REVISED
Full Year and Fourth Quarter Earnings March 13, 2007 3:30 p.m. ET
Contact GMAC Investor Relations at (866) 710-4623 or investor.relations@gm.com
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”, “intend”, “evaluate”, “pursue”, “seek” and 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, actual results may differ materially due to numerous important factors that are described in GMAC’s most recent report on SEC Form 10-K, 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; changes in economic conditions, currency exchange rates, significant terrorist attacks or political instability in the major markets where we operate; recent developments in the residential mortgage market, especially in the nonprime sector; changes in the laws, regulations, policies or other activities of governments, agencies and similar organizations where such actions may affect the production, licensing, distribution or sale of our products, the cost thereof or applicable tax rates; and the outbreak or escalation of hostilities between the United States and any foreign power or territory and changes in international political conditions may continue to affect both the United States and the global economy and may increase other risks. Investors are cautioned not to place undue reliance on forward-looking statements. GMAC undertakes no obligation to update or revise any forward-looking statements unless required by law. A reconciliation of 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
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 market is in the midst of a radical slow down
―
Slowing home price appreciation and nonprime credit weakness having significant negative impact
Steady operating performance at auto finance in 2006
―
Results were stable year-over-year despite one-time debt buy back costs
Insurance reported record earnings in 2006 with robust underwriting results
―
Successfully rebalanced investment portfolio towards higher fixed income and lower equity weightings
3
Restatement
GMAC has restated its historical financial information for the years 2001 – 2005 and the first three quarters of 2006 Technical requirements of FAS 133 primary driver for restatement Restatement has no economic or cash impact
Q1-Q3 2006 $1,248 (139) $1,109 (11.1%)
($ millions, after tax)
Previously reported net income Restatements, net of tax Restated Net Income Percent change
2005 $2,394 (112) $2,282 (4.7%)
2004 $2,913 (19) $2,894 (0.7%)
2003 $2,793 (287) $2,506 (10.3%)
2002 $1,870 333 $2,203 17.8%
4
Operating Earnings Walk 2005 vs. 2006
.00
($ millions)
$710 ($89)
.00
($839) $2,721
($474)
.00
$2,029
.00
2005 Operating Earnings Auto Finance ResCap
1
Insurance
2
Other
3
2006 Operating Earnings
1. Includes gross impact of sale of equity interest in a regional homebuilder of about $259 million, net of tax 2. Includes $568 million capital gains in Q4 due to rebalancing the investment portfolio 3. Includes lower income from our former Commercial Mortgage unit, attributable to 21% ownership following the sale on March 23, 2006 vs.100% ownership in 2005 and deterioration in Commercial Finance related to credit reserves
5
Full Year Net Income
($ in millions)
Global Automotive Finance ResCap1 Insurance2 Other3
2006 $791 182 1,127 (71)
2005 $880 1,021 417 403
Change ($89) (839) 710 (474)
Operating Earnings
LLC conversion Goodwill impairment Net Income
$2,029
791 (695) $2,125
$2,721
(439) $2,282
($692)
791 (256) ($157)
1. Includes gross impact of sale of equity interest in a regional homebuilder of about $259 million, net of tax 2. Includes $568 million capital gains in Q4 due to rebalancing the investment portfolio 3. Includes lower income from our former Commercial Mortgage unit, attributable to 21% ownership following the sale on March 23, 2006 vs.100% ownership in 2005 and deterioration in Commercial Finance related to credit reserves
6
Fourth Quarter Net Income
($ in millions)
Global Automotive Finance ResCap Insurance1 Other2
Q4 2006 $147 (651) 735 (6)
Q4 2005 $180 118 133 120
Change ($33) (769) 602 (126)
Operating Earnings
LLC conversion Goodwill impairment Net Income
1. 2.
