Ally Bank 2012 Annual Report Download - page 5

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wholesale invoice price of new vehicles. Interest on wholesale automotive financing is generally payable monthly and is usually indexed to a
floating rate benchmark. The rate for a particular dealer is based on the dealer's creditworthiness and eligibility for various incentive
programs, among other factors. During 2012, we financed an average of $27.2 billion of dealer vehicle inventory through wholesale or
floorplan financings. We provide comprehensive automotive remarketing services, including the use of SmartAuction, our online auction
platform, which efficiently supports dealer-to-dealer and other commercial wholesale car transactions. In 2012, we and others including
dealers, fleet rental companies, financial institutions, and GM, utilized SmartAuction to sell 221,000 vehicles to dealers and other commercial
customers. SmartAuction served as the remarketing channel for 35% of Ally's off-lease vehicles.
Manufacturer Agreements
We are currently party to an agreement with GM pursuant to which GM initially agreed to offer all vehicle financing incentives to
customers through Ally. However, the agreement, which was originally entered into in November 2006, provides for annual reductions in the
percentage of retail financing subvention programs that GM is required to provide through Ally, and currently applies to a limited percentage.
The agreement expires on December 31, 2013.
We are also party to an agreement to make available automotive financing products and services to Chrysler dealers and customers. We
provide dealer financing and services and retail financing to qualified Chrysler dealers and customers as we deem appropriate according to
our credit policies and in our sole discretion, and Chrysler is obligated to use Ally for a designated minimum threshold percentage of Chrysler
retail financing subvention programs. On April 25, 2012, Chrysler provided us with notification of nonrenewal related to this agreement and
as a result, the agreement will expire on April 30, 2013.
The agreements with GM and Chrysler described above do not provide us with any benefits relating to standard rate financing or lease
products. As a result, since the inception of these agreements, we have successfully competed at the dealer-level for standard consumer retail
financing and leasing originations for GM and Chrysler automobiles based on our strong dealer relationships, competitive pricing, full suite of
products, and comprehensive service. We have further diversified our customer base by establishing agreements to become the preferred
financing provider for vehicles manufactured by Thor Industries, Maserati, The Vehicle Production Group LLC, Forest River, and Mitsubishi
Motors.
Insurance
Our Insurance operations offer both consumer finance protection and insurance products sold primarily through the automotive dealer
channel, and commercial insurance products sold directly to dealers. As part of our focus on offering dealers a broad range of consumer
finance and insurance products, we provide vehicle service contracts, maintenance coverage, and GAP products. We also underwrite selected
commercial insurance coverages, which primarily insure dealers' wholesale vehicle inventory in the United States. Our Insurance operations
had $8.4 billion of assets at December 31, 2012, and generated $1.2 billion of total net revenue in 2012.
Our vehicle service contracts for retail customers offer owners and lessees mechanical repair protection and roadside assistance for new
and used vehicles beyond the manufacturer's new vehicle warranty. These vehicle service contracts are marketed to the public through
automotive dealerships and on a direct response basis. The vehicle service contracts cover virtually all vehicle makes and models. We also
offer GAP products, which allow the recovery of a specified economic loss beyond the covered vehicle's value in the event the vehicle is
damaged and declared a total loss.
Wholesale vehicle inventory insurance for dealers provides physical damage protection for dealers' floorplan vehicles. Dealers are
generally required to maintain this insurance by their floorplan finance provider. We sell these insurance products to approximately 4,000
dealers. Among U.S. GM franchised dealers to whom we provide wholesale financing, our wholesale insurance product penetration rate is
approximately 80%. Dealers who receive wholesale financing from Ally are eligible for wholesale insurance incentives, such as automatic
eligibility in our preferred insurance programs and increased financial benefits.
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 investment guidelines and strategies. The guidelines established by this committee reflect our risk
tolerance, liquidity requirements, regulatory requirements, and rating agency considerations, among other factors.
Mortgage
Our ongoing Mortgage operations are conducted through Ally Bank. We intend to continue to originate a modest level of jumbo and
conventional conforming residential mortgages for our own portfolio through a select group of correspondent lenders. Our Mortgage
operations also consist of noncore business activities including portfolios in runoff. Additionally, on October 26, 2012, we announced that
Ally Bank had begun to explore strategic alternatives for its agency mortgage servicing rights portfolio and its business lending operations.
On February 28, 2013, we sold our business lending operations to Walter Investment Management Corp. Our Mortgage operations had $14.7
billion of assets at December 31, 2012, and generated $1.8 billion of total net revenue in 2012.
During 2012, we originated or purchased residential mortgage loans totaling $32.5 billion in the United States. Conforming and
government-insured residential mortgage loans comprised 93.2% of our 2012 originations, which, in the ordinary course of business, are sold
to the Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), or Government
National Mortgage Association (Ginnie Mae) (collectively, the Government-sponsored Enterprises, or GSEs). Since the onset of the housing
Table of Contents Ally Financial Inc. • Form 10-K