Ally Bank 2014 Annual Report Download - page 55

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Table of Contents
Management's Discussion and Analysis
Ally Financial Inc. • Form 10-K
43
Investment income totaled $227 million for the year ended December 31, 2013, compared to $124 million in 2012. The increase was
primarily due to higher realized investment gains and lower recognition of other-than-temporary impairment on certain equity securities of
$20 million in 2013 as compared to $61 million in 2012.
Other income totaled $14 million for the year ended December 31, 2013, compared to $35 million in 2012. The decrease was primarily
due to a 2012 gain of $8 million on the sale of our Canadian personal lines business.
Insurance losses and loss adjustment expenses totaled $405 million for the year ended December 31, 2013, compared to $454 million for
the year ended December 31, 2012. The decrease was due to the wind-down of the Canadian personal lines portfolio and lower losses in line
with earned premium.
Premium and Service Revenue Written
The following table shows premium and service revenue written by insurance product.
Year ended December 31, ($ in millions) 2014 2013 2012
Vehicle service contracts
New retail $ 422 $ 421 $ 406
Used retail 509 509 509
Reinsurance (152) (143) (119)
Total vehicle service contracts 779 787 796
Wholesale 186 157 132
Other finance and insurance (a) 58 53 133
Total $ 1,023 $ 997 $ 1,061
(a) Other finance and insurance includes GAP coverage, excess wear and tear, wind-down of Canadian personal lines, and other ancillary products.
Insurance premiums and service revenue written was $1.0 billion for the year ended December 31, 2014, compared to $997 million in
2013. The increase in Insurance premiums and service revenue written primarily resulted from higher wholesale premium, partially offset by
higher vehicle service reinsurance participation. VSC 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 VSCs written during 2014 will be recognized as income in future periods.
Insurance premiums and service revenue written was $997 million for the year ended December 31, 2013, compared to $1.1 billion in
2012. Insurance premiums and service revenue written decreased due to the wind-down of the Canadian personal lines business. Excluding
Canadian Personal Lines, written premium for the year ended December 31, 2013 decreased by $6 million as compared to 2012 due to a
decrease in VSCs as a result of increased reinsurance participation, which was in line with market trends, partially offset by an increase in
wholesale due to higher dealer inventory levels.
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.