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ISSUED 06 JANUARY 2020

PROVIDER SECTOR Rowanmoor

FINANCIAL

STRENGTH

ASSESSMENT

Rowanmoor P R O V I D E R S E C T O R

© AKG Financial Analytics Ltd 2 06 January 2020

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ABOUT THIS FINANCIAL STRENGTH ASSESSMENT

This AKG report and the analysis and ratings contained within it provide assessment of financial strength and associated considerations. Financial Strength is focused on the ability of a company to deliver ongoing operational capability in the interest of its customers and in line with their fairly held expectations. AKG’s perspective in the assessment of financial

strength is wholly that of a customer of a product or service. From that foundation, this analysis is specifically designed to inform financial advisers and assist in their required understanding of a company’s operational financial strength.

Given the underlying customer perspective, the financial strength of companies needs to be focused at an operational

level (i.e. the elements and functions of an organisation which operate to specifically deliver and manage a proposition or service to the customer), specifically on the company that is effecting the product or service that a customer is selecting. This is important, because from the customer’s perspective it is that company that needs to survive in a form that maintains the requisite operational characteristics to meet their fairly held requirements. And it is thus at this level that the selection

needs of the customers’ advisers must be met. This contrasts to credit rating, which will be undertaken at group or parent company level where investment or debt placement etc. is made.

Further details on how analysis is undertaken is provided at the end of this report and may also be obtained from AKG.

TABLE OF CONTENTS

Rating & Assessment Commentary ........................................................................................................................................................................... 3

Ratings .................................................................................................................................................................................................................................................................... 3

Summary ............................................................................................................................................................................................................................................................... 3

Commentary ...................................................................................................................................................................................................................................................... 3

Group & Parental Context............................................................................................................................................................................................ 6

Background ......................................................................................................................................................................................................................................................... 6

Group Structure (simplified) ................................................................................................................................................................................................................... 7

Company Analysis: Rowanmoor Personal Pensions Ltd................................................................................................................................... 8

Basic Information ............................................................................................................................................................................................................................................. 8

Operations .......................................................................................................................................................................................................................................................... 9

Strategy ............................................................................................................................................................................................................................................................... 10

Key Company Financial Data ............................................................................................................................................................................................................... 12

Company Analysis: Rowanmoor Executive Pensions Ltd ............................................................................................................................. 15

Basic Information .......................................................................................................................................................................................................................................... 15

Operations ....................................................................................................................................................................................................................................................... 15

Strategy ............................................................................................................................................................................................................................................................... 16

Key Company Financial Data ............................................................................................................................................................................................................... 17

Guide ................................................................................................................................................................................................................................... 19

Introduction ..................................................................................................................................................................................................................................................... 19

Rating Definitions ......................................................................................................................................................................................................................................... 19

About AKG ...................................................................................................................................................................................................................................................... 22

CONTACT INFORMATION

AKG Financial Analytics Ltd, Anderton House, 92 South Street, Dorking, Surrey, RH4 2EW Tel: +44 (0) 1306 876439 Email: [email protected] Web: www.akg.co.uk



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Rating & Assessment Commentary

RATINGS

Overall Financial Strength

B

PROVIDER SECTOR STRONG

ROWANMOOR PERSONAL PENSIONS LTD

B

PROVIDER SECTOR STRONG

ROWANMOOR EXECUTIVE PENSIONS LTD

Additional Financial Strength and Supporting Ratings

Non Profit

Financial

Strength

Unit Linked

Financial

Strength

With Profits

Financial

Strength

Service Image &

Strategy

Business

Performance

Rowanmoor Personal Pensions

Ltd � � � ��

Rowanmoor Executive Pensions

Ltd � � � ��

SUMMARY

Rowanmoor now benefits from its inclusion in the Embark group, with the support, development and growth focus this brings

The Embark group has recently seen significant investment from FNZ, BlackRock, Legg Mason and Merian Chrysalis, changing its ownership structure and strengthening its capital position

Rowanmoor has a strong technical reputation

Having followed an acquisitive strategy in recent years, the Embark group is now more focussed on a period of

organic growth, however remains open to inorganic opportunities

The Embark group reported a regulatory capital surplus of £6.0m at the end of 2018

Following the asset purchase of Liberty SIPP, Embark Group Assets under Administration are now c. £15bn, which it hopes to grow ahead of the reported option of an IPO as soon as 2020

Overall the Embark group is developing an increasingly integrated structure

COMMENTARY

Financial Strength Ratings

Rowanmoor Personal Pensions Ltd Rowanmoor Personal Pensions Ltd (RPP) has seen fairly steady revenue in recent years after its earlier growth. It is also operating profitably, and while this has been at relatively low levels recently, 2018 saw an increase in profit margins.

The introduction of more onerous capital resources adequacy rules has required additional capital and also led to a reduced CRR coverage ratio. Capital of £600k was injected in 2018, and RPP also secured a £400k subordinated loan from Embark Group Ltd in March 2018, which is repayable in 5 years. Capital resources increased to £3.2m at the end of

2018, with a CRR coverage ratio of 146%.



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Now part of the Embark group, AKG would expect further support to be forthcoming if required, and the company benefits from being part of this wider group with its growth strategy, and access to capital.

The company draws strength from its position in the Embark group. In July 2019, it was announced that BlackRock, Legg

Mason and Merian Chrysalis Investment Company had taken a combined 40% stake in the Embark group, contributing alongside FNZ, which had previously taken a stake. The move sees a reduction in the proportion of the group held by Richard Wohanka, as well as improving the group's capital position.

Rowanmoor Executive Pensions Ltd Rowanmoor Executive Pensions Ltd (REP) has maintained its position as a leading SSAS operator in recent years. It has performed reasonably well and is profit making, albeit at a fairly low level, although margins were up considerably in 2017 and 2018. Whilst there is no prescribed CRR coverage ratio, 2018 again saw an increase in Shareholder Funds.

