Sallie Mae 2007 Annual Report Download - page 92

CORPORATE AND OTHER BUSINESS SEGMENT
Our Corporate and Other reportable segment reflects the aggregate activity of our smaller operating units
including our Guarantor Servicing and Loan Servicing operating units,Upromise (acquired in August 2006),
other products and services, as well as corporate expenses that do not pertain directly to our operating
segments.
In our Guarantor Servicing operating unit, we provide a full complement of administrative services to
FFELP guarantors including guarantee issuance, processing, account maintenance, and guarantee fulfillment.
In our Loan Servicing operating unit, we originate and service student loans on behalf of lenders who are
unrelated to SLM Corporation. In our Upromise operating unit, we provide 529 college-savings plan
administration services and operate an affinity marketing program.
Condensed Statements of Income
2007 2006 2005 2007 vs. 2006 2006 vs. 2005
Years Ended
December 31, % Increase (Decrease)
Net interest income (loss) after provisions for
losses ............................. $ (1) $ (5) $ (1) 80% 400%
Guarantor servicing fees ................. 156 132 115 18 15
Loan servicing fees..................... 23 29 44 (21) (34)
Upromise ............................ 124 43 — 188 100
Other ............................... 71 83 81 (14) 2
Total other income ..................... 374 287 240 30 20
Operating expenses ..................... 341 250 235 36 6
Income before income taxes .............. 32 32 4 — 700
Income tax expense .................... 12 12 1 — 1,100
“Core Earnings” net income .............. $ 20 $ 20 $ 3 —% 567%
USA Funds, the nation’s largest guarantee agency, accounted for 86 percent, 83 percent, and 82 percent,
respectively, of guarantor servicing fees and 16 percent, 25 percent, and 27 percent, respectively, of revenues
associated with other products and services for the years ended December 31, 2007, 2006 and 2005.
2007 versus 2006
The increase in guarantor servicing fees versus the year-ago period was primarily due to the recognition
of $15 million of previously deferred guarantee account maintenance fee revenue related to a negotiated
settlement with USA Funds in the second quarter of 2006. The negotiated settlement with USA Funds would
have resulted in the Company having to return the $15 million to USA Funds, if certain events occurred prior
to December 31, 2007. These events did not occur prior to December 31, 2007, as stipulated in the negotiated
settlement. As a result, all such contingencies were removed, resulting in the recognition of this deferred
revenue in 2007. This amount is non-recurring in nature.
The increase in fees from Upromise for the year ended December 31, 2007 versus the year-ago period
was primarily due to the acquisition of Upromise in August 2006.
2006 versus 2005
The increase in guarantor servicing fees in 2006 versus 2005 is primarily due to a negotiated settlement
with USA Funds such that USA Funds was able to pay account maintenance fees that were previously held up
by the cap on payments from ED to guarantors in 2005. This cap was removed by legislation reauthorizing the
student loan programs of the Higher Education Act on October 1, 2006.
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