group has continued to quantify the complaints
provision as the best estimate of the amount necessary to settle the present
obligation, taking into account the associated risks and uncertainties. The
key estimate in assessing the value of the provision is the assessment of the
proportion of cases requiring redress. Further details of the provision are
set out in Note 9.
Judgements
The primary areas in which the Group has applied judgement are as follows:
Consolidation
Entities are consolidated within the Group financial statements if they are
controlled by the Group. Control exists if the Group is exposed to, or has
rights to, variable returns from its involvement with the entity and the Group
has the ability to affect those returns through its power over the entity.
Significant judgement can be involved in determining whether the Group
controls an entity, such as in the case of the structured entity set up for
the Group's securitisation transaction, SJP Partner Loans No.1 Limited, and
for the Group's unit trusts.
A structured entity is one that has been designed so that voting or similar
rights are not the dominant factor in deciding who controls the entity. As a
result, factors such as whether a Group entity is able to direct the relevant
activities of the entity and the extent to which the Group is exposed to
variability of returns are considered. In the case of SJP Partner Loans No.1
Limited, it was determined that the Group does control the entity and hence it
is consolidated. This is due to an entity in the Group holding the junior
tranche of loan notes, hence being subject to variability of returns, and the
same entity being able to direct the relevant activities of the structured
entity through its role of servicer to the securitised portfolio.
Unit trusts are consolidated when the Group holds more than 30% of the units
in that unit trust. This is the threshold at which the Group is considered to
achieve control, having regard to factors such as:
· the scope of decision-making authority held by
St. James's Place Unit Trust Group Limited, the unit trust manager.
· rights held by external parties to remove the unit trust manager.
· the Group's exposure to variable returns through its holdings in
the unit trusts and its ability to influence the unit trust manager's
remuneration.
Determining non-performing business loans to Partners
Business loans to Partners are considered to be non-performing (Stage 3), in
the context of the definition prescribed by IFRS 9, if they are in default.
This is defined as a loan to either:
· a Partner who has left the St. James's Place Partnership; or
· a Partner whom management considers to be at significant risk of
leaving the Partnership and where an orderly settlement of debt is considered
to be in question.
Determining the derecognition of business loans to Partners
Business loans to Partners are derecognised, in the context of the definition
prescribed by IFRS 9, when:
· the assets have been sold to a third-party
· there is an obligation to pay received cash flows in full without
material delay to a third party under a 'pass-through' arrangement
· the originator has transferred substantially all the risks and
rewards of owning the assets.
See Note 7 for further information on the derecognition of business loans to
Partners.
3. Segment reporting
IFRS 8 Operating Segments requires operating segments to be identified on the
basis of internal reports about components of the Group that are regularly
reviewed by the Board, in order to allocate resources to each segment and
assess its performance.
The Group's only reportable segment under IFRS 8 is a 'wealth management'
business - providing support to our clients through our network of advisers
providing valuable face-to-face financial advice, and financial solutions
including (but not limited to) wealth management products manufactured in the
Group, such as insurance bonds, pensions, unit trust and ISA investments, and
a DFM service.
Separate geographical segmental information is not presented since the Group
does not segment its business geographically. Most of its customers are based
in the United Kingdom, as is management of the assets. In particular,
the operation based in Asia is not yet sufficiently material for separate
consideration.
Segment revenue
Revenue received from fee and commission income is set out in Note 4, which
details the different types of revenue received from our wealth management
business.
Segment profit
Two separate measures of profit are monitored by the Board. These are the
post-tax Underlying cash result and the pre-tax European Embedded Value (EEV)
profit. Further details can be found within the glossary of alternative
performance measures section.
Underlying cash result
The measure of cash profit monitored by the Board is the post-tax Underlying
cash result. For further information please refer to the glossary of
alternative performance measures section.
More detail is provided in section 2.2 of the financial review.
The Cash result should not be confused with the IFRS consolidated statement of
cash flows, which is prepared in accordance with IAS 7.
Year ended Year ended
31 December 2024 31 December 2023
£'Million £'Million
Underlying cash result after tax 447.2 392.4
Ongoing Service Evidence provision - (323.7)
Movement in DAC/DIR/PVIF (0.1) 3.1
Impact of policyholder tax asymmetry (see Note 4) (38.9) (44.4)
Equity-settled share-based payments (11.2) (5.4)
Impact of deferred tax (9.0) (24.9)
Other 10.4 (7.0)
IFRS profit/(loss) after tax 398.4 (9.9)
Shareholder tax 137.5 5.4
Profit/(loss) before tax attributable to shareholders' returns 535.9 (4.5)
Tax attributable to policyholder returns 513.2 444.1
IFRS profit before tax 1,049.1 439.6
EEV operating profit
EEV operating profit is monitored by the Board. The components of the EEV
operating profit are included in more detail in the financial review within
the Annual Report and Accounts 2024.
Year ended Year ended
31 December 2024 31 December 2023
£'Million £'Million
EEV operating profit/(loss) before tax after exceptional items 1,045.0 (1,891.6)
Investment return variance 533.7 501.7
Economic assumption changes 23.5 2.5
EEV profit/(loss) before tax 1,602.2 (1,387.4)
Adjustments to IFRS basis:
Deduct: amortisation of purchased value of in-force business (3.2) (3.2)
Movement of balance sheet life value of in-force business (net of tax) (354.5) 2,769.6
Movement of balance sheet unit trust and DFM value of in-force business (net (345.4) 226.0
of tax)
Movement of balance sheet other value of in-force business (net of tax) (291.4) (1,918.9)
Tax on movement in value of in-force business (71.8) 309.4
Profit/(loss) before tax attributable to shareholders' returns 535.9 (4.5)
Tax attributable to policyholder returns 513.2 444.1
IFRS profit before tax 1,049.1 439.6
The movement in life, unit trust and DFM, and other value of in-force business
is the difference between the opening and closing discounted value of the
profits that will emerge from the in-force book over time, after adjusting for
DAC and DIR impacts which are already included under IFRS.
Segment assets
Funds under management (FUM)
FUM, as reported in section 1 of the financial review, is the measure of
segment assets which is monitored on a monthly basis by the Board.
31 December 2024 31 December 2023
£'Million £'Million
Investment 39,180.0 35,990.0
Pension 101,980.0 87,320.0
UT/ISA and DFM 49,050.0 44,890.0
Total FUM 190,210.0 168,200.0
Exclude client and third-party holdings in non-consolidated unit trusts and (4,183.3) (4,360.4)
DFM
Other 3,923.7 3,968.2
Gross assets held to cover unit liabilities 189,950.4 167,807.8
IFRS intangible assets 335.1 399.6
Shareholder gross assets 4,589.6 4,085.7
Total assets 194,875.1 172,293.1
Other represents liabilities included within the underlying unit trusts. The
unit trust liabilities form a reconciling item between total FUM, which is
reported net of these liabilities, and total assets, which exclude these
liabilities.
More detail on IFRS intangible assets and shareholder gross assets is provided
in section 2.2 of the financial review.
