Ally Bank 2011 Annual Report Download - page 28

Table of Contents
Ally Financial Inc. • Form 10−K
reported, including claims adjustment expenses relating to direct insurance and assumed reinsurance agreements. For further discussion related to estimates
and assumptions, see Management's Discussion and Analysis of Financial Condition and Results of Operations−Critical Accounting Estimates. It is difficult
to determine the accuracy of our estimates and assumptions, and our actual experience may differ materially from these estimates and assumptions. A
material difference between our estimates and assumptions and our actual experience may adversely affect our cash flow, profitability, financial condition,
and business prospects.
Our business outside the United States exposes us to additional risks that may cause our revenues and profitability to decline.
We conduct a significant portion of our business outside the United States exposing us to risks such as the following:
• multiple foreign regulatory requirements that are subject to change;
• differing local product preferences and product requirements;
• fluctuations in foreign interest rates;
• difficulty in establishing, staffing, and managing foreign operations;
• differing labor regulations;
• consequences from changes in tax laws;
• restrictions on our ability to repatriate profits or transfer cash into or out of foreign countries; and
• political and economic instability, natural calamities, war, and terrorism.
The effects of these risks may, individually or in the aggregate, adversely affect our revenues and profitability.
Our business could be adversely affected by changes in foreign−currency exchange rates.
We are exposed to risks related to the effects of changes in foreign−currency exchange rates. Changes in currency exchange rates can have a
significant impact on our earnings from international operations as a result of foreign−currency−translation adjustments. While we carefully monitor and
attempt to manage our exposure to fluctuation in currency exchange rates through foreign−currency hedging activities, these types of changes could have a
material adverse effect on our business, results of operations, and financial condition.
Fluctuations in valuation of investment securities or significant fluctuations in investment market prices could negatively affect revenues.
Investment market prices in general are subject to fluctuation. Consequently, the amount realized in the subsequent sale of an investment may
significantly differ from the reported market value and could negatively affect our revenues. Additionally, negative fluctuations in the value of
available−for−sale investment securities could result in unrealized losses recorded in equity. Fluctuation in the market price of a security may result from
perceived changes in the underlying economic characteristics of the investee, the relative price of alternative investments, national and international events,
and general market conditions.
A loss of contractual servicing rights could have a material adverse effect on our financial condition, liquidity, and results of operations.
We are the servicer for all of the receivables we have acquired or originated and transferred to other parties in securitizations and whole−loan sales of
automotive receivables. Our mortgage subsidiaries service the mortgage loans we have securitized, and we service the majority of the mortgage loans we
have sold in whole−loan sales. In each case, we are paid a fee for our services, which fees in the aggregate constitute a substantial revenue stream for us. In
each case, we are subject to the risk of termination under the circumstances specified in the applicable servicing provisions.
In most securitizations and whole−loan sales, the owner of the receivables or mortgage loans will be entitled to declare a servicer default and
terminate the servicer upon the occurrence of specified events. These events typically include a bankruptcy of the servicer, a material failure by the servicer
to perform its obligations, and a failure by the servicer to turn over funds on the required basis. The termination of these servicing rights, were it to occur,
could have a material adverse effect on our financial condition, liquidity, and results of operations and those of our mortgage subsidiaries.
Changes in accounting standards issued by the Financial Accounting Standards Board (FASB) could adversely affect our reported revenues,
profitability, and financial condition.
Our financial statements are subject to the application of GAAP, which are periodically revised and/or expanded. The application of accounting
principles is also subject to varying interpretations over time. Accordingly, we are required to adopt new or revised accounting standards or comply with
revised interpretations that are issued from time to time by various parties, including accounting standard setters and those who interpret the standards, such
as the FASB and the SEC, banking regulators, and our independent registered public accounting firm. Those changes could adversely affect our reported
revenues, profitability, or financial condition.
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