$225
791 $1,016
$551
(439) $112
($326)
791 439 $904
Includes $568 million capital gains due to rebalancing the investment portfolio Q4 includes 21% ownership of our former Commercial Mortgage unit following the sale on March 23, 2006 vs. 100% ownership in 2005 as well as deterioration in Commercial Finance related to credit reserves
7
ResCap – 2006 Key Metrics
Moving
(Securitization/Sales)
Negative nonprime valuations
Storage
(HFI/Servicing)
Increase in loan loss provisions on nonprime
Lending
(Lending Receivables)
Nonprime credit issues in warehouse lending
International
Increased origination volumes
8
ResCap – Changing Market
Deterioration in the Nonprime Mortgage Market Drove a Net Loss at ResCap in 4Q 2006
• 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 leaned away from the nonprime market in 2006, but still held substantial exposure when dislocation occurred in 4Q
Change in Median Home Price
20.0% 15.0% Y/Y % Change 10.0%
$ billions $700 $600 $500 $400 $300 $200
($ millions)
Q1 2006 $201.5 $201.5
Q2 2006 $548.1 $548.1
Q3 2006 $83.4 $83.4
Q4 2006 ($651.2) 523.2 ($128.0)
Total $181.8 523.2 $705.0
Operating Earnings LLC Benefit Net Income/(Loss)
•
U.S. Nonprime Market Share
7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
5.0% 0.0% -5.0% -10.0%
Ja n01 Ju l-0 1 Ja n02 Ju l-0 2 Ja n03 Ju l-0 3 Ja n04 Ju l-0 4 Ja n05 Ju l-0 5 Ja n06 Ju l-0 6 Ja n07
$100 $0
19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06
Existing
New
B&C Mkt $
RCG B&C Share %
Source: U.S Census Bureau, National Association of Realtors, as of December 2006
Source: Inside Mortgage
9
ResCap – Impact on Business
Long term fundamental earnings potential of the franchise remains solid Losses are confined to areas with nonprime exposure
―
Incremental provisioning in the Held for Investment portfolio due to anticipated increased frequency and severity of loss Mark-to-market adjustments in the Held for Sale portfolio Specific reserves on Warehouse lending assets
― ―
A new strategic plan is being implemented to return our U.S. mortgage business to profitability
―
Significantly reduced nonprime origination volume through tighter underwriting criteria and pricing changes Nonprime Held for Investment portfolio runoff of $20 billion in 2007 Structural expense reduction and acceleration of prime and nonprime U.S. mortgage integration plan
― ―
10
ResCap – U.S. Production and Servicing
Production for the Year Ended 12/31/2006 $162 Billion
15% 2% 27%
Servicing Portfolio at 12/31/2006 $412 Billion1
8% 5%
Nonprime Nonprime
19%
14% 48%
25%
37%
Prime Conforming Prime Non-Conforming
1.
Prime Second-Lien Government
Nonprime
Excludes loans for which we acted as a subservicer totaling an unpaid principal balance of $55.4 billion as of 12/31/2006
($ millions)
Three Months Ended 12/31/2006 12/31/2005 % Change $34.3 6.9 $28.6 12.1 20% (43%)
Twelve Months Ended 12/31/2006 12/31/2005 % Change $131.0 $30.6 $412.4 $123.2 $35.9 $354.9 6% (15%) 16%
U.S. Production Prime Loan Production Nonprime Loan Production U.S. Servicing Portfolio
11
ResCap – Held for Investment Portfolio
Total HFI Portfolio Year Ended 12/31/2006 $69 Billion Nonprime HFI Portfolio by Vintage Year Ended 12/31/2006 $48 Billion
1% 3%
13% 1% 10%
Nonprime
12%
76%
33%
Nonprime broken down by vintage
16%
35%
Prime Conforming Prime Non-Conforming Prime Second-Lien Nonprime Pre 2002 2002 2003 2004 2005 2006
At the end of the second quarter, ResCap began to limit the addition of nonprime exposure to the HFI portfolio Nonprime portfolio reduced approximately $4.6 billion year over year
12
ResCap – Held for Investment Portfolio - Credit Quality
Nonaccrual Loans as a % of total MLHFI *
10.5% 9.1% 9.0% 9.2% 9.0% 8.4% 8.3% Q2 Q3
2006
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
9.2%
Q1
Q2
Q3
2005
Q4
Q1
Q4
Net charge-offs as a % of total MLHFI *
0.3% 0.2% 0.2% 0.2% 0.1% 0.2% 0.2% 0.2%
Allowance for loan losses increased to 2.17% at 12/31/2006 from 1.55% at 12/31/2005 for the HFI portfolio
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2005
2006
* MLHFI – Mortgage Loans Held for Investment. The total MLHFI is $69.4 billion for 2006 & $69.0 billion for 2005 and is included in the balance sheet under the caption "Finance receivables and loans, net of unearned income"
13
ResCap - Lending Receivables Portfolio - Credit Quality
Nonaccrual Assets as a % of total lending receivables
9.29%
Asset quality weaker due to severe stress with some nonprime counterparties Repurchase and liquidity issues continue to affect some nonprime market participants
0.05% 0.12% 0.08% 0.50% 0.41% 0.24% 0.21%
Q1 Q2
2005
Q3
Q4
Q1
Q2
Q3
2006
Q4
Net charge-offs as a % of total lending receivables
Allowance for loan losses increased to 2.66% at 12/31/2006 from 1.38% at 12/31/2005 for lending receivables Warehouse receivables represented $8.8 billion of lending receivables with about 25% supported with nonprime collateral on 12/31/2006
0.00%
0.02%
0.03% 0.00% 0.00%
0.03%
0.02%
(0.00%)
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2005
2006