4. Fee and commission income
Year ended Year ended
31 December 31 December
2024 2023
£'Million £'Million
Advice charges (post RDR) 1,089.2 954.3
Third-party fee and commission income 131.3 132.4
Wealth management fees 1,234.1 1,065.0
Investment management fees 74.5 68.4
Fund tax deductions 513.2 444.1
Policyholder tax asymmetry (38.9) (44.4)
Discretionary fund management fees 23.4 23.6
Fee and commission income before DIR amortisation 3,026.8 2,643.4
Amortisation of DIR 137.1 145.5
Total fee and commission income 3,163.9 2,788.9
Advice charges are received from clients for the provision of initial and
ongoing advice in relation to a post-Retail Distribution Review (RDR)
investment into a St. James's Place or third-party product.
Third-party fee and commission income is received from the product provider
where an investment has been made into a third-party product.
Wealth management fees represent charges levied on manufactured business.
Investment management fees are received from clients for the provision of all
aspects of investment management. Broadly, investment management fees are
matched by investment management expenses.
Fund tax deductions represent amounts credited to, or deducted from, the life
insurance business to match policyholder tax credits or charges. Market
conditions will impact the level of fund tax deductions. This may lead to
significant year on year movements when markets are volatile.
Life insurance tax incorporates a policyholder tax element, and the financial
statements of a life insurance group need to reflect the liability to HMRC,
with the corresponding deductions incorporated into policy charges ('Fund tax
deductions' in the table above). The tax liability to HMRC is assessed using
IAS 12 Income Taxes, which does not allow discounting, whereas the policy
charges are designed to ensure fair outcomes between clients and so reflect a
wide range of possible outcomes. This gives rise to different assessments of
the current value of future cash flows and hence an asymmetry in the IFRS
consolidated statement of financial position between the deferred tax position
and the offsetting client balance. The net tax asymmetry balance reflects a
temporary position, and in the absence of market volatility we expect it will
unwind as future cash flows become less uncertain and are ultimately realised.
External market conditions drive the movement in the policyholder tax
asymmetry balances. Net market gains in the year to 31 December 2024 have
resulted in a negative policyholder tax asymmetry.
Discretionary fund management fees are received from clients for the provision
of DFM services.
Where an investment has been made in a St. James's Place product, the
initial product charge is deferred and recognised as a deferred income
liability. This liability is extinguished, and income recognised, over the
expected life of the investment. The income is the amortisation of DIR in the
table above.
5. Investment return and movement in investment contract benefits
The majority of the business written by the Group is unit-linked investment
business, and so investment contract benefits are measured by reference to the
underlying net asset value of the Group's unitised investment funds. As a
result, investment return on the unitised investment funds and the movement in
investment contract benefits are linked.
Investment return
Year ended Year ended
31 December 31 December
2024 2023
£'Million £'Million
Attributable to unit-linked investment contract benefits:
Rental income 60.8 69.9
Loss on revaluation of investment properties (3.3) (44.9)
Net investment return on financial instruments classified at fair value 15,594.6 13,013.4
through profit and loss
15,652.1 13,038.4
Income attributable to third-party holdings in unit trusts 7,036.4 3,092.5
Investment return on net assets held to cover unit liabilities 22,688.5 16,130.9
Net investment return on financial instruments classified at fair value 95.6 60.2
through profit and loss
Net investment return on financial instruments held at amortised cost 1.2 6.5
Investment return on shareholder assets 96.8 66.7
Total investment return 22,785.3 16,197.6
Included in the net investment return on financial instruments classified as
fair value through profit and loss, within investment return on net assets
held to cover unit liabilities, is dividend income of £1,576.7 million (2023:
£1,499.1 million).
Movement in investment contract benefits
2024 2023
£'Million £'Million
Balance at 1 January 123,149.8 106,964.7
Deposits 14,451.6 11,842.3
Withdrawals (10,778.2) (7,459.6)
Movement in unit-linked investment contract benefits 15,652.1 13,038.4
Fees and other adjustments (1,436.5) (1,236.0)
Balance at 31 December 141,038.8 123,149.8
Current 6,762.1 6,584.5
Non-current 134,276.7 116,565.3
141,038.8 123,149.8
Movement in unit liabilities
Unit-linked investment contract benefits 15,652.1 13,038.4
Third-party unit trust holdings 7,036.4 3,092.5
Movement in investment contract benefits in the 16,130.9
consolidated statement of comprehensive income
22,688.5
6. Income and deferred taxes
Tax for the year
Year ended Year ended
31 December 31 December
2024 2023
£'Million £'Million
Current tax
UK corporation tax
- Current year charge 330.7 222.8
- Adjustment in respect of prior year 1.9 (0.5)
Overseas taxes
- Current year charge 17.0 2.9
- Adjustment in respect of prior year (0.3) 0.1
349.3 225.3
Deferred tax
Unrealised capital gains in unit-linked funds 261.6 243.4
Unrelieved expenses
- Utilisation in the year 8.9 11.3
Capital losses
- Utilisation in the year - 2.2
- Adjustment in respect of prior year - (0.1)
DAC, DIR and PVIF (5.3) (7.8)
Share-based payments (5.3) 8.1
Renewal income assets (3.9) (1.4)
Fixed asset timing differences 0.5 2.6
UK trading losses 40.8 (36.1)
Other items 3.8 1.8
Overseas losses - 0.3
Transitional adjustment 3.4
Adjustment in respect of prior year (3.1) (0.1)
301.4 224.2
Total tax charge for the year 650.7 449.5
Attributable to:
- Policyholders 513.2 444.1
- Shareholders 137.5 5.4
650.7 449.5
The prior year adjustment of £1.6 million charge in current tax above
represents a £2.4 million charge in respect of policyholder tax (2023: £1.4
million credit) and a credit of £0.8 million in respect of shareholder tax
(2023: £1.0 million charge). The prior year adjustment of £3.1 million
credit in deferred tax above represents £0.1 million credit in respect of
policyholder tax (2023: £nil) and a credit of £3.0 million in respect of
shareholder tax (2023: £0.2 million credit).
In arriving at the profit before tax attributable to shareholders' returns, it
is necessary to estimate the distribution of the total tax charge/(credit)
between that payable in respect of policyholders and that payable by
shareholders. Shareholder tax is estimated by making an assessment of the
effective rate of tax that is applicable to the shareholders on the profits
attributable to shareholders. This is calculated by applying the appropriate
effective corporate tax rates to the shareholder profits. The remainder of the
tax charge/(credit) represents tax on policyholders' investment returns. This
calculation method is consistent with the legislation relating to the
calculation of tax on shareholder profits.
