This document provides a summary of GMAC's preliminary first quarter 2007 earnings. It reports a net loss of $305 million compared to net income of $495 million in the first quarter of 2006. Pressures in the US residential mortgage market impacted results at ResCap. Auto finance had strong operating performance. ResCap maintained strong liquidity at $72.1 billion and GMAC had cash and marketable securities of $12.8 billion.
Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Quotidiano Piemontese
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Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
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Concluding remarks
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After this second you should be able to: Explain the main determinants of demand for any mineral product, and their relative importance; recognise and explain how demand for any product is likely to change with economic activity; recognise and explain the roles of technology and relative prices in influencing demand; be able to explain the differences between the rates of growth of demand for different products.
Sanjiv Khattri, Executive Vice President and CFO of GMAC Financial Services GMAC First Quarter 2007 Earnings
1. Preliminary 2007 First Quarter Earnings
May 2, 2007
3:30 p.m. ET
Contact GMAC Investor Relations at (866) 710-4623 or investor.relations@gm.com
2. Forward Looking Statements
In the presentation that follows and related comments by GMAC LLC (“GMAC”) management, the use of the words
“expect,” “anticipate,” “estimate,” “forecast,” “initiative,” “objective,” “plan,” “goal,” “project,” “outlook,” “priorities,” “target,”
“intend,” “evaluate,” “pursue,” “seek,” “may,” “would,” “could,” “should,” “believe,” “potential,” “continue,” or similar
expressions is intended to identify forward-looking statements. While these statements represent our current judgment
on what the future may hold, and we believe these judgments are reasonable, these statements are not guarantees of
any events or financial results, and GMAC’s actual results may differ materially due to numerous important factors that
are described in the most recent reports on SEC Form 10-K for GMAC and Residential Capital, LLC (“ResCap”), each
of which may be revised or supplemented in subsequent reports on SEC Forms 10-Q and 8-K. Such factors include,
among others, the following: securing low cost funding to sustain growth for GMAC and ResCap and maintaining the
mutually beneficial relationship between GMAC and General Motors Corporation (“GM”); our ability to maintain an
appropriate level of debt; the profitability and financial condition of GM; restrictions on ResCap’s ability to pay dividends
to us; recent developments in the residential mortgage market, especially in the nonprime sector; changes in the
residual value of off-lease vehicles; the impact on ResCap of the continuing decline in the U.S. housing market;
changes in U.S. government -sponsored mortgage programs or disruptions in the markets in which our mortgage
subsidiaries operate; changes in our contractual servicing rights; costs and risks associated with litigation; changes in
our accounting assumptions that may require or that result from changes in the accounting rules or their application,
which could result in an impact on earnings; changes in the credit ratings of ResCap, GMAC or GM; changes in
economic conditions, currency exchange rates or political stability in the markets in which we operate; and changes in
the existing or the adoption of new laws, regulations, policies or other activities of governments, agencies and similar
organizations. Investors are cautioned not to place undue reliance on forward-looking statements. GMAC undertakes
no obligation to update publicly or otherwise revise any forward-looking statements except where expressly required by
law. A reconciliation of certain non-GAAP financial measures included within this presentation is provided in the
supplemental charts.
Use of the term “loans” describes products associated with direct and indirect lending activities of GMAC’s global
operations. The specific products include retail installment sales contracts, loans, lines of credit, leases or other
financing products. The term “originate” refers to GMAC’s purchase, acquisition or direct origination of various “loan”
products.
