Ally Financial Inc. · NYSE:ALLY
Ally Financial — Gmac — Debt Investor Presentation (April 2007)
42 slides from Ally Financial's debt investor presentation, Apr 26, 2007
Slide 1: AFSA International Fixed Income Investor Presentation
Contact GMAC Investor Relations at (866) 710-4623 or investor.relations@gm.com AFSA International Fixed Income Investor Presentation April 26, 2007 Sanjiv Khattri EVP & CFO
Slide 2: Forward Looking Statements
Forward Looking Statements In the presentation that follows and in related comments by GMAC LLC ("GMAC") management, our use of the words "expect", "anticipate", "estimate", "forecast", "objective", "plan", "could", "should", "would", "may", "goal", "project", "outlook", "priorities", "targets", "in
Slide 3: Overview
Overview 2006 Performance Funding Strategic Overview 2007 Outlook Summary
Slide 4: 2006 Performance
2006 Performance
Slide 5: 2006 Performance Highlights
2006 Performance Highlights On Nov. 30th, successfully completed sale of 51% of GMAC Established independent credit rating 2006 net income of $2.1 billion compared to $2.3 billion for 2005 U.S. residential mortgage market is in the midst of a radical slow down Slowing home price appreciation and non
Slide 6: Operating Earnings Walk 2005 vs. 2006
Includes gross impact of sale of equity interest in a regional homebuilder of about $259 million, net of tax Includes $568 million capital gains in Q4 due to rebalancing the investment portfolio Includes lower income from our former Commercial Mortgage unit, attributable to 21% ownership following t
Slide 7: Full Year Net Income
Includes gross impact of sale of equity interest in a regional homebuilder of about $259 million, net of tax Includes $568 million capital gains in Q4 due to rebalancing the investment portfolio Includes lower income from our former Commercial Mortgage unit, attributable to 21% ownership following t
Slide 8: ResCap - Diversified Mortgage Enterprise
ResCap is diversified across most sectors of the residential mortgage market Has the franchise platform to capitalize on opportunities to better utilize its competitive advantages ResCap - Diversified Mortgage Enterprise
Slide 9: ResCap - 2006 Key Metrics
Negative nonprime valuations Increase in loan loss provisions on nonprime Nonprime credit issues in warehouse lending Increased origination volumes Moving (Securitization / Sales) Storage (HFI / Servicing) Lending (Lending Receivables) International ResCap - 2006 Key Metrics
Slide 10: ResCap - Nonprime Loan Risk
Warehouse Lending Receivables Total: $8.8 ResCap - Nonprime Loan Risk Relative nonprime loan exposure varies on balance sheet as does its risk 2002 2003 Fixed Income 27 73 Loan Servicing Portfolio Total: $448.6 Nonprime Prime ($ billions) 2002 2003 Fixed Income 17 83 17% Held For Investment Total: $
Slide 11: ResCap - Held for Investment Portfolio - Credit Quality
Asset quality weaker due to slowing housing market and stress in nonprime mortgage market Nonprime assets continue to drive increase in delinquencies and nonaccruals Declines in home price appreciation increased severity of losses Allowance for loan losses increased to 2.17% at 12/31/2006 from 1.55%
Slide 12: ResCap - Capital
ResCap - Capital Capital increased in 2006, resulting in equity at year end of $7.6 billion ResCap's equity base essentially in line with economic capital requirements Capital factors are under review to incorporate recent market volatility GMAC is committed to maintaining a strong capital position
Slide 13: ResCap - 2007 Outlook
ResCap - 2007 Outlook What worked in 2006 continues to work IBG performance remains solid BCG businesses performing as expected Strong prime originations and market share growth What was bad in Q4 continues to be challenging Liquidity of nonprime assets Warehouse lending counterparty risk Rising del
Slide 14: ResCap - Long-term Profile
ResCap - Long-term Profile Long term fundamental earnings potential of the franchise remains solid Pressure on income related to nonprime assets likely to abate as new strategic initiatives are implemented Sharply reduced nonprime origination volume through tighter underwriting criteria and pricing
Slide 15: Auto Finance - 2006 Key Metrics
Strong lease and retail originations While delinquencies trended higher, losses remained at historically low levels U.S. residuals down slightly, reflecting weaker used car prices NAO margins improved in Q4, IO still under pressure Originations Credit Losses Lease Residuals Margins Auto Finance - 20
Slide 16: Auto Finance - Consumer Originations
2006 originations increased slightly from 2005 levels Strong lease growth and GM's successful 72 hour sale helped drive volumes ($ billions) Total Units 3,423 3,082 3,083 2,622 2,575 (in 000s) Auto Finance - Consumer Originations
Slide 17: Auto Finance - Consumer Credit Quality
Delinquencies trended higher in 2006, reflecting a somewhat weaker consumer credit environment Losses remain at historically low levels 2005 2006 Annualized credit losses as a % of average managed retail contracts 2005 2006 Delinquencies as a % of serviced retail assets 30 days or more past due 2006
Slide 18: Auto Finance - Nonprime
Auto Finance - Nonprime Nonprime auto market has not experienced the pressures affecting the nonprime mortgage industry Typical leading indicators for deterioration in nonprime auto credit performance are rising interest rates or rising unemployment - which we are not seeing GMAC's exposure to nearp
Slide 19: Insurance - 2006 Key Metrics
Written Revenue* Underwriting Results Combined Ratio Investment Income Flat despite decline in GM retail volume and increased competition in U.S. personal lines Strong underwriting results driven by higher earned premiums and lower loss experience Improved combined ratio of 92.3% in 2006 vs. 93.9% i
Slide 20: Insurance - Consolidated Earnings
