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Reporting season: 18 lessons from 2017 results (so far)

It has been a very busy few weeks for annual results at some big firms. We have seen profit spikes and sales hikes, and even a shock de-merger. Click on to get a summary of all the big news.

21 February

Lloyds Banking Group (pt.1)

'A very different' advice arm

When Lloyds Banking Group announced its annual results last month it surprised no-one by further confirming its intention to return to financial advice.

Speaking after the bank revealed plans to attract £50 billion of financial planning and retirement assets by 2020, Antonio Horta-Osorio (pictured) said pension freedoms presented an opportunity for Lloyds to reinvent its advice arm.

'We have a very different culture and approach in terms of what you were used to 10 years ago,' he said. 

Lloyds exited mass market financial advice in 2012 following a number of mis-selling fines that culminated with the bank setting aside £225 million in 2014 to cover 'legacy sales of investment and protection products.'

21 February

Lloyds Banking Group (pt.1)

'A very different' advice arm

When Lloyds Banking Group announced its annual results last month it surprised no-one by further confirming its intention to return to financial advice.

Speaking after the bank revealed plans to attract £50 billion of financial planning and retirement assets by 2020, Antonio Horta-Osorio (pictured) said pension freedoms presented an opportunity for Lloyds to reinvent its advice arm.

'We have a very different culture and approach in terms of what you were used to 10 years ago,' he said. 

Lloyds exited mass market financial advice in 2012 following a number of mis-selling fines that culminated with the bank setting aside £225 million in 2014 to cover 'legacy sales of investment and protection products.'

21 February 2018

Lloyds Banking Group (pt.2)

A new advised platform

In addition to its full year results, Lloyds said that it planned to develop a new advised platform as part of its push into the pension market.

We questioned Scottish Widows (which is part of Lloyds Banking Group) chief executive Antonio Lorenzo about the plans and he said the following:

'We want to be where the customers are and we know part of that proposition comes through intermediaries,' he said.

'We are investing in a new platform for intermediaries and we will have a presence through digital and the network [of bank branches].'

21 February 2018

Lloyds Banking Group (pt.3)

Number crunching

Future plans and ideas aside, Lloyds posted a statutory pre-tax profit of £5.3 billion for the last twelve months, a 24% increase. 

Total Life and pension sales of £9.9 billion were up 12%, driven by a 29% growth across workplace, planning, retirement and protection. This figure was partially offset, it said, by a slight decrease in bulk annuity business. In 2017 it wrote £600 million of bulk annuity business, and said it continues to see 'significant demand' from UK defined benefit schemes for bulk annuity deals to help manage risk.

Workplace, planning and retirement assets under administration rose 15% to £43 billion, on the back of positive inflows and market movements.

Wealth customer assets increased 7% to £25 billion, reflecting market movements, it said. However, the insurance and wealth division overall saw underlying profit fall, by 3% to £939 million, due to lower wealth income.

 

23 February 2018

Standard Life Aberdeen (pt.1)

Standard Life Aberdeen offloads insurance arm

One of the biggest stories we reported this company results season was Standard Life Aberdeen's decision to offload its insurance arm to closed book pension provider Phoenix Group.

The deal is worth £3.2 billion. However, Standard Life Aberdeen will keep its three platforms (Standard Life Wrap, Elevate and Parmenion) and its restricted advice arm 1825, which historically were part of its insurance division.

Under the terms of the deal Standard Life Aberdeen will receive around £3.2 billion. Phoenix will pay £2 billion in cash, with a further £312 million dividend payment due from the insurance company before it is sold. The remaining value of the deal consists of Standard Life Aberdeen taking a 20% stake in Phoenix.

 

23 February 2018

Standard Life Aberdeen (pt.2)

Gars outflow

Standard Life Aberdeen's results revealed that its Gars strategy was hit with a £10.7 billion net outflow in 2017. 

This contributed to an overall net outflow of £22.1 billion for the firm's investment engine, Aberdeen Standard Investments.  

This continues the run of outflows from its key Gars multi-asset strategy, which suffered a £4.3 billion outflow in 2016.  

'Investment performance sentiment resulted in a slowdown in gross flows and increased rate of redemptions,' the firm said in its update

So many different names to remember!

Standard Life Aberdeen, Aberdeen Standard.

If only there was a simpler name...

#staberdeen

23 February 2018

Standard Life Aberdeen (pt.3)

Platforms boosted by DB surge

In a trend repeated across lots of annual results this year, we saw Standard Life Aberdeen achieve a 66% year on year rise in platform inflows, thanks in large part to defined benefit (DB) pension transfers.

