Registration No. 33-6534
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Or
Transition Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended December 31, 1993
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
(Exact name of registrant as specified in its charter)
Barbados Not Applicable
(State or other jurisdiction (I.R.S. employer identification
of incorporation or organization) number)
Financial Services Centre
Bishops Court Hill Not Applicable
St. Michael, Barbados, W.I. (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number, including area code (809) 436-4895
Securities registered pursuant to Section 12(b) of the Act:
Name of each
Title of each class Exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
Aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 1, 1994, was $1,477,500*.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Class As of March 1, 1994
Common Stock, no-par value 2,000
Participating Stock, no-par value 19,700
* Based on current offering price of $75 per share.
PART I
Item 1. BUSINESS
INTRODUCTION
Motors Mechanical Reinsurance Company, Limited (the "Company") was incorporated
in Barbados on June 12, 1986. It became registered in Barbados as an insurer
on June 30, 1986 and commenced insurance operations on December 11, 1987.
The business of the Company is the assumption of motor vehicle mechanical
breakdown insurance risks arising under insurance policies reinsured by Motors
Insurance Corporation ("MIC") to the extent such policies are attributable to
an MIC agency account in respect of which a series of shares is issued and
outstanding (the "Policies"). These policies are issued either to General
Motors Corporation or affiliates ("GM") or to automobile dealers, reinsured by
MIC, and retroceded to the Company. Shares of the Company's Participating
Stock (the "Shares") are sold to persons designated by owners of motor vehicle
sales franchises with respect to which MIC maintains an MIC Agency Account. A
separate series is created for Shares relating to each MIC Agency Account, and
a separate "Subsidiary Capital Account" is maintained for each such series.
The profitability of the Company reflects both underwriting and investment
experience, which is allocated among the Subsidiary Capital Accounts.
THE RETROCESSION
The Retroceding Company. MIC, the retroceding company under the Retrocession
Agreement described below, is a stock insurance company organized under the
laws of New York. All of MIC's outstanding stock is owned by General Motors
Acceptance Corporation which, in turn, is a wholly owned subsidiary of GM. MIC,
directly and through its subsidiaries, offers property and casualty coverages
in all 50 states and the District of Columbia, as well as in Canada and Europe.
MIC consistently has been awarded A.M. Best Company's insurance financial
rating of A + (Superior), one of the highest possible ratings.
MIC maintains MIC Agency Accounts in respect of Franchises to which the risks
to be retroceded can be attributed. (A single MIC Agency Account may be estab-
lished either for a single Franchise or in respect of a group of Franchises
treated as a single business unit by MIC and its subsidiaries.) Currently,
there are more than 6,800 MIC Agency Accounts in respect of Franchises through
which mechanical insurance business is produced.
The Retrocession Agreement -- Principal Agreement. The Company has entered
into a "quota share" retrocession agreement (the "Agreement") which became
effective as of December 11, 1987. Pursuant to the Agreement, MIC retrocedes
to the Company, and the Company is obligated to assume, MIC's risks in respect
of policies issued by any MIC subsidiary and reinsured by MIC that cover
automobile mechanical breakdown risks, to the extent that risks under such
policies are attributable to an MIC Agency Account in respect of which a series
of Shares is issued and outstanding. MIC retrocedes 100% of the risk and the
Company assumes 75% of the original gross premium, reduced by agents'
commissions, if any. The remaining 25% of the gross premium is retained by MIC
as a ceding commission. The Company assumes 75% of the risk with respect to
these policies and MIC pays 56.25% of the gross premium at the time the
policies are written. The remaining 25% of the risk is ceded to the Company
and MIC pays 18.75% of the gross premium as the premiums are earned.
Settlements between the Company and MIC are made quarterly.
