Ally Financial Inc

Previous wording

Our Automotive Finance operations include purchasing retail installment sales contracts and operating leases from dealers and automotive retailers, extending automotive loans directly to consumers, offering term loans to dealers, financing dealer floorplans and providing other lines of credit to dealers, supplying warehouse lines to automotive retailers, offering automotive-fleet financing, providing financing to companies and municipalities for the purchase or lease of vehicles, and supplying vehicle-remarketing services. Our success as an automotive-finance provider is driven by the consistent and broad range of products and services we offer to dealers and automotive retailers. The automotive marketplace is dynamic and evolving, including substantial investments in electrification by automobile manufacturers and suppliers. We continue to identify and cultivate relationships with automotive retailers, including those with leading e-commerce platforms. We also operate an online direct-lending platform for consumers seeking direct financing. We believe these actions will enable us to respond to the growing trends for a more streamlined and digital automotive financing process to serve both dealers and consumers. Additionally, we provide comprehensive automotive remarketing services, including the use of SmartAuction, our online auction platform, which efficiently supports dealer-to-dealer and other commercial wholesale vehicle transactions. SmartAuction provides diversified fee-based revenue and serves as a means of deepening relationships with our dealership customers. Furthermore, our strong and expansive dealer relationships, comprehensive suite of products and services, full-spectrum financing, and depth of experience position us to evolve with future shifts in automobile technologies, including electrification. We have provided and continue to provide automobile financing for battery-electric and plug-in hybrid vehicles, including brands such as Jeep, Tesla, Ford, and BMW. This positions us to remain a leader in automotive financing as we believe the majority of these vehicles will be sold through dealerships and automotive retailers with whom we have an established relationship. Additionally, we continue to partner and build relationships with automotive manufacturers who use a direct-to-consumer model. During the three months ended March 31, 2024, $305 million of our consumer automotive retail loan originations and purchases, and $417 million of our operating lease originations and purchases, were for battery-electric and plug-in hybrid vehicles. As of March 31, 2024, $1.3 billion of our consumer automotive finance receivables and loans had battery-electric or plug-in hybrid vehicles as the underlying collateral, and $1.3 billion of our investment in operating leases were battery-electric or plug-in hybrid vehicles.

Current wording

Our Automotive Finance operations include purchasing retail installment sales contracts and operating leases from dealers and automotive retailers, extending automotive loans directly to consumers, offering term loans to dealers, financing dealer floorplans and providing other lines of credit to dealers, supplying warehouse lines to automotive retailers, offering automotive-fleet financing, providing financing to companies and municipalities for the purchase or lease of vehicles, and supplying vehicle-remarketing services. Our success as an automotive-finance provider is driven by the consistent and broad range of products and services we offer to dealers and automotive retailers. The automotive marketplace is dynamic and evolving, including substantial investments in electrification by automobile manufacturers and suppliers. We continue to identify and cultivate relationships with automotive retailers, including those with leading e-commerce platforms. We also operate an online direct-lending platform for consumers seeking direct financing. We believe these actions will enable us to respond to the growing trends for a more streamlined and digital automotive financing process to serve both dealers and consumers. Additionally, we provide comprehensive automotive remarketing services, including the use of SmartAuction, our online auction platform, which efficiently supports dealer-to-dealer and other commercial wholesale vehicle transactions. SmartAuction provides diversified fee-based revenue and serves as a means of deepening relationships with our dealership customers. Beyond offering a full suite of solutions for our dealership customers, we also offer application pass-through programs for credit applications that do not meet our underwriting criteria, allowing dealers to provide expanded access to credit for consumers and improve sales at their dealership. Through our pass-through programs, we are able to monetize our declined applications by generating a combination of acquisition fee and servicing revenue for loans that are originated, sold to, and serviced on behalf of a third-party lender, or one-time acquisition fees for loans funded and serviced by a third party. Furthermore, our strong and expansive dealer relationships, comprehensive suite of products and services, full-spectrum financing, and depth of experience position us to evolve with future shifts in automobile technologies, including electrification. We have provided and continue to provide automobile financing for battery-electric and plug-in hybrid vehicles, including brands such as Jeep, Tesla, Ford, and BMW. This positions us to remain a leader in automotive financing as we believe the majority of these vehicles will be sold through dealerships and automotive retailers with whom we have an established relationship. Additionally, we partner and build relationships with automotive manufacturers who use a direct-to-consumer model. During the six months ended June 30, 2024, $670…

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Previous wording

Our Insurance operations offer both consumer finance protection and insurance products sold primarily through the automotive dealer channel, and commercial insurance products sold directly to dealers. We serve approximately 2.5 million consumers nationwide across F&I and P&C products. During 2024, we added relationships with Nissan and Toyota to our vehicle inventory insurance program. In addition, we offer F&I products in Canada, where we serve more than 400 thousand consumers and are the preferred VSC and other protection plan provider for GM Canada and VSC provider for Subaru Canada. Our contract to serve as the preferred VSC and protection plan provider for GM Canada extends into the third quarter of 2027.

