Ally Financial Inc. · NYSE:ALLY
Ally Financial — Gmac — Investor Presentation (March 2007)
89 slides from Ally Financial's investor presentation, Mar 28, 2007
Slide 1: Investor Forum
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Slide 2: Beas
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Slide 3: Susan Shank, Director, Investor Relations
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Slide 4: 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 5: Beas
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Slide 6: Eric Feldstein, CEO, GMAC
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Slide 7: Cerberus led Investor Consortium New GMAC Ownership
Cerberus led Investor Consortium New GMAC Ownership 51% Equity 49% Equity
Slide 8: Symmetry Of Shareholder/Bondholder Interest
Shareholder Interests Bondholder Interests Symmetry Of Shareholder/Bondholder Interest
Slide 9: Value Play
VALUE PLAY Increase the return on capital to equity holders by further strengthening GMAC's credit profile and reducing funding costs Symmetry Of Shareholder / Bondholder Interest
Slide 10: Symmetry Of Shareholder / Bondholder Interest
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 Increas
Slide 11: GMAC 5-Year CDS
GMAC 5-Year CDS Original Excel Chart below 0% 1% 2% 3% 4% 5% 6% 7% 8% Jul- 04 Jan- 05 Jul- 05 Jan- 06 Jul- 06 Jan- 07 BBB- Composite GMAC GM Announces intention to sell GMAC Signing of GMAC deal
Slide 12: Risk Mitigation Efforts
Risk Mitigation Efforts GM credit risk reduction Prudent balance sheet and capital management Enhanced liquidity and funding flexibility
Slide 13: Significant reduction in credit exposure to GM
Significant reduction in credit exposure to GM Certain unsecured credit exposure to GM U.S. entities capped contractually at $1.5 billion Secured Exposure to GM Unsecured Exposure to GM ($ billions) ($ billions) * Represents $4B undrawn GM credit line that expired on Sept. 30, 2006 $4.1 $2.1 9/30/20
Slide 14: Balance Sheet & Capital Management - 2007
Contain / reduce level of managed assets retained on the balance sheet Large scale origination volume will be maintained "Originate / Sell" business model will be advanced Anticipated run off of $20 billion in nonprime mortgage asset portfolio Balance Sheet & Capital Management - 2007 Strengthen GMA
Slide 15: Liquidity, Liquidity & Liquidity
Liquidity, Liquidity & Liquidity Exceptional liquidity position offers significant flexibility Facilitates asset growth Provides cushion against "shocks" which might impair market access * Includes $15 billion cash and cash equivalents and $3 billion invested in marketable securities ($ billions) 20
Slide 16: ResCap Liquidity - Strategic Advantage
ResCap Liquidity - Strategic Advantage In the wake of a highly challenging mortgage market, LIQUIDITY will be a critical success factor ResCap's year-end 2006 cash position of $2.0 billion and equity base of $7.6 billion provides competitive advantage Enables company to: Comfortably meet all debt ob
Slide 17: Growth Initiatives
Growth Initiatives Augment profitability of existing GM-related business Diversify auto finance and insurance operations beyond the GM dealer network Increase share of U.S. mortgage market over the long term Capitalize on opportunities arising from sharp market downturn Continue profitable expansion
Slide 18: Summary
Summary GMAC enters 2007 as a fundamentally stronger company with an improved credit profile Better positioned to withstand near term challenges Greater flexibility to pursue long term growth opportunities Value Play for equity holders and bondholders Reduce borrowing costs Improve net margins Incre
Slide 19: Beas
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Slide 20: Beas
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Slide 21: BubebeGseets,
BubebeGseets, PoBeseeetau
Slide 22: Bill Muir, President
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Slide 23: GMAC Financial Services Business Update
GMAC FINANCIAL SERVICES Business Update SERVICES
Slide 24: Earnings by business, 2001-2006 ($ billions)
$ billions b ! $2.9 $25 $2.2 $2.3 $2.1 : | ! 2001 2002 2003 2004 2005 2006 Global Automotive Finance mResCap / Insurance / Other
Slide 25: 2006 Assessment
2006 Assessment Achieved solid overall results despite very difficult environment Higher interest rates Flattening yield curve Sharp downturn in U.S. mortgage market Demonstrates the diversity of GMAC's earnings base Ability to withstand near-term challenges
Slide 26: ResCap - 2006 Key Metrics