Now part of the Embark Group, AKG would expect further support to be forthcoming if required, and the company benefits from being part of this wider group with its growth strategy.

Service Rating Rowanmoor describes itself as 'a true service provider, focussed on sustaining high-quality, friendly, efficient, personal and professional pension administration'. It cites strong customer service standards, and an individual approach to customer

needs.

Rowanmoor states it invests in its staff, 'giving them the expertise, knowledge, skills and technology they need to provide a first class service'. Rowanmoor regularly runs nationwide masterclasses where it provided a more in depth look at a

range of topical subjects. It reports a SIPP service standard score for March 2018 of 98.58% and a SSAS score of 97.11%. Its FT Adviser Service Rating for 2018 and 2016 was 2 star, with 3 stars in 2017.

Image & Strategy Rating Rowanmoor is a trading name of the Embark Group. Rowanmoor's products and services are provided by REP, RPP and Rowanmoor Trustees Ltd (RTL).

Rowanmoor is highly regarded in both the SSAS and SIPP markets. Rowanmoor's focus is on organic growth, while

maintaining service and technical excellence.

Now under new ownership, this strategy, and indeed the Rowanmoor companies' image, is set to evolve as a component of the wider Embark proposition and strategic direction.

Embark was established in 2013 to capitalise on a collision of demographic, behavioural, regulatory, market and structural changes that had taken place or were anticipated. Now moving into Phase 2 of its approach, over the next five years Embark intends to leverage its disruptive position in the Wrap sector and combine this with its workplace offering to

ensure that the group is fully participative in all the major distribution channels for retirement savings in the UK.

Business Performance Rating Both RPP and REP operated profitably in 2018. RPP stated its performance exceeded targets, with new business generation

offsetting back book attrition. The investment seen is now generating improved profitability, and equity. While REP saw SSAS numbers decrease slightly, this was also considerably ahead of market trends. Ongoing reorganisation and integration activity has continued post acquisition, with functional alignment and the use of a shared service entity, Embark Corporate

Services Ltd.

The acquisition by Embark brought a new era, one in which Rowanmoor should be well placed to take advantage of market opportunities and parental support. The Rowanmoor companies have benefitted from the broader experience of

the larger group, and incumbent support teams have been functionally aligned under a single shared services entity, Embark Corporate Services Ltd.

The Embark group itself has sought further investment to fund its expansion and development, with share issues of £7.3m in October and December 2018, £3.25m in 2017 and £6.8m in 2016. In December 2018, the holding company of FNZ

became a minority shareholder of Embark, with a 9.09% holding. In July 2019, 3 new investors took a combined 40% stake in the Embark group, raising £39.4m of capital. At the 2018 year end, Embark had bank loans of £750k and loan notes for



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£2m issued in July 2016. The on-going changes, moving away from a paper-based operation to a technology-led administration, and revamping product and distribution strategies, have and will continue to require further investment.

The Embark group continued to expand, with significant developments in 2017 and 2018. It acquired the assets of DISCUS

in March 2017 and acquired EBS Management plc, renamed as EBS Pensions Ltd (EBS), together with its subsidiaries, from Charles Stanley Group plc in May 2017. The Embark platform, described as a low-cost investment platform, was launched in December 2017. RCL Consultancy was sold in December 2017. In October 2018 the group acquired the trading assets

of Liberty SIPP Ltd and subsequently injected further capital totalling £2.8m in 2018 into EBS.



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Group & Parental Context

BACKGROUND

The Embark group states a commitment to acquiring, developing and holding for the long-term a range of financial services businesses in the UK and internationally. The financial services businesses currently operating under Embark Group are: the SIPP/SSAS providers - EBS, Hornbuckle, and Rowanmoor; Embark (and formerly Avalon) - platform provider; The

Adviser Centre - a research and consultancy service, designed for financial advisers; DISCUS - a discretionary investment manager information service and Vested, an employee benefits and workplace savings collaboration between Embark group and Mazars LLP.

The holding company of all the entities in the group is now Embark Group Ltd (EGL), renamed from Hornbuckle Mitchell

Holdings Ltd (HMH) in December 2015. Hornbuckle, formerly Hornbuckle Mitchell, is the trading name of Embark Services Ltd (ESL). ESL was previously named The Hornbuckle Mitchell Group Ltd (HMG) until January 2016. EGL came under new ownership in 2013, with 60% of the holdings being sold to two new investors, with R Wohanka taking a

controlling interest. There has been some movement in share ownership since and there is now no single majority owner or controlling party. At the end of 2018, R Wohanka had the largest share of ownership at 43%, with two new investors, A Carter and New Star Investment Trust plc, each having around 12%. Members of the Executive Management team also

held around 12%. Platform software provider FNZ took, via its holding company, a 9.09% stake in the group in January 2019, and extended its 10 year partnership with Embark until 2028. In July 2019, it was announced that BlackRock, Legg Mason and Merian Chrysalis Investment Company had taken a combined 40% stake in the Embark group. Following the

agreement, BlackRock and Legg Mason each took a 9.9% stake in Embark, with Merian Chrysalis taking a 19.9% stake. The agreement, which raised £39.4m of capital, saw Richard Wohanka reduce his stake down from 40% to around 14%. Richard Wohanka stepped down from his position as a non-executive director in September 2019.

In February 2016, EGL acquired the platform assets of Avalon Investment Services Ltd, which was in administration, through a newly formed subsidiary, Embark Investment Services Ltd.

In July 2016, Embark acquired Rowanmoor Group plc, renamed as Rowanmoor Group Ltd and its subsidiaries RPP, Rowanmoor Consultancy Ltd (RCL) and RTL. The Rowanmoor companies have been retained as separate entities, but

RPP and RCL were sold to EGL in December 2016 as part of an internal reorganisation to segregate regulated and non-regulated entities. Rowanmoor Group Ltd was renamed as REP in January 2017. All ex-Rowanmoor entities were retained as segregated subsidiaries of EGL and continue to operate independently of other parts of the group, but will leverage

common infrastructure benefits and capital support over time. They also changed their year end to 31 December, in line with the wider Embark group.