The Agreement may be terminated at any time by mutual consent of the parties,
or by either party upon 30 days written notice. Upon termination of the
Agreement, MIC and the Company will remain bound by their respective
obligations under the Agreement with respect to risks retroceded prior to the
close of business on the date of termination. However, risks not yet
retroceded to the Company under the Agreement shall remain risks of MIC.
The Retrocession Agreement -- Supplemental Agreement. MIC from time to time
enters into agreements with Franchise owners for which an MIC Agency Account is
established, pursuant to which MIC, acting for itself and on behalf of certain
of its subsidiaries, agrees to cede or retrocede to another insurance company
mutually satisfactory to MIC and the respective Franchise owners the unexpired
liability on service contracts, insured under the Policies, sold after the date
specified in each such agreement. This liability can be ceded or retroceded to
dealer-owned companies organized specifically with respect to a particular
Franchise or, if a series of Shares is issued which relates to the Franchise,
pursuant to an agreement between MIC and the Company (the "Supplemental
Retrocession Agreement"). For this purpose, unexpired liability means MIC's
liability in respect of the remaining period of coverage under the Policy as of
the effective date of the cession. Under the Supplemental Retrocession
Agreement, unexpired liability in respect of the Policies is assumed on the
same basis as risks retroceded to the Company under the principal Retrocession
Agreement.
Types of Risks Subject to Retrocession. Coverages assumed under the Agreement
are limited to service contracts or insurance policies insured or reinsured by
MIC that provide indemnification against specific automobile mechanical
breakdowns not covered by a manufacturer's new vehicle warranty. Such service
contracts or insurance policies often provide additional coverages, such as
towing and rental allowances.
Loss Reserves. Reserves are balance sheet liabilities representing estimates
of amounts needed in the future to pay claims with respect to insured events
which have occurred as of the balance sheet dates.
For purposes of establishing loss reserves, the Company relies upon the advice
of MIC. Loss reserves are based on judgments of the effects of technological
change, manufacturer's warranties, and MIC's historical experience with
automotive mechanical breakdown risks. Consequently, the determination of loss
reserves is a process inherently subject to a number of highly variable
factors. Any adjustments to reserves are reflected in the operating results
for the periods in which they become known.
The Company's incurred loss ratios (losses incurred as a percentage of net
premium earned) on all mechanical business for the fiscal years ended December
31, 1993, 1992 and 1991, were 70.7%, 62.8% and 68.2%, respectively.
The following table sets forth an analysis of changes in the loss reserves for
the fiscal years ended December 31, 1993, 1992 and 1991:
Period Ended
12/31/91 12/31/92 12/31/93
Beginning balance in
reserves for losses....... $1,075,123 $1,396,542 $1,622,855
Add-provision for losses
incurred related to:
Current claim year...... $7,301,654 $8,461,984 $11,046,932
Prior claim years....... $ (282,726) $ (297,535) $ (134,249)
Total................ $7,018,928 $8,164,449 $10,912,683
Deduct-paid losses
attributable to:
Current claim
year.................... $5,948,952 $7,025,671 $9,363,720
Prior claim
years................... $ 748,557 $ 912,465 $1,261,788
Total................... $6,697,509 $7,938,136 $10,625,508
Ending balance in reserves
for losses................ $1,396,542 $1,622,855 $1,910,030
The following table analyzes the development of loss and loss adjustment
expense from February 1, 1989 through December 31, 1993.
1/31/90 12/31/90 12/31/91 12/31/92 12/31/93
Liability
for unpaid
claims and
claims
adjustment
expense
$ 766,912 $1,075,123 $1,396,542 $1,622,855 $1,910,030
Paid (cumulative)
in subsequent
year(s)
$ 666,866 $ 748,557 $ 912,465 $1,261,788
Estimated unpaid
liability as of
December 31*
2,393 43,840 186,542 226,818
Cumulative Deficiency
(Redundancy)
$ (97,653) $(282,726) $ (297,535) $ (134,249)
*/ Because mechanical breakdown claims are generally paid within 90 days of
when they are incurred, liability for unpaid claims incurred in prior years is
negligible. Accordingly, liability for unpaid claims incurred in all prior
years has been combined at each year end.
