Ally Bank 2012 Annual Report Download - page 45

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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) 2012 2011 2010
Favorable/
(unfavorable)
2012-2011
% change
Favorable/
(unfavorable)
2011-2010
% change
Insurance premiums and other income
Insurance premiums and service revenue earned $ 1,055 $ 1,153 $ 1,342 (8) (14)
Investment income 124 220 418 (44) (47)
Other income 35 25 41 40 (39)
Total insurance premiums and other income 1,214 1,398 1,801 (13) (22)
Expense
Insurance losses and loss adjustment expenses 454 452 511 —12
Acquisition and underwriting expense
Compensation and benefits expense 61 61 64 —5
Insurance commissions expense 382 431 510 11 15
Other expenses 157 138 159 (14) 13
Total acquisition and underwriting expense 600 630 733 514
Total expense 1,054 1,082 1,244 313
Income from continuing operations before income tax
expense $ 160 $ 316 $ 557 (49) (43)
Total assets $ 8,439 $ 8,036 $ 8,789 5(9)
Insurance premiums and service revenue written $ 1,061 $ 1,039 $ 1,029 21
Combined ratio (a) 98.3% 93.1% 90.6%
(a) Management uses a combined ratio as a primary measure of underwriting profitability with its components measured using accounting principles
generally accepted in the United States of America. 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
income.
2012 Compared to 2011
Our Insurance operations earned income from continuing operations before income tax expense of $160 million for the year ended
December 31, 2012, compared to $316 million for the year ended December 31, 2011. The decrease was primarily attributable to lower
investment income, lower insurance premiums and service revenue earned from our U.S. vehicle service contracts, and higher weather-related
losses, including the effects of Storm Sandy.
Insurance premiums and service revenue earned was $1.1 billion for the year ended December 31, 2012, compared to $1.2 billion in
2011. The decrease was primarily due to declining U.S. vehicle service contracts written between 2007 and 2009 as a result of lower domestic
vehicle sales volume.
Investment income totaled $124 million for the year ended December 31, 2012, compared to $220 million in 2011. The decrease was
primarily due to the recognition of other-than-temporary impairment on certain equity securities of $61 million and lower realized investment
gains.
Other income totaled $35 million for the year ended December 31, 2012, compared to $25 million in 2011. The increase was primarily
due to a gain of $8 million on the sale of our Canadian personal lines business during the second quarter of 2012.
Insurance losses and loss adjustment expenses totaled $454 million for the year ended December 31, 2012, compared to $452 million for
the year ended December 31, 2011. The slight increase was driven primarily by higher weather-related losses in the United States on our
dealer inventory insurance products, including the effects of Storm Sandy, mostly offset by lower frequency experienced in our vehicle
service contract business and lower losses matching our decrease in earned premium. Despite the decrease in insurance premiums and service
revenue earned, insurance losses and loss adjustment expenses increased primarily due to the impacts of Storm Sandy, which further impacted
the increase in the combined ratio.
Acquisition and underwriting expense decreased 5% for the year ended December 31, 2012, compared to 2011. The decrease was
primarily a result of lower commission expense in our U.S. dealership-related products matching our decrease in earned premiums, partially
offset by increased technology expense.
Table of Contents
Management's Discussion and Analysis
Ally Financial Inc. • Form 10-K