2
3. 2007 – First Quarter Performance Highlights
1Q 2007 net loss of ($305) million compared to net income of $495 million for 1Q
2006
Pressures in the U.S. residential mortgage market remained high throughout the
quarter
Slowing home price appreciation has impacted valuations
―
Nonprime credit has weakened significantly
―
Prevailing market environment has depressed loan valuations
―
Strong operating performance at Auto Finance in the quarter
Improved margins with new vehicle originations in line with year-ago levels
―
Significantly increased used vehicle originations
―
Insurance reported yet another quarter of strong earnings with robust
underwriting results
Favorable loss experience compared to year-ago levels
―
GMAC and ResCap maintain strong liquidity positions
Cash and marketable securities totaled $12.8 billion at the end of 1Q
―
$1.0 billion common equity injected by GM, based on final settlement provisions of the GMAC
―
sale transaction
3
4. First Quarter Net Income
($ millions) 1Q 2007 1Q 2006 Change
Global Automotive Finance $396 $186 $210
ResCap (910) 201 (1,111)
Insurance 143 129 14
Other* 66 (21) 87
Net Income ($305) $495 ($800)
* 1Q 2007 includes 21% ownership of our former Commercial Mortgage unit; 1Q 2006 includes 100% ownership through March 23, 2006, sale
date and 21% ownership thereafter
4
5. First Quarter Pre-Tax Income
($ millions) 1Q 2007 1Q 2006 Change
Global Automotive Finance $436 $268 $168
ResCap (851) 339 (1,190)
Insurance 191 186 5
Other* 69 (76) 145
Pre-tax income (155) 717 (872)
Taxes (150) (222) 72
Net Income ($305) $495 ($800)
* 1Q 2007 includes 21% ownership of our former Commercial Mortgage unit; 1Q 2006 includes 100% ownership through March 23, 2006, sale
date and 21% ownership thereafter
A number of GMAC’s U.S. entities converted to limited liability companies
(LLC) in conjunction with the transaction to sell a controlling interest in the
company last year
5
6. ResCap – 1Q 2007 Key Metrics
Reduced liquidity for
Moving
higher risk loans
(Securitization/Sales)
Credit pressure remains as
Storage
nonprime portfolio runs-off
(HFI/Servicing)
Warehouse Lending Increased provisions for
(Lending Receivables) nonprime warehouse lending
Solid earnings, but
Business Capital
weakness among certain
(Lending Receivables)
home builders
International Continued strong performance
and residual risk was reduced
6
7. ResCap – Nonprime Loan Risk
Relative nonprime loan exposure varies on balance sheet as does its risk
Warehouse Lending Receivables
Loan Servicing Portfolio
Total: $6.5B
Total: $452.9B
16% 18%
Nonprime
Prime
Held For Sale Held For Investment
Total: $22.0B Total: $65.3B
73%
23%
As of 3/31/2007
7
8. Sales of HFS Portfolio
Total 1Q sales were $29.9 billion
Strong securitization activity despite challenging conditions
ResCap Issuance 1Q 07 Distribution of $29.9 billion
FY 06 and 1Q 07 (Issuance and whole loan sales)
$25
$22.5
$21.5
$20.6
$18.8
$20
33%
$16.5
Agency
($ billions)
$15
$10
$5
54%
$0
Non-Agency Public
1%
1Q06 2Q06 3Q06 4Q06 1Q07
Securitizations
Private
Jumbo A International
Other
2nd Lien
Alt-A 12%
Non-Agency Whole
Does not include net interest margin securities, resecuritizations, private
Loans
issuance or whole loan sales. Source: www.gmacrfc.com and
www.gmacmbond.com. Other - includes the following products: 1st Lien
HLTV, Seasoned Loans, Negotiated Conduit Assets, Nonprime and 125
CLTV
8
9. U.S. HFI Nonprime Portfolio
U.S. nonprime HFI portfolio decreased $4.5 billion to $45.0 billion at
03/31/07
2005 and 2006 vintages represented 54% of runoff
―
On target to achieve $20 billion reduction in nonprime HFI in 2007
Run-off expected to generate over $1 billion of cash
―
U.S. Nonprime HFI Reduction In 1Q 07 Totaled $4.5 billion
34%
23%
20%
9%
14%
2002 2003 2004 2005 2006
9
10. ResCap – Held for Investment Portfolio - Credit Quality
Asset quality weaker due to
Nonaccrual Loans as a % of total MLHFI * continuing slow housing market and
stress in nonprime mortgage market
11.9%
10.5%
Nonprime assets continue to drive
9.2% 9.2% 9.2% increase in delinquencies and
9.1% 9.0%
8.4% 8.3%
nonaccruals
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
Slowing of home price appreciation
