St James Place : Solvency and Financial Condition Report 2023

St. James's Place Group Solvency and Financial Condition Report 2023

Contents

Introduction

01

C) Risk Profile

Summary

02

C.1

Underwriting risk

Statement of

C.2

Market risk

Directors' Responsibilities

05

C.3

Credit risk

Auditors' Report and Opinion

06

C.4

Liquidity risk

A) Business and Performance

10

C.5

Operational risk

A.1

Business

10

C.6

Other material risks

A.2

Underwriting performance

11

C.7

Any other information

A.3

Investment performance

11

D) Valuation for Solvency Purposes

A.4

Performance of

D.1

Assets

other activities

11

D.2

Technical provisions

B) System of Governance

12

D.3

Other liabilities

B.1

General information on

D.4

Alternative methods

the system of governance

12

of valuation

B.2

Fit and proper requirements

13

D.5

Any other information

B.3

Risk management system

including the ORSA

14

B.4

Internal control system

15

B.5

Internal audit function

16

B.6

Actuarial function

16

B.7

Outsourcing

17

19	E) Capital Management					33
20	E.1	Own Funds						33
21	E.2	Solvency Capital
22		Requirement & Minimum
	Capital Requirement				35
22
E.3	Use of duration based
23
	equity risk sub-module
23		in the calculation of SCR				37
23	E.4	Difference between
24		Standard Formula and		37
24		any internal model used
E.5	Non-compliance with the
27
	MCR and non-compliance
31
	with the SCR				37
32	Appendix:
Quantitative Reporting Templates		38
32	Glossary of Terms		66

St. James's Place Plc

Solvency and Financial Condition Report 2023

01

Introduction

This Solvency and Financial Condition Report (SFCR) has been prepared in line with the requirements of the Solvency

1. (SII) Regulations, to assist clients of the St. James's Place Group (the Group) and other stakeholders in understanding the nature of our business, how it is managed, and its solvency position.

This is a single SFCR that incorporates consolidated information at the level of the Group, and solo information for the subsidiary insurance undertakings located within the UK and European Union: St. James's Place UK plc (SJPUK) and St. James's Place International plc (SJPI). This report is prepared in compliance with rule modification D000007962 granted by the PRA with effect from 1 January 2024.

Following the UK's exit from the EU and the end of the subsequent Transitional Period, the PRA has adopted the SII requirements with only limited changes, other than to the calculation of the risk margin. Throughout this document, any references to the SII Directive and associated Delegated Regulation should be interpreted as referring to:

• the UK enactment of the legislation (unless otherwise indicated) for the Group and for SJPUK; and
• the EU enactment of the legislation for SJPI.

Relevant information about the business of our Group is provided in the Group's Annual Report and Accounts for the year ended 31 December 2023 (the Group Report & Accounts), a copy of which can be found at www.sjp.co.uk/ shareholders/results-reports-presentation/reports-presentation-webcasts/. Where appropriate we will refer readers to that document.

There are, however, certain specific SFCR requirements which are not already reported publicly elsewhere, and those are specifically included in this report. In particular this report includes full reporting of the SII valuation undertaken at 31 December 2023, and the associated capital position for our Group. Those results are also presented in quantitative reporting templates (QRTs), and the Group's and its solo insurance undertakings' submissions can be found in the Appendix to this report.

www.sjp.co.uk

02

Summary

St. James's Place plc is the largest financial advice business in the UK. We provide holistic financial planning and wealth management services, working in partnership to plan, grow and protect clients' financial futures. Our services are delivered exclusively by a team of 4,834 highly-skilled advisers within the St. James's Place Partnership. We want our clients to feel confident about their finances, so we provide a broad range of products and services to meet their needs, both for today and for the future. To complement the provision of sound, long-term financial advice we have a distinctive investment management approach, where we design and build our own range of investment funds and portfolios, but contract some of the world's best external managers to manage them.

The Group provides insurance-based investment and pension products, mainly to UK clients, through two key subsidiary companies - St. James's Place UK plc (SJPUK) which is based in the UK, and St. James's Place International plc (SJPI) which is based in the Republic of Ireland. The Group also provides insurance-based investment products to a small but growing number of clients, mainly expatriates, in Asia and the Middle East, through a branch of SJPI based in Singapore and

a subsidiary of SJPUK based in Hong Kong. The Group also provides ISAs, unit trusts and discretionary fund management.

Our Business

Our financial business model remains straightforward and unchanged. We attract and then retain funds under management on which we will receive an annual management fee. We use this income to meet our overheads and to invest for the future.