Total lending receivables are $14.9 billion for 2006 & $13.6 billion for 2005 and are included in the balance sheet under the caption “Finance receivables and loans, net of unearned income”
14
ResCap – International
Net Income for the Period Ended ($ millions)
$170
Production for the Period Ended ($ billions)
$27.8
$90 $51 $24 $8.0
$16.5 $14.0
2003
2004
2005
2006
2003
2004
2005
2006
International net income increased 89% year over year Production increased 68% year over year Business opportunities continue to expand
15
ResCap – Liquidity
($ in billions)
2006 $2 3 51 8 $64
Cash and Marketable Securities Unused Bank Facilities Unused Conduit Capacity Unused Whole Loan Facilities Total Available Liquidity
Strong levels of contingent liquidity available Only $1.3 billion unsecured debt maturities in 2007 Good access to global markets
16
ResCap – Outlook
Solid franchise, strong capital and liquidity provide strength and stability to operate through mortgage market cycles
―
Diverse franchise Top 10 market share position in originations and servicing Growth in servicing portfolio continues to enhance income Third party servicing activities continue to expand Business Capital and International businesses continue to demonstrate strong financial performance
Originations Company Countrywide Wells Fargo WaMu CitiMortgage Chase Home Fin B of A Mortgage ResCap Wachovia IndyMac Volume ($Billions) $462.5 397.6 195.7 183.5 172.9 167.9 161.8 104.7 90.0 2006 Rank 1 2 3 4 5 6 7 8 9
Servicing Volume ($Billions) $1,298.4 1,341.9 711.0 521.5 674.1 419.5 412.4 175.2 148.0 2006 Rank 2 1 3 5 4 6 7 9 12
Source: Inside Mortgage Finance Feb 2, 2007 and Feb 9, 2007
―
Capital and liquidity remain a competitive strength Over $2.0 billion of liquidity currently available New facilities totaling $2.3 billion established to address funding needs for hard to finance assets Year end equity capitalization $7.6 billion GMAC is able to contribute capital in order to maintain an appropriate ResCap equity level and support investment grade ratings
17
Auto Finance – 2006 Key Metrics
Originations
Strong lease and retail originations
Credit Losses
While delinquencies trended higher, losses remained at historically low levels
Lease Residuals
U.S. residuals down slightly, reflecting weaker used car prices
Margins
NAO margins improved in Q4, IO still under pressure
18
Auto Finance – Consumer Originations
($ billions)
$61
$57
$59 $51
$55
$10
$10
$8
$7
$6
2002
Total Units (in 000s) 3,423
2003
3,082
2004
3,083
2005
2,622
2006
2,575
New
Used
2006 originations increased slightly from 2005 levels
―
Strong lease growth and GM’s successful 72 hour sale helped drive volumes
19
Sales Proceeds on Scheduled U.S. Lease Terminations
($ per vehicle)
$13,949 $13,277 $12,646 $12,549
$13,848
36-Month Leases (Adjusted for Vehicle Mix)
1
2002
Lease terminations (Units 000s) 738
2003
611
2004
414
2005
283
2006
272
Overall trends remain stable
―
2006 performance was down slightly reflecting weaker used car prices
20
Note: Figures represent GMAC serviced portfolio
Auto Finance – Consumer Credit Quality
Delinquencies as a % of serviced retail assets 30 days or more past due
2.47% 2.21% 2.06% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2.27%
2.34% 2.16%
2.40%
2.41%
Delinquencies trended higher in 2006, reflecting a somewhat weaker consumer credit environment
2005
2006
Annualized credit losses as a % of average managed retail contracts
1.09% 1.05%
0.95%
0.91%
0.96%
1.03%
0.83%
0.95%
Losses remain at historically low levels
2005
Q1 Q2 Q3 Q4
2006
Q1 Q2 Q3 Q4
2005
2006
21
Insurance – 2006 Key Metrics
Written Revenue*
Flat despite decline in GM retail volume and increased competition in U.S. personal lines
Underwriting Results
Strong underwriting results driven by higher earned premiums and lower loss experience
Combined Ratio
Improved combined ratio of 92.3% in 2006 vs. 93.9% in 2005
Investment Income
Rebalanced investment portfolio to reduce capital requirements
* Includes Written Premium
22
Insurance – Consolidated Earnings
($ millions) Core Earnings1 Capital Gains2 Interest Expense Net Income Combined Ratio3 Fourth Quarter 2006 2005 $170 569 (4) $735 92.5% $99 38 (4) $133 92.8% Full Year 2006 2005 $499 652 (24) $1,127 92.3% $361 72 (16) $417 93.9%
1. Core Earnings = Underwriting income + Investment income (net of tax) 2. Portfolio was rebalanced in Q4 2006 resulting in significant capital gains 3. Combined Ratio = Sum of all reported losses and expenses (excluding interest and income tax expense) divided by the total of premiums and service revenues earned and other income
Favorable underlying core earnings trend continues
23
Insurance – Investment Portfolio
($ billions)
$7.0 $3.9 $1.2 $4.5 $1.7 $5.1 $2.2 $5.3 $2.4 $0.6 2003 2004 Fixed Income 2005 Equities 2006
2002
Rebalanced portfolio in Q4 2006, reducing equity exposure from over 30% to under 10%
24
Global Liquidity
($ billions)
2006 YE $18 32 72 46 $167
Cash and Marketable Securities* Unused Bank Facilities Unused Conduit Capacity Unused Whole Loan Facility Total Available Liquidity
* Includes $15 billion cash and cash equivalents and $3 billion invested in marketable securities Total does not sum to $167 billion due to rounding.