Current wording

Our Insurance operations offer both consumer finance protection and insurance products sold primarily through the automotive dealer channel, and commercial insurance products sold directly to dealers. We serve approximately 2.5 million consumers nationwide across F&I and P&C products. During 2024, we added relationships with Nissan and Toyota to our vehicle inventory insurance program. In addition, we offer F&I products in Canada, where we serve more than 450 thousand consumers and are the preferred VSC and other protection plan provider for GM Canada and VSC provider for Subaru Canada. Our contract to serve as the preferred VSC and protection plan provider for GM Canada extends into the third quarter of 2027.

Previous wording

Through our direct-to-consumer channel, we offer a variety of competitively priced jumbo and conforming fixed- and adjustable-rate mortgage products through a third party. Under our current arrangement, our direct-to-consumer conforming mortgages are originated as held-for-sale and sold, while jumbo and LMI mortgages are originated as held-for-investment and subserviced by a third party. Loans originated in the direct-to-consumer channel are sourced by existing Ally customer marketing, prospect marketing on third-party websites, and email or direct mail campaigns. In April 2019, we announced a strategic partnership with BMC, which delivers an enhanced end-to-end digital mortgage experience for our customers through our direct-to-consumer channel. Through this partnership, BMC conducts the sales, processing, underwriting, and closing for Ally’s digital mortgage offerings in a highly innovative, scalable, and cost-efficient manner, while Ally retains control of all the marketing and advertising strategies and loan pricing. This partnership with BMC limits operational volatility as the mortgage industry continues to evolve in the current interest rate environment. During the three months ended March 31, 2024, we originated $233 million of mortgage loans through our direct-to-consumer channel.

Current wording

Through our direct-to-consumer channel, we offer a variety of competitively priced jumbo and conforming fixed- and adjustable-rate mortgage products through a third party. Under our current arrangement, our direct-to-consumer conforming mortgages and certain direct-to-consumer non-conforming jumbo mortgages are originated as held-for-sale and sold. The remaining jumbo and LMI mortgages are originated as held-for-investment and subserviced by a third party. Loans originated in the direct-to-consumer channel are sourced by existing Ally customer marketing, prospect marketing on third-party websites, and email or direct mail campaigns. In April 2019, we announced a strategic partnership with BMC, which delivers an enhanced end-to-end digital mortgage experience for our customers through our direct-to-consumer channel. Through this partnership, BMC conducts the sales, processing, underwriting, and closing for Ally’s digital mortgage offerings in a highly innovative, scalable, and cost-efficient manner, while Ally retains control of all the marketing and advertising strategies and loan pricing. This partnership with BMC limits operational volatility as the mortgage industry continues to evolve in the current interest rate environment. During the six months ended June 30, 2024, we originated $494 million of mortgage loans through our direct-to-consumer channel.

Previous wording

Through the bulk loan channel, we purchase loans from several qualified sellers, including direct originators and large aggregators who have the financial capacity to support strong representations and warranties, and the industry knowledge and experience to originate high-quality assets. Bulk purchases are made on a servicing-released basis, allowing us to directly oversee servicing activities and manage refinancing through our direct-to-consumer channel. During the three months ended March 31, 2024, we purchased $4 million of mortgage loans that were originated by third parties. Our mortgage loan purchases are held-for-investment.

Current wording

Through the bulk loan channel, we purchase loans from several qualified sellers, including direct originators and large aggregators who have the financial capacity to support strong representations and warranties, and the industry knowledge and experience to originate high-quality assets. Bulk purchases are made on a servicing-released basis, allowing us to directly oversee servicing activities and manage refinancing through our direct-to-consumer channel. During the six months ended June 30, 2024, we purchased $8 million of mortgage loans that were originated by third parties. Our mortgage loan purchases are held-for-investment.

Previous wording

•Our Corporate Finance operations primarily offer senior-secured loans to private equity sponsor-owned U.S.-based middle-market companies and to well-established asset managers that mostly provide leveraged loans. The portfolio is composed of floating-rate leveraged asset-based and cash flow/enterprise value loans. Our Corporate Finance operations had $10.4 billion of assets at March 31, 2024, and generated $134 million of total net revenue during the three months ended March 31, 2024, and continues to offer attractive returns and diversification benefits to our broader lending portfolio. Our Sponsor Finance business focuses on companies owned by private-equity sponsors with loans typically used for leveraged buyouts, refinancing and recapitalizations, mergers and acquisitions, growth, turnarounds, and debtor-in-possession financings. Additionally, our Lender Finance business provides asset managers with facilities to partially fund their direct-lending activities. We also provide a commercial real estate product, currently focused on lending to skilled nursing facilities, senior housing, and medical office buildings.

Current wording

•Our Corporate Finance operations primarily offer senior-secured loans to private equity sponsor-owned U.S.-based middle-market companies and to well-established asset managers that mostly provide leveraged loans. The portfolio is composed of floating-rate leveraged asset-based and cash flow/enterprise value loans. Our Corporate Finance operations had $9.9 billion of assets at June 30, 2024, and generated $268 million of total net revenue during the six months ended June 30, 2024, and continues to offer attractive returns and diversification benefits to our broader lending portfolio. Our Sponsor Finance business focuses on companies owned by private-equity sponsors with loans typically used for leveraged buyouts, refinancing and recapitalizations, mergers and acquisitions, growth, turnarounds, and debtor-in-possession financings. Additionally, our Lender Finance business provides asset managers with facilities to partially fund their direct-lending activities. We also provide a commercial real estate product, currently focused on lending to skilled nursing facilities, senior housing, and medical office buildings.

