Excellent performance in a difficult environment
Without a doubt, 2005 was a year that tested us. Credit rating downgrades, narrower margins, rising market rates, competition that intensified in many of our markets — these were the forces that challenged our ability to excel.
Yet excel we did. While we did not match the record results of 2004, our performance was strong — exceedingly strong in light of the environment in which we operated. Early in 2005, we set a target for earnings of $2.5 billion, ambitious given the challenges we knew we faced. One year later, we reported 2005 operating earnings of $2.8 billion, down only slightly from the record earnings of $2.9 billion we posted in 2004. Our 2005 net income results included a non-cash, after-tax goodwill impairment of $439 million primarily associated with a 1999 acquisition. Including this non-recurring charge, GMAC’s 2005 reported earnings were a still-impressive $2.4 billion.
Our 2005 performance was a validation of the strategy we embarked upon a few years ago to strengthen our company by diversifying our business. The challenges we encountered largely impacted GMAC’s financing operations, which earned nearly $1.1 billion in 2005 (excluding after-tax goodwill impairment charges of $398 million), down from about $1.5 billion in 2004. However, this year-over-year earnings decline in GMAC’s financing operations was largely offset by increases in net income at GMAC’s mortgage and insurance businesses. Mortgage operations earned a record of nearly $1.4 billion (excluding after-tax goodwill impairment charges of $41 million), up from just over $1.1 billion in 2004. Our insurance operations delivered very strong performance as well: 2005 net income of $417 million, a solid increase from the $329 million we reported in 2004.
Our diversified portfolio of businesses and strong global growth have proven critical for GMAC. Mortgage and insurance operations now provide more than half of GMAC’s net income. Furthermore, GMAC’s international businesses across all three of our business sectors are the most rapidly growing operations within the company.