The demand for trusted, face-to-face financial advice remains as strong as ever, but client capacity and confidence to commit to long-term investment has been impacted in 2023 by an environment characterised by higher interest rates, stubbornly high inflation and short-term alternatives in the form of cash.

Despite the challenging operating environment, we continue to generate significant levels of net inflows, once again demonstrating the ongoing resilience of our business model. With our advisers attracting £15.4 billion (2022: £17.0 billion) of new client investments and retention excluding regular income withdrawals and maturities remaining strong at 95.3% (2022: 96.5%), net inflows totalled £5.1 billion (2022: £9.8 billion). Combined with the positive impact of investment performance, this resulted in funds under management closing the year at a record £168.2 billion (2022: £148.4 billion).

During the year, we announced the outcome of an internal review which will see us simplify our charging structure from the second half of 2025, addressing the evolution over time of an external environment that is increasingly seeking simple comparability of all advice, investment management and other services on a component-by-component basis. As a result of this disaggregation of charges, the proportion of Group profit that will arise within our life companies will reduce, in favour of increased profit emergence in our other regulated companies. Reflecting the different regulatory treatment of these businesses, the effect of this change is to reduce the value of in-force, risk margin and the Solvency Capital Requirements associated with our life companies at 31 December 2023, with a corresponding increase in the solvency ratio.

The unit-linked business model means that the financial positions of SJPUK and SJPI have remained resilient throughout the year.

Insurance FUM in the Group and individual entities grew over the year as follows:

	SJP Group			SJPUK1			SJPI
£'Billion	2023	2022		2023	2022		2023	2022
Opening Insurance FUM	107.16	110.78		97.08	100.22		10.08	10.56
Gross inflows	11.86	12.21		10.97	11.24		0.89	0.97
Outflows	(6.82)	(5.00)	(6.18)	(4.56)	(0.64)	(0.44)
Investment return	11.11	(10.83)	10.13	(9.82)	0.98	(1.01)
Closing Insurance FUM	123.31	107.16		112.00	97.08		11.31	10.08

1 Figures for SJPUK include closing funds under management of £0.28 billion (2022: £0.23 billion) in a subsidiary life insurance company based in Hong Kong.

Most of the Group's insurance business is investment-related. However, both SJPUK and SJPI have small legacy books of protection business.

The Group has an additional £44.89 billion (2022: £41.22 billion) of funds under management within its unit trust and discretionary fund management companies.

More information about our business can be found in Section A of this report.

St. James's Place Plc

Solvency and Financial Condition Report 2023

03

Summary continued

Risk Management

The Group Board and the Boards of the insurance entities have responsibility for assessing the main risks affecting the business, and these are monitored on a regular basis.

The complex and rapidly evolving macroeconomic environment continued in 2023, which was exacerbated by political turmoil. We continue to expect to see challenges at a national level in the UK in 2024 and beyond as people and businesses continue to adjust to a higher cost of living and higher interest rate environment. Our approach to the fundamentals of risk management within the Group continue to demonstrate resilience from a financial and operational perspective. We remain highly confident in our ability to withstand further challenges that may or may not emerge.

Although these risks remain outside of our control, we remain focussed on understanding the degree to which the various outcomes might impact the business to allow us to consider how they might be mitigated. Stress and scenario testing has been performed which demonstrates that the businesses remain resilient, and we continually monitor the changing environment to ensure our analysis and scenario testing remains appropriate.

The key risks that could impact on the profitability of the Group's insurance businesses are:

• Market risk: A reduction in funds under management owing to market shocks, poor market performance or currency and exchange rate movements would reduce future annual management charges, and hence future profits.
• Lapse risk: Similarly, a reduction in funds under management owing to higher withdrawal rates would reduce future annual management charges. This may arise from factors such as changes in the economic climate, poor investment performance, competitor activity, or reputational damage to the Group.
• Expense risk: Higher expenses would reduce future profits.
• Operational risk: Operational risk events, such as a product failure, failure of a third-party administrator or a significant cyber-attack could result in one-off losses as well as wider reputational damage which could impact on client retention.

Although these risks may impact on the future profitability of the Group, they do not have a significant impact on our ability to meet contractual payments to clients. Our investment business is managed on a 'unit-linked' basis, where we hold assets which match our liabilities to clients, ensuring that we are always able to meet clients' withdrawal requests in line with their products' terms and conditions.

The low-risk nature of our business also means that our solvency ratio remains resilient to changes in our business and external markets.

More information about the risks that the business faces, and how we manage them, can be found in Section C of this report.