In October 2016, EGL acquired the assets of The Adviser Centre from City Financial Investment Company Ltd, through

a newly-created subsidiary The Adviser Centre Ltd (TAC). Embark states that 'the transition accelerates the development of its service capabilities to the UK IFA and Wealth Management sectors, adding highly-regarded and experienced investment research personnel to its existing investment due diligence resources. It also deepens its digital reach into the

UK IFA sector'. TAC also acquired the assets of Scopic Research in December 2016.

In December 2016, ESL sold its technology platform to Embark Corporate Services Ltd (ECS), the newly created group shared services company.

In March 2017, TAC acquired the assets of DISCUS.

EBS Management plc, renamed as EBS Pensions Ltd, together with its subsidiaries was acquired from Charles Stanley Group plc in May 2017, with whom it has a 5 year distribution partnership. The Embark Platform, a 'low-cost open architecture' platform, provided by Embark Investment Services Ltd was launched in November 2017.

On 29 December 2017 the group sold RCL Consultancy, an independent financial advisory company, to Mazars Ltd. The deal with Mazars LLP also involved Embark entering into a strategic partnership to participate in the employee benefits and workplace savings sector with Mazars LLP. The group also bought a controlling interest (51%) in Mazars Employee

Benefits Ltd, which was renamed Vested Employee Benefits Ltd (Vested) in January 2018.



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On 15 October 2018 the Embark group completed the purchase of all trading assets of Liberty SIPP Ltd (‘Liberty’) via EBS, bringing EBS AuA to £6.8bn. Cash injections from Embark added £2m of additional regulatory capital into EBS to support scale and growth for the business.

Following the acquisition of EBS, the sale of RCL, and the addition of Liberty business, Embark now employs around 460 people and manages around £15bn for 140,000 end customers.

The group stated it had a regulatory capital coverage surplus of £6m in December 2018, giving a coverage of 181%.

In 2017 and 2018, there were reports of preparation for a potential IPO for the group, following planned further growth in AuA. It was reported that this could be as early as 2020.

In November 2019 Embark Group announced that it had agreed to acquire Zurich’s investment and retail platform

business (Sterling ISA Managers Ltd) and its Authorised Corporate Director (ACD) and investment management business (Zurich Investment Services (UK) Ltd). When completed the purchase should bring c. £11bn AuA and an advised book of over 130,000 clients to Embark. It should also add further distribution capability with the aim of further increasing

Embark’s presence in the UK investment savings sector.

At the same time the group has entered into a five-year partnership agreement with Zurich with the aim of creating digital life and protection products.

GROUP STRUCTURE (SIMPLIFIED)

Rowanmoor Personal Pensions Ltd P R O V I D E R S E C T O R


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Company Analysis: Rowanmoor Personal Pensions Ltd

BASIC INFORMATION

Company Type Non-insured SIPP Operator

Ownership & Control RPP is wholly owned by EGL. Following changes in share ownership, EGL has no majority owner or controlling party.

Year Established 1988

Country of Registration UK

Head Office

Rowanmoor House, 46-50 Castle Street, Salisbury, Wiltshire, SP1 3TS

Contact Tel: 03445 440 550 Email: [email protected] Web: www.rowanmoor.co.uk

Key Personnel

Role Name

Group Non-Executive Chairman D J Etherington

Group Chief Executive Officer P J Smith

Group Chief Financial Officer V P F Cambonie

Group Chief Operating Officer R K Adams

Group Head of Compliance A D Cragg

Group Chief Risk Officer A Abbott

Managing Director, Rowanmoor D J King

Rowanmoor Head of Risk and Compliance W J Mulligan

Rowanmoor SIPP Operations Director S Nightingale

Managing Director, Hornbuckle & EBS P Downing

Company Background RPP was incorporated in 1988 under the name Northshare Ltd, subsequently Bridford Pension Trustees Ltd until 2006, when its present name was taken on. It was formerly a non-trading trustee company within Abbey National plc. RPP entered into the group SIPP market in 2006 with its Family SIPP, the 'Rowanmoor Pensions Family Pension Trust'.

Incorporated within the management buyout was a non-compete period, which limited Rowanmoor from activity in the individual SIPP market. Subsequent to completing this period, on 5 May 2009, Rowanmoor launched its bespoke Rowanmoor SIPP. RPP is the scheme administrator and the scheme operator for the SIPP schemes and RTL acts as the

trustee.

As at 31 December 2018, Rowanmoor Pensions managed 4,241 Full SIPPs, 387 Single Investment SIPPs and 839 Family Pension Trust schemes.



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OPERATIONS

Governance System and Structure Rowanmoor's past issues and failings are now relatively well in the past and even before its change in ownership it had made changes to improve its governance. Now under the Embark umbrella, learning and discipline can be shared.

The Embark group states that it is committed to achieving high standards of corporate governance, integrity and business

ethics. The group board has sub-committees to provide corporate governance and these also meet formally on a quarterly basis. These sub-committees comprise of Non-Executive Directors with Executive Directors in attendance as required. Each of the sub-committees (Audit; Risk, Regulatory & Compliance; Remuneration and Nominations; Customer

Outcomes) are governed by terms of reference that have been approved by the board.

Embark states that the management of the business and execution of the group strategy are subject to Board governance against a comprehensive risk management framework, which is defined at group level.

Risk Management As with the governance framework, risk consideration now benefits from the group context. The group's risk management framework considers at a detailed level, risks against shareholders' appetite for the following risks: strategic, people, financial, operational, legal and regulatory, proposition, distribution and asset concentration risk. There is a formal structure

for monitoring and managing risks throughout the group, comprising a risk appetite agreed by the board and detailed risk management policies, independent governance and risk oversight.