'05 '05 '05 '05 '06 '06 '06 '06 '07
increased severity of losses
Net charge-offs as a % of total MLHFI *
Allowance for loan losses increased to
2.54% at 3/31/2007 from 2.17% at
0.3% 0.3%
12/31/2006 for the HFI portfolio
0.3%
0.2% 0.2%
0.2%
0.2% 0.2%
0.1%
Much of portfolio is securitized –
ResCap net exposure limited to $1.2
billion first loss position at 3/31/3007
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
compared to $1.6 billion at YE 2006
'05 '05 '05 '05 '06 '06 '06 '06 '07
* MLHFI – Mortgage Loans Held for Investment. The total MLHFI is $65.2 billion for quarter ended 3/31/2007, $69.4 billion for 2006 & $69.0
10
billion for 2005 and is included in the balance sheet under the caption quot;Finance receivables and loans, net of unearned incomequot;
11. ResCap – Lending Receivables Portfolio - Credit Quality
Continued asset quality weakness
due to severe stress with some
Nonaccrual Assets as a % of total 10.94%
nonprime counterparties
lending receivables 9.29%
Allowance for loan losses
increased to 4.06% at 3/31/2007
0.05% 0.12% 0.08% 0.50% 0.41% 0.24% 0.21%
from 2.66% at 12/31/2006 for
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q lending receivables
'05 '05 '05 '05 '06 '06 '06 '06 '07
Warehouse receivables
represented $6.5 billion of lending
Net charge-offs as a % of total
receivables with only 15%
0.38%
lending receivables
supported with nonprime collateral
on 3/31/2007
0.03% 0.03%
0.00% 0.02% 0.00% 0.00% 0.02%
0.00%
Nonprime warehouse receivables
reduced by $1.2B or 50% in 1Q
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
'05 '05 '05 '05 '06 '06 '06 '06 '07 2007
Total lending receivables are $12.9 billion for quarter ended 3/31/2007, $14.9 billion for 2006 & $13.6 billion for 2005 and are included in the
11
balance sheet under the caption “Finance receivables and loans, net of unearned income”
12. ResCap – Business Capital
Business Capital’s operating earnings were flat despite continued weakness in
the home building industry
Residential real estate market remains challenging for our customers
—
Diversified presence across borrowers, geographies and products
—
Bolstering risk mitigation efforts
Raising standards for new transactions/reduced volume
—
Pursuing opportunities to reduce risk exposures in whole or in part
—
Increased account monitoring activities
—
Increasing proportion of secured borrowing
—
Business Capital is a world class franchise in the building space, with long-term
mutually beneficial relationships
Also continue to grow businesses not directed at residential construction
Health Capital
—
Resort Finance
—
12
13. ResCap – International
Year-over-year improvement largely driven by increased gain on sale volume
sold
Challenging competition reduced expected loan production but up year-over-year
—
U.K. market continued to show strong appetite for assets, generating favorable
margins on whole loan sales
Favorable capital market conditions allowed International to sell a larger risk position
—
First residual sale in Latin America
Continued expansion through new operations, new relationships and strategic
investments
Increase market share in existing countries
—
New country development and builder lending to support long-term earnings growth
—
13
14. ResCap - Recent Changes in U.S. Underwriting and Servicing
Tightened underwriting standards for consumer loans in a number of
areas
Nonprime and Alt-A mortgages
—
Second liens and home equity loans
—
Refocused warehouse lending strategy
Targeting relationship-oriented clients
—
Stricter adherence to margin and document requirements
—
Implemented targeted loss mitigation strategies to reduce both
frequency and severity
Performing special targeting of certain asset populations
—
Modifications
Repayment plans
Foreclosure alternatives
Enhanced enterprise risk management efforts
Revamped credit risk management
—
Created workout team for warehouse lending and implemented more rigorous 14
—
collateral valuation process
15. ResCap – Liquidity
03/31/07
($ in billions)
Cash and Cash Equivalents $2.6
Unused Bank Facilities 8.6
Unused Conduit Capacity 56.3
Unused Whole Loan Facilities 4.6
Total Available Liquidity $72.1