Previous wording

The sale of Ally Lending closed on March 1, 2024. For further information, refer to Note 2 to the Condensed Consolidated Financial Statements.

Current wording

We closed the sale of Ally Lending on March 1, 2024. For further information, refer to Note 2 to the Condensed Consolidated Financial Statements.

Previous wording

Financial information related to our credit card business, Ally Credit Card, is included within Corporate and Other. Ally Credit Card is our scalable, digital-first credit card platform and features leading-edge technology, and a proprietary, analytics-based underwriting model. We believe Ally Credit Card enhances our ability to grow and deepen both new and existing customer relationships. As of March 31, 2024, our credit card business had $2.0 billion of finance receivables and loans and approximately 1.2 million customers.

Current wording

Financial information related to our credit card business, Ally Credit Card, is included within Corporate and Other. Ally Credit Card is our scalable, digital-first credit card platform and features leading-edge technology, and a proprietary, analytics-based underwriting model. We believe Ally Credit Card enhances our ability to grow and deepen both new and existing customer relationships. As of June 30, 2024, our credit card business had $2.0 billion of finance receivables and loans and approximately 1.2 million active cardholders.

Previous wording

We earned net income from continuing operations of $157 million for the three months ended March 31, 2024, compared to $320 million for the three months ended March 31, 2023. During the three months ended March 31, 2024, results were favorably impacted by higher total financing revenue and other interest income, a decrease in income tax expense from continuing operations, and an increase in insurance premiums and service revenue earned. These items were more than offset by higher interest expense, provision for credit losses, and noninterest expense for the three months ended March 31, 2024.

Current wording

We earned net income from continuing operations of $294 million and $451 million for the three months and six months ended June 30, 2024, respectively, compared to $329 million and $649 million for the three months and six months ended June 30, 2023. During the three months and six months ended June 30, 2024, results were favorably impacted by higher total financing revenue and other interest income, a decrease in income tax expense from continuing operations, and an increase in insurance premiums and service revenue earned. These items were more than offset by higher interest expense, provision for credit losses, and noninterest expense for the three months and six months ended June 30, 2024.

Previous wording

Net financing revenue and other interest income decreased $146 million for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. Consumer automotive revenue increased as higher portfolio yields resulting from pricing actions taken in response to rising benchmark interest rates contributed to the increase in revenue. The increase was also impacted by higher average consumer assets resulting from growth in the used-vehicle portfolio, primarily through franchised dealers and national retailers. Commercial automotive revenue increased due to higher asset balances resulting from improvements in new vehicle supply. The increase was also impacted by higher yields from higher benchmark interest rates, as our commercial automotive loans are generally variable-rate. Additionally, revenue increased due to the impacts of a higher interest rate environment on the investment securities portfolio and higher interest associated with cash and cash equivalents. The increase was more than offset by higher interest expense for the three months ended March 31, 2024, as compared to the same period in 2023, in response to higher benchmark interest rates, which increased our cost of funds associated with our deposit liabilities.

Current wording

Net financing revenue and other interest income decreased $78 million and $224 million for the three months and six months ended June 30, 2024, respectively, as compared to the three months and six months ended June 30, 2023. Consumer automotive revenue increased as higher portfolio yields resulting from pricing actions taken in response to rising benchmark interest rates contributed to the increases in revenue. The increases were partially offset by lower average consumer assets resulting from the transfers of financial assets to nonconsolidated SPEs. Commercial automotive revenue increased due to higher average assets resulting from improvements in new vehicle supply. The increases were also impacted by higher yields from higher benchmark interest rates, as our commercial automotive loans are generally variable-rate. Additionally, revenue increased due to the impacts of a higher interest rate environment on the investment securities portfolio and higher interest associated with cash and cash equivalents. These increases were more than offset by higher interest expense for the three months and six months ended June 30, 2024, as compared to the same periods in 2023, in response to higher benchmark interest rates, which increased our cost of funds associated with our deposit liabilities. Additionally, the decrease in net financing revenue and other interest income was driven by the sale of Ally Lending, which closed on March 1, 2024.

Previous wording

Insurance premiums and service revenue earned was $345 million for the three months ended March 31, 2024, compared to $306 million for the same period in 2023. The increase for the three months ended March 31, 2024, was primarily driven by growth of our P&C vehicle inventory insurance program due to higher dealer inventory levels and the addition of a new relationship with Nissan. Additionally, we expect continued growth in our P&C exposure as we recently added a new relationship with Toyota to our vehicle inventory insurance program during the second quarter of 2024. The increase was also driven by higher other premium and service revenue written from non-automotive assumed reinsurance business.

Current wording

Insurance premiums and service revenue earned was $341 million and $686 million for the three months and six months ended June 30, 2024, respectively, compared to $310 million and $616 million for the three months and six months ended June 30, 2023. The increases for the three months and six months ended June 30, 2024, were primarily driven by growth of our P&C vehicle inventory insurance program due to higher dealer inventory levels and the addition of new relationships with Nissan and Toyota. The increases were also driven by higher other premium and service revenue written from non-automotive assumed reinsurance business.