Despite the growth in complexity in the risk environment, the directors believe the company continues to see a reduction

in its risk exposure. This follows on from a multi-year transformation program where the group has invested heavily in its technology, people and competence.

Administration During 2017 and 2018, incumbent support teams were functionally aligned under common management and oversight

into a single share services entity, Embark Corporate Services Ltd. This change has a focus on output quality, standardising processes, creating opportunities for people and reducing cost.

Overall Embark as a group is taking a more integrated approach to service provision; with functions shared across the

constituent companies and offerings.

Rowanmoor’s focus on service is based on a set of stated principles, these being:

Customers are individual

Treating customers fairly

Innovative problem solving

No call centres

Investment in staff

Rowanmoor also publishes a range of case studies These are stated as ‘being from around the business demonstrating the benefits that our approach to service brings to our customers’.

In its SSAS and SIPP Service Standard the aim is for continuous improvement in the quality of the services. Administration is monitored against processing timescales with the aim to complete no less than 95% of work within these timescales for both lines. Individual service standards targets with regards processing timescales are shown online for both SIPP and SSAS

business covering new business, banking, transfers, investments, benefits and other general processes. All clients are supported by a dedicated, named administrator.

Benchmarks Rowanmoor prides itself on excellent customer service and publishes monthly service standards. The latest figures show

that the SIPP reported a service standard of 98.58% in March 2019, the SSAS 97.11% and the Family Pension Trusts (FPT), 98.89%.



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Rowanmoor has won numerous awards, including the Life and Pensions Innovation Award at the 2016 FT Adviser Online Innovation and Service Awards; best SSAS provider at the 2018 Investment Life and Pensions Moneyfacts Awards for the eleventh successive year; Rowanmoor has been shortlisted for the ‘Best SIPP Provider’ at the 2019 Investment Life and

Pensions Moneyfacts Awards; in November 2014 Rowanmoor received a 4 star rating in the Life and Pensions Category at the Financial Adviser Service Awards, although recent ratings have been 2 star (2018 and 2016) and 3 star (2017 and 2015); Rowanmoor received a 5 star rating for the full SIPP, a 4 star rating for the single investment SIPP and a 5 star

rating for the SSAS from the Moneyfacts 2019 ratings awards.

Outsourcing Rowanmoor does not itself make use of any significant outsourcing outside of the Embark group, which includes its partnership with global platform technology provider FNZ. Within the group, it utilises the services of Embark Corporate

Services Ltd for finance, marketing, facilities, HR, compliance & legal and senior management costs; investment research and due diligence services are provided by the Adviser Centre Ltd; REP provides property plant and equipment, sales, administration and management services.

RPP provides outsourcing services to EIS (Embark) for the administration of its SIPP portfolio.

STRATEGY

Market Positioning Embark was established in 2013 with a vision to be a leading independent digital retirement platform within 10 years by combining a full ‘waterfront’ of pensions expertise and manufacturing capability with multi-channel digital distribution.

In 2016, the acquisition of Rowanmoor was completed and the second stage of the strategy commenced. The group focused on exceeding £12bn of AuA and bringing economic leverage to bear in each of the businesses through the deployment of common technology, distribution & marketing and central shared competencies through a combination of

organic and inorganic activities.

Rowanmoor is central to the delivery of the strategy and has a national presence, with offices in Salisbury, London, Bolton, Edinburgh and Leicester. The administrative centres are based in Salisbury and Bolton. Rowanmoor is a leading provider of Small Self-Administered Scheme’s (SSAS), bespoke Self-Invested Personal Pensions (SIPPs) and FPTs (Family SIPPs).

Rowanmoor also offer professional actuarial and scheme accountancy services, and scheme practitioner services for SSAS trustees with scheme administrator responsibilities.

At the forefront of the member-directed pensions industry since 1979, Rowanmoor has won many industry awards for

the quality of the pension scheme administration services and has a strong heritage and reputation for quality service, expertise and innovation in pioneering major product development in the member-directed pension scheme market. Rowanmoor states that it is fully committed to the complex pensions market and believes that the introduction of pensions

freedoms, and the demographic of the UK population, confirms a considerable opportunity for fully digitally enabled simple and complex products. The interests of Rowanmoor's target market of higher net worth individuals may be met by retaining funds to benefit from inheritance tax planning opportunities, which is translating as extending the longevity of

SIPP plans on the company's books.

The company describes its focus as 'providing individuals and businesses with investment flexibility; delivered securely through a reputation for technical expertise, independence and compelling resources'.

The focus on efficiency and appropriate risk management has seen the business transform from a paper-based operational capability to a technology led organisation. The business will continue to seek efficiencies and service advancement by further digital improvements. Growth is anticipated to come from reduced competition driven by higher capital requirements and regulatory pressures on competitors.

The distribution strategy focuses on the support of Intermediated businesses - Rowanmoor will continue with this strategy and has a national sales team (managed via six regions). This team is complemented by a highly regarded Technical Support Unit and a full pre and post application Sales Support unit based in Salisbury.



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Proposition Rowanmoor operates two SIPP schemes, the Rowanmoor Pensions SIPP and the Family Pension Trust (FPT), a Family SIPP.

The Rowanmoor SIPP is a fully bespoke pension designed to give full control of pension funds, allowing decisions to be made on how funds are invested, utilising a wide range of investment opportunities. The product has both a single investment option and full investment option.

Rowanmoor has partnership links with a number of providers offering investment services, including access to a Third Party Investment Account via the group Embark platform, a newly launched, fully digital open architecture platform offering market leading pricing. Rowanmoor aims to provide the most comprehensive range of investment choice available under current legislation. This process will permit assets provided:

it does not give rise to an unauthorised payment tax charge;

satisfactory title to the asset can be obtained;

ownership of the asset will not give rise to an unacceptable liability or risk.

Depending on the option selected, fees and services will vary.