Reconciliation of tax charge to expected tax
Year ended Year ended
31 December 31 December
2024 2023
£'Million £'Million
Profit before tax 1,049.1 439.6
Tax attributable to policyholders' returns (513.2) (444.1)
Profit/(loss) before tax attributable to shareholders' returns 535.9 (4.5)
Shareholder tax charge/(credit) at corporate tax rate of 25% (2023: 23.5%) 134.0 25% (1.1) 23.5%
Adjustments:
Lower rates of corporation tax in overseas subsidiaries (1.2) (0.2%) (1.8) 39.4%
Expected shareholder tax 132.8 24.8% (2.9) 62.9%
Effects of:
Non-taxable income (0.4) (2.5)
Adjustment in respect of prior year
- Current tax (0.8) 1.0
- Deferred tax (3.1) (0.2)
Differences in accounting and tax bases in relation to employee share schemes (3.1) 0.3
Impact of difference in tax rates between current and deferred tax - (2.3)
Disallowable expenses 6.1 4.3
Change in accounting base - Hong Kong 4.2 -
Provision for future liabilities (0.6) 5.1
Tax losses not recognised 2.4 1.9
Other - 0.7
4.7 0.9% 8.3 (182.9%)
Shareholder tax charge 137.5 25.7% 5.4 (120.0%)
Policyholder tax charge 513.2 444.1
Total tax charge for the year 650.7 449.5
Tax calculated on profit before tax at 25.0% (2023: 23.5%) would amount to a
charge of £262.3 million (2023: charge of £103.3 million). The difference of
£388.4 million (2023: £346.2 million) between this number and the total tax
charge of £650.7 million (2023: £449.5 million credit) is made up of the
reconciling items above which total a charge of £3.5 million (2023: £6.5
million charge) and the effect of the apportionment methodology on tax
applicable to policyholder returns of £384.9 million (2023: £339.7 million).
Tax paid in the year
Year ended Year ended
31 December 31 December
2024 2023
£'Million £'Million
Current tax charge for the year 349.3 225.3
(Payments to be made)/refunds due to be received in future years in respect of (22.9) 1.7
current year
Payments made/(refunds received) in current year in respect of prior years 0.6 (39.7)
Other (0.9) (7.9)
Tax paid 326.1 179.4
Tax paid can be analysed as:
- Taxes paid in UK 252.4 156.4
- Taxes paid in overseas jurisdictions 5.9 6.2
- Withholding taxes suffered on investment income received 67.8 16.8
Total 326.1 179.4
Deferred tax balances
Deferred tax assets
As at (Charge)/credit to the statement of comprehensive income Impact of acquisitions Reanalysis to deferred tax liabilities As at 31 December 2024 Expected utilisation period
1 January
2024
Utilised and created in year Total As at 31 December 2024
(charge)/
credit
£ Million £ Million £ Million £ Million £ Million £ Million
Deferred acquisition costs (DAC) (18.6) 0.1 0.1 - 19.4 0.9 14 years
Deferred income (DIR) 35.1 (0.1) (0.1) - (33.3) 1.7 14 years
Fixed asset temporary differences 1.3 - - - (1.3) - 6 years
Renewal income assets (19.9) - - - 19.9 - 20 years
Share-based payments 4.8 - - - (4.8) - 3 years
UK trading losses 36.1 (36.1) (36.1) - - - -
Other temporary differences (2.3) - - - 2.4 0.1 -
Total 36.5 (36.1) (36.1) - 2.3 2.7
As at 1 January 2023 Credit/(charge) to the statement of comprehensive income Impact of acquisitions Reanalysis to deferred tax As at 31 December 2023 Expected utilisation period
liabilities
Utilised and created in year Total credit/ As at 31 December 2023
(charge)
£ Million £ Million £ Million £ Million £ Million £ Million
Deferred acquisition costs (DAC) (20.4) 1.8 1.8 - - (18.6) 14 years
Deferred income (DIR) 37.7 (2.6) (2.6) - - 35.1 14 years
Fixed asset temporary differences 3.9 (2.6) (2.6) - - 1.3 6 years
Renewal income assets (20.7) 1.5 1.5 (0.7) - (19.9) 20 years
Share-based payments 12.9 (8.1) (8.1) - - 4.8 3 years
UK trading losses - 36.1 36.1 - - 36.1 1 years
Other temporary differences (0.9) (2.3) (2.3) 0.9 - (2.3) -
Total 12.5 23.8 23.8 0.2 - 36.5
Deferred tax liabilities
As at 1 January 2024 Charge/(credit) to the statement of comprehensive income Impact of acquisitions Reanalysis from As at 31 Expected utilisation period
deferred tax assets December 2024
Utilised and created in year Impact of tax rate change Total charge/ (credit) As at 31 December 2024
£ Million £ Million £ Million £ Million £ Million £ Million £ Million
Deferred acquisition costs (DAC) 12.3 (7.6) - (7.6) - 19.4 24.1 14 years
Deferred income (DIR) - 3.2 3.2 - (33.3) (30.1) 14 years
Purchased value of in-force business (PVIF) 2.0 (0.8) - (0.8) - - 1.2 2 years
Unrealised capital gains on life insurance (BLAGAB) assets 423.4 261.5 - 261.5 - - 684.9 6 years
backing unit liabilities
Unrelieved expenses on life insurance business (26.2) 8.9 - 8.9 - - (17.3) 4 years
Fixed asset temporary differences - 0.9 - 0.9 - (1.3) (0.4) 6 years
Renewal income assets - (2.5) - (2.5) - 19.9 17.4 20 years
Share-based payments - (5.3) - (5.3) - (4.8) (10.1) 3 years
Transitional adjustment - 3.4 - 3.4 - 1.6 5.0 4 years
Other temporary differences 0.2 3.6 - 3.6 0.1 0.8 4.7 -
Total 411.7 265.3 - 265.3 0.1 2.3 679.4
As at 1 January 2023 Charge/(credit) to the statement of Comprehensive Income Impact of acquisitions Reanalysis from Expected utilisation period
deferred tax assets
As at 31 December 2023
Utilised and created in year Impact of tax rate change Total charge/(credit) As at 31 December 2023
£ Million £ Million £ Million £ Million £ Million £ Million £
Mi
ll
io
n
Capital losses (2.1) 2.1 - 2.1 - - - -
(available for future relief)
Deferred acquisition costs (DAC) 20.2 (7.9) - (7.9) - - 12.3 14 years
Purchased value of in-force business (PVIF) 2.8 (0.8) - (0.8) - - 2.0 2 years
Unrealised capital gains on life insurance (BLAGAB) assets backing unit 180.1 243.3 - 243.3 - - 423.4 6 years
liabilities
Unrelieved expenses on life insurance business (37.5) 11.3 - 11.3 - - (26.2) 5 years
Other temporary differences (0.6) 0.1 - 0.1 0.7 - 0.2 -
Total 162.9 248.1 - 248.1 0.7 - 411.7
Appropriate investment income, gains or profits are expected to arise against
which the tax assets can be utilised. Whilst the actual rates of utilisation
will depend on business growth and external factors, particularly investment
market conditions, they have been tested for sensitivity to experience and are
resilient to a range of reasonably foreseeable scenarios.
At the reporting date there were unrecognised deferred tax assets of £19.4
million (2023: £17.3 million) in respect of £116.7 million (2023: £101.9
million) of losses in companies where appropriate profits are not considered
probable in the forecast period. These losses primarily relate to the Group's
Asia-based businesses and can be carried forward indefinitely.
Future tax changes
There are no relevant enacted future tax changes.
Changes in accounting base - Hong Kong
As of 1 July 2024, the Insurance Authority (IA) in Hong Kong has implemented
the Risk-Based Capital (RBC) regime. The RBC regime introduces significant
changes in the calculation of non-unit reserves and the Margin Over Current
Estimate (MOCE) compared to the previous capital regime. As a result of
aligning SJPIHK's taxable profit basis with the regulatory basis this gives
rise in the year to a transitional tax liability, which under RBC rules will
be run off through current tax over the next five years on a straight-line
basis.
