Ally Bank 2012 Annual Report Download - page 46

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2011 Compared to 2010
Our Insurance operations earned income from continuing operations before income tax expense of $316 million for the year ended
December 31, 2011, compared to $557 million for the year ended December 31, 2010. The decrease was primarily attributable to lower
insurance premiums and service contract revenue earned from our U.S. vehicle service contracts and lower realized investment gains.
Insurance premiums and service revenue earned was $1.2 billion for the year ended December 31, 2011, compared to $1.3 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 $220 million for the year ended December 31, 2011, compared to $418 million in 2010. The decrease was
primarily due to lower realized investment gains.
Insurance losses and loss adjustment expenses totaled $452 million for the year ended December 31, 2011, compared to $511 million in
2010. The decrease was primarily due to lower frequency and severity experienced in our U.S. vehicle service contract business and the sale
of certain international insurance operations during the fourth quarter of 2010, which was partially offset by higher weather-related losses in
the United States on our dealer inventory insurance products.
Acquisition and underwriting expense decreased 14% for the year ended December 31, 2011, compared to 2010. The decrease was
primarily due to the sale of certain international insurance operations during the fourth quarter of 2010 and lower commission expense in our
U.S. dealership-related products matching our decrease in earned premiums.
Premium and Service Revenue Written
The following table shows premium and service revenue written by insurance product.
Year ended December 31, ($ in millions) 2012 2011 2010
Vehicle service contracts
New retail $ 406 $ 376 $ 315
Used retail 509 514 517
Reinsurance (119) (103) (91)
Total vehicle service contracts 796 787 741
Wholesale 132 115 103
Other finance and insurance (a) 129 133 113
North American operations 1,057 1,035 957
International and Corporate (b) 44 72
Total $ 1,061 $ 1,039 $ 1,029
(a) Other finance and insurance includes Guaranteed Automobile Protection (GAP) coverage, excess wear and tear, wind-down of Canadian personal lines,
and other ancillary products.
(b) International and Corporate includes certain international operations that were sold during the fourth quarter of 2010 and other run-off products.
Insurance premiums and service revenue written was $1.1 billion for the year ended December 31, 2012, compared to $1.0 billion in
2011 and 2010. Insurance premiums and service revenue written increased slightly due to higher written premiums in our new retail vehicle
service contract and dealer inventory insurance products. Vehicle service contract revenue is earned over the life of the service contract on a
basis proportionate to the anticipated cost pattern. Accordingly, the majority of earnings from vehicle service contracts written during 2012
will be recognized as income in future periods.
Cash and Investments
A significant aspect of our Insurance operations is the investment of proceeds from premiums and other revenue sources. We use these
investments to satisfy our obligations related to future claims at the time these claims are settled. Our Insurance operations have an
Investment Committee, which develops guidelines and strategies for these investments. The guidelines established by this committee reflect
our risk tolerance, liquidity requirements, regulatory requirements, and rating agency considerations, among other factors.
Table of Contents
Management's Discussion and Analysis
Ally Financial Inc. • Form 10-K