The table shows initial estimated reserves at December 31, 1993, 1992, 1991 and
1990, and January 31, 1990 and amounts paid on claims unsettled at each prior
period end. Claims are typically processed for payment at the time the claim
is reported. Therefore, the recorded claim liability at each year end
represents the estimated incurred but not reported claims and claims in the
process of payment. The cumulative deficiency or redundancy represents the
total change in reserve estimates covering prior years.
It should be noted that the policies reinsured by the Company are written for
multiple years (up to six years) and losses do not occur equally over the
period for which the policy is written but tend to be clustered in the later
years. Therefore, loss experience for prior years may not be indicative of
that for future years.
INVESTMENT INCOME
A major source of income to an insurance company is income earned on the
investment of amounts not currently required to meet claims or expenses. The
principal funds available for investment by the Company come from accumulated
capital, and the cumulative excess of premiums collected over losses and
operating expenses paid.
The Company's funds are invested in a manner consistent with investment
guidelines that have been established by the Board. Under the
present guidelines, the Company is permitted to invest only in U.S.
dollar-denominated securities issued outside of the United States by
non-United States private or governmental issuers, and U.S. dollar-
denominated bank certificates of deposit issued by foreign banks and
foreign branches of U.S. banks. Such securities and certificates must be rated
at least AA2 by Moody's or AA by Standard & Poor's (S&P) or the equivalent, or
guaranteed by such an issuer. Investments in such securities, particularly
those of nongovernmental issuers, may involve considerations not ordinarily
associated with investments in domestic issuers. These considerations include,
but are not limited to, the possibility of expropriation, the unavailability of
financial information or difficulty in interpreting such information when it is
prepared under foreign accounting or regulatory standards, the possible
negative impact of political, social or diplomatic developments, and the
possible imposition of withholding taxes by foreign taxing authorities.
Rothschild Asset Management Limited ("Rothschild") manages the investment and
reinvestment of the Company's funds in accordance with the investment policies
and guidelines established by the Board. Rothschild, which is one of the
leading institutions engaged in the management of offshore fixed-income
portfolios, and which has been providing this service since 1974, is an
affiliate of NM Rothschild and Sons Limited, a prominent merchant bank in
London which has been in the investment management business worldwide for more
than 100 years. Rothschild charges a management fee of 0.3% per annum on the
first $20,000,000 of assets under management based on the market value of the
company's investment portfolio at the end of each calendar quarter, and 0.15%
per annum on the excess thereof.
ALLOCATIONS TO SUBSIDIARY CAPITAL ACCOUNTS
The Company has established a Subsidiary Capital Account with respect to the
Common Stock as a class, and establishes such an account with respect to each
series of Shares at the time a series is issued. Subsidiary Capital Accounts
are maintained solely for the purpose of the allocations described below, and
do not serve any other legal or accounting function. None of the Company's
assets are segregated or earmarked with respect to those accounts.
The consideration received by the Company upon the issuance of a particular
series of Shares and the Common Stock as a class are allocated to the
Subsidiary Capital Account for that series or class. Items of income and
expense, and losses, attributable to insurance underwriting activities are
determined and allocated to the Subsidiary Capital Accounts as of the end of
each quarter. Investment experience, and other items of income and expense,
gains and losses and distributions with respect to the Capital Stock, are
determined and allocated to the Subsidiary Capital Accounts as of the end of
each quarter. All such accounting determinations are made using United States
generally accepted accounting principles, unless otherwise required by the
Articles.
For purposes of the following discussion, items shall be "related" to the
Subsidiary Capital Account for the series identified with the MIC Agency
Account to which such items can be attributed.