Previous wording

Other gain on investments, net was $29 million for the three months ended March 31, 2024, compared to $74 million for the three months ended March 31, 2023. The decrease for the three months ended March 31, 2024, compared to the same period in 2023, was primarily attributable to the performance of equity securities, consistent with broader stock market performance.

Current wording

Other loss on investments, net was $7 million for the three months ended June 30, 2024, and other gain on investments, net was $22 million for the six months ended June 30, 2024, compared to other gain on investments, net of $26 million and $100 million for the three months and six months ended June 30, 2023, respectively. The decreases for the three months and six months ended June 30, 2024, compared to the same periods in 2023, were primarily attributable to the performance of the equity securities included in the portfolio.

Previous wording

The provision for credit losses increased $61 million for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. The increase in provision for credit losses for the three months ended March 31, 2024, was primarily driven by higher net charge-offs in our consumer automotive portfolio, partially offset by the sale of Ally Lending. Refer to the Risk Management section of this MD&A for further discussion on our provision for credit losses.

Current wording

The provision for credit losses increased $30 million and $91 million for the three months and six months ended June 30, 2024, respectively, compared to the three months and six months ended June 30, 2023. The increases in provision for credit losses for the three months and six months ended June 30, 2024, were primarily driven by higher net charge-offs in our consumer automotive portfolio, partially offset by the sale of Ally Lending. Refer to the Risk Management section of this MD&A for further discussion on our provision for credit losses.

Previous wording

Noninterest expense increased $42 million for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The increase for the three months ended March 31, 2024, was primarily driven by increased expenses to support the growth of our consumer product suite and expand our digital capabilities and portfolio of products, higher collection and repossession costs, and an increase to our FDIC special assessment estimate. Additionally, insurance losses and loss adjustment expenses increased for the three months ended March 31, 2024, as compared to the same period in 2023, primarily due growth in our P&C business, higher GAP losses driven by increased loss frequency and severity following vehicle value normalization, and growth in the non-automotive assumed reinsurance business.

Current wording

Noninterest expense increased $37 million and $79 million for the three months and six months ended June 30, 2024, as compared to the three months and six months ended June 30, 2023. The increases for the three months and six months ended June 30, 2024, were primarily driven by insurance losses and loss adjustment expenses from our vehicle inventory insurance program attributable to higher weather frequency and severity, growth in our P&C business, higher GAP losses driven by used vehicle value normalization, and growth in non-automotive assumed reinsurance business. The increases were also driven by increased expenses to support the growth of our consumer product suite and expand our digital capabilities and portfolio of products, and higher collection and repossession costs. Additionally the increase for the six months ended June 30, 2024, was driven by an increase to our FDIC special assessment.

Previous wording

We recognized total income tax expense from continuing operations of $14 million for the three months ended March 31, 2024, compared to income tax expense of $68 million for the three months ended March 31, 2023. The decrease in income tax expense for the three months ended March 31, 2024, compared to the same period in 2023, was primarily due to the tax effects of a decrease in pretax earnings. Additionally, an income tax benefit for qualified clean vehicle tax credits for purchased plug-in electric vehicles or fuel cell vehicles, along with other tax credits, resulted in a significant variation in the customary relationship between pretax income and income tax expense for the three months ended March 31, 2024.

Current wording

We recognized total income tax benefit from continuing operations of $37 million and $23 million for the three months and six months ended June 30, 2024, respectively, compared to income tax expense of $74 million and $142 million for the three months and six months ended June 30, 2023. The decreases in income tax expense for the three months and six months ended June 30, 2024, compared to the same periods in 2023, were primarily due to an increase in qualified clean vehicle tax credits and the tax effects of a decrease in pretax earnings. The increase in qualified clean vehicle tax credits was primarily driven by a new automotive manufacturer relationship added during the six months ended June 30, 2024, which increased our purchased battery-electric vehicle lease origination volume. The income tax benefit for qualified clean vehicle tax credits, along with other tax credits, resulted in a significant variation in the customary relationship between pretax income and income tax expense for the three months and six months ended June 30, 2024.

Previous wording

(a)Includes net remarketing gains of $46 million and $47 million for the three months ended March 31, 2024, and 2023, respectively.

Current wording

(a)Includes net remarketing gains of $59 million and $105 million for the three months and six months ended June 30, 2024, respectively, compared to $70 million and $117 million for the three months and six months ended June 30, 2023.

Previous wording

Our Automotive Finance operations earned income from continuing operations before income tax expense of $322 million for the three months ended March 31, 2024, compared to $442 million for the three months ended March 31, 2023. For the three months ended March 31, 2024, the decrease was primarily due to higher interest expense and higher provision for credit losses, partially offset by higher financing revenue and other interest income.

Current wording

Our Automotive Finance operations earned income from continuing operations before income tax expense of $407 million and $729 million for the three months and six months ended June 30, 2024, respectively, compared to $501 million and $943 million for the three months and six months ended June 30, 2023. For the three months and six months ended June 30, 2024, the decreases were primarily due to higher interest expense and higher provision for credit losses, partially offset by higher total financing revenue and other interest income.

Previous wording

Consumer automotive loan financing revenue and other interest income increased $232 million for the three months ended March 31, 2024, compared to the same period in 2023. Higher portfolio yields resulting from pricing actions taken in response to rising benchmark interest rates contributed to the increase in revenue. The increase was also impacted by higher average consumer assets resulting from growth in the used-vehicle portfolio, primarily through franchised dealers and national retailers.