Pillar Two - global minimum tax
With effect from 1 January 2024 the SJP Group is subject to the global minimum
tax rules introduced by the Organisation for Economic Co-operation and
Development (OECD) and adopted into local legislation of various territories
in which the SJP Group operates; including the UK and Ireland. The Group is
subject to a domestic top-up tax in relation to its operations in Ireland,
where the statutory corporate tax rate is 12.5%. This increases the effective
tax rate for the SJP profits arising in Ireland to 15% and an adjustment of
£0.1 million additional Irish tax has been posted in this respect. A Pillar
Two adjustment is not required in any other location in which SJP operates.
7. Other receivables
31 December 31 December
2024 2023
£'Million £'Million
Receivables in relation to unit liabilities excluding policyholder 656.4 956.0
interests
Other receivables in relation to life and unit trust business 55.9 151.9
Operational readiness prepayment 256.3 283.5
Advanced payments to Partners 137.4 127.4
Other prepayments and accrued income 37.8 37.9
Business loans to Partners 557.3 408.0
Renewal income assets 121.0 138.3
Miscellaneous 45.3 44.3
Total other receivables on the Solvency II Net Assets Balance Sheet 1,867.4 2,147.3
Policyholder interests in other receivables 816.7 846.9
Other 3.3 3.2
Total other receivables 2,687.4 2,997.4
Current 1,781.3 2,243.8
Non-current 906.1 753.6
2,687.4 2,997.4
All items within other receivables meet the definition of financial assets
with the exception of prepayments and advanced payments to Partners. The fair
value of those financial assets held at amortised cost is not materially
different from amortised cost.
Receivables in relation to unit liabilities relate to outstanding market trade
settlements (sales) in the life unit-linked funds and the consolidated unit
trusts. Other receivables in relation to insurance and unit trust business
primarily relate to outstanding policy-related settlement timings. Both of
these categories of receivables are short-term.
The operational readiness prepayment consists of directly invoiced operational
readiness costs advanced and relates to the Bluedoor administration platform
which has been developed by our key outsourced back-office administration
provider. Management has assessed the recoverability of this prepayment
against the expected cost saving benefit of lower future tariff costs arising
from the platform. It is believed that no reasonably possible change in the
assumptions applied within this assessment, notably levels of future business,
the anticipated future service tariffs and the discount rate, would have an
impact on the carrying value of the asset.
Renewal income assets represent the present value of future cash flows
associated with business combinations or books of business acquired by the
Group.
Business loans to Partners
31 December 31 December
2024 2023
£'Million £'Million
Business loans to Partners directly funded by the Group 386.6 340.8
Securitised business loans to Partners 170.7 67.2
Total business loans to Partners 557.3 408.0
Business loans to Partners are interest-bearing (linked to Bank of England
base rate plus a margin), repayable in line with the terms of the loan
contract and secured against the future income streams of the respective
Partners.
Reconciliation of the business loans to Partners' opening and closing gross
loan balances
Stage 1 Stage 2 Stage 3 Total
performing under- non-
performing performing
£'Million £'Million £'Million £'Million
Gross balance at 1 January 2024 359.7 44.6 8.5 412.8
Business loans to Partners classification changes:
- Transfer to underperforming (19.0) 19.0 - -
- Transfer to non-performing (21.0) (2.5) 23.5 -
- Transfer to performing 16.5 (16.4) (0.1) -
New lending activity during the year 215.0 7.8 2.6 225.4
Interest charged during the year 37.4 3.6 2.0 43.0
Repayment activity during the year (104.4) (7.6) (3.4) (115.4)
Gross balance at 31 December 2024 484.2 48.5 33.1 565.8
Stage 1 Stage 2 Stage 3 Total
performing under- non-
performing performing
£'Million £'Million £'Million £'Million
Gross balance at 1 January 2023 297.1 17.7 4.6 319.4
Business loans to Partners classification changes:
- Transfer to underperforming (11.9) 11.9 - -
- Transfer to non-performing (3.2) (0.2) 3.4 -
- Transfer to performing 4.2 (3.5) (0.7) -
New lending activity during the year 195.0 16.9 0.7 212.6
Interest charged during the year 26.2 3.1 0.8 30.1
Repayment activity during the year (147.7) (1.3) (0.3) (149.3)
Gross balance at 31 December 2023 359.7 44.6 8.5 412.8
Business loans to Partners: provision
The expected loss impairment model for business loans to Partners is based on
the levels of loss experienced in the portfolio, with due consideration given
to forward-looking information. For those business loans to Partners sold to a
third-party in 2022, full credit risk was transferred.
The provision held against business loans to Partners as at 31 December 2024
was £8.5 million (2023: £4.8 million). During the year, £1.1 million of the
provision was released (2023: £0.2 million), £3.1 million was utilised
(2023: £3.4 million) and new provisions and adjustments to existing
provisions increased the total by £7.9 million (2023: £4.6 million).
There is no provision held against any other receivables held at amortised
cost.
Business loans to Partners as recognised on the statement of financial
position
31 December 31 December
2024 2023
£'Million £'Million
Gross business loans to Partners 565.8 412.8
Provision (8.5) (4.8)
Net business loans to Partners 557.3 408.0
Renewal income assets
Movement in renewal income assets
2024 2023
£'Million £'Million
Balance at 1 January 138.3 115.5
Additions 4.8 32.0
Disposals (0.7) (2.1)
Revaluation (21.4) (7.1)
Balance at 31 December 121.0 138.3
The key assumptions used for the assessment of the fair value of the renewal
income are as follows:
31 December 31 December
2024 2023
Lapse rate - SJP Partner renewal income 1 5.0% to 15.0% 5.0% to 15.0%
Lapse rate - non-SJP renewal income 1 6.5% to 25.0% 6.5% to 25.0%
Discount rate 15.8% 11.8%
1 Future income streams are projected making use of retention assumptions
derived from the Group's experience of the business or, where insufficient
data exists, from external industry experience. These assumptions are reviewed
on an annual basis.
These assumptions have been used for the analysis of each business combination
classified within renewal income.
8. Other payables
31 December 31 December
2024 2023
£'Million £'Million
Payables in relation to unit liabilities excluding policyholder interests 216.7 437.1
Other payables in relation to life and unit trust business 590.4 738.6
Accrual for ongoing advice fees 168.9 150.0
Other accruals 138.5 101.1
Contract payment 72.2 84.2
Lease liabilities: properties 107.2 120.5
Other payables in relation to Partner payments 88.9 75.1
Miscellaneous 62.6 50.4
Total other payables on the Solvency II Net Assets Balance Sheet 1,445.4 1,757.0
Policyholder interests in other payables 692.7 613.3
Other 6.2 17.8
Total other payables 2,144.3 2,388.1
Current 1,992.5 2,212.9
Non-current 151.8 175.2
2,144.3 2,388.1
Payables in relation to unit liabilities relate to outstanding market trade
settlements (purchases) in the life unit-linked funds and the consolidated
unit trusts. Other payables in relation to insurance and unit trust business
primarily relate to outstanding policy-related settlement timings. Both of
these categories of payables are short-term.
