NEW YORK -

Despite financing originations tailing off a bit during the fourth quarter, Ally Financial senior executive vice president of finance and corporate planning Jeffrey Brown contends the company is in a great position to capitalize on growing vehicle and F&I sales through a streamlined framework. Brown made that assertion after Ally's Q4 originations came in at $8.2 billion, down from $8.9 billion a year earlier.

The Q4 level also dipped sequentially, too, as Ally's third-quarter originations totaled $9.6 billion.

"We continue to believe that the coupling of the leading auto finance franchise with a top direct bank is a winning combination," Brown said on Thursday when Ally conducted its quarterly conference call to discuss the company's latest performance.

"We've been successful with our auto finance franchise through a very competitive period, and we see that competitive landscape continuing," he continued. "We are focused on our strengths and the value that our platform offers to dealers. We are also guided by profitability and asset quality as opposed to just growth and share. We want to engage in segments of the business that deliver an appropriate return. That is how we will continue to approach the business."

As far as what business is now, Ally is coming off a quarter in which its auto finance division reported pre-tax income of $207 million, compared to $371 million in the corresponding prior year period.

Excluding the $98 million charge related to the settlements with the Consumer Financial Protection Bureau and U.S. Department of Justice, Ally indicated the segment reported pre-tax income of $305 million.

"Results for the quarter were driven by strong net financing revenue, which improved $33 million year-over-year, resulting from growth in the lease, used and diversified channels, despite continued intense competition. This was partially offset by an increase in provision expense as the portfolio continues to shift to a more diversified and higher margin credit mix," Ally chief financial officer Christopher Halmy said.

Ally noted that its U.S. auto finance earning assets – comprised primarily of consumer and commercial receivables, and leases – totaled $108 billion at the end of last year, up 8 percent compared to the close of 2012.

Looking closer at the Q4 origination total, Ally explained the $8.2 billion was comprised of $3.6 billion of new retail loans, $2.3 billion of used contracts and $2.3 billion of leases.

"U.S. consumer financing origination levels in the fourth quarter of 2013 were driven by strong year-over -year origination growth in used, lease and diversified new retail channels, growing 13 percent, 6 percent and 20 percent respectively, compared to the fourth quarter of 2012," Halmy said.

In total, used, lease and diversified new retail originations continue to account for more than 60 percent of total U.S consumer originations," he continued.

"If you look at the year-over-year comparison, much of that decline was driven by lower subvented volume through the Chrysler channel given the emergence of Chrysler Capital," Halmy went on to say. "Much of the decline quarter-over-quarter was driven by lower sales going through our dealer customer base and more seasonal factors, which can also be contributed to the current competitive environment.

"We continue to see some players pricing aggressively in the super prime space and we've chosen to let some of that business go. We continue to focus on profitability and asset quality over market share," he added.

And speaking of subvented deals, an analyst from Jeffries came into this week's call under the impression that Ally's contract with General Motors expired on Dec. 31. However, Ally president Bill Muir clarified the current situation.

"Actually Ally and GM have extended their existing agreement for a period of time so it actually didn't expire at the end of last year," Muir said. "We are finalizing a new agreement, which we expect to have in place soon. Having said that, I don't want to speculate on anything but it should not really change at all or having impact on the nature of our business in how we approach and work with GM dealers."

Elsewhere in the auto finance division, Ally highlighted that its net charge-off rate decreased sequentially to finish 2013 as opposed to what the company experience a year earlier. The Q4 rate was 0.80 percent as net charge-offs totaled $114 million, down slightly from the Q3 readings of 0.82 percent and $115 million.

In 2012, Ally reported the Q3 net charge-off rate at 0.54 percent and the amount of $70 million before rising to 0.76 percent and $100 million in the fourth quarter.

"We did have the benefit of additional recoveries that were recognized this quarter, which helped to keep that number lower from the seasonal increase that you would expect to see the fourth quarter," Halmy said.

"In general, we continue to expect to see charge-off follow seasonal patterns on a quarterly basis and continue to increase somewhat on a year-over-year basis driven by the same themes we have discussed on previous calls," he continued.

And the themes Halmy pinpointed included:

—Shift to a more balanced and profitable credit mix particularly compared to 2009 through 2011 vintages.

—Larger vintages with a more balanced credit mix entering their peak loss periods versus the vintages that were entering their peak loss periods a year ago.

—Slowing portfolio growth rate.

—Continued moderation of used-vehicle prices.

Also of note, Ally's delinquency rate extended its upward trajectory to four quarters in a row, settling 35 basis points higher at 2.35 percent in Q4. The streak started in Q1 of last year when Ally's delinquency rate stood at 1.53 percent.

"Again, this is completely as expected and performances are right in line or better than we used to price the loans," Halmy said.

Update on Insurance Business

Ally also touched on its insurance division, which focuses on dealer-centric products such as extended vehicle service contracts and dealer inventory insurance.

The company reported pre-tax income from continuing operations, excluding repositioning items, of $67 million in the fourth quarter of 2013, compared to $27 million in the corresponding prior year period.

Net investment income increased to $37 million in the fourth quarter of 2013, compared to investment income of $34 million in the comparable prior year period due to investment gains resulting from a strong equity market and an other than temporary impairment on certain investment securities for the fourth quarter of 2012 that did not repeat.

"Underwriting income improved to $30 million excluding repositioning items in the quarter, compared to a loss of $7 million in the corresponding prior year period, which had been significantly impacted by weather losses last year related to Superstorm Sandy," Ally said.

The company also highlighted the group continued to experience strong written premiums despite increasing competition, resulting in written premiums of $225 million during the fourth quarter of 2013, down approximately $11 million compared to the fourth quarter of 2012.

"The business maintained its high wholesale insurance penetration levels with approximately 82 percent of U.S. dealers with Ally floor plan financing also carrying floor plan insurance with the company," Ally said.