Current wording

Consumer automotive loan financing revenue and other interest income increased $188 million and $420 million for the three months and six months ended June 30, 2024, respectively, compared to the same periods in 2023. Higher portfolio yields resulting from pricing actions taken in response to rising benchmark interest rates contributed to the increases in revenue. The increases were partially offset by lower average consumer assets resulting from the transfers of financial assets to nonconsolidated SPEs. Refer to Note 10 to the Condensed Consolidated Financial Statements for additional information regarding assets sold to nonconsolidated SPEs.

Previous wording

Commercial loan financing revenue and other interest income increased $112 million for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. The increase was primarily due to higher asset balances resulting from improvements in new vehicle supply. The increase was also impacted by higher yields from higher benchmark interest rates, as our commercial automotive loans are generally variable-rate.

Current wording

Commercial loan financing revenue and other interest income increased $100 million and $212 million for the three months and six months ended June 30, 2024, respectively, compared to the three months and six months ended June 30, 2023. The increases were primarily due to higher asset balances resulting from improvements in new vehicle supply. The increases were also impacted by higher yields from higher benchmark interest rates, as our commercial automotive loans are generally variable-rate.

Previous wording

Interest expense was $1.1 billion for the three months ended March 31, 2024, compared to $732 million for the three months ended March 31, 2023. The increase for the three months ended March 31, 2024, was primarily driven by a higher interest rate environment, resulting in higher funding costs. Additionally, the increase was driven by higher average interest-earning asset balances during the three months ended March 31, 2024.

Current wording

Interest expense was $1.1 billion and $2.2 billion for the three months and six months ended June 30, 2024, respectively, compared to $828 million and $1.6 billion for the three months and six months ended June 30, 2023. The increases for the three months and six months ended June 30, 2024, were primarily driven by a higher interest rate environment, resulting in higher funding costs.

Previous wording

Total net operating lease revenue decreased $24 million for the three months ended March 31, 2024, compared to the same period in 2023. The decrease in net operating lease revenue was driven by lower asset balances. Refer to the Operating Lease Residual Risk Management section of this MD&A for further discussion.

Current wording

Total net operating lease revenue decreased $36 million and $60 million for the three months and six months ended June 30, 2024, respectively, compared to the same periods in 2023. The decreases in net operating lease revenue were driven by lower asset balances, as well as lower remarketing gains. Refer to the Operating Lease Residual Risk Management section of this MD&A for further discussion.

Previous wording

Total other revenue increased $20 million for the three months ended March 31, 2024, compared to the same period in 2023. The increase was primarily due to an increase in servicing fees and late charges. The increase in servicing fees was due to the growth in financial assets transferred to a nonconsolidated SPE for which we retain the ongoing right to service the assets. The increase in late charges was due to higher delinquencies amid deterioration in macroeconomic conditions, driven by persistent inflation. While delinquencies within our consumer automotive loan portfolio increased for the three months ended March 31, 2024, as compared to the same period in 2023, we observed a moderation in the pace of change for delinquencies since March 31, 2023, as we continue to make adjustments to our underwriting strategies. Refer to Note 10 to the Condensed Consolidated Financial Statements for additional information regarding assets sold to nonconsolidated SPEs.

Current wording

Total other revenue increased $10 million and $30 million for the three months and six months ended June 30, 2024, respectively, compared to the same periods in 2023. The increases were primarily due to an increase in servicing fees resulting from the growth in financial assets transferred to a nonconsolidated SPE for which we retain the ongoing right to service the assets. Refer to Note 10 to the Condensed Consolidated Financial Statements for additional information regarding assets sold to nonconsolidated SPEs.

Previous wording

The provision for credit losses increased $97 million for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. The increase in provision for credit losses was primarily driven by higher net charge-offs in our consumer automotive portfolio during the three months ended March 31, 2024. Refer to the Risk Management section of this MD&A for further discussion on our provision for credit losses.

Current wording

The provision for credit losses increased $52 million and $149 million for the three months and six months ended June 30, 2024, respectively, compared to the three months and six months ended June 30, 2023. The increases in provision for credit losses were primarily driven by higher net charge-offs in our consumer automotive portfolio during the three months and six months ended June 30, 2024. Refer to the Risk Management section of this MD&A for further discussion on our provision for credit losses.

Previous wording

(c)Excludes the effects of derivative financial instruments designated as hedges, which is included within Corporate and Other. Including the impact of hedging activities, the yield was 9.06% and 8.48% for the three months ended March 31, 2024, and 2023, respectively.

Current wording

(c)Excludes the effects of derivative financial instruments designated as hedges, which is included within Corporate and Other. Including the impact of hedging activities, the yield was 9.19% and 9.13% for the three months and six months ended June 30, 2024, respectively, and 8.81% and 8.65% for the three months and six months ended June 30, 2023.

Previous wording

(d)Excludes the effects of derivative financial instruments designated as hedges, which is included within Corporate and Other. Including the impact of hedging activities, the yield was 7.69% and 7.29% for the three months ended March 31, 2024, and 2023, respectively.

Current wording

(d)Excludes the effects of derivative financial instruments designated as hedges, which is included within Corporate and Other. Including the impact of hedging activities, the yield was 7.64% and 7.67% for the three months and six months ended June 30, 2024, respectively, and 7.71% and 7.51% for the three months and six months ended June 30, 2023.