The contract payment of £72.2 million (2023: £84.2 million) represents
payments made by a third-party service provider to the Group as part of a
service agreement, which are non-interest-bearing and repayable over the life
of the service agreement. The contract payment received prior to 2020 is
repayable on a straight-line basis over the original 12-year term, with
repayments commencing on 1 January 2017. The contract payment received in 2020
is repayable on a straight-line basis over 13 years and 4 months, with
repayments commencing on 1 September 2020.
The lease liabilities: properties line item represents the present value of
future cash flows associated with the Group's portfolio of property leases.
The fair value of financial instruments held at amortised cost within other
payables is not materially different from amortised cost.
Policyholder interests in other payables are short-term in nature and can vary
significantly from period to period due to prevailing market conditions and
underlying trading activity.
9. Other provisions and contingent liabilities
Complaints Ongoing Service Evidence provision Lease Clawback Total provisions
provision provision provision
£'Million £'Million £'Million £'Million £'Million
At 1 January 2023 29.7 - 13.3 3.0 46.0
Additional provisions 61.8 426.0 2.6 0.1 490.5
Utilised during the year (21.0) - (0.8) - (21.8)
Release of provision (14.4) - (0.2) - (14.6)
At 31 December 2023 56.1 426.0 14.9 3.1 500.1
Additional provisions 21.8 - 0.3 0.3 22.4
Utilised during the year (24.9) (18.5) (0.1) - (43.5)
Impact of discounting - 17.6 - - 17.6
Release of provision (35.3) - (1.0) - (36.3)
At 31 December 2024 17.7 425.1 14.1 3.4 460.3
Other provisions
Complaints provision
The provision represents the best estimate of the complaint redress, based on
complaints identified, an assessment of the proportion redressed; and an
estimated cost of redress based on historic experience. A reasonably possible
change of 10% in the key assumption, being the proportion requiring redress,
would result in an increase/decrease of circa £1.4 million to the total
complaints provision.
Ongoing Service Evidence provision
During 2023 the Group experienced elevated levels of complaints in connection
with the delivery of historic ongoing advice services.
Given the claims experience, a skilled person was engaged to undertake an
initial assessment of a statistically credible representative cohort of
clients to explore whether issues raised by the complaints were replicated
across the wider client base. Following the assessment, the Group committed to
review the sub-population of clients that has been charged for ongoing
servicing since the start of 2018 but where the evidence of delivery falls
below the acceptable standard. Where the standard of evidence is deemed by the
Group to be marginal the Group will invite clients to join the review (the
'Opt-In population'), but where the standard of evidence is deemed to be poor
the Group will include clients in the review unless instructed otherwise (the
'Opt-Out population').
The provision that has been recognised includes an estimated refund of
charges, together with interest at FOS rates, plus the administration costs
associated with completing this work. Allowance is also made for discounting
over the expected duration of the exercise.
A provision of £426.0 million was recognised at 31 December 2023 with the
best estimate assessment based on extrapolation of the experience of the
statistically credible representative cohort of clients.
IAS 37 and IAS 1 requires the Group to set out sensitivities. In compliance
with these requirements, the following table sets out the potential change to
the provision balance at 31 December 2024 and 31 December 2023 if the key
assumptions were to vary as described:
Sensitivity analysis Change in profit/(loss) before tax
Change in assumption
Favourable changes Unfavourable changes
Percentage £'Million £'Million
Extrapolation from a representative cohort 2% 22.0 (22.0)
- Variation in proportion of client population subject to the review
Extrapolation from a representative cohort 10% 31.0 (31.0)
- Variation in the level of charges, subject to refund
Opt-In response rate 10% 17.0 (17.0)
- Variation in response rate
Administration costs 10% 12.0 (12.0)
- Change in estimation of the cost to fulfil the exercise (cost per claim)
It is estimated that significantly all the provision will be utilised over a
one-to-two-year period from the reporting date.
Lease provision
The lease provision represents the value of expected future costs of
reinstating leased property to its original condition at the end of the lease
term. The estimate is based on the square footage of leased properties and
typical costs per square foot of restoring similar buildings to their original
state. The Group expects £1.3 million (2023: £1.5 million) of the provision
to be utilised within one year. The majority of the provision relates to
leased property with a maturity date of greater than five years.
Clawback provision
The clawback provision represents amounts due to third parties less amounts
recovered from Partners. The provision is based on estimates of the indemnity
commission that may be repaid. The Group expects to utilise the provision on
a straight-line basis over four years.
With the exception of the Complaint and Ongoing Service Evidence provisions,
it is considered that no reasonably possible level of changes in estimates
would have a material impact on the value of the best estimate of the
provisions.
Contingent liabilities
Complaints and disputes
The Group is committed to achieving good client outcomes but does, in the
normal course of business receive complaints and claims. Also, and as
described in the strategic report, the FCA continues to reinforce the need for
firms to embed the Consumer Duty regulation and there remains a risk that we
fail to provide quality suitable advice to clients, or that we fail to
evidence the provision of good quality service and advice, which could result
in regulatory sanction and/or a need to refund or compensate clients.
The costs, including legal costs, of these issues as they arise can be
significant and where appropriate, provisions have been established in
accordance with IAS 37.
Guarantees
During the normal course of business, the Group may from time to time provide
guarantees to Partners, clients or other third parties. However, based upon
the information currently available to them, the Directors do not believe
there are any guarantees which would have a material adverse effect on the
Group's financial position, and so the fair value of any guarantees has been
assessed as £nil (2023: £nil).
10. Borrowings and financial commitments
Borrowings
Borrowings are a liability arising from financing activities. The Group has
two different types of borrowings:
· senior unsecured corporate borrowings which are used to manage
working capital, bridge intra-Group cash flows and fund investment in the
business.
· securitisation loan notes which are secured only on a legally
segregated pool of the Group's business loans to Partners, and hence are
non-recourse to the Group's other assets. Further information about business
loans to Partners is provided in Note 7.
Senior unsecured corporate borrowings
31 December 31 December
2024 2023
£'Million £'Million
Corporate borrowings: bank loans 250.0 50.0
Corporate borrowings: loan notes 138.3 151.1
Senior unsecured corporate borrowings 388.3 201.1
The primary senior unsecured corporate borrowings are:
· An undrawn revolving credit facility (RCF) of £345.0 million
which is repayable at maturity in 2028 with variable interest rates. At 31
December 2024 the undrawn credit available under this facility was £345.0
million (2023: £295.0 million).
· A fully drawn £250.0 million bridging facility, which is
repayable at maturity in 2026 or sooner at the discretion of the Company with
due notice, with variable interest rates.
· A Note Purchase Agreement for £38.3 million. The notes are
repayable in three equal instalments before maturity in 2027, with variable
interest rates.
· A Note Purchase Agreement for £100.0 million. The notes are
repayable at maturity in 2031, with variable interest rates.
On 13 February 2025 the Group made an irrevocable commitment to repay all of
the fully drawn £250.0 million bridging loan. The repayment is due on 27
February 2025.