Cash balance of $2.6 billion at the end of 1Q 07, up $600 million from YE
2006
Ended 1Q with $7.2 billion in equity (includes $500 million March capital
contribution)
Additional $500 million capital contribution made in April
―
Only $1.3 billion unsecured debt maturities in 2007
Strong levels of contingent liquidity available
Executed $2.2 billion in new committed funding facilities in the quarter
—
Anticipate continued good access to global markets
15
16. ResCap - 2007 Outlook
Weak financial performance in 1Q 07 largely driven by deterioration in the
nonprime market
Profits from international and business capital operations overshadowed by
—
disappointing U.S. mortgage performance
Multiple actions underway to mitigate risk and improve controls
—
New management team with significant mortgage experience
Current capitalization and liquidity are ample
Should real estate market pressures continue, ResCap has significant liquidity to
—
operate throughout the cycle
Anticipate considerable improvement in 2Q financial performance, with
losses in U.S. residential mortgage at a much reduced level
Diverse earnings base coupled with strong origination and servicing
platforms should drive longer-term earnings growth
16
17. Auto Finance – 1Q 2007 Key Metrics
Strong lease and retail originations
Originations
Credit performance remains at
Credit Losses
historically low levels
U.S. residual performance improved
Lease Residuals versus 2006, reflecting higher sales
proceeds supported by stable used car
prices
Improved NAO margins more than
Margins
offset margins at IO which remain
under pressure
17
18. Auto Finance – Consumer Originations
1Q 2007 new vehicle originations in line with 2006 levels despite lower retail
volumes at GM
Significant increase in used vehicle originations consistent with growth strategy
—
$19
($ billions)
$13
$12 $12
$11
New
Used
$2.1
$1.5 $1.4 $1.4
$1.4
1Q '06 2Q '06 3Q '06 4Q '06 1Q '07
Total Units 603 627 817 528 624
(in 000s)
18
19. Auto Finance – Consumer Credit Quality
Delinquencies as a % of serviced retail assets
30 days or more past due
1Q 2007 delinquency up
2.47% 2.41% slightly versus year-ago
2.34% 2.40% 2.33% levels. Performance
2.21% 2.27%
2.16% remains near historically
2.06%
low levels
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
'05 '05 '05 '05 '06 '06 '06 '06 '07
Annualized credit losses as a % of average
managed retail contracts
Losses remain near
1.12% 1.22% 1.14%
1.11%
1.09% historically low levels
0.96%
0.95% 0.91% 0.95%
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
'05 '05 '05 '05 '06 '06 '06 '06 '07 19
20. Auto Finance – Nonprime
Nonprime auto market has not experienced the pressures affecting the
nonprime mortgage industry
Historically, leading indicators for deterioration in nonprime auto credit
―
performance have been rising interest rates or rising unemployment – neither
one a factor to date
GMAC's exposure to nearprime and nonprime auto loans is limited
Less than 15% of U.S. serviced consumer asset base is considered nonprime
―
or nearprime using traditional credit bureau scores
2006 and early 2007 retail auto delinquencies above 2005 levels but in
line with expectations and broader industry experience
Other factors that distinguish nonprime auto from nonprime mortgage
No floating rate or option arm equivalent
―
Loan pricing reflects depreciating characteristic of the asset
―
Consistent underwriting and credit-scoring criteria
―
20
21. Insurance – 1Q 2007 Key Metrics
Growth in reinsurance and
Written Revenue*
international markets offset by
declines in vehicle service contracts
and personal lines
Strong underwriting results driven by
Underwriting Results
higher earned premiums and lower
loss experience. Improved combined
ratio of 91.0% in 1Q 2007 vs. 91.3%
in 1Q 2006
Investment Income Increase in the amount of fixed
income assets in the portfolio from
68% to 92%
21
* Includes Written Premium
22. Insurance – Consolidated Earnings
Favorable underlying core earnings trend continues
($ millions) 1Q 2007 1Q 2006 Change
Core Earnings1 $143 $118 $25
Capital Gains2 3 19 (16)
Interest Expense3 (3) (8) 5
Net Income $143 $129 $14
Combined Ratio4 91.0% 91.3%
1. Core Earnings = Underwriting income + Investment income (net of tax)