Previous wording

(f)Yield includes net gains on the sale of off-lease vehicles of $46 million and $47 million for the three months ended March 31, 2024, and 2023, respectively. Excluding these gains on sale, the yield was 4.80% and 5.03% for the three months ended March 31, 2024, and 2023, respectively.

Current wording

(f)Yield includes net gains on the sale of off-lease vehicles of $59 million and $105 million for the three months and six months ended June 30, 2024, respectively, compared to $70 million and $117 million for the three months and six months ended June 30, 2023. Excluding these gains on sale, the yield was 4.52% and 4.66% for the three months and six months ended June 30, 2024, respectively, compared to 4.83% and 4.93% for the three months and six months ended June 30, 2023.

Previous wording

During the three months ended March 31, 2024, our portfolio yield for consumer automotive loans, excluding the impact of hedging activities, increased 103 basis points, as compared to the same period in 2023. The increase for the three months ended March 31, 2024, was primarily driven by higher portfolio yields resulting from pricing actions. We continued to opportunistically adjust pricing in response to high benchmark interest rates during the three months ended March 31, 2024. Our portfolio yield for consumer automotive loans, including the effects of derivative financial instruments designated as hedges, was 43 basis points higher than our portfolio yield for consumer automotive loans excluding the effects of derivative financial instruments designated as hedges for the three months ended March 31, 2024. This is attributable to the execution of hedging strategies that are used to mitigate interest rate risks. The effects of derivative financial instruments designated as hedges are included within Corporate and Other. Refer to Note 19 to the Condensed Consolidated Financial Statements for further discussion.

Current wording

During the three months and six months ended June 30, 2024, our portfolio yield for consumer automotive loans, excluding the impact of hedging activities, increased 100 and 102 basis points, respectively, as compared to the same periods in 2023. The increases for the three months and six months ended June 30, 2024, were primarily driven by higher portfolio yields resulting from pricing actions. We continued to opportunistically adjust pricing in response to elevated benchmark interest rates. Our portfolio yield for consumer automotive loans, including the effects of derivative financial instruments designated as hedges, was 36 and 40 basis points higher than our portfolio yield for consumer automotive loans excluding the effects of derivative financial instruments designated as hedges for the three months and six months ended June 30, 2024, respectively. This is attributable to the execution of hedging strategies that are used to mitigate interest rate risks. The effects of derivative financial instruments designated as hedges are included within Corporate and Other. Refer to Note 19 to the Condensed Consolidated Financial Statements for further discussion.

Previous wording

Retail loan originations with a term of 76 months or more represented 22% of total retail loan originations for the three months ended March 31, 2024, compared to 20% for the three months ended March 31, 2023. Substantially all the loans originated with a term of 76 months or more during both the three months ended March 31, 2024, and 2023, were considered to be prime and in credit tiers S, A, or B. Our underwriting processes are designed to consider various deal structure variables—such as payment-to-income, LTV, debt-to-income, and FICO® score—that compensate for longer loan terms and mitigate underwriting risk.

Current wording

Retail loan originations with a term of 76 months or more represented 24% and 23% of total retail loan originations for the three months and six months ended June 30, 2024, respectively, compared to 24% and 22% for the three months and six months ended June 30, 2023. Substantially all the loans originated with a term of 76 months or more during both the three months and six months ended June 30, 2024, and 2023, were considered to be prime and in credit tiers S, A, or B. Our underwriting processes are designed to consider various deal structure variables—such as payment-to-income, LTV, debt-to-income, and FICO® score—that compensate for longer loan terms and mitigate underwriting risk.

Previous wording

During the three months ended March 31, 2024, approximately 80% of our used retail loan originations were for vehicles with a model year of 2018 or newer. According to the Bureau of Transportation Statistics, the average age of light vehicles in operation in the United States during 2023 was approximately 13 years. Substantially all used retail loan originations with a term of 76 months or more during the three months ended March 31, 2024, were for vehicles with a model year of 2018 or newer.

Current wording

During the three months ended June 30, 2024, approximately 83% of our used retail loan originations were for vehicles with a model year of 2018 or newer. According to the Bureau of Transportation Statistics, the average age of light vehicles in operation in the United States during 2023 was approximately 13 years. Substantially all used retail loan originations with a term of 76 months or more during the three months ended June 30, 2024, were for vehicles with a model year of 2018 or newer.

Previous wording

(a)Includes CSG originations of $1.1 billion and $1.3 billion for the three months ended March 31, 2024, and 2023, respectively.

Current wording

(a)Includes CSG originations of $1.0 billion and $1.3 billion for the three months ended June 30, 2024, and 2023, respectively.

Previous wording

Total consumer automotive loan and operating lease originations increased $235 million for the three months ended March 31, 2024, compared to the same period in 2023. The increase was primarily driven by our dynamic underwriting strategies, including strategic pricing actions to optimize our risk appetite and returns. The decrease in originations sourced from Stellantis dealers was more than offset by increased originations with other dealers and automotive retailers during the three months ended March 31, 2024.