The single investment option is designed for clients looking to invest in a managed portfolio with a discretionary fund manager, stockbroker, or fund platform. Some basic, direct single investments are also available. One investment portfolio, or single investment, can be established within the SIPP, in addition to the SIPP bank account.

The full investment option makes available the SIPP’s complete investment flexibility. There are no restrictions on the number of investments that can be held, giving the option to diversify and establish multiple investment portfolios, or invest in other assets, such as commercial property, unquoted shares and intellectual property.

Both the full and single investment SIPPs provide the widest choice of options available when taking benefits, allowing the phasing of retirement income to suit individual circumstances.

Rowanmoor appoints an administrator to each SIPP and it is also possible to monitor SIPP accounts via the SIPPView

online service.

The Family Pension Trust (FPT) is a highly flexible vehicle offering substantial benefits in pensions and tax planning for groups of individuals, business partners, family or simply though shared investment interests. The scheme offers full flexibility

in choosing assets to invest in, and how to take benefits. Rowanmoor acts as Administrator and independent trustee.

While there have been multiple acquisitions over the last 5 years, the group states it now has an increasingly high bar of requirements to deploy capital in this way. While open to the opportunistic acquisitions, the Embark group has an emphasis in the short term on organic growth.



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KEY COMPANY FINANCIAL DATA

Last 3 reporting periods up to 31 December 2018

Capital Resources Disclosures

Dec 16

£m

Dec 17

£m

Dec 18

£m

Available capital resources 2.22 3.23

Capital resources requirement (CRR)

2.05 2.21

Excess capital resources 0.18 1.01

CRR coverage ratio (%) 109 146

The capital resources requirement for RPP was £2,214k as at 31 December 2018. At this point the company had

regulatory capital of £3,228k, giving a coverage ratio of 145.8%.

The Embark group reported an aggregate capital requirement of £7.4m with a surplus of £6.0m at the end of 2018 [2017: £3.1m], resulting in a coverage of 181%. To align with the target figure of 140% of regulatory capital, the group reported

it would reduce its surplus to £3.0m, leaving a coverage of 141%.

Statement of Financial Position

Dec 16

£m

Dec 17

£m

Dec 18

£m

Assets 2.80 3.12 5.21

Current liabilities (0.62) (0.75) (1.72)

Long-term liabilities 0.00 0.00 (0.40)

Net assets 2.18 2.37 3.09

Statement of Changes in Equity

Dec 16

£m

Dec 17

£m

Dec 18

£m

Equity at start of period 1.44 2.18 1.87

Movement due to:

Share capital and premium 0.25 0.00 0.60

Retained earnings 0.50 0.17 0.60

Other 0.00 0.02 0.01

Equity at end of period 2.18 2.37 3.09

Shareholder funds increased to £3.1m [2017: £2.4m]. The 2018 opening figure for reserves having been adjusted down by £494k due to a change of accounting treatment relating to revenue recognition. Increases to share capital came from a capital injection of £600k [2017: £nil; 2016: £250k; 2015: £175k].and retained earnings of £602k. RPP secured a £400k

subordinated loan from EGL in March 2018, which is repayable in 5 years. RPP itself has no external borrowing.

Consolidated group shareholder funds were £13.6m at the year end [2017: 7.8m]. EGL issued a total of 64k £1 ordinary shares in April and July 2017 for a combined consideration of £3,250k [2016: £6,767k]. Further shares with a combined

consideration of £7.3m were issued in October and December 2018. Additional capital of £39.4m was raised in July 2019, with shares issues to the new investors.

The group had borrowing at the year end as follows: bank loans of £750k [2017: £2m] in relation to a £3m loan from Barclays, put in place in its current form in July 2016 and due to be repaid in quarterly instalments from July 2016; loan

notes issued by EGL for £2m [£2m], repayable in July 2019; and an unsecured loans for £2.05m [£500k], made up of one loan put in place with shareholders in April 2017, repayable in June 2019, and a second loan put in place on 15 July 2018, repaid in January 2019. The initial cash consideration payable to Charles Stanley was £2m, with the deferred consideration

outstanding at the end of 2017 being largely paid in 2018.



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Income Statement

Dec 16

£m

Dec 17

£m

Dec 18

£m

Revenue 5.95 5.09 5.67

Other operating income 0.00 0.00 0.00

Operating expenses (5.46) (4.94) (4.91)

Operating profit (loss) 0.49 0.15 0.76

Other gains (losses) 0.02 0.01 0.02

Profit (loss) before taxation 0.51 0.17 0.77

Taxation (0.01) 0.00 (0.17)

Profit (loss) after taxation 0.50 0.17 0.60

Other comprehensive

income 0.00 0.00 0.00

Dividends 0.00 0.00 0.00

Retained profit (loss) 0.50 0.17 0.60

Financial Ratios

Dec 16

%

Dec 17

%

Dec 18

%

Operating margin 8 3 13

Pre-tax profit margin 9 3 14

Employee costs as a % of revenue

27 26 26

Revenue in 2018 of £5.7m was up by 11.3% compared with 2017, benefitting from additional services provided to other Embark entities and base rate increases. With expenses fairly steady over the year, the company reported an increased pre-tax profit of £774k [2017: £166k]. Staff costs increased by 15%, with an increase in the average number of monthly

staff, which rose from 37 to 42. The majority of expenses were recharged from REP, with the elements being sales and administration services (£1.54m), and a recharge for plant, property and equipment usage of £229k. £1.16m was also charged by Embark Corporate Services Ltd for services including finance, facilities and senior management. No dividend

was paid in 2018 [2017: nil].

At group level, Embark reported a 9% [2017: 59%] increase in its consolidated revenue to £31.8m and reduced administration expenses of £32.2m [2017: £29.2m and £33.3m respectively], as it continued to invest in people and technology. This resulted in a loss from operations of £0.4m [2017: loss from operations £4.1m] and an overall pre-tax

loss of £0.95m [2017: pre-tax loss of £2.6m; 2016: pre-tax loss of £3.5m]. There was no dividend paid [2017: £nil].