Our Solvency Position and Capital Management

We continue to manage our balance sheet prudently to ensure the Group's solvency, and that of its subsidiary entities, is maintained safely through the business cycle. We hold assets which match our liabilities to clients, and the remaining assets in the insurance companies are invested in high quality, liquid assets - typically AAA rated money market funds.

Each subsidiary company holds capital which is sufficient to cover any regulatory requirements, together with an additional margin which can absorb adverse future changes.

The Group's solvency position assessed on the UK and EU Solvency II regulatory basis is shown in the following table:

	SJP Group			SJPUK			SJPI
Solvency (£'Million)	2023	2022	2023	2022	2023	2022
Solvency II Own Funds (A)1	3,299.7	5,443.9	2,596.0	4,457.8	277.8	343.9
Solvency Capital Requirement (B)	1,727.7	3,522.5	1,450.2	3,212.7	162.2	192.6
Solvency II Free Assets (A-B)	1,572.0	1,921.4	1,145.8	1,245.1	115.6	151.3
Solvency ratio (A/B)	191%	155%	179%	139%	171%	179%
Foreseeable dividend (C)	43.9	202.4	260	315.0		-	45.0
Post-dividend solvency ratio (A-C)/B	188%	149%	161%	129%	171%	155%

1 Before payment of final dividends, as presented in the Group Report & Accounts.

www.sjp.co.uk

04

Summary continued

Our Solvency Position and Capital

Management continued

The Group and its insurance subsidiaries remain resilient and have maintained Solvency II Own Funds in excess of their Solvency II Capital Requirement throughout the year.

The Group's business model is focussed on wealth management, and the overwhelming majority of its insurance business is unit-linked investment and pensions business. However, both SJPUK and SJPI have small legacy books of protection business.

In 2021 SJPUK entered into a reinsurance arrangement with Munich Re which is designed to manage its exposure to moderate to severe mass lapse events. As a consequence, the capital required to support lapse risks reduced as

a proportion of the FUM. This arrangement has continued in 2023.

More information about our approach to the solvency valuation and capital management can be found in Sections D and E of this report.

Our Systems of Governance

The Group Board is collectively responsible for the long-term success of our business, and a number of

key governance, strategy, planning and risk management processes operate at a Group level. However, key matters must also be considered directly by the relevant entity Board(s).

The UK-regulated entities within the Group (including SJPUK) are subject to the Senior Managers & Certification Regime (SM&CR). SJPI is subject to the Senior Executive Accountability Regime (SEAR).

During the year, there have been significant changes to the Group Board, with Mark FitzPatrick joining the Board as Chief Executive Officer (CEO) designate on 1 October 2023, before becoming CEO on 1 December 2023 when Andrew Croft stepped down from the Group Board.

More information about our system of governance and changes to the regulated subsidiary entity boards can be found in Section B of this report.

St. James's Place Plc

Solvency and Financial Condition Report 2023

05

Statement of Directors' Responsibilities

The Directors are responsible for preparing the SFCR in accordance with the Prudential Regulatory Authority (PRA) rules and SII Regulations.

The PRA Rulebook for SII firms in Rule 6.1(2) and Rule 6.2(1) of the Reporting Part requires that the Group must have in place a written policy ensuring the ongoing appropriateness of any information disclosed and that the Group must ensure that its SFCR is subject to approval by the Directors.

Each of the Directors, whose names and functions are listed in the Board of Directors section of the Report & Accounts, are satisfied that:

1. throughout the financial year in question, the Group and its solo insurance undertakings have complied in all material respects with the requirements of the PRA rules and SII Regulations as applicable; and
2. it is reasonable to believe that, at the date of the publication of the SFCR, the Group and its solo insurance undertakings continue to comply, and will continue to comply in future.

By Order of the Board

Craig Gentle, Chief Financial Officer

27 February 2024

www.sjp.co.uk

06

Auditors' Report and Opinion

Report of the external independent auditors to the Directors of St. James's Place plc ('the Company') pursuant to Rule 4.1

1. of the External Audit Part of the PRA Rulebook applicable to Solvency II firms

Report on the Audit of the relevant elements of the Single Group-Wide Solvency and Financial Condition Report

Opinion

Except as stated below, we have audited the following documents prepared by the Company as at

31 December 2023:

• The 'Valuation for solvency purposes' and 'Capital Management' sections of the Single Group-Wide Solvency and Financial Condition Report of the Company as at 31 December 2023, ('the Narrative Disclosures subject to audit'); and
• Group templates S.02.01.02, S.23.01.22, S.25.01.22 and S.32.01.22 ('the Group Templates subject to audit').
• Company templates S.02.01.02, S.12.01.02, S.23.01.01, S.25.01.21 and S.28.01.01 in respect of St. James's Place UK plc and St. James's Place International plc
  ('the Company Templates subject to audit')

The Narrative Disclosures subject to audit, the Group Templates subject to audit and the Company Templates subject to audit are collectively referred to as the

'relevant elements of the Single Group-Wide Solvency and Financial Condition Report'.