2. Represents a post tax number, pre-tax capital gains was $4 for 2007 and $29 for 2006
3. Represents a post tax number, pre-tax interest expense was $4 for 2007 and $12 for 2006
4. Combined Ratio = Sum of all reported losses and expenses (excluding interest and income tax expense) divided by the total of
premiums and service revenues earned and other income
22
23. Global Liquidity
03/31/07
($ billions)
Cash and Marketable Securities* $13
Unused Bank Facilities 31
Unused Conduit Capacity 86
Unused Whole Loan Facility 44
Total Available Liquidity $174
* Includes $3 billion cash invested in a portfolio of highly liquid marketable securities
GMAC and ResCap maintain strong liquidity position
Cash levels down primarily due to significant debt maturities in 1Q 2007
―
Completed $6 billion bridge funding facility to provide added liquidity protection for
―
older wholesale securitizations
Received $1 billion equity injection from GM based on final settlement provisions of
―
the GMAC sale transaction
GMAC and ResCap will continue to balance prudent liquidity
management with reductions in cost of borrowing 23
24. GM Exposure
Secured Exposure Unsecured Exposure
($ billions) ($ billions)
$6.2 - $10.2*
$4.1
$2.1 $1.9 $6.2
$1.2
$1.0
9/30/2005 12/31/2006 3/31/2007
9/30/2005 12/31/2006 3/31/2007
* Represents $4 billion undrawn credit line that expired on Sept. 30, 2006
Certain unsecured credit exposure to GM U.S. entities capped contractually
at $1.5 billion
U.S. exposure $0.9 billion at 3/31/07
─
Exposure monitored continuously
Governance mandates that any new credit exposure over $5 million with
affiliated parties (includes both GM and Cerberus) requires GMAC Board
approval 24
25. Growth Initiatives
Leverage existing GM relationships to facilitate growth of diversified
wholesale and retail business
1Q used vehicle volume up significantly compared to 2006 levels
―
Increased insurance offerings and improved penetration
―
Develop platform for growth of auto wholesale and consumer financing and
auto related insurance products for independent dealerships
Continue profitable expansion overseas for all GMAC segments
Capitalize on unique international footprint – 40 countries
―
Extensive experience operating in lesser developed markets
―
Export superior auto and real estate financing technology to markets with
―
potential for high growth
Build on 1Q growth of diversified full service leasing
―
25
26. Summary
1Q 2007
Disappointing performance driven largely by ResCap loss due to falling nonprime
—
mortgage asset values
Solid performances at Insurance and Auto Finance were not enough to offset the
—
loss
Despite operating challenges, GMAC and ResCap maintain strong liquidity
—
position
Significant cash balances, large-scale committed funding facilities and access to
unsecured markets offer extensive financial flexibility
Due to near-term expectations of continued U.S. mortgage market
pressures, have implemented measures to reduce risk at ResCap
Longer-term, GMAC’s diversity and liquidity anticipated to spur successful
earnings growth
Well positioned to withstand near term challenges and structured to pursue long-
—
term possibilities
On track with growth strategy
—
26
29. Reconciliation of Managed to Serviced Assets
Retail Auto Finance
($ millions) 3/31/07 12/31/06 9/30/06 6/30/06 3/31/06
On-balance sheet assets $60,774 $61,106 $65,962 $62,394 $65,732
Off-balance sheet securitized assets 5,632 6,589 4,389 5,108 5,875
Managed assets 66,406 67,695 70,351 67,502 71,607
Whole loan sales* 19,657 19,354 19,684 20,707 18,095
Serviced assets $86,063 $87,049 $90,035 $88,209 $89,702
* Retail receivables included in whole loan sales and full securitization transactions where GMAC is no longer exposed to
credit and/or interest rate risk
S2
30. Reconciliation of Insurance Core Earnings
1Q 2007 1Q 2006
($ millions)
Net Income $143 $129
1
Add: Pre-tax interest expense 4 12
2
Less: Pre-tax capital gains (4) (29)
Add: Tax expense on interest & capital gains - 6
Core Earnings $143 $118
1. Amount within premium tax and other expense in Forms 10-Q and 10-K respectively
2. Amount within investment income in Forms 10-Q and 10-K respectively
S3