Statement of Cash Flows

Dec 16

£m

Dec 17

£m

Dec 18

£m

Net cash generated from operating activities

(0.25) (1.52) 0.85

Net cash used in investing activities

0.02 0.01 0.02

Net cash used in financing

activities 0.25 0.00 1.00

Net increase (decrease) in

cash and cash equivalents 0.03 (1.50) 1.87

Cash and cash equivalents at end of period

1.81 0.30 2.17

Assets under Administration (AuA)

Dec 16

£m

Dec 17

£m

Dec 18

£m

Assets at start of period 996 1,091

Inflows 66

Outflows (33)

Net market and other

movement 62

Assets at end of period 1,091

Growth rate (%) 10

Net inflows as % of opening AuA

7

RPP had a net cash inflow from its operating activities of £854k [2017: outflow £1,518k]. With £1m cash receipts from financing activities, cash deposits increased by £1.9m to £2.2m [2017: £303k].

The consolidated group increased its cash balances to £7.7m [2017: £3.9m]. While there was an outflow from its operating activities (£0.4m), the share issue of £7.3m plus a net loan receipt of £0.7m outweighed the payments to acquire intangible assets (£2.6m) and payment to acquire Liberty SIPP (£0.7m) and interest paid (£0.4m).



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Rowanmoor (all companies) had AuA £3,978m at 31 December 2016 of which £1,091m was in RPP. There was £594m in the Rowanmoor SIPP and £497m in the FPT. The number of SIPP schemes increased marginally over 2018 from 4,595 (2017 restated from 5,874) to 4,628 at the end of 2018. The number of FPT schemes under management decreased

from 854 to 839.

AuA for the Embark group, including Hornbuckle, Rowanmoor and the Embark platform, were £14.7bn at the end of 2018, with around 139,200 clients, of which 63,700 were pension clients. AuA and client numbers were up by 29% and

22% respectively.

Rowanmoor Executive Pensions Ltd P R O V I D E R S E C T O R


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Company Analysis: Rowanmoor Executive Pensions Ltd

BASIC INFORMATION

Company Type SSAS Administrator

Ownership & Control REP is wholly owned by EGL. Following changes in share ownership, EGL has no majority owner or controlling party.

Year Established 2006

Country of Registration UK

Head Office

Rowanmoor House, 46-50 Castle Street, Salisbury, Wiltshire, SP1 3TS

Contact Tel: 0344 544 0440 Email: [email protected] Web: www.rowanmoor.co.uk

Key Personnel

Role Name

See RPP

Company Background

The company was incorporated as Rowanmoor Group plc on 24 April 2006 and its name was changed to Rowanmoor Group Ltd and then Rowanmoor Executive Pensions Ltd (REP) on 1 August 2016 and 3 January 2017, respectively.

Previously the holding company of the Rowanmoor Group, it is now an operating subsidiary of EGL. REP sold 100% of its

ownership of RCL, RPP, RTL, WF (Trustees) Ltd and GB Trustees Ltd to EGL in December 2016.

REP is a non-regulated entity which operates administration, accounting and trustee services for Small Self Administered Schemes (SSASs).

REP had previously also provided services to the ex-Rowanmoor group companies, such as the provision of staff, computer

and administrative systems and other support services. These are now provided by ECS.

As at 31 December 2018, the company administered a total of 3,418 SSASs.

OPERATIONS

Governance System and Structure See RPP

Risk Management See RPP



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Administration See RPP

Benchmarks See RPP

Outsourcing See RPP

REP provides outsourcing services to ESL (Hornbuckle) for the administration of its SSAS portfolio.

It also provides SSAS administration to Standard Life.

STRATEGY

Market Positioning See RPP

Proposition REP is the largest SSAS provider in the UK, administering over 3,800 schemes. It also provides ‘white-label’ SSAS solutions

for other businesses and in October 2017, announced it had been reappointed to administer Standard Life SSAS’s for a further 10 year term.

The scheme provides members with full flexibility when choosing assets to invest in and when deciding to take benefits.

Members can use funds, within the SSAS, to invest in their business through secured loans, or by purchasing property to lease back to the business. Rowanmoor offer three SSAS arrangements:

SSAS - a registered pensions scheme for 11 or fewer members, offering the benefits as described above.

Defined Benefit SSAS - an occupational pension scheme offering the opportunity to maximise the provision of pension benefits for directors and key employees in a given year. This is a highly valuable and specialised tax

planning vehicle for employers and Rowanmoor include scheme actuary services and feasibility reporting.

Solo SSAS - an employer sponsored pension scheme designed for a single employee, or director.

The Solo SSAS is structured to provide the most comprehensive range of investment choices under current legislation.

This process will permit assets provided:

it does not give rise to an unauthorised payment tax charge;

satisfactory title to the asset can be obtained;

ownership of the asset will not give rise to an unacceptable liability or risk.

In addition, Rowanmoor offers scheme practitioner services - this is designed to assist employers and SSAS trustees with scheme administrator responsibilities seeking professional support for their services.

In recognition of winning the Moneyfacts best SSAS provider for the 10th consecutive year, Rowanmoor waived 100% of

new scheme and takeover set up fees for schemes applied for between 1 October 2017 and 31 March 2018.



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KEY COMPANY FINANCIAL DATA

Last 3 reporting periods up to 31 December 2018

Capital Resources Disclosures

Dec 16

£m

Dec 17

£m

Dec 18

£m

Available capital resources

Capital resources

requirement (CRR)

Excess capital resources

CRR coverage ratio (%)

As a non-regulated entity, REP is not subject to any capital resources disclosure.

