BMW 2006 Annual Report Download - page 25

24 Group Management Report
10 Group Management Report
10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to §289 (4)
and §315 (4) HGB
43 Financial Analysis
43 – Internal Management System
44 – Earnings performance
46 – Financial position
48 – Net assets position
50 – Subsequent events report
50 – Value added statement
53 – Key performance figures
54 – Comments on BMW AG
58 Risk Management
62 Outlook
Continued growth in the area of dealer
financing
The total volume of dealer financing contracts man-
aged by the Financial Services segment stabilised
at a high level in 2006. The total volume of dealer
financing at 31 December 2006 amounted to euro
7,246 million, with more than 194,000 contracts in
place at that date. This represents a volume in-
crease of 2.3% compared to one year earlier. New
areas of growth were opened up during the year
under report by increasing geographical coverage
and by expanding the range of dealer financing
products offered to multiple-brand dealers. These
areas represent significant potential growth factors
for the future.
Fleet business remains on growth course
The BMW Group brand-neutral fleet business, which
offers its services on the markets under the name
Alphabet, operates in the fields of financing, full-
service leasing and fleet management.
Despite greater competition in this area, the
pace of growth achieved in the previous year was
maintained. In this vein, Alphabet achieved an im-
portant milestone in the second quarter of 2006,
topping the figure of 150,000 contracts. At the year-
end,13 Alphabet companies were managing a total
portfolio of 179,884 contracts. This represents an
increase of 29.9% over the year, with the previous
year’s level being surpassed in all markets.
In December 2006, the BMW Group signed a
contract to acquire LHS Leasing- und Handels-
gesellschaft mbH and DSL Fleetservices GmbH.
The acquisition is still subject to approval by the
EU antitrust authorities and had not been completed
by the reporting date. With the purchase of these
two companies, Alphabet would move into the top
ten companies of its kind in Europe and its portfolio
would grow to over 230,000 contracts.
Continued growth in the area of insurance
business
In addition to credit financing and lease contracts,
the Financial Services segment also operates as an
agent for motor vehicle, residual liability and other
vehicle-related insurance policies via cooperations
with local insurance companies. This service is now
being offered in more than 30 markets. In 2006,
several new products were brought onto the market
in a number of countries, including Switzerland,
Hungary and Russia. On top of this, the range of
products on offer in existing markets was also ex-
panded. The motor vehicle insurance line of busi-
ness continued to perform strongly in 2006, reflected
in a 17.1% increase in new business. At the end of
2006, the segment had a worldwide portfolio of
603,939 insurance contracts, a figure 39.8 % higher
than one year earlier.
Deposit business influenced by increased
competition
The Financial Services segment is currently engaged
in deposit business in Germany,theUnited Kingdom
and the USA (in the latter via brokers). Since the be-
ginning of 2006, the segment has been conducting
deposit business in the United Kingdom in con-
junction with a cooperation agreement with the
Newcastle Building Society.
The Financial Services segment derives great
benefit from the first-class credit ratings of its financ-
ing companies. In June 2006, for example, Moody’s
Investors Service issued an A1 and Prime-1 rating
to the BMW Bank of North America(USA)for its short-
term and long-term deposits, reflecting its above-
average profitability and solid capital resources.
In the face of greater competition, the segment’s
deposit volume worldwide was 9.6% lower than
one year earlier, totalling euro 5,781 million at 31 De-
cember 2006. The total deposit volume includes
approximately euro 1,200 million of deposits bro-
kered
by agents in the USA.
The objective of encouraging deposit cus-
tomers to move into more diversified forms of in-
vestment is successfully being realised with the help
of the tried and tested product combination of
“Save&Invest” as well as with the new savings mod-
el “Save& Plan”. This model allows wealth to be built
up on a long-term basis by regular savings which are
split between a savings account and a fund invest-
ment.
In the investment funds business, the range of
funds on offer was expanded by the addition of several
attractive investment funds over the course of the
year. Furthermore, Express Certificates were also
offered for the first time. Despite the overall positive
development of the stock markets, investors in Ger-
many withdrew funds, resulting in the net cash inflow
for investment funds in 2006 falling by10.5% to euro
84 million. By the year-end, the number of customer
deposit accounts had increased by 10.3% to 30,011.