Moving (Securitization / Sales) Storage (HFI / Servicing) Lending (Lending Receivables) International Negative nonprime valuations ResCap - 2006 Key Metrics Increase in loan loss provisions on nonprime Nonprime credit issues in warehouse lending Increased origination volumes
Slide 27: ResCap - Changing Market Conditions
Cyclical downturn in the nonprime mortgage business occurred very rapidly following one of the industry's strongest historical periods of performance from 2001 to 2005 ResCap - Changing Market Conditions Change in Median Home Price Source: U.S Census Bureau, National Association of Realtors, as of D
Slide 28: ResCap - Changing Market Conditions: U.S. Nonprime Market Share
$0 $100 $200 $300 $400 $500 $600 $700 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 $ billions 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% B&C Mkt $ RCG B&C Share % ResCap - Changing Market Conditions U.S. Nonprime Market Share Source: Inside Mortgage News ResCap leaned away from the nonpr
Slide 29: ResCap - Outlook
ResCap - Outlook Losses are confined to areas with nonprime exposure Implementing plan to return U.S. business to profitability Reduced nonprime origination Structural expense reduction via platform integration Long-term fundamental earnings potential remains solid Diverse franchise Top 10 market sh
Slide 30: Auto Finance - 2006 Key Metrics
Strong lease and retail originations Originations Credit Losses Lease Residuals Margins Auto Finance - 2006 Key Metrics 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
Slide 31: Auto Finance - Consumer Originations
2006 originations increased slightly from 2005 levels ($ billions) Total Units 3,423 3,082 3,083 2,622 2,575 (in 000s) Auto Finance - Consumer Originations $61 $57 $59 $51 $55 $10 $10 $8 $7 $6 2002 2003 2004 2005 2006 New Used
Slide 32: Sales Proceeds On Scheduled U.S. Lease Terminations
Overall trends remain stable 2006 performance was down slightly reflecting weaker used car prices Sales Proceeds On Scheduled U.S. Lease Terminations Lease 738 611 414 283 272 terminations (Units 000s) ($ per vehicle) $12,646 $12,549 $13,277 $13,949 $13,848 2002 2003 2004 2005 2006 Note: Figures rep
Slide 33: Auto Finance - Consumer Credit Quality
Delinquencies trended higher in 2006, reflecting a somewhat weaker consumer credit environment Losses remain at historically low levels Annualized Credit Losses As A % Of Average Managed Retail Contracts Delinquencies As A % Of Serviced Retail Assets 30 Days Or More Past Due Auto Finance - Consumer
Slide 34: Insurance - 2006 Key Metrics
Written Revenue* Underwriting Results Combined Ratio Investment Income Flat despite decline in GM retail volume and soft market in U.S. personal lines * Includes Written Premium Insurance - 2006 Key Metrics Strong underwriting results driven by higher earned premiums and lower loss experience Improv
Slide 35: Insurance - Investment Portfolio
Insurance - Investment Portfolio Rebalanced portfolio in Q4 2006, reducing equity exposure from over 30% to under 10% ($ billions) $3.9 $4.5 $5.1 $5.3 $7.0 $0.6 $2.4 $2.2 $1.7 $1.2 2002 2003 2004 2005 2006 Fixed Income Equities
Slide 36: Insurance - Consolidated Earnings
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) divided by the total of premiums and service revenues e
Slide 37: The Transaction
Cerberus led Investor Consortium The Transaction 51% Equity 49% Equity
Slide 38: New GMAC
New GMAC With the closing of the GMAC sale transaction, GMAC has emerged as an independent company with an improved credit profile New ownership Independent governance Strengthened capital position New and expanded funding facilities Formalized long-term operating agreements with GM More diversified
Slide 39: Strategic Vision: Create Premier Global Financial Services Company
Leadership positions across all major sectors #1 auto finance Top ten player in mortgage #1 auto extended warranty #1 dealer inventory insurance Tremendous asset origination capability World-class servicing Well managed risk profile Global franchise spanning roughly 40 countries GMAC Business Streng
Slide 40: Strategic Priorities
Implement changes to U.S. mortgage operations to address deteriorating nonprime 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 dealer network Continue pro
Slide 41: 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 acquisition cost Attack cost side of the
Slide 42: 2007 Outlook
2007 Outlook Pressures at ResCap will constrain GMAC results in the near term Expect continued pressure from housing prices and nonprime mortgage market Highest priority is implementing changes at ResCap Sharply reduce nonprime mortgage origination volume Expand loan remediation activities Right-siz
Slide 43: 2007 Outlook (Continued...)
