Business unit review: Asset management
PPM America
1. Market review and summary of strategy
PPM America (PPMA) manages assets for Prudential’s US, UK and Asian affiliates. PPMA also provides investment services to other affiliated and unaffiliated institutional clients including CDOs, private investment funds, institutional accounts and mutual funds.
PPMA’s strategy is focused on effectively managing existing assets, maximising synergies with international asset management affiliates and leveraging investment management capabilities across the Prudential Group.
A summary of PPMA’s year end 2006 assets under management follows:
| (US$ billions) | US | UK | Asia | Total |
|---|---|---|---|---|
| Insurance | 45.5 | 16.3 | 0.5 | 62.3 |
| Retail | 0.0 | 2.5 | 5.0 | 7.5 |
| Institutional | 0.2 | 0.0 | 0.0 | 0.2 |
| CDOs | 3.6 | 0.0 | 0.0 | 3.6 |
| Total | 49.3 | 18.8 | 5.5 | 73.6 |
2. Current year initiatives
During 2006, PPMA executed several initiatives to improve operational effectiveness and scalability, including the enhancement of fixed income analytical capabilities. Initiatives designed to maximise synergies within the Group included leveraging PPMA’s capabilities to manufacture financial products distributed by affiliates.
3. Financial results and performance
Investment performance was favourable in 2006, particularly across US affiliate portfolios, the US public equity and fixed income components of the portfolios managed for UK affiliates and CDOs.
IFRS operating profit in 2006 was £12 million versus £20 million in 2005. The 2005 results benefited from a £5 million positive non-recurring item related to revaluation of a CDO.
4. Outlook and forthcoming objectives
The 2007 outlook is positive driven by current momentum, favourable economic and market conditions, and the growth prospects of internal clients.