The combined drawn carrying value of the senior unsecured corporate borrowings
as at 31 December 2024 is £388.3 million (2023: £201.1 million). The Group
is required to comply with financial covenants that are linked to (i) balance
sheet leverage, (ii) total FUM, (iii) a minimum level of net assets; and (iv)
our Solvency II ratio at the end of each annual and interim reporting period.
The Group has complied with these covenants throughout the reporting period.
There are no indications that the Group would have difficulties complying with
the covenants when they will be next tested at 30 June 2025.
Total borrowings
31 December 31 December
2024 2023
£'Million £'Million
Senior unsecured corporate borrowings 388.3 201.1
Senior tranche of non-recourse securitisation loan notes 128.5 50.3
Total borrowings 516.8 251.4
Current 41.3 62.0
Non-current 475.5 189.4
516.8 251.4
The senior tranche of securitisation loan notes are repayable over the
expected life of the securitisation (estimated to be five years) with a
variable interest rate. They are held by third-party investors and secured on
a legally segregated portfolio of business loans to Partners, and on the other
net assets of the securitisation entity SJP Partner Loans No.1 Limited.
Holders of the securitisation loan notes have no recourse to the assets held
by any other entity within the Group. For further information on business
loans to Partners, including the sale of securitised business loans to
Partners during the year, refer to Note 7.
In addition to the senior tranche of securitisation loan notes, a junior
tranche has been issued to another entity within the Group. The junior notes
were eliminated on consolidation in the preparation of the Group financial
statements and so do not form part of Group borrowings.
31 December 31 December
2024 2023
£'Million £'Million
Junior tranche of non-recourse securitisation loan notes 48.2 20.9
Senior tranche of non-recourse securitisation loan notes 128.5 50.3
Total non-recourse securitisation loan notes 176.7 71.2
Backed by
Securitised business loans to Partners (see Note 7) 170.7 67.2
Other net assets of SJP Partner Loans No.1 Limited 6.0 4.0
Total net assets held by SJP Partner Loans No.1 Limited 176.7 71.2
Movement in borrowings
Borrowings are liabilities arising from financing activities. The cash and
non-cash movements in borrowings over the year are set out below, with the
cash movements also set out in the consolidated statement of cash flows.
Senior Senior Total Senior Senior Total
unsecured tranche of securitisation borrowings unsecured tranche of borrowings
corporate loan notes corporate securitisation
borrowings borrowings loan notes
2024 2024 2024 2023 2023 2023
£'Million £'Million £'Million £'Million £'Million £'Million
Balance at 1 January 201.1 50.3 251.4 163.8 - 163.8
Additional borrowing during the year 360.0 113.8 473.8 175.0 58.1 233.1
Repayment of borrowings during the year (172.8) (35.3) (208.1) (137.7) (7.1) (144.8)
Costs on additional borrowings during the year (0.7) (1.0) (1.7) - - -
Unwind of borrowing costs (non-cash movement) 0.9 0.7 1.6 - - -
Reclassification of prepaid loan facility expense to prepayments (0.2) - (0.2) - (0.7) (0.7)
Balance at 31 December 388.3 128.5 516.8 201.1 50.3 251.4
The fair value of the outstanding borrowings is not materially different from
amortised cost. Interest expense on borrowings is recognised within Finance
costs in the consolidated statement of comprehensive income.
Financial commitments
Guarantees
The Group guarantees loans provided by third parties to Partners. In the event
of default on any individual Partner loan, the Group guarantees to repay the
full amount of the loan, with the exception of Metro Bank. For this
third-party the Group guarantees to cover losses up to 50% of the value to the
total loans drawn. These loans are secured against the future income streams
of the Partner. The value of the loans guaranteed is as follows:
Loans guaranteed Facility
31 December 31 December 31 December 31 December
2024 2023 2024 2023
£'Million £'Million £'Million £'Million
Bank of Scotland 12.3 19.6 16.0 35.0
Investec 26.5 33.3 50.0 50.0
Metro Bank 10.6 17.6 35.0 50.0
NatWest 27.5 32.2 75.0 75.0
Santander 171.4 186.5 206.6 189.1
Total loans 248.3 289.2 382.6 399.1
The fair value of these guarantees has been assessed as £nil (2023: £nil).
11. Cash generated from operations
Year ended Year ended
31 December 31 December
2024 2023 1
£'Million £'Million
Cash flows from operating activities
Profit before tax for the year 1,049.1 439.6
Adjustments for:
Amortisation of purchased value of in-force business 3.2 3.2
Amortisation of computer software 22.4 15.4
Depreciation 23.4 24.0
Impairment of goodwill 10.3 -
Loss on disposal of computer software - 0.8
Loss on disposal of property and equipment, including leased assets 4.1 2.3
Gain on disposal of subsidiary - (1.2)
Share-based payment charge 11.2 4.9
Interest income 1 (236.6) (168.6)
Interest expense 36.4 17.3
(Decrease)/increase in provisions (39.8) 454.1
Exchange rate (gains)/losses (0.2) 2.3
(165.6) 354.5
Changes in operating assets and liabilities
Decrease in deferred acquisition costs 18.2 32.2
Decrease in investment property 218.0 184.2
Increase in other investments (23,738.7) (21,077.2)
Increase in investments in associates (3.5) -
(Increase)/decrease in reinsurance assets (1.9) 41.6
Decrease/(increase) in other receivables 310.3 (14.2)
Increase in insurance contract liabilities 22.6 25.5
Increase in financial liabilities (excluding borrowings) 17,868.1 15,991.8
Decrease in deferred income (22.0) (38.9)
(Decrease)/increase in other payables (246.1) 206.2
Increase in net assets attributable to unit holders 4,163.0 3,908.1
(1,412.0) (740.7)
Cash (used in)/generated from operations (528.5) 53.4
1 Restated to reclassify £60.6 million money market fund interest from
interest income to interest received, which had been misclassified
12. Share capital, earnings per share and dividends
Share capital
Number of Called-up
ordinary shares share capital
£'Million
At 1 January 2023 544,235,757 81.6
- Issue of shares - -
- Exercise of options 4,369,037 0.7
At 31 December 2023 548,604,794 82.3
- Issue of shares - -
- Exercise of options - -
- Shares repurchased in the buy-back programme (4,590,083) (0.7)
At 31 December 2024 544,014,711 81.6
Ordinary shares have a par value of 15 pence per share (2023: 15 pence per
share) and are fully paid.
Included in the called-up share capital are 4,876,364 (2023: 3,411,743) shares
held in the Shares in trust reserve with a nominal value of £0.7 million
(2023: £0.5 million). The shares are held by the SJP Employee Benefit Trust
and the St. James's Place 2010 Share Incentive Plan Trust to satisfy
certain share-based payment schemes. The Trustees of the SJP Employee Benefit
Trust retain the right to dividends on the shares held by the Trust but have
chosen to waive their entitlement to the dividends on 2,135,521 shares at 31
December 2024 and 1,896,985 shares at 31 December 2023. The trustees of
St. James's Place 2010 Share Incentive Plan Trust retain the right to
dividends on forfeited shares held by the Trust but have chosen to waive
their entitlement to the dividend on 1,034 shares at 31 December 2024 (2023:
556).
Share capital increases are included within the exercise of options line of
the table above where they relate to the Group's share-based payment schemes.