(1) Allocations with respect to underwriting activities are made as follows:
(a) With respect to premiums ceded by MIC to the Company, 100% to the related
Subsidiary Capital Account; provided, however, that an amount equal to 1-1/3%
of those premiums, net of related ceding commissions, are subtracted from such
Subsidiary Capital Account and allocated to the Subsidiary Capital Account for
the Common Stock.
(b) With respect to any agents' or brokers' commissions, commissions
recaptured, unearned premiums, reinsurance premiums ceded, and any United
States excise tax, 100% to the related Subsidiary Capital Account.
(c) With respect to losses incurred, and any amount of losses recovered
through salvage, subrogation, reimbursement or otherwise:
(i) ninety percent (90%) to the related Subsidiary Capital Account; and
(ii) the remainder among all Subsidiary Capital Accounts of the Shares pro
rata in accordance with the relative earned premiums attributable to those
accounts for the quarter in which the losses are incurred.
(d) With respect to return premiums, 98-2/3% to the related Subsidiary
Capital Account and 1-1/3% to the Subsidiary Capital Account for the Common
Stock.
(2) Any expenses or liabilities attributable to day-to-day Company
operations, excluding any United States Federal income taxes, are allocated
among all Subsidiary Capital Accounts for the Shares pro rata in accordance
with the relative earned premiums allocated to those accounts for the quarter
in which the expense or liability is incurred.
(3) Any United States Federal income tax liability (and any interest thereon
or any penalties related thereto) is allocated among the Subsidiary Capital
Accounts based upon the relative contribution of each of those accounts to the
taxable income of the Company upon which the tax (or any interest or penalties)
is imposed.
(4) Any expenses or liabilities attributable to the sale and issuance of
Shares, including but not limited to the costs of compliance with regulations
and requirements of the Securities and Exchange Commission and state securities
laws (but not including ongoing periodic reporting costs), are allocated to the
Subsidiary Capital Account for the Common Stock; however, MIC may undertake to
pay such expenses.
(5) Any expenses or liabilities of the Company not allocable in the manner
described in paragraphs 2 through 4 above are allocated among the Subsidiary
Capital Accounts on the basis of the relative balances of those accounts as of
the end of the quarter preceding the date on which the expense or liability is
incurred.
(6) (a) Investment income, net of any direct investment expense, is
allocated among the Subsidiary Capital Accounts pro rata based upon the
relative Investment Asset Balance (as defined in subparagraph (b) below) of
each of those accounts as of the last day of the quarter preceding the quarter
for which the investment income is being allocated. For these purposes, net
investment income includes realized (but not unrealized) gains and losses.
(b) The Investment Asset Balance of each Subsidiary Capital Account is equal
to the capital and surplus of each account, increased by:
(i) the unearned portions of the written premiums that have been collected by
the Company attributable to those accounts as of the last day of the quarter
preceding the quarter for which the income is being allocated, net of any
applicable commissions and taxes;
(ii) the outstanding loss reserves attributable to each of those accounts as
of the last day of the quarter preceding the quarter for which the income is
being allocated; and
(iii) any other outstanding liability that has been charged to the account as
of the last day of the quarter preceding the quarter for which the income is
being allocated.
(7) (a) If, after the credits and charges described in paragraphs 1-6 above
are made to the Subsidiary Capital Accounts there exists a deficit in one or
more of the accounts, then each such deficit is allocated to and charged
against:
(i) first, the Subsidiary Capital Account for the Common Stock to the extent
of Restricted Earned Surplus (the phrase "Restricted Earned Surplus" refers to
the portion of the earned surplus, if any, in the Subsidiary Capital Account
for the Common Stock equal to that 1-1/3% of the premiums ceded to the Company
during the immediately preceding five-year period which was subtracted from the
Subsidiary Capital Accounts for the Shares pursuant to paragraph 1(a) above,
net of losses allocated to that account during such period pursuant to the
allocation procedure described in this paragraph 7 and net of return premiums
allocated to that Account during such period pursuant to the allocation
procedure described in paragraph (1)(d) above);
(ii) then, the Subsidiary Capital Accounts for the Shares, pro rata, based
upon the relative earned premiums allocated to each such account for the
quarter for which the allocation is being made, provided, however, that only
accounts which have positive balances are taken into account for purposes of
this allocation;
(iii) then, the remaining Subsidiary Capital Accounts for the Shares with
positive balances as of the last day of the quarter for which the allocation is
being made, pro rata, based upon such balances; and
(iv) then, to the extent necessary, the Subsidiary Capital Account for the
Common Stock.