The company recorded net inflows of £7 billion across its three platforms over 2017, as assets under administration rose to £54 billion. 

 Net inflows onto the Standard Life Wrap and Elevate platforms were 'boosted by transfers from defined benefit to defined contribution pension schemes, which helped the UK retail channel achieve a 73% increase in net flows to £6.4 billion (£3.7 billion in 2016),' the company said. 

Parmenion’s net flows made up £1.3 billion of the combined inflows, with assets under management of £4.4 billion in 2017.

Assets under advice at restricted advice firm 1825 were £3.5 billion by the end of last year, Standard Life Aberdeen added. 

However, despite the strong performance in its retail business, total pre-tax profits for the group were down 1.4% from £1.05 billion in 2016 to £1.04 billion last year.   

23 February 2018

Standard Life Aberdeen (pt.4)

Robo-advice commitment

In another trend, we saw Standard Life Aberdeen re-affirm its commitment to  robo-advice.

In its financial statements for 2017 the company said it is 'developing our capability in offering automated advice based on customer data, or "robo-advice."'

Previously Barry O’Dwyer, until now Standard Life Abderdeen’s life and pension chief executive, told New Model Adviser® that the company was significantly investing in the digital proposition in order to fill the advice gap.

'If we think we have an advice gap now it is going to be massive in 10 years’ time. We could sit back and watch that happen but what we wanted to do is part of the solution.'

'1825 is about building for the future. We see a massive advice gap part in the middle market and we need to fill that gap. Actually we will probably fill it a lot with digital advice.'

'In 10 or 15 years I think the vast majority of people will get advice online, some people will need telephony back up to that, and then for some people face to face advice will be crucial,' said O’Dwyer.

28 February 2018

St James's Place (pt.1)

Record-breaking headline figures

Advice giant St James's Place announced it annual results at the back end of last month, fronted by a series of record-breaking figures.

Along with the record gross inflows of £14.6 billion announced last month, up 29%, SJP also recorded a 40% rise in net inflows to £9.5 billion. This fed into a 20% increase in funds under management, which hit an all-time high of £90.7 billion.

New business profit was up 50% to £779.8 million, on the back of another substantial increase in contributions from new pensions business, which climbed 75% from £207.9 million to £363.5 million.

Operating profits also rose 36%, from £673.6 million to £918.5 million.

28 February 2018

St James's Place (pt.2)

Investing in the future

SJP's results revealed that the business now has 3,661 qualified advisers across its partnership businesses, an increase of 7%.

The advice giant invested £6.6 million post-tax in its Academy and Next Generation Academy last year, compared to £5.8 million in 2016, and saw 124 newly-qualified advisers graduate during 2017. 

SJP expects the equivalent figure for 2018 to be 140, and by the end of 2018, hopes to have over 500 academy graduates active as advisers.

28 February 2018

St James's Place (pt.3)

Adviser numbers

Along with its financial results for the year, SJP also published its own figures on adviser numbers. Some simple maths allowed us to put more pieces of the jigsaw together regarding the business's presence in the UK.

A slide in the company's results presentation said there were 35,548 advisers in the UK in 2016 (no 2017 are figures available yet) so that means SJP, with its 3,661 advisers, could account for just under 10% of the advice market in the UK.

And where are SJP's advisers based? Not in Scotland, Northern Ireland or Wales it would appear. 

As you would expect the spread of clients largely matches that of its advisers. 

SJP is placing advisers near clients, building a local presence rather than using long distance relationships like some IFAs do. 
 

7 March 2018

Legal & General

Profits up, inflows up, annuity sales up

Legal & General (L&G) increased operating profits by 32%, its full year results revealed earlier this month.

Profits for 2017 were £2.1 billion, up from £1.6 billion in 2016. Nigel Wilson (pictured), L&G group chief executive, said: 'Our transformative, innovative businesses treat disruption as a privilege and a responsibility,' adding that 'Many of our initiatives are changing markets in the customer's favour.'

The rise in profits was given a significant helping hand by a change in life expectancy assumptions, which allowed L&G to release £332 million of reserves. Life expectancy is increasing, but at a slower rate than had been assumed in previous years.

One area highlighted by Wilson as a success was 'scale business' L&G Investment Management (LGIM) which enjoyed record external net inflows of £43.5 billion.

Individual annuity sales increased in 2017 by 78% to £671 million (2016: £378 million).

 

8 March 2018

ATS

'A challenging year'

Platform Alliance Trust Savings (ATS) ended a 'challenging year' by recording a loss of £19.3 million after a write down of its platform business.