Other share capital increases are included within the issue of shares line.
During the year, the Company repurchased and cancelled 4,590,083 shares (2023:
nil) for a total consideration of £32.9 million (2023: £nil) and incurred
transaction costs of £0.2 million (2023: £nil). The cancelled shares, which
had a nominal value of £0.7 million (2023: £nil), have been reflected as a
decrease in share capital with a corresponding increase in the capital
redemption reserve as required by the Companies Act 2006.
Earnings per share
Year ended Year ended
31 December 31 December
2024 2023
£'Million £'Million
Earnings
Profit/(loss) after tax attributable to equity shareholders (for both basic 398.4 (10.1)
and diluted EPS)
Million Million
Weighted average number of shares
Weighted average number of ordinary shares in issue (for basic EPS) 545.4 547.6
Adjustments for outstanding share options 3.6 8.8
Weighted average number of ordinary shares (for diluted EPS) 549.0 556.4
Pence Pence
Earnings per share (EPS)
Basic earnings per share 73.0 (1.8)
Diluted earnings per share 72.6 (1.8)
Dividends
The following dividends have been paid by the Group:
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2024 2023 2024 2023
Pence per share Pence per share £'Million £'Million
Final dividend in respect of 2022 - 37.19 - 203.1
Interim dividend in respect of 2023 - 15.83 - 86.5
Final dividend in respect of 2023 8.00 - 43.8 -
Interim dividend in respect of 2024 6.00 - 32.8 -
Total dividends 14.00 53.02 76.6 289.6
In respect of 2024 the Directors have recommended a 2024 final dividend of
12.00 pence per share. This amounts to £65.3 million based on the number of
shares in issue on 31 December 2024 and will, subject to shareholder approval
at the Annual General Meeting, be paid on 23 May 2025 to those shareholders
on the register as at 11 April 2025.
In addition, under the authority granted by shareholders at the 2024 Annual
General Meeting, the Directors have resolved to undertake a final share
buy-back programme in respect to 2024, committing to purchase shares up to a
maximum value of £92.6 million. The share buy-back will commence on 28
February 2025. This is in addition to the interim share buy-back in respect to
2024 of £32.9 million, which is referred to above.
13. Related party transactions
Transactions with associates and non-wholly owned subsidiaries
Associates
Outstanding at the year-end were business loans of £11.9 million (2023: £2.9
million) to associates of the Group. During the year £8.9 million (2023:
£1.6 million) was advanced and £4.3 million (2023: £1.8 million) was
repaid. Business loans to associates are interest-bearing (linked to the Bank
of England base rate plus a margin) and repayable in line with the terms
of the loan contract. Interest of £0.6 million was received during 2024
(2023: £nil).
In addition, commission, advice fees and other payments of £10.0 million were
paid (2023: £2.3 million paid), under normal commercial terms, to
associates of the Group. The outstanding amount at 31 December 2024 was £0.7
million payable (2023: £0.5 million payable).
Non-wholly owned subsidiaries
Commission, advice fees and other payments of £4.3 million were paid (2023:
£3.8 million paid), under normal commercial terms, to non-wholly-owned Group
companies. The outstanding amount at 31 December 2024 was £0.5 million
payable (2023: £0.6 million payable).
Transactions with key management personnel
Key management personnel have been defined as the Board of Directors and
members of the Group Executive Committee. The remuneration paid to the
Board of Directors of St. James's Place plc is set out in the Directors'
remuneration report, in addition to the disclosure below.
The Directors' remuneration report also sets out transactions with the
Directors under the Group's share-based payment schemes, together with details
of the Directors' interests in the share capital of the Company.
Compensation of key management personnel is as follows:
Year ended Year ended
31 December 31 December
2024 2023
£'Million £'Million
Short-term employee benefits 10.2 5.0
Post-employment benefits 0.6 0.5
Share-based payments (0.7) 0.2
Total 10.1 5.7
The total value of Group FUM held by related parties of the Group as at 31
December 2024 was £25.2 million (2023: £17.9 million). The total value of
St. James's Place plc dividends paid to related parties of the Group during
the year was £0.2 million (2023: £1.0 million).
During 2022 the Group acquired Edwards Wealth Ltd, under normal commercial
terms, from key management personnel and their connected parties. As at 31
December 2024 there was deferred contingent consideration outstanding of £nil
(2023: £nil), with £nil deferred contingent consideration paid during the
year (2023: £3.2 million).
Commission, advice fees and other payments of £1.3 million (2023: £1.3
million) were paid, under normal commercial terms, to St. James's Place
advisers who were related parties by virtue of being connected persons with
key management personnel. The outstanding amount payable at 31 December 2024
was £0.1 million (2023: £nil).
Outstanding at the year-end were Partner loans of £nil (2023: £nil) due from
St. James's Place advisers who were related parties by virtue of being
connected persons with key management personnel. The Group either advanced, or
guaranteed, these loans. During the year £nil (2023: £nil) was advanced and
£nil (2023: £0.1 million) was repaid by advisers who were related parties.
14. Events after the end of the reporting period
On 13 February 2025 the Group made an irrevocable commitment to repay all of
the fully drawn £250.0 million bridging loan. The repayment is due on 27
February 2025.
15. Non-statutory accounts
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 2024 or 2023 but is derived
from those accounts. Statutory accounts for 2023 have been delivered to the
registrar of companies, and those for 2024 will be delivered in due course.
The auditors have reported on those accounts; their report was (i)
unqualified, (ii) did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 of the Companies Act 2006.
16. Annual Report
The Company's Annual Report and Accounts for the year ended 31 December 2024
is expected to be posted to shareholders by early April. Copies of both this
announcement and the Annual Report and Accounts 2024 will be available to the
public through the Company's website at www.sjp.co.uk (http://www.sjp.co.uk) .
Glossary of alternative performance measures
Within this document various alternative performance measures (APMs) are
disclosed.
An APM is a measure of financial performance, financial position or cash flows
which is not defined by the relevant financial reporting framework, which for
the Group is International Financial Reporting Standards as adopted by the UK
(adopted IFRSs). APMs are used to provide greater insight into the performance
of the Group and the way it is managed by the Directors. The tables below
define each APM, explains why it is used and, if applicable, detail where the
APM has been reconciled to IFRS:
Financial-position-related APMs
APM Definition Why is this measure used? Reconciliation
to the financial statements
Solvency II net assets Based on IFRS Net Assets, but with the following adjustments: Our ability to satisfy our liabilities to clients, and consequently our Refer to section 3 of the financial review.
solvency, is central to our business. By removing the liabilities which are
1. Reflection of the recognition requirements of the Solvency II regulations fully matched by assets, this presentation allows the reader to focus on the
for assets and liabilities. In particular this removes deferred acquisition business operation. It also provides a simpler comparison with other wealth
costs (DAC), deferred income (DIR), purchased value of in-force (PVIF) management companies.
and their associated deferred tax balances, other intangibles and some other
small items which are treated as inadmissible from a regulatory perspective;
and
2. Adjustment to remove the matching client assets and the liabilities as
these do not represent shareholder assets.
No adjustment is made to deferred tax, except for that arising on DAC, DIR and
PVIF, as this is treated as an allowable asset in the Solvency II regulation.