Statement of Financial Position

Dec 16

£m

Dec 17

£m

Dec 18

£m

Assets 6.57 8.94 8.70

Current liabilities (3.94) (5.60) (4.01)

Long-term liabilities 0.00 0.00 0.00

Net assets 2.63 3.34 4.69

Statement of Changes in Equity

Dec 16

£m

Dec 17

£m

Dec 18

£m

Equity at start of period 2.35 2.63 3.74

Movement due to:

Share capital and premium 0.00 0.00 0.00

Retained earnings 0.23 0.69 0.94

Other 0.06 0.02 0.01

Equity at end of period 2.63 3.34 4.69

Total equity was £4.7m as at 31 December 2018 [2017: £3.3m], the 2018 opening figure for reserves having been adjusted down by £404k due to a change of accounting treatment relating to revenue recognition.

REP carries an intangible asset of £1.6m relating to goodwill arising on the management buy-out of the SSAS business from James Hay Pension Trustees Ltd and the acquisition of James Hay Investment Services Ltd on 31 August 2006, with no impairment having yet been made after each annual review.



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Income Statement

Dec 16

£m

Dec 17

£m

Dec 18

£m

Revenue 9.61 7.83 8.23

Other operating income 0.00 0.00 0.00

Operating expenses (9.41) (7.02) (7.10)

Operating profit (loss) 0.20 0.81 1.14

Other gains (losses) 0.00 0.01 0.03

Profit (loss) before taxation 0.20 0.82 1.16

Taxation 0.13 (0.13) (0.22)

Profit (loss) after taxation 0.33 0.69 0.94

Other comprehensive

income (0.11) 0.00 0.00

Dividends 0.00 0.00 0.00

Retained profit (loss) 0.23 0.69 0.94

Financial Ratios

Dec 16

%

Dec 17

%

Dec 18

%

Operating margin 2 10 14

Pre-tax profit margin 2 10 14

Employee costs as a % of revenue

96 74 58

Revenue at £7.2m was up by 5.2% on the previous period. Staff costs remained the largest single expense, at 68% of total expenses. The number of staff dropped from 160 to 132, with costs decreasing in line. With total operating expenses up by only 1.1%, the company again reported an increased operating profit of £1.1m. No dividend was paid [2017: £nil].

Statement of Cash Flows

Dec 16

£m

Dec 17

£m

Dec 18

£m

Net cash generated from

operating activities (1.45) 0.25 0.90

Net cash used in investing

activities 1.37 (0.08) 0.03

Net cash used in financing activities

0.07 0.00 0.00

Net increase (decrease) in cash and cash equivalents

0.00 0.17 0.93

Cash and cash equivalents

at end of period 0.06 0.23 1.16

Assets under Administration (AuA)

Dec 16

£m

Dec 17

£m

Dec 18

£m

Assets at start of period 2,884

Inflows 191

Outflows (265)

Net market and other movement

77

Assets at end of period 2,887

Growth rate (%) 0

Net inflows as % of opening

AuA 7

REP saw a net cash inflow of £901k from operating activities in 2018 [2017: £248k]. Net cash of £25k was received from investing activities, reflecting interest income and minimal payments to acquire property, plant and equipment. There was an increase in cash over the year of £926k [2017: £167k].



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Guide

INTRODUCTION

For over 20 years AKG has particularly focused on the financial strength requirements of financial advisers, who when acting on behalf of their clients, need to ascertain a company's ability to deliver sustained provision.

From this customer perspective, the financial strength of companies needs to be focused at an operational level, specifically

on the company that is effecting the product or service that a customer is selecting. This is important, because from the customer’s perspective it is that company (not some higher corporate entity) that needs to survive in a form that maintains the requisite operational characteristics to meet their fairly held requirements. And it is thus at this level that the selection needs of the customers’ advisers must be met.

It is also important to understand the sector approach (comparative peer groups) that is adopted in financial strength assessment and rating process.

At AKG, this is again driven by the end customer perspective and the fact that assessment is designed solely for this

purpose, i.e. as a component in helping customers’ advisers to select between comparable companies competing to deliver relevant products or services.

AKG’s focus and approach has remained consistent over the years since it commenced assessment and rating support for

the market. However, coverage, format and presentation has rightly evolved over this period, in line with the needs and expectations of assessment and rating users in the market. And AKG considers further changes on a continual basis.

Further details including an explanation of what is included in the assessment reports and coverage can be found online

at https://www.akg.co.uk/information/reports/provider.

AKG’s process for assessment and rating is to use a balanced scorecard of measures and comparative information, relevant to the companies contained within each peer group. This is gathered via Public Information only for non-participatory

assessments and public information plus company interactions with companies for participatory assessments. Further details on AKG’s process can be found at https://www.akg.co.uk/information/reports.

This includes further information on the different participatory and non-participatory basis and for companies wishing to learn more about participatory assessment AKG is pleased to outline this and welcomes contact.

This is a participatory assessment.

RATING DEFINIT IONS

Overall Financial Strength Rating The objective is to provide a simple indication of the general financial strength of a company from the perspective of those financial advisers who when acting on behalf of their clients need to ascertain a company's ability to deliver sustained

operational provision of products or services.

The overall rating inherently reflects the mix of business within the company, since different types of customer or policyholder have different requirements and expectations, and the company may have particular strengths and

weaknesses in respect of its key product or service areas. However, it also takes account of comparison across the sector in which it is assessed.

The rating takes into account those of the following criteria which are relevant (depending upon the company's mix of

business in-force): capital and asset position, expense position and profitability, structure (and size) of funds within the company, parental strength (and likely attitude towards supporting the company), operational capability, management



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strength and capability, strategic position and rationale, brand and image, typical fund performance achievements or product / service features, its operating environment and ability to withstand external forces.

Rating Scale A B+ B B- C D �

Superior Very Strong Strong Satisfactory Weak Very Weak Not applicable

With Profits Financial Strength Rating

The objective is to provide a simple indication of the with profits financial strength of a company, where it currently offers with profits business or has existing with profits business within it.