2007 Outlook (Continued...) Global Auto Finance is well positioned to generate attractive returns Solid foundation for growth Cost of funds should improve over time Revenue diversification Insurance is expected to deliver another robust year Positive underwriting results Solid investment returns GMA
Slide 44: Summary
Summary 2006 Record performance at Insurance and strong operating results in Auto Finance helped offset weakness in U.S. mortgage sector 2007 Expect solid performance at Insurance and Auto Finance Anticipate near term profitability constraints at ResCap due to market pressures Maintaining strong liq
Slide 45: BubebeGseets,
BubebeGseets, PoBeseeetau
Slide 46: Investor Forum: ResCap
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Slide 47: BubebeGseets,
BubebeGseets, PoBeseeetau
Slide 48: Sanjiv Khattri, EVP & CFO
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Slide 49: Overview
Overview 2006 Performance Near-term Earnings Drivers Funding Update Credit Profile Risk Management Update 2007 Outlook Conclusion
Slide 50: 2006 Performance
2006 Performance
Slide 51: 2006 Performance Highlights
2006 Performance Highlights On Nov. 30th, successfully completed sale of 51% of GMAC Established independent credit rating Q4 2006 net income of $1.0 billion and $2.1 billion for full- year 2006 Compares to Q4 2005 net income of $0.1 billion and full year $2.3 billion U.S. residential mortgage marke
Slide 52: Operating Earnings Walk 2005 vs. 2006
Earnings* 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 f
Slide 53: 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 54: Select Balance Sheet Data
Select Balance Sheet Data Includes cash invested in a portfolio of highly liquid marketable securities of $2.8 billion and $4.2 billion at December 31, 2006 and December 31, 2005, respectively On balance sheet, net of allowance for credit losses On balance sheet, net of accumulated depreciation Repr
Slide 55: Near-Term Earnings Drivers
Near-Term Earnings Drivers
Slide 56: GMAC Organization Structure
Other Corporate GMAC Financial Services North American Auto Finance International Auto Finance MIC Personal Lines Commercial Finance Group Capmark* * 21% ownership of entity formerly know as GMAC Commercial Holdings GMAC Organization Structure Automotive Finance Insurance ResCap Other
Slide 57: 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 58: 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 59: 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 - m
Slide 60: Funding Cost Reductions
Funding Cost Reductions Capital base is being strengthened Issued $2.1 billion preferred equity at closing Essentially retaining all "after-tax" earnings in 2007-2008 Credit profile has improved - expect ratings will also improve in time Demonstrate financial and operating performance Continue reduc
Slide 61: Operating Expense Reductions
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
Slide 62: International Earnings Growth
Compound Annual Growth Rate ResCap figures represent IBG only 2006 figures exclude goodwill impairment charges International Earnings Growth International has been and will remain important source of earnings growth / diversification GMAC very competitively positioned Uniquely broad global footprint
Slide 63: Fee Generating Businesses
Fee Generating Businesses Growing fee generating operations Generates significant cashflow Limited strain on capital position Auto Finance SmartAuction Fee Income $ millions $ millions ResCap Fee for Service Income 2002 2003 2004 2005 2006 2007 31 33 58 64 76 2003 2004 2005 2006 2007 27 35 65 112 $7
Slide 64: Funding Update
Funding Update
Slide 65: Strategic Priorities - Funding
Maintain appropriate liquidity cushion Significant cash balances and committed liquidity facilities Extensive auto loan assets that can be monetized quickly ("dry powder") Laddering of debt with moderate near-term maturities Reduce all-in cost of borrowings Active liability management to reduce cost
Slide 66: Global Liquidity
($ Billions) Global Liquidity Exceptional liquidity position offers significant flexibility in operating the business in a cost effective manner Facilitates asset growth Allows for additional liability management actions Provides cushion against market or GM-related shocks * Includes $15 billion cas
Slide 67: Global Debt Maturities
Global Debt Maturities Staggered maturity profile minimizes refinancing risks Significant debt outstanding beyond 5 years provides flexibility Scheduled Maturity Of Long-Term Debt At 12/31/2006 2006 2007 2008 2009 2010 2011 2012 and thereafter Secured 13.6 12.4 16.7 6.4 2.1 1.6 55.2 Unsecured 28.1 2
Slide 68: Excess Cash
Excess Cash Goal is to reduce excess cash levels modestly over time However, will not compromise downturn planning ($ billions) To provide liquidity, GMAC has operated with large excess cash balances over the past several years Negative carry has significantly reduced operating performance
Slide 69: Calls / Tenders