GMAC and ResCap maintain strong liquidity position
― ―
Successfully completed GMAC and ResCap unsecured bond deals in December GMAC completed landmark wholesale securitization transaction in February
GMAC and ResCap will continue to balance prudent liquidity management with reductions in cost of borrowing
25
GM Exposure
Secured Exposure to GM
($ billions)
Unsecured Exposure to GM
($ billions)
$6.2 - $10.2*
$4.1 $2.1
$6.2 9/30/2005 $1.0 12/31/2006
9/30/2005
12/31/2006
* Represents $4B undrawn GM credit line that expired on Sept. 30, 2006
Significant reduction in credit exposure to GM Exposure monitored frequently New governance mandates that any new credit exposure over $5 million with affiliated parties (includes both GM and Cerberus) requires GMAC Board approval
26
“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 business strategies
GMAC Strategic Focus
―
Transform GMAC from a captive operation into an independent globallydiversified financial services company
27
Strategic Priorities – Operations
Implement changes to U.S. mortgage operations to address deteriorating market environment Diversify revenue sources in all major business lines Continue profitable expansion overseas Grow fee-based businesses (e.g., SmartAuction, fee for servicing, etc.) Capitalize on cross-sell opportunities across GMAC’s 18 million customers* Drive efficiencies on cost side of the business
* Based on outstanding consumer loans and contracts; aggregate figures do not adjust for overlap
28
Strategic Priorities – Funding
Reduce all-in cost of borrowings
―
Continue to diversify across markets, asset types, currencies and investors Reduce expensive “legacy” debt burden Expand use of securitization programs
― ―
Maintain appropriate liquidity cushion
―
Continue executing whole loan sales in Auto Finance and Mortgage to reduce risk, free up capital and generate liquidity Maintain significant retail auto loan “dry powder” Assets which can be monetized quickly through committed whole loan and conduit facilities
―
Projected funding in 2007-2008 consistent with 2005-2006 levels
29
2007 Outlook
Continuing pressures at ResCap likely to constrain overall GMAC results near term
―
Expect continued pressure from:
Softening US housing market Adjustment of nonprime mortgage market to credit and liquidity issues Weak performance from nonprime component of HFI portfolio
Highest priority is implementing changes at ResCap to address rapidly changing mortgage market
― ― ― ― ―
Nonprime mortgage origination volume sharply reduced Expanding remediation activities on delinquent loans Right-sizing structural cost base Capitalize on opportunities arising from market downturn Maximize earnings from ResCap’s other businesses