This is from the perspective of those financial advisers who when acting on behalf of their clients, for this product type, need to ascertain a company's ability to deliver sustained operational provision of with profits funds, products or

propositions. Its comparison is with other companies within the assessment sector that offer or have with profits business.

The main criteria taken into account are: capital and asset position, expense position and profitability, the amount of with profits business in-force, parental strength (and likely attitude towards supporting the company), and image and strategy.

NOTE: More detailed analysis of with profits companies is included in AKG’s UK Life Office With Profits Reports.

Rating Scale ��

Excellent Very Good Good Adequate Poor Not Rated

Unit Linked Financial Strength Rating The objective is to provide a simple indication of the unit linked financial strength of a company, where it currently offers unit linked business or has existing unit linked business within it. This is from the perspective of those financial advisers

who when acting on behalf of their clients, for this product type, need to ascertain a company's ability to deliver sustained operational provision of unit linked products or propositions. Its comparison is with other companies within the assessment sector that offer or have unit linked business.

The main criteria taken into account are: capital and asset position, expense position and profitability, structure (and size) of funds within the company, parental strength (and likely attitude towards supporting the company), operational capability, management strength and capability, strategic position and rationale, brand and image, typical fund performance

achievements or product / service features, its operating environment and ability to withstand external forces.

Rating Scale ��


Non Profit Financial Strength Rating The objective is to provide a simple indication of the non profit financial strength of a company, where it currently offers or has existing products and propositions such as term assurance and annuities. This focuses on the company’s ability to

deliver sustained operational provision of such non profit products or propositions. Its comparison is with other companies within the assessment sector that offer or have non profit business.

The main criteria taken into account are: capital and asset position, expense position and profitability, structure (and size) of funds within the company, parental strength (and likely attitude towards supporting the company), operational capability,

management strength and capability, strategic position and rationale, brand and image, product / service features, its operating environment and ability to withstand external forces.



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Rating Scale ��


Service Rating The objective is to assess the quality of the organisation's service to the intermediary market in respect of the brand concerned.

Criteria taken into account include: performance in surveys, awards and benchmarking exercises (external and internal), the organisation's philosophy, service charters, the extent of investments designed to improve service, and feedback from intermediaries.

Rating Scale ��


Image & Strategy Rating

The objective is to assess the effectiveness of the means by which the organisation currently positions itself to distribute its products for the brand concerned and the plans it has to maintain and/or develop its position.

Criteria taken into account include: overall trends in the company’s market share position, brand visibility and reputation, feedback from intermediaries and industry commentators, and AKG’s view of the company’s general strategy.

Rating Scale ��


Business Performance Rating This review is an assessment of how the company and the brand has fared against its peers, and how it is perceived externally. Effectively this is how it has performed recently in the market. Whilst it will include performance indicators from the most recent available statutory reporting (report and accounts and SFCRs in the case of insurance companies,

for example) it will also draw on other recent key performance elements before and after such disclosure, up to the point at which the assessment is undertaken.

Criteria taken into account include: increase/decrease in market shares, expense containment, publicity good or bad, press

or market commentary, regulatory fines, and competitive position.

Rating Scale ��




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ABOUT AKG

AKG is an independent organisation. Originally established as an actuarial consultancy AKG has, for over 20 years, specialised in the provision of assessment, ratings, information and market assistance to the financial services industry.

As the market has evolved over this period, the range of entities considered by AKG has expanded. Consequently, AKG

has brought additional skill sets into its operations. This has meant the inclusion of accounting, corporate finance, IT and market intelligence experience, alongside actuarial resources, to deliver an expanded professional capability.

Today AKG’s core purpose is in the provision of financial analysis and review services to support the wider financial services

sector and its customers.

© AKG Financial Analytics Ltd (AKG) 2019

This report is issued as at a certain date, and it remains AKG's current assessment with current ratings until it is superseded by a subsequently issued

report or subsequently issued ratings (at which point the newly issued report or ratings should be used), or until AKG ceases to make such a report

or ratings available.

The report contains assessment based on available information at the date as shown on the report’s cover and in its page footer. This includes prior

regulatory data which may have an earlier date associated with it, but the report also takes into account all relevant events and information, available

to and considered by AKG, which have occurred prior to this stated cover and footer date. Events and information subsequent to this date are not

covered within it, but AKG continually monitors and reviews such events and information and where individually or in aggregate such events or

information give rise to rating revision an updated report under an updated date is issued as soon as possible.

All rights reserved. This report is protected by copyright. This report and the data/information contained herein is provided on a single site multi

user basis. It may therefore be utilised by a number of individuals within a location. If provided in paper form this may be as part of a physical library

arrangement, but copying is prohibited under copyright. If provided in electronic form, this may be by means of a shared server environment, but

copying or installation onto more than one computer is prohibited under copyright. Printing from electronic form is permitted for own (single

location) use only and multiple printing for onward distribution is prohibited under copyright. Further distribution and uses of the report, either in its

entirety or part thereof, may be permitted by separate agreement, under licence. Please contact AKG in this regard or with any questions:

[email protected], Tel +44 (0) 1306 876439. AKG has made every effort to ensure the accuracy of the content of this report and to ensure that the

information contained is as current as possible at the date of issue, but AKG (inclusive of its directors, officers, staff and shareholders and any affiliated

third parties) cannot accept any liability to any party in respect of, or resulting from, errors or omissions. AKG information, comments and opinion,

as expressed in the form of its analysis and ratings, do not establish or seek to establish suitability in any individual regard and AKG does not provide,

explicitly or implicitly, through this report and its content, or any other assessment, rating or commentary, any form of investment advice or fiduciary

service.

AKG Financial Analytics Ltd Anderton House, 92 South Street, Dorking, Surrey RH4 2EW Tel: +44 (0) 1306 876439 Email: [email protected] Web: www.akg.co.uk © AKG Financial Analytics Ltd 2019

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