Favorable underlying core earnings trend continues Core Earnings = Underwriting income + Investment income (net of tax) Portfolio was rebalanced in Q4 2006 resulting in significant capital gains Combined Ratio = Sum of all reported losses and expenses (excluding interest and income tax expense) divi
Slide 21: Funding
Funding
Slide 22: Global Liquidity
ResCap's liquidity position at 2006 YE was $64 billion $1 billion GM equity contribution in March 2007 Substantial committed funding facilities $10 billion Citibank secured facility in place New $6 billion wholesale bridge facility Exceptional liquidity position offers significant flexibility Facili
Slide 23: Global Debt Maturities
Global Debt Maturities Staggered maturity profile minimizes refinancing risks Significant debt outstanding beyond 5 years provides flexibility Scheduled Maturity Of Long-Term Debt At 12/31/2006 Unsecured Secured $13.6 $12.4 $6.4 $2.1 $1.6 $55.2 $28.1 $22.8 $16.6 $11.1 $7.9 $13.3 $27.9 $16.7 2006 200
Slide 24: 2007 Funding Plan
2007 Funding Plan Maintain appropriate liquidity cushion Significant cash balances and committed liquidity facilities Extensive auto loan assets that can be monetized quickly ("dry powder") Laddering of debt with moderate near-term maturities Reduce all-in cost of borrowings Active liability managem
Slide 25: Strategic Overview
Strategic Overview
Slide 26: GMAC - Diversified Enterprise
GMAC Financial Services Automotive Finance Insurance ResCap GMAC - Diversified Enterprise Other North American Auto International Auto MIC Personal Lines Commercial Finance Group Equity interest in Capmark* * Minority equity interest in Capmark. In March 2006, we closed the sale of approximately 78%
Slide 27: Operating Earnings Mix - Business Diversification
With the growth in our mortgage and insurance operations, our auto finance earnings now represent less than half of GMAC's net income Very different than a few years ago when GMAC was predominantly an auto finance company Auto Finance ResCap 2005 $2.7B1 2006 $2.0B1,2 Insurance 2002 $2.2B1 1 Operatin
Slide 28: Gross Revenue - Business Diversification
Gross Revenue - Business Diversification Notably strong growth in diversified revenues with about 50% of revenue being contributed by our mortgage and insurance operations Gross revenue reflects gross financing revenue plus insurance premiums and service revenue plus mortgage banking income plus inv
Slide 29: The Transaction
Cerberus led Investor Consortium The Transaction 51% Equity 49% Equity
Slide 30: New GMAC
New GMAC With the closing of the GMAC sale transaction, GMAC has emerged as an independent company with an improved credit profile Strengthened capital position Dividend restrictions Cost cuttings plans More diversified business strategies GMAC Strategic Focus Transform GMAC from a captive operation
Slide 31: GMAC Improved Credit Profile
GMAC Improved Credit Profile Strengthened Credit Profile New $2.1 billion (face) layer of preferred equity injected $1 billion GM equity contribution in March 2007 Essentially all 2007-2008 "after-tax earnings" to be retained by GMAC All 2009-2011 after-tax profit distributions to Cerberus to be re-
Slide 32: Strategic Priorities
Strategic Priorities Implement changes to U.S. mortgage operations to address deteriorating non-prime market environment Position business to grow again as industry consolidates Diversify operations beyond GM-related businesses Leverage existing dealer relationship to expand presence beyond GM deale
Slide 33: Strategic Priorities (Continued...)
Strategic Priorities (Continued...) Grow GMAC fee-based businesses (e.g., SmartAuction, Fee for Servicing, etc.) Generates cashflow with virtually no strain on capital position Capitalize on cross-sell opportunities across GMAC's 18 million customers Sell more products per customer Reduce asset acqu
Slide 34: 2007-2008 Earnings Drivers
2007-2008 Earnings Drivers Earnings Drivers - 2007-2008 Funding Cost Reduction: Strengthen the capital base Improve the credit ratings Reduce borrowing costs Expand net margins Operating Expense Reduction: Align global resources more efficiently Eliminate redundant cost structures Earnings Drivers -
Slide 35: Operating Expense Reductions
Lean operations Examples Combine similar platforms Integrating ResCap conforming and non-conforming platforms Integrating Semperian and Nuvell auto servicing platforms One general ledger system on a global basis Reduce HQ overlap across business units Common systems and processes across platforms to
Slide 36: New GMAC - Symmetry Of Shareholder / Bondholder Interest
Priority Equity Holder Initiatives Bolster Capital Base Enhance Liquidity Strengthen Credit Measures Aligned Interests Provides Significant Protection to Unsecured Bondholders Drives Equity Holder Returns Reduce Borrowing Costs Expand Net Margins Increase Net Income VALUE PLAY New GMAC - Symmetry Of
Slide 37: 2007 Outlook
2007 Outlook
Slide 38: 2007 Outlook
2007 Outlook Continuing pressures at ResCap likely to constrain overall GMAC results near term Highest priority is implementing changes at ResCap to address rapidly changing mortgage market Global Auto Finance is well-positioned to generate attractive returns Insurance is expected to deliver another
Slide 39: Summary
Summary
Slide 40: Summary
Summary 2006 Record performance at Insurance group and strong operating results in Auto Finance helped offset weakness in U.S. mortgage sector 2007 Continued solid performance at Insurance and Auto Finance anticipated ResCap profitability likely to remain constrained near term as pressure on nonprim
Slide 41: Supplemental
The following supplemental chart is provided to reconcile adjusted financial data comprehended in the primary chart set with GAAP-based data (per GMAC's financial statements) and/or provide clarification with regard to definition of non-GAAP terminology Supplemental
Slide 42: Reconciliation of Insurance Core Earnings
Amount within premium tax and other expense in Form 10-K Amount within investment income in Form 10-K S1 Reconciliation of Insurance Core Earnings