Ally Bank 2011 Annual Report Download - page 55

Table of Contents
Management's Discussion and Analysis
Ally Financial Inc. • Form 10−K
Insurance
Results of Operations
The following table summarizes the operating results of our Insurance operations excluding discontinued operations for the periods shown. The
amounts presented are before the elimination of balances and transactions with our other operating segments.
Year ended December 31, ($ in millions) 2011 2010 2009
Favorable/
(unfavorable)
2011−2010
% change
Favorable/
(unfavorable)
2010−2009
% change
Insurance premiums and other income
Insurance premiums and service revenue earned $ 1,556 $ 1,721 $ 1,817 (10) (5)
Investment income 252 444 255 (43) 74
Other income 59 75 72 (21) 4
Total insurance premiums and other income 1,867 2,240 2,144 (17) 4
Expense
Insurance losses and loss adjustment expenses 682 784 825 13 5
Acquisition and underwriting expense
Compensation and benefits expense 93 94 109 1 14
Insurance commissions expense 500 578 621 13 7
Other expenses 185 222 268 17 17
Total acquisition and underwriting expense 778 894 998 13 10
Total expense 1,460 1,678 1,823 13 8
Income from continuing operations before income tax expense $ 407 $ 562 $ 321 (28) 75
Total assets $ 8,036 $ 8,789 $ 10,614 (9) (17)
Insurance premiums and service revenue written $ 1,486 $ 1,460 $ 1,318 2 11
Combined ratio (a) 91.3% 94.1% 97.1%
(a) Management uses combined ratio as a primary measure of underwriting profitability with its components measured using accounting principles generally accepted in the United
States of America. Underwriting profitability is indicated by a combined ratio under 100% and is calculated as the sum of all incurred losses and expenses (excluding interest and
income tax expense) divided by the total of premiums and service revenues earned and other income.
2011 Compared to 2010
Our Insurance operations earned income from continuing operations before income tax expense of $407 million for the year ended December 31,
2011, compared to $562 million for the year ended December 31, 2010. The decrease was primarily attributable to lower realized investment gains.
Insurance premiums and service revenue earned was $1.6 billion for the year ended December 31, 2011, compared to $1.7 billion in 2010. The
decrease was primarily due to the sale of certain international insurance operations during the fourth quarter of 2010 and lower earnings from our U.S.
vehicle service contracts written between 2007 and 2009 due to lower domestic vehicle sales volume.
Investment income totaled $252 million for the year ended December 31, 2011, compared to $444 million in 2010. The decrease was primarily due to
lower realized investment gains, as well as realizing other−than−temporary impairments of $11 million during 2011.
Insurance losses and loss adjustment expenses totaled $682 million for the year ended December 31, 2011, compared to $784 million in 2010. The
decrease was primarily due to lower frequency and severity experienced at our international business and the sale of certain international insurance
operations during the fourth quarter of 2010, which was partially offset by higher weather−related losses in the United States on our dealer inventory
insurance products.
Acquisition and underwriting expense decreased 13% for the year ended December 31, 2011, compared to 2010. The decrease was primarily due to
the sale of certain international insurance operations during the fourth quarter of 2010 and lower commission expense in our U.S. dealership−related
products matching our decrease in earned premiums.
2010 Compared to 2009
Our Insurance operations earned income from continuing operations before income tax expense of $562 million for the year ended December 31,
2010, compared to $321 million for the year ended December 31, 2009. The increase was primarily due to higher realized investment gains driven by
overall market improvement and reduced expenses.
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