(b) If, as a result of an allocation of a deficit as described in
subparagraph (ii) or (iii) of paragraph (a) above, a deficit is created in one
or more of the Subsidiary Capital Accounts, then the resulting deficit(s) are
further allocated in the manner provided in that subparagraph before applying a
subsequent subparagraph.
(c) Notwithstanding the foregoing, if any Subsidiary Capital Account for a
series of Shares had a deficit that was allocated to and charged against the
Restricted Earned Surplus, then at the end of any succeeding quarter for which
that account otherwise would show an account balance greater than zero, the
balance is reallocated to the Restricted Earned Surplus until all reductions of
that surplus attributable to that Subsidiary Capital Account have been
restored.
Thus, a loss in a Subsidiary Capital Account which exceeds the balance in that
account is absorbed by other Subsidiary Capital Accounts, in general, as
follows: The amount of such excess losses is charged first to the Restricted
Earned Surplus portion of the Subsidiary Capital Account of the Common Stock.
Any remaining losses, should the Restricted Earned Surplus be exhausted, is
allocated among the Subsidiary Capital Accounts of other participating series.
Any then unabsorbed losses are charged to the Subsidiary Capital Account of the
Common Stock.
Funds drawn from the Restricted Earned Surplus in the manner described above
must be restored from the Subsidiary Capital Account that drew the funds if at
any time it returns to a positive balance. Funds drawn from the Subsidiary
Capital Accounts of other series are not, however, restored.
(8) (a) Dividends, payments upon redemption or liquidation (described
below), and any other distributions with respect to the Capital Stock are
allocated to the Subsidiary Capital Account for the class or series with
respect to which the dividend, payment or distribution was made.
(b) Where all Shares of a series are repurchased by the Company pursuant to
its right of first refusal or redeemed in accordance with the Company's
procedures for redemption, the Subsidiary Capital Account for that series is
terminated. Thereafter, all underwriting income and expenses, and losses that
would have been allocated to the terminated account, are allocated among the
Subsidiary Capital Accounts of the existing series of Shares pro rata based
upon relative earned premiums attributable to each of those accounts for the
calendar quarter in which the item was earned or incurred.
The allocations of income and expense, gains and losses, and distributions
described above are subject to approval by the Board, and when finally so
approved are considered final and conclusive and will be binding on all holders
of Shares for all purposes including without limitation any redemption of
Shares pursuant to the Company's procedures for redemption.
Using the procedures described above, the Company has allocated items of gain
and loss to the Subsidiary Capital Account for each series. Initially each
Account had a balance of $7,500 representing the amount paid for the Shares of
that series. During the fiscal year ended December 31, 1993, $507,643 of net
underwriting gains were allocated among the 189 series of Shares outstanding as
of December 31, 1993 and $2,700,242 of net investment income and $503,178 of
administrative expenses were allocated among the 189 series of Shares
outstanding as of December 31, 1993 and the Common Stock.
As of December 31, 1993, 163 such series had balances greater than $7,500
(ranging from $7,537 to $187,718) and 26 series had balances less than $7,500
(ranging from $6,904 to zero). (It should be noted that the amounts in the
Subsidiary Capital Accounts can fluctuate substantially and therefore may not
be indicative of future results.) At December 31, 1993, an aggregate of
$901,758 had been advanced from the Restricted Earned Surplus (which forms a
portion of the Account established for the Common Stock owned by MIC) to 15
Subsidiary Capital Accounts and remained outstanding at that date. Aggregate
deficits reallocated among the Subsidiary Capital Accounts of the Shares
through December 31, 1993 were $369,711.