Current wording

Total consumer automotive loan and operating lease originations decreased $573 million and $338 million for the three months and six months ended June 30, 2024, respectively, compared to the same periods in 2023. The decreases were primarily driven by our dynamic underwriting strategies, including strategic pricing and curtailment actions to optimize returns within our risk appetite.

Previous wording

The following table presents the percentage of retail loan and operating lease originations and purchases, in dollars, by FICO® Score and product type. We define prime consumer automotive loans primarily as those loans with a FICO® Score at origination of 620 or greater.

Current wording

The following tables present the percentage of retail loan and operating lease originations and purchases, in dollars, by FICO® Score and product type. We define prime consumer automotive loans primarily as those loans with a FICO® Score at origination of 620 or greater.

Previous wording

Originations with a FICO® Score of less than 620 (considered nonprime) represented 9% of total consumer loan and operating lease originations for the three months ended March 31, 2024, compared to 10% for the three months ended March 31, 2023. Consumer loans and operating leases with FICO® Scores of less than 540 represented 2% of total originations for the three months ended March 31, 2024, as compared to 1% of total originations for the same period in 2023. Nonprime applications are subject to more stringent underwriting criteria (for example, minimum payment-to-income ratio, maximum debt-to-income ratio, and maximum amount financed), and our nonprime loan portfolio generally does not include any loans with a term of 76 months or more. The carrying value of our held-for-investment, nonprime consumer automotive loans before allowance for loan losses was $8.5 billion and $8.7 billion at March 31, 2024, and December 31, 2023, respectively, or approximately 10.2% and 10.3% of our total consumer automotive loans at March 31, 2024, and December 31, 2023. For discussion of our credit-risk-management practices and performance, refer to the section titled Risk Management.

Current wording

Originations with a FICO® Score of less than 620 (considered nonprime) represented 7% and 8% of total consumer loan and operating lease originations for the three months and six months ended June 30, 2024, respectively, compared to 9% for both the three months and six months ended June 30, 2023. Consumer loans and operating leases with FICO® Scores of less than 540 represented 1% of total originations for both the three months and six months ended June 30, 2024, as compared to 2% of total originations for both the three months and six months ended June 30, 2023. Nonprime applications are subject to more stringent underwriting criteria (for example, maximum payment-to-income ratio, maximum debt-to-income ratio, and maximum amount financed), and our nonprime loan portfolio generally does not include any loans with a term of 76 months or more. The carrying value of our held-for-investment, nonprime consumer automotive loans before allowance for loan losses was $8.3 billion and $8.7 billion at June 30, 2024, and December 31, 2023, respectively, or approximately 10.0% and 10.3% of our total consumer automotive loans at June 30, 2024, and December 31, 2023. For discussion of our credit-risk-management practices and performance, refer to the section titled Risk Management.

Previous wording

During the first quarter of 2024, we amended our relationship with Carvana, a leading e-commerce platform for buying and selling used vehicles. Specifically, we maintained our committed facility at a maximum of $4.0 billion to support our continued efforts to optimize risk-adjusted returns. This commitment is effective for 364 days. As part of the agreement, we continue to purchase finance receivables on a periodic basis within prescribed eligibility requirements and risk appetite, consistent with purchase practices in prior years. All the finance receivables purchased through this channel are used vehicles, and are included in non-OEM-franchised dealers and automotive retailers in our consumer origination metrics. While different vintages exhibit varying performance, collectively to date, finance receivables purchased from Carvana have exhibited consistent delinquency and loss performance compared to loans with similar credit characteristics acquired through our indirect dealer channel. Consumer finance receivables and loans sourced from Carvana represented 8.6% and 8.2% of our total consumer automotive finance receivables and loans as of March 31, 2024 and December 31, 2023, respectively. Loan purchases from Carvana were 9% and 7% of our total consumer automotive financing originations during the three months ended March 31, 2024, and 2023, respectively.

Current wording

During the first quarter of 2024, we amended our relationship with Carvana, a leading e-commerce platform for buying and selling used vehicles. Specifically, we maintained our committed facility at a maximum of $4.0 billion to support our continued efforts to optimize risk-adjusted returns. This commitment is effective for 364 days. As part of the agreement, we continue to purchase finance receivables on a periodic basis within prescribed eligibility requirements and risk appetite, consistent with purchase practices in prior years. All the finance receivables purchased through this channel are used vehicles, and are included in non-OEM-franchised dealers and automotive retailers in our consumer origination metrics. While different vintages and credit tiers exhibit varying performance, collectively to date, finance receivables purchased from Carvana have generally exhibited consistent delinquency and loss performance compared to loans with similar credit characteristics acquired through our indirect dealer channel. Consumer finance receivables and loans sourced from Carvana represented 8.3% and 8.2% of our total consumer automotive finance receivables and loans as of June 30, 2024, and December 31, 2023, respectively. Loan purchases from Carvana were 5% and 7% of our total consumer automotive financing originations during the three months and six months ended June 30, 2024, respectively, as compared to 10% and 9% for the same periods in 2023.

Previous wording

Average commercial wholesale financing receivables outstanding increased $3.9 billion during the three months ended March 31, 2024, as compared to the same period in 2023. The increase for the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to increased industry-wide new vehicle inventory levels, partially offset by reduced used vehicle inventory levels.

