Higher costs, levy bill dent St James's Place profits for 2015

* FSCS levy contribution rises 240 pct

* Cost hit overshadows strong operational performance

* Shares (Berlin: DI6.BE - news) down 1.4 pct, lagging FTSE 100 (NasdaqGS: Z - news) (Adds detail from statement, CEO quote, share price)

By Simon Jessop

LONDON, Feb 25 (Reuters) - British wealth manager St James's Place said on Thursday that higher costs and an increase in its contribution to a government compensation scheme weighed on full-year pretax profits.

The firm, which provides a range of financial services to around 500,000 UK clients, as well as others in Asia, has been a beneficiary of changes to Britain's pensions rules over the past year that have allowed savers to invest more freely.

While analysts said the firm's operational performance was strong, a 240 percent rise in the levy paid to the industry-wide Financial Services Compensation Scheme (FSCS) to 20.1 million pounds ($27.97 million), and the increased cost of investment in its Asia, training and distribution businesses dragged.

"(The results) were ... impacted by both a significant increase in the levy charged by the Financial Services Compensation Scheme (FSCS levy) and the higher costs associated with a number of strategic investments we are making in the business, laying foundations for the future," Chief Financial Officer Andrew Croft said in a statement.

As a result, profit before shareholder tax fell to 151 million pounds in 2015, from 183 million pounds a year earlier.

St James's Place's underlying cash result, adjusted for factors including solvency requirements and one-offs, and which the company uses as a guide to its ability to fund a dividend, also lagged slightly at 182.1 million pounds compared with a company supplied consensus of 184.7 million pounds.

That did not stop the firm sticking to a well-flagged 20 percent increase in its full-year dividend, though.

The drop in profit hit the company's shares, which were down 1.4 percent by 0843 GMT, bucking a near 1 percent rise in Britain's FTSE 100 index, although analysts were broadly pleased with the strength of the firm's underlying performance.

Operating profit on an embedded value basis rose 10.7 percent to 660.2 million pounds, beating a company supplied consensus forecast for 553.4 million pounds.

Embedded value, a key measure of the firm's profitability, gives a net present value for the expected future cashflow of the company.

Calling the results "excellent", Shore Capital analyst Eamonn Flanagan reiterated his 'buy' recommendation on the stock and said the company "is clearly thriving in the current regulatory and financial environment".

Despite a market expectation that the British finance minister will look to change pension taxation at the next Budget in March, Chief Executive David Bellamy said he expected flows to remain strong given growing demand for face-to-face advice. ($1 = 0.7185 pounds) (Reporting by Simon Jessop; Editing by Rachel Armstrong and Susan Fenton)