Calls / Tenders From time to time, GMAC redeems debt before maturity Such redemptions consist of calls, tender offers and open market repurchases Objective of the calls / tenders is to Manage cash portfolio (short dated debt) Reduce funding costs (longer dated debt) Adjust overall liability profile
Slide 70: Retail Funding
Retail Funding Since 1985, GMAC has aggressively sought to tap retail investor demand through a variety of products Total Y-E 2006 outstanding of about $40 billion Current offerings include ($6 billion*) Variable Denomination and Variable Rate Online Banking Money Markey Savings Account Certificates
Slide 71: Institutional Unsecured Funding
Institutional Unsecured Funding GMAC has long been a frequent issuer of unsecured debt globally After a period of minimal activity during 2005 / 2006 due to market volatility, GMAC re-entered the bond market in December 2006 $1 billion 5 year transaction was heavily oversubscribed Mixed ratings drov
Slide 72: Expanding Auto ABS
Expanding Auto ABS GMAC continues to expand its auto securitization capabilities Geographic reach to top international countries U.S. Canada Australia Germany Mexico Netherlands U.K. New Zealand Ecuador Argentina Italy Securitization sale of all major auto asset classes Prime and nonprime retail Ret
Slide 73: Whole Loan Sales
Whole Loan Sales As an alternative to ABS, GMAC has worked hard to develop and expand the Whole Loan market for auto-related assets Eliminate capital burden and maintain both origination and servicing income Over $40 billion sold since inception of strategy Auto Whole Loan Sales / Full Securitizatio
Slide 74: Wholesale Securitization Update
Wholesale Securitization Update GMAC has been an active issuer of wholesale securitizations since 1994 Through 2006, U.S. transactions included an amortization trigger in the event of a GM Chapter 11 bankruptcy filing New $1 billion wholesale securitization structure launched last month Structure do
Slide 75: U.S. Auto Term Funding Mix
Asset Backed Securities Institutional Unsecured Whole Loan Sales Retail U.S. Auto Term Funding Mix 2001 $65B 2005 $41B 2006 $32B 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr East 0.14 0.21 0 0.65 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr East 0.25 0 0.1 0.63 West 30.6 38.6
Slide 76: Funding Summary
Funding Summary Continuous focus on exceptional liquidity and reducing cost Delicate balance will be maintained Core issuance philosophy of diversification helps manage both objectives Secured and unsecured, whole loans and deposits Private and public Retail and institutional Tenors from overnight t
Slide 77: Credit Profile
Credit Profile
Slide 78: GMAC Credit Profile Strengthened
GMAC 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-invested
Slide 79: GMAC 5-year Unsecured Bond Spreads
GMAC 5-year Unsecured Bond Spreads GMAC bond spreads have narrowed to the lowest level since early-2004 Market acknowledges credit de-linkage with GM Nonetheless, GMAC 5-Year spreads still 90 bps above those of the BBB- composite 0% 2% 4% 6% 8% 10% 12% 14% Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 J
Slide 80: GM Exposure
GM Exposure Significant reduction in credit exposure to GM Recent success in eliminating indirect exposure to wholesale business due to Chapter 11 trigger Exposure monitored frequently New governance mandates that any new credit exposure over $5 million with affiliated parties (includes both GM and
Slide 81: Risk Management Update
Risk Management Update
Slide 82: Risk Management
Risk Management GMAC approaches risk management at both the corporate level and within each business unit A corporate wide Enterprise Risk Management Committee oversees market, credit and operational risk Each business entity has additional committees and personnel with oversight of matters such as
Slide 83: Enterprise Risk Management Responsibilities
Enterprise Risk Management Responsibilities Reviews all significant risk exposures and issues to provide a comprehensive view of risks to GMAC management Oversee enterprise wide risk policies and standards Establishes policies and minimum risk standards Provides enterprise-wide risk identification,
Slide 84: Regulators Oversight Of GMAC
Regulators Oversight Of GMAC GMAC is subject to regulatory oversight primarily as a result of its ownership of a U.S. based bank Oversight from FDIC and Utah Department of Financial Institutions Supervision of banks includes examination and oversight of banks' owners, including indirect owners, so G
Slide 85: 2007 Outlook
2007 Outlook
Slide 86: 2007 Outlook
2007 Outlook Continuing pressures at ResCap likely to constrain GMAC's overall near-term results 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 anoth
Slide 87: Conclusion
Conclusion
Slide 88: Summary
Summary In 2006 record performance at Insurance and strong operating results in Auto Finance helped offset weakness in U.S. mortgage sector GMAC enters 2007 as a fundamentally stronger company with improved credit profile despite subprime housing pressures GMAC also enjoys exceptional liquidity sour
Slide 89: BubebeGseets,
BubebeGseets, PoBeseeetau