Ally Bank 2014 Annual Report Download - page 54

Table of Contents
Management's Discussion and Analysis
Ally Financial Inc. • Form 10-K
42
Insurance Operations
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 reportable segments.
Year ended December 31, ($ in millions) 2014 2013 2012
Favorable/
(unfavorable)
2014-2013
% change
Favorable/
(unfavorable)
2013-2012
% change
Insurance premiums and other income
Insurance premiums and service revenue earned $ 979 $ 1,012 $ 1,055 (3) (4)
Investment income, net (a) 194 227 124 (15) 83
Other income 12 14 35 (14) (60)
Total insurance premiums and other income 1,185 1,253 1,214 (5) 3
Expense
Insurance losses and loss adjustment expenses 410 405 454 (1) 11
Acquisition and underwriting expense
Compensation and benefits expense 63 62 61 (2) (2)
Insurance commissions expense 374 370 382 (1) 3
Other expenses 141 162 157 13 (3)
Total acquisition and underwriting expense 578 594 600 31
Total expense 988 999 1,054 15
Income from continuing operations before income tax
expense (benefit) $ 197 $ 254 $ 160 (22) 59
Total assets $ 7,190 $ 7,124 $ 8,439 1(16)
Insurance premiums and service revenue written $ 1,023 $ 997 $ 1,061 3(6)
Combined ratio (b) 100.2% 98.0% 98.3%
(a) Includes gain on investments of $143 million, $177 million, and $77 million for the years ended December 31, 2014, 2013, and 2012, respectively; and
interest expense of $54 million, $64 million, and $79 million for the years ended December 31, 2014, 2013, and 2012, respectively.
(b) Management uses a combined ratio as a primary measure of underwriting profitability. 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 fee income.
2014 Compared to 2013
Our Insurance operations earned income from continuing operations before income tax expense of $197 million for the year ended
December 31, 2014, compared to $254 million for the year ended December 31, 2013. The decrease was primarily due to higher weather-
related losses, lower earned revenue, and lower realized investment gains, partially offset by lower non-weather losses.
Insurance premiums and service revenue earned was $979 million for the year ended December 31, 2014, compared to $1.0 billion in
2013. The decrease was primarily due to the wind-down of our Canadian personal lines portfolio.
Net investment income totaled $194 million for the year ended December 31, 2014, compared to $227 million in 2013. The decrease was
primarily due to lower realized investment gains as well as interest and dividend income, offset by lower other-than-temporary impairments,
which totaled $14 million in 2014 as compared to $20 million in 2013.
Insurance losses and loss adjustment expenses totaled $410 million for the year ended December 31, 2014, compared to $405 million for
the year ended December 31, 2013. The increase was primarily due to higher weather-related losses from severe hailstorms, particularly in the
second quarter of 2014, partially offset by lower non-weather-related losses driven by the wind-down of the Canadian personal lines portfolio
and lower loss experience of VSC products. Higher weather losses primarily drove the increase in the combined ratio to 100.2% for the year
ended December 31, 2014, compared to 98.0% for the year ended December 31, 2013.
2013 Compared to 2012
Our Insurance operations earned income from continuing operations before income tax expense of $254 million for the year ended
December 31, 2013, compared to $160 million for the year ended December 31, 2012 The increase was primarily attributable to higher
realized investment gains partially offset by a reduction in insurance premiums and service revenue earned.
Insurance premiums and service revenue earned was $1.0 billion for the year ended December 31, 2013, compared to $1.1 billion in
2012. The decrease was primarily due to declining U.S. VSCs written in prior years when the automotive market was depressed.