We are not required to audit, nor have we audited, and as a consequence do not express an opinion on the Other Information which comprises:

• The 'Summary', 'Business and performance', 'System of governance' and 'Risk profile' elements of the Single Group-Wide Solvency and Financial Condition Report;
• Group template S.05.01.02 and Company templates S.05.01.02 and S.05.02.01;
• The written acknowledgement by management of their responsibilities, including for the preparation of the Single Group-Wide Solvency and Financial Condition Report ('the Responsibility Statement');
• Information which pertains to an undertaking that is not a Solvency II undertaking and has been prepared in accordance with PRA rules other than those implementing the Solvency II Directive or in accordance with an EU instrument other than the Solvency II regulations ('the sectoral information') as identified
  in the Appendix to this report.

To the extent the information subject to audit in the relevant elements of the Single Group-Wide Solvency and Financial Condition Report includes amounts that are totals, subtotals or calculations derived from the Other Information, we have relied without verification on the Other Information.

In our opinion, the information subject to audit in the relevant elements of the Single Group-Wide Solvency and Financial Condition Report of the Company as at

31 December 2023 is prepared, in all material respects, in accordance with the financial reporting provisions of the PRA Rules and Solvency II regulations on which they are based, as modified by relevant supervisory modifications.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) including ISA (UK) 800 and ISA (UK) 805, and applicable law. Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the relevant elements of the Single Group-Wide Solvency and Financial Condition Report section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the Single Group-Wide Solvency and Financial Condition Report in the UK, including the FRC's Ethical Standard as applied to public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

Our evaluation of the Directors' assessment of the Company's ability to continue to adopt the going concern basis of accounting included:

• Obtaining the Directors' going concern assessment for the Group and Company and gaining an understanding of the Directors' going concern assessment process, including the preparation of the budget.
• Obtaining the budget covering the period of the going concern assessment and evaluating the forecasting method adopted by the Directors in assessing going concern.
• Testing the mathematical accuracy of the model and evaluating the key assumptions using our understanding of the Group and external evidence where appropriate. We also performed a comparison of the 2023 budget and the actual results to assess the historical accuracy of the budgeting process.
• Evaluating the results of management's analysis of the relevant solvency requirements and liquidity position of the Group, including forward looking plausible downside scenarios within the Group's Own Risk and Solvency Assessment.
• Evaluating the reasonableness of management's downside assumptions using our understanding of the Group and the external environment. We evaluated management's assumptions by performing independent

St. James's Place Plc

Solvency and Financial Condition Report 2023

07

Auditors' Report and Opinion continued

stress testing to determine whether a reasonable alternative stressed scenario would result in a breach of minimum regulatory requirements or the Group's liquidity requirements.

• Evaluating the mitigating actions that management identified and assessing whether these were in the control of management and possible in the going concern period of assessment.
• Evaluating information obtained through review of regulatory correspondence, minutes of meetings of the Board, Group Audit and Group Risk Committees, as well as publicly available information to identify any information that would contradict management's assessment.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from the date on which the Single Group-Wide Solvency and Financial Condition Report is authorised for issue.

In auditing the Single Group-Wide Solvency and Financial Condition Report, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the Single Group-Wide Solvency and Financial Condition Report is appropriate.

However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Company's ability to continue as a going concern.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.

In connection with our audit of the Single Group-Wide Solvency and Financial Condition Report, our responsibility is to read the Other Information and, in doing so, consider whether the Other Information is materially inconsistent with the relevant elements of the Single Group-Wide Solvency and Financial Condition Report, or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies

or apparent material misstatements, we are required to determine whether there is a material misstatement in the relevant elements of the Single Group-Wide Solvency and Financial Condition Report or a material misstatement of the Other Information. If, based on the work we have performed, we conclude that there is a material misstatement of this Other Information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Directors for the Single Group - Wide Solvency and Financial Condition Report

The Directors are responsible for the preparation of the Single Group-Wide Solvency and Financial Condition Report in accordance with the financial reporting provisions of the PRA rules and Solvency II regulations. which have been modified by the modifications, and supplemented by the approvals and determinations made by the PRA under section 138A of FSMA, as detailed below:

• Permission to publish a Single Group-Wide Solvency and Financial Condition Report

The Directors are also responsible for such internal control as they determine is necessary to enable the preparation of a Single Group-Wide Solvency and Financial Condition Report that is free from material misstatement, whether due to fraud or error.