Solvency II net assets is not the same as Solvency II own funds as it excludes
Solvency II value of in-force (VIF) and Risk margin.
Total embedded value A discounted cash flow valuation methodology, assessing the long-term economic Life business and wealth management business differ from most other Not applicable.
value of the business. businesses, in that the expected shareholder income from the sale of a
product emerges over a long period in the future. We therefore supplement the
Our embedded value is determined in line with the European Embedded Value IFRS and Cash results by providing additional disclosure on an embedded value
(EEV) principles originally set out by the Chief Financial Officers (CFO) basis, which brings into account the net present value of expected future cash
Forum in 2004, and amended for subsequent changes to the principles, including flows, as we believe that a measure of the total economic value of the Group
those published in April 2016, following the implementation of Solvency II. is useful to investors.
EEV net asset value (NAV) per share EEV net asset value per share is calculated as the EEV net assets divided by Total embedded value provides a measure of total economic value of the Group, Not applicable.
the year-end number of ordinary shares. and assessing the EEV NAV per share allows analysis of the overall value of
the Group by share.
IFRS NAV per share IFRS net asset value per share is calculated as the IFRS net assets divided by Total IFRS net assets provides a measure of value of the Group, and assessing Not applicable.
the year-end number of ordinary shares. the IFRS NAV per share allows analysis of the overall value of the Group by
share.
Cash result, and Underlying cash result The Cash result is defined as the movement between the opening and closing IFRS income statement methodology recognises non-cash items such as deferred Refer to sections 2.1 and 2.2 of the financial review and also see Note 3 to
Solvency II net assets adjusted as follows: tax and equity-settled share options. By contrast, dividends can only be paid the consolidated financial statements.
to shareholders from appropriately fungible assets. The Board therefore uses
1. The movement in deferred tax is excluded, except that in relation to the the Cash results to monitor the level of cash generated by the business.
exceptional Ongoing Service Evidence provision;
While the Cash result gives an absolute measure of the cash generated in the
2. The movements in goodwill and other intangibles are excluded; and year, the Underlying cash result is particularly useful for monitoring the
expected long-term rate of cash emergence, which supports dividends and
3. Other changes in equity, such as dividends paid in the year and sustainable dividend growth.
equity-settled share option costs, are excluded.
The Underlying cash result reflects the regular emergence of cash from the
business, excluding any items of a one-off nature and temporary timing
differences.
The Cash result reflects all other cash items, including items of a one-off
nature and temporary timing differences.
Neither the Cash result nor the Underlying cash result should be confused with
the IFRS consolidated statement of cash flows which is prepared in accordance
with IAS 7.
Underlying cash basic and diluted earnings per share (EPS) These EPS measures are calculated as Underlying cash divided by the number of As Underlying cash is the best reflection of the cash generated by the Not applicable.
shares used in the calculation of IFRS basic and diluted EPS. business, Underlying cash EPS measures allow analysis of the shareholder cash
generated by the business by share.
EEV profit Derived as the movement in the total EEV during the year. Both the IFRS and Cash results reflect only the cash flows in the year. See Note 3 to the consolidated financial statements.
However, our business is long-term, and activity in the year can generate
business with a long-term value. We therefore believe it is helpful to
understand the full economic impact of activity in the year, which is the aim
of the EEV methodology.
EEV operating profit A discounted cash flow valuation methodology, assessing the long-term economic Both the IFRS and Cash results reflect only the cash flows in the year. See Note 3 to the consolidated financial statements.
value of the business. However, our business is long-term, and activity in the year can generate
business with a long-term value. We therefore believe it is helpful to
Our embedded value is determined in line with the EEV principles originally understand the full economic impact of activity in the year, which is the aim
set out by the Chief Financial Officers (CFO) Forum in 2004, and amended for of the EEV methodology.
subsequent changes to the principles, including those published in April 2016,
following the implementation of Solvency II. Within the EEV, many of the future cash flows derive from fund charges, which
change with movements in stock markets. Since the impact of these changes is
The EEV operating profit reflects the total EEV result with an adjustment to typically unrelated to the performance of the business, we believe that the
strip out the impact of stock market and other economic effects during the EEV operating profit (reflecting the EEV profit, adjusted to reflect only the
year. expected investment performance and no change in economic basis) provides the
most useful measure of embedded value performance in the year.
Within EEV operating profit is new business contribution, which is the change
in embedded value arising from writing new business during the year.
Policyholder and shareholder tax Shareholder tax is estimated by making an assessment of the effective rate of The UK tax regime facilitates the collection of tax from life insurance Disclosed as separate line items in the statement of comprehensive income.
tax that is applicable to the shareholders on the profits attributable to the policyholders by making an equivalent charge within the corporate tax of the
shareholders. This is calculated by applying the appropriate effective Company. The total tax charge for the insurance companies therefore comprises
corporate tax rates to the shareholder profits. both this element and an element more closely related to normal corporation
tax.
The remainder of the tax charge represents tax on policyholders' investment
returns. Life insurance business impacted by this tax typically includes policy charges
which align with the tax liability, to mitigate the impact on the corporate
This calculation method is consistent with UK legislation relating to the entity. As a result, when policyholder tax increases, the charges
calculation of the tax on shareholders' profits. also increase. Since these offsetting items can be large, and typically do
not perform in line with the business, it is beneficial to be able to
identify the two elements separately. We therefore refer to that part of the
overall tax charge which is deemed attributable to policyholders as
policyholder tax, and the rest as shareholder tax.
Profit before shareholder tax A profit measure which reflects the IFRS result adjusted for policyholder tax, The IFRS methodology requires that the tax recognised in the financial Disclosed as a separate line item in the statement of comprehensive income.
but before deduction of shareholder tax. Within the consolidated statement statements should include the tax incurred on behalf of policyholders in our
of comprehensive income the full title of this measure is 'profit before tax UK life assurance company. Since the policyholder tax charge is unrelated to
attributable to shareholders' returns'. the performance of the business, we believe it is also useful to separately
identify the profit before shareholder tax, which reflects the IFRS profit
before tax, adjusted only for tax paid on behalf of policyholders.
Controllable expenses The total of expenses which reflects establishment, development, and our We are focused on managing long-term growth in controllable expenses. Full details of the breakdown of
Academy.
expenses is provided in section 2.2 of the financial review
Responsibility Statement of the Directors in respect of the Annual Financial
Report
The Directors confirm to the best of their knowledge that:
· The Financial Statements have been prepared in accordance with
UK-adopted International Accounting Standards and with the requirements of the
Companies Act 2006 as applicable to companies reporting under those standards
and give a true and fair view of the assets, liabilities, financial position
and profit for the Company and the undertakings included in the consolidation
as a whole; and
· Pursuant to Disclosure and Transparency Rules Chapter 4, the
Directors' Report and Strategic Report of the Company's Annual Report and
Accounts 2024 includes a fair review of the development and performance of the
business and the position of the Company and the undertakings included in the
consolidation taken as a whole, together with a description of the principal
risks and uncertainties faced by the business.
On behalf of the Board
Mark FitzPatrick Caroline Waddington
Chief Executive Officer Chief Financial Officer
26 February 2025
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