30
2007 Outlook (cont.)
Global Auto Finance is well-positioned to generate attractive returns
― ― ―
Solid foundation for growth Improved cost of funds over time Revenue diversification
Insurance is expected to deliver another robust year
― ― ―
Positive underwriting results Solid investment returns Diversification of service contracts and dealer inventory insurance
GMAC’s long-term prospects remain favorable
― ―
ResCap’s fundamental earnings potential remains solid Auto finance and insurance operations should offset pressure at ResCap in near-term and provide base for growth in long-term
31
Summary
2006
―
Record performance at Insurance group and strong operating results in Auto Finance helped offset weakness in U.S. mortgage sector Continued solid performance at Insurance and Auto Finance anticipated ResCap profitability likely to remain constrained near term as pressure on nonprime asset values persist
Prime mortgage lending and servicing operations continue to run profitably in the U.S. and abroad
2007
― ―
―
Strong liquidity position at GMAC and ResCap
Significant cash balances, large-scale committed funding facilities and access to unsecured markets offer extensive financial flexibility
GMAC enters 2007 as a fundamentally stronger company with improved credit profile
― ―
Better positioned to withstand near term challenges Greater flexibility to pursue long term growth possibilities
32
Supplemental Charts
The following supplemental charts are 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
Restatements by Quarter for 2005 and 2006
(in millions)
Previously reported net income Restatements, net of tax Restated Net Income Percent change
Q1 2006 $672 (177) $495 (26.3%)
Q2 2006 $900 (113) $787 (12.6%)
Q3 2006 ($324) 151 ($173) (46.6%)
(in millions)
Previously reported net income Restatements, net of tax Restated Net Income Percent change
Q1 2005 $728 (104) $624 (14.3%)
Q2 2005 $816 158 $974 19.4%
Q3 2005 $675 (103) $572 (15.3%)
Q4 2005 $175 (63) $112 (36.0%)
S1
Reconciliation of Net Income to Operating Earnings
Reporting Segments Q4 2006
($ millions)
GAAP net income (loss) Less: LLC conversion benefit Operating Earnings
Global Auto Finance $530 383 $147
ResCap ($128) 523 ($651)
Insurance $735 $735
Other * ($121) (115) ($6)
Total $1,016 791 $225
* LLC conversion benefit ($115 mil) relates to Commercial Finance Group
Reporting Segments Q4 2005
($ millions)
GAAP net income (loss) Add: goodwill impairment charges Operating Earnings
Global Auto Finance $180 $180
ResCap $118 $118
Insurance $133 $133
Other * ($319) 439 $120
Total $112 439 $551
* Goodwill impairment charges of $439 million after-tax ($712 mil pre-tax); $398 million after-tax ($648 mil pre-tax) related to Commercial Finance Group and remaining $41 million after-tax ($64 mil pre-tax) related to Commercial Mortgage
Reporting Segments 2006
($ millions)
GAAP net income (loss) Less: LLC conversion benefit Add: goodwill impairment charges Operating Earnings
Global Auto Finance $1,174 383 $791
ResCap $705 523 $182
Insurance $1,127 $1,127
Other * ($881) (115) 695 ($71)
Total $2,125 791 695 $2,029
* Goodwill impairment charges of $695 million after-tax ($840 mil pre-tax) and LLC conversion benefit ($115 mil) relates to Commercial Finance Group
Reporting Segments 2005
($ millions)
GAAP net income (loss) Add: goodwill impairment charges Operating Earnings
Global Auto Finance $880 $880
ResCap $1,021 $1,021
Insurance $417 $417
Other * ($36) 439 $403
Total $2,282 439 $2,721
* Goodwill impairment charges of $439 million after-tax ($712 mil pre-tax); $398 million after-tax ($648 mil pre-tax) related to Commercial Finance Group and remaining $41 million after-tax ($64 mil pre-tax) related to Commercial Mortgage
S2
Reconciliation of Managed to Serviced Assets
RETAIL AUTO FINANCE
2006
($ millions)
12/31/06 $61,106 6,589 67,695 19,354 $87,049
9/30/06 $65,962 4,389 70,351 19,684 $90,035
6/30/06 $62,394 5,108 67,502 20,707 $88,209
3/31/06 $65,732 5,875 71,607 18,095 $89,702
On-balance sheet assets Off-balance sheet securitized assets Managed assets Whole loan sales* Serviced assets
* Retail receivables included in whole loan sales and full securitization transactions where GMAC is no longer exposed to credit and/or interest rate risk
2005
($ millions)
12/31/05 $71,541 5,745 77,286 17,420 $94,706
9/30/05 $78,623 6,283 84,906 11,466 $96,372
6/30/05 $78,261 12,017 90,278 12,980 $103,258
3/31/05 $89,489 4,602 94,091 7,620 $101,711
On-balance sheet assets Off-balance sheet securitized assets Managed assets Whole loan sales* Serviced assets
* Retail receivables included in whole loan sales and full securitization transactions where GMAC is no longer exposed to credit and/or interest rate risk
S3
Reconciliation of Insurance Core Earnings
Fourth Quarter 2006 2005 $735 7 (875) 303 $170 $133 6 (58) 18 $99 Full Year 2006 2005 $1,127 37 (1,003) 338 $499 $417 24 (111) 31 $361
($ millions)
Net Income Add: Pre-tax interest expense1 Less: Pre-tax capital gains2 Add: Tax expense Core Earnings
1. 2. Amount within premium tax and other expense in Form 10-K Amount within investment income in Form 10-K
S4