The Investment Column: St James Place reaps rewards

SIR MARK Weinberg did not do any favours for private investors when a committee he chaired effectively barred them from getting involved in the majority of new issues. But it is a different story at St James Place Capital, his upmarket life insurance group, which has rewarded shareholders, both large and small, handsomely over the last few years.

St James Place Capital is essentially a holding company for J Rothschild Assurance Group. The group has a two pronged strategy. First, it hires experienced sales people to pitch to rich clients. Total new business rose by 26 per cent to pounds 109.3m in 1997, well ahead of the competition.

Second, JRA holds a 23 per cent stake in the "vulture fund" life insurer, LAHC. The company takes advantage of consolidation in the life sector by buying ailing life insurers, closing them to new business and stripping out costs. In February, LAHC bought GAN (UK), a business with pounds 2.8bn under management, which should add substantially to this year's earnings.

Positive results saw the shares jump by 22 per cent to 283.5p. However it is not just strong trading that has prompted the strong share price performance. Prudential, which has boosted its stake to nearly 30 per cent, is seen as a likely suitor.

However, a bid is far from certain. Sir Mark believes a takeover could damage JRA's business, where sales people are productive precisely because they are independent.

St James Place reported profits of pounds 51.8m, or earnings per share of 8.6p. Stripping out the earnings from LAHC, Kleinwort Benson forecasts earnings next year of 11.2p, putting the group on a forward multiple of over 25, against around 20 for the sector. Now would be a good time to take some profits.