NEW YORK — GMAC Financial Services has reported the 2006 net income to be $2.1 billion, compared to net income of $2.3 billion in 2005. GMAC's 2006 performance reflects record earnings in the insurance business and continued strong profitability in automotive finance, but significantly reduced net income at Residential Capital LLC (ResCap), in congruence with a declining U.S. residential housing market.

"The diversity of our earnings base continues to benefit GMAC's consolidated results. The all-time record performance of our insurance business and strong net income at our global automotive finance operations helped to offset an earnings setback in the real estate finance segment," said GMAC CEO Eric Feldstein.

"For GMAC, 2006 marked a year of challenge and a year of opportunity," Feldstein continued. "GMAC encountered a very difficult environment — higher interest rates, a flat yield curve and a sharp downturn in the U.S. mortgage market. Nevertheless, the company was able to post $2.1 billion of net income. But far more significant, the sale of a majority interest in GMAC to a Cerberus-led consortium has set the stage for exciting new growth opportunities as we transform GMAC from a captive operation to a more globally diversified operation."

GMAC's 2006 operating earnings totaled $2.0 billion, compared to $2.7 billion of operating earnings in 2005.

As previously announced, GMAC restated financial results for the first, second and third quarters of 2006 and the years 2001 through 2005 related to the accounting treatment for certain hedging activity and other nonmaterial items. These restatements had no economic or cash impact on the business in any period.

For the fourth quarter of 2006, GMAC reported net income of $1.0 billion, up from earnings of $112 million in the fourth quarter of 2005. The fourth quarter results include a $791 million benefit related to the LLC conversion, and compare to net income in the year-ago period that included goodwill impairment charges of $439 million after-tax.

On Nov. 30, 2006, a 51 percent equity stake in GMAC was sold to an investor consortium led by Cerberus in a landmark transaction that marked the end of GMAC's 87-year history as a wholly owned subsidiary of General Motors Corp. (GM). As part of the transaction, GMAC and GM entered into a 10-year agreement in which the parties will maintain their mutually beneficial automotive financing relationship.

"Under the new ownership structure, GMAC benefited from a strengthened capital position, higher credit ratings and improved access to low-cost funding, while remaining the exclusive provider for essentially all GM-sponsored auto finance programs," explained Feldstein. "As a result, GMAC's prospects for long-term profitable growth are significantly enhanced."

GMAC and ResCap ended the year with an exceptionally strong liquidity position. GMAC's consolidated cash and marketable securities totaled $18.3 billion as of Dec. 31, 2006, up from $14.1 billion on Sept. 30, 2006. Cash balances were augmented in the fourth quarter by unsecured debt issuances at GMAC and ResCap following credit rating upgrades in connection with the GMAC sale transaction.

During the fourth quarter, GM and the Cerberus-led consortium together invested cash of $1.9 billion in preferred interests in GMAC, bringing the company's 2006 year-end equity and preferred interests to $16.6 billion. In addition, by the end of the first quarter of 2007, GMAC expects to receive a common equity injection from GM of approximately $1.0 billion based on the final settlement provisions of the transaction.