The Stocktrade platform, which was acquired from Brewin Dolphin in 2015, has faced a tough time of it of late, with it receiving a flurry of complaints during 2017 and facing high costs from its move to technology provided by GBST.

ATS has now revealed it has written down the intangible value of its Stocktrade business, which has resulted in an exceptional charge of £13.2 million. This, combined with integration issues for the platform, meant ATS recorded a loss of £19.3 million for 2017.

 

13 March 2018

Close Brothers

Hires pay off for Close Brothers

Close Brothers’ funds business experienced a step change 25% increase in operating profit to £11.4 million over the six months to the end of January, as client inflows rose 13% on a year earlier.

‘All our channels performed well, delivering positive net flows of £573 million,’ the business said in a statement. The operating margin climbed from 18% to 20% as earlier hires and acquisitions began to feed through to the bottom line.

The company’s staff expenses climbed from 54% of income to 57% however, 'reflecting new hires and an increase in variable compensation in the period.'   

The company has quietly reconfigured its asset management division over the past 18 months, selling OLIM Investment Management and buying regional advisers EOS Wealth Managementand Adrian Smith & Partners.

14 March 2018

Prudential (pt.1)

Pru splits in two to sell of £12bn annuity business

Just like we saw with Standard Life, Prudential was also in the market to sell its insurance business this year.

Prudential also announced the sale of its £12 billion annuity book which as 40,000 policyholders to closed-book Rothesay Life.

Parent company Prudential Plc also announced plans to split itself in two so that one business can focus on the UK and Europe, and one can focus on the US and Asia. 

 

14 March 2018

Prudential (pt.2)

Though the de-merger was obviously headline news, M&G Prudential announced a 10% profit jump, which it said was fuelled by strong sales to its flagship PruFund range which saw assets under management rise by 46%.

For the UK and Europe, M&G Prudential’s operating profit was at £1.4 billion for 2017, which was up 10% on the previous year.

This profit jump was boosted by the PruFund range which saw new business profit up 28% at £342 million.

Assets under administration for the PruFund range were £35.9 billion as of 31 December 2017– a rise of 46% from the start of 2017. This was up from £7.5 billion in 2012.

14 March 2018

Prudential (pt.3)

PruFunds to go D2C?

M&G Prudential also suggested it will open up its flagship PruFund range to customers without advisers as part of a £250 million investment in its digital service.

The with-profits PruFund range has been successful in recent years even though it is only available to advised clients. Assets under administration hit £35.9 billion at the end of 2017. 

 Following the publication of the business's annual results, M&G Prudential’s chief executive John Foley (pictured) said direct to consumer (D2C) clients were a target market for the range. 

'We will hopefully have more to say around that later in the year,' he said. 

Foley added a D2C offering for PruFunds will be part of a £250 million investment in improving M&G Prudential’s digital service, which will supplement its own advice arm. 

‘Quite candidly we have excellent sales through the intermediary channels and through Prudential Financial Planning but once we have digitised our offering to customers we would expect to see greater inflows through that channel - so that is effectively is the D2C channel,’ he said.

15 March 2018

Old Mutual Wealth (pt.1)

Old Mutual Wealth is set to spend £44 million on acquiring advice businesses, including £24 million on the advice network Caerus, the business said in its annual results.

In Old Mutual plc's annual report for 2017 said the total consideration for Caerus was £24 million including £15 million cash consideration and £3 million that has been deferred for two years and £6 million that has been deferred for three years.

New Model Adviser® previously reported that the deal would cost at least £9 million.

Kerching!

15 March 2018

Old Mutual Wealth (pt.2)

A bumper year

Old Mutual Wealth has reported net asset flows rose 110% in 2017 after a bumper year for defined benefit (DB) pension transfers.

In its full year results for 2017 the company said net flows were £10.9 billion, from £5.2 billion the previous year. These net flows include assets invested in discretionary fund manager Quilter Cheviot, the Old Mutual Wealth platform and single strategy investment business Old Mutual Global Investors (OMGI).

A previously announced separation plan will see Old Mutual Wealth renamed as Quilter and float separately from Old Mutual Wealth plc. This involved OMGI being sold to private equity firm TA Associates last year in a £600 million deal. 

Without OMGI, Old Mutual Wealth recorded net flows of £6.3 billion in 2017, compared to £3.3 billion in 2016.

Old Mutual Wealth highlighted the levels of transfers by customers from their DB pensions into defined contribution schemes. Last year such transfers accounted for gross platform sales of £1.8 billion, making up 20% of gross platform sales and 6% of total sales. Overall platform net flows were up 61% to £4.5 billion.

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