Current wording

Average commercial wholesale financing receivables outstanding increased $4.2 billion and $4.1 billion during the three months and six months ended June 30, 2024, respectively, as compared to the same periods in 2023. The increases for the three months and six months ended June 30, 2024, as compared to the same periods in 2023, were primarily due to an increase in dealer new vehicle inventory levels, which is consistent with broader industry trends.

Previous wording

Carvana's commercial line of credit totals $1.5 billion, with a scheduled maturity in the third quarter of 2025. The line of credit represents a commitment to fund Carvana’s wholesale floorplan financing of used vehicles and is consistent in form and structure with our other wholesale floorplan financing arrangements. This includes the line of credit being fully collateralized to mitigate counterparty credit risk in the event of a default. At March 31, 2024, Carvana’s gross wholesale floorplan assets outstanding balance was $104 million.

Current wording

Carvana's commercial line of credit totals $1.5 billion, with a scheduled maturity in the third quarter of 2025. The line of credit represents a commitment to fund Carvana’s wholesale floorplan financing of used vehicles and is consistent in form and structure with our other wholesale floorplan financing arrangements. This includes the line of credit being fully collateralized to mitigate counterparty credit risk in the event of a default. At June 30, 2024, Carvana’s gross wholesale floorplan assets outstanding balance was $72 million.

Previous wording

We also provide other forms of commercial financing for the automotive industry including automotive dealer term and revolving loans and automotive fleet financing. Automotive dealer term and revolving loans are loans that we make to dealers to finance other aspects of the dealership business, including acquisitions. These loans are usually secured by real estate or other dealership assets and are typically personally guaranteed by the individual owners of the dealership. Additionally, these loans generally include cross-collateral and cross-default provisions. Automotive fleet financing credit lines may be obtained by dealers, their affiliates, and other independent companies that are used to purchase vehicles, which they lease or rent to others. The average balances of other commercial automotive loans increased $583 million for the three months ended March 31, 2024, compared to the same period in 2023, to an average of $6.3 billion for the three months ended March 31, 2024.

Current wording

We also provide other forms of commercial financing for the automotive industry including automotive dealer term and revolving loans and automotive fleet financing. Automotive dealer term and revolving loans are loans that we make to dealers to finance other aspects of the dealership business, including acquisitions. These loans are usually secured by real estate or other dealership assets and are typically personally guaranteed by the individual owners of the dealership. Additionally, these loans generally include cross-collateral and cross-default provisions. Automotive fleet financing credit lines may be obtained by dealers, their affiliates, and other independent companies that are used to purchase vehicles, which they lease or rent to others. The average balances of other commercial automotive loans increased $476 million and $529 million for the three months and six months ended June 30, 2024, respectively, compared to the same periods in 2023, to an average of $6.4 billion for both the three months and six months ended June 30, 2024.

Previous wording

(a)Includes interest expense of $10 million and $8 million for the three months ended March 31, 2024, and 2023, respectively.

Current wording

(a)Includes interest expense of $11 million and $21 million for the three months and six months ended June 30, 2024, respectively, and $7 million and $15 million for the three months and six months ended June 30, 2023.

Previous wording

(b)Includes net unrealized gains on equity securities of $17 million and $65 million for the three months ended March 31, 2024, and 2023, respectively.

Current wording

(b)Includes net unrealized losses on equity securities of $28 million and $11 million for the three months and six months ended June 30, 2024, respectively, and net unrealized gains on equity securities of $24 million and $89 million for the three months and six months ended June 30, 2023.

Previous wording

Our Insurance operations earned income from continuing operations before income tax expense of $70 million for the three months ended March 31, 2024, compared to $92 million for the three months ended March 31, 2023. The decrease for the three months ended March 31, 2024, was primarily driven by a lower net gain on investments, an increase in insurance losses and loss adjustment expenses, and an increase in acquisition and underwriting expense, which were partially offset by an increase in insurance premiums and service revenue earned.

Current wording

Our Insurance operations incurred a loss from continuing operations before income tax expense of $42 million for the three months ended June 30, 2024, and earned income of $28 million for the six months ended June 30, 2024, compared to income of $8 million and $100 million for the three months and six months ended June 30, 2023, respectively. The decreases in income for the three months and six months ended June 30, 2024, were primarily driven by increases in insurance losses and loss adjustment expenses and lower net investments gains, which were partially offset by increases in insurance premiums and service revenue earned.

Previous wording

Insurance premiums and service revenue earned was $345 million for the three months ended March 31, 2024, compared to $306 million for the three months ended March 31, 2023. The increase for the three months ended March 31, 2024, was primarily driven by growth of our P&C vehicle inventory insurance program due to higher dealer inventory levels and the addition of a new relationship with Nissan. Additionally, we expect continued growth in our P&C exposure as we recently added a new relationship with Toyota to our vehicle inventory insurance program during the second quarter of 2024. The increase was also driven by higher other premium and service revenue written from non-automotive assumed reinsurance business.

Current wording

Insurance premiums and service revenue earned was $341 million and $686 million for the three months and six months ended June 30, 2024, respectively, compared to $310 million and $616 million for the same periods in 2023. The increases for the three months and six months ended June 30, 2024, were primarily driven by growth of our P&C vehicle inventory insurance program due to higher dealer inventory levels and the addition of new relationships with Nissan and Toyota. The increases were also driven by higher other premium and service revenue written from non-automotive assumed reinsurance business.