Emphasis of Matter - Basis of Accounting

We draw attention to the 'Valuation for solvency purposes' of the Single Group-Wide Solvency and Financial Condition Report, which describe the basis of accounting. The Single Group-Wide Solvency and Financial Condition Report is prepared in compliance with the financial reporting provisions of the PRA Rules and Solvency II regulations, and therefore in accordance with a special purpose financial reporting framework. The Single Group-Wide Solvency and Financial Condition Report is required to be published, and intended users include but are not limited to the Prudential Regulation Authority. As a result, the Single Group-Wide Solvency and Financial Condition Report may not be suitable for another purpose. Our opinion is not modified in respect of this matter.

Other Information

The Directors are responsible for the Other Information.

Our opinion on the relevant elements of the Single Group- Wide Solvency and Financial Condition Report does not cover the Other Information and we do not express an audit opinion or any form of assurance conclusion thereon.

Auditors' Responsibilities for the Audit of the relevant elements of the Single Group-Wide Solvency and Financial Condition Report

It is our responsibility to form an independent opinion as to whether the information subject to audit in the relevant elements of the Single Group-Wide Solvency and Financial Condition Report is prepared, in all material respects, in accordance with the financial reporting provisions of the PRA Rules and Solvency II regulations on which they are based.

Our objectives are to obtain reasonable assurance about whether the relevant elements of the Single Group-Wide Solvency and Financial Condition Report are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but it is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the decision making or the judgement of the users taken on the basis of the Single Group-Wide Solvency and Financial Condition Report.

www.sjp.co.uk

08

Auditors' Report and Opinion continued

Irregularities, including fraud, are instances of non- compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud,

is detailed below.

Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud:

Based on our understanding of the Company/industry, we identified that the principal risks of non-compliance with laws and regulations related to breaches of UK regulatory principles, such as those governed by the Prudential Regulation Authority and the Financial Conduct Authority, and we considered the extent to which non-compliance might have a material effect on the Single Group-Wide Solvency and Financial Condition Report. We also considered those laws and regulations that have a direct impact on the Single Group-Wide Solvency and Financial Condition Report such as Solvency II regulations. We evaluated management's incentives and opportunities for fraudulent manipulation of the Single Group-Wide Solvency and Financial Condition Report (including the risk of override of controls), and determined that the principal risks were related to management bias in accounting estimates specifically persistency assumptions used in the valuation of technical provisions and investments with a judgemental valuation, being investment properties and level 3 investments in the Diversified Assets Fund. Audit procedures performed included:

• Discussions with the Risk and Compliance function, Internal Audit and the company's legal counsel, including consideration of known or suspected instances of non-compliance with laws and regulation and fraud;
• Reading the Group Audit Committee papers in which whistle blowing matters are reported and considered the impact of these matters on the group's compliance with laws and regulations;
• Reading key correspondence with the Prudential Regulation Authority, the Financial Conduct Authority and the Central Bank of Ireland in relation to compliance with laws and regulations;
• Reviewing relevant meeting minutes including those of the Board, Risk and Group Audit Committees;
• Reviewing data regarding customer complaints and the company's register of litigation and claims, in so far as they related to non-compliance with laws and regulations and fraud;
• Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations increasing reported revenues; and
• Designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing.

There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the Single Group-Wide Solvency and Financial Condition Report. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.

A further description of our responsibilities for the audit is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors' report.

Use of this report

This report, including the opinion, has been prepared for the Board of Directors of the Company in accordance with External Audit rule 2.1 of the Solvency II firms Sector of the PRA Rulebook and for no other purpose. We do not, in providing this report, accept or assume responsibility for any other purpose or to any other party save where expressly agreed by our prior consent in writing.

Report on Other Legal and Regulatory Requirements

Sectoral Information

In our opinion, in accordance with Rule 4.2 of the External Audit Part of the PRA Rulebook, the sectoral information has been properly compiled in accordance with the PRA rules and EU instruments relating to that undertaking from information provided by members of the group and the relevant insurance group undertaking.

Other Information

In accordance with Rule 4.1 (3) of the External Audit Part of the PRA Rulebook for Solvency II firms we are also required to consider whether the Other Information is materially inconsistent with our knowledge obtained in the audit of the Company's statutory financial statements. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

The engagement partner on the audit resulting in this independent auditors' report is Gary Shaw.

PricewaterhouseCoopers LLP

Chartered Accountants

Bristol

27 February 2024

St. James's Place Plc

Solvency and Financial Condition Report 2023