The Subsidiary Capital Account for the Common Stock had, at the time it was
established, a balance of approximately $200,000, representing the capital paid
in by MIC for the 2,000 shares of the Common Stock issued to it. That
Subsidiary Capital Account is not affected directly by underwriting gains and
losses attributable to the various Subsidiary Capital Accounts related to
series of Shares, but is affected by those gains and losses indirectly to the
extent that one of the Subsidiary Capital Accounts for a series of Shares
incurs a deficit, in which case resort to the Subsidiary Capital Account for
the Common Stock will result, in the manner described above.
The Company is currently in compliance with the net asset value requirements of
Barbados insurance law. However, in the event that the Company is unable to
comply with such requirements in the future, it has the right to reduce the
business related to a Subsidiary Capital Account by retrocession or any other
means to the extent necessary to permit the Subsidiary Capital Account to meet
its pro rata share of the Company's required capital and surplus.
EMPLOYES
The Company does not have any full-time employes. Rather, the Company relies
on Alexander Insurance Managers (Barbados) Ltd. (the "Manager"), to handle its
day-to-day operations. (See "Business of the Company -- Insurance Management
Agreement," below.) In addition, corporate secretarial services for the
Company are provided by Corporate Services Limited of St. Michael, Barbados.
The Board and the committees thereof, however, remain responsible for the
establishment and implementation of policy decisions.
COMPETITION
The insurance business is extremely competitive. MIC management believes that
at present, MIC and its subsidiaries are, as a group, one of the largest
mechanical breakdown insurers of new GM vehicles in the United States. There
are other major companies offering similar coverage. Because the insurance
business of the Company is limited to the assumption of certain mechanical
breakdown insurance business ceded by MIC, the profitability of the Company
depends to a large degree on the success experienced by MIC and its affiliates
in competing with those other insurers.
Many commercial insurance groups are seeking to capture additional mechanical
insurance business by offering to assist automobile dealers in the formation of
their own dealer-owned reinsurance companies. MIC itself has assisted in the
establishment of such companies for a number of qualified GM dealers. However,
MIC believes that participation in the Company represents a more practical
alternative for dealers who do not have the available capital, insurance
management expertise or time for the personal involvement necessary for their
own reinsurance company.
INSURANCE MANAGEMENT AGREEMENT
The Company has entered into an Insurance Management Agreement (the "Management
Agreement") with the Manager, pursuant to which the Manager collects and dis-
burses funds on behalf of the Company, provides bookkeeping, clerical, tele-
phone, telex, and other services for the Company, and advises and consults with
the Company in regard to all aspects of the Company's retrocession activities.
Pursuant to the Management Agreement, the Manager has undertaken to maintain an
office in Barbados to perform its duties. Further, during the term of the
Management Agreement and generally for a period of one year thereafter, the
Manager has agreed not to provide management or accounting services for any
other company which, by the nature of its operations, is offering, insuring or
reinsuring mechanical breakdown and/or extended warranty or related coverages
on a multi-state basis in the United States or Canada with respect to motor
vehicles sold by franchised GM dealerships. Under the terms of the Management
Agreement, the Company pays the Manager a fee based on hourly rates for
services performed. For the fiscal year ended December 31, 1993, the Company
paid fees to the Manager in the amount of $180,135.
The Manager is responsible for the payment of the salaries of its officers and
employes and all office and staff overhead and other costs attributable to its
services on the Company's behalf. However, out-of-pocket expenses, such as
telephone, telex, postage, travel, and other items are borne by the Company on
an expense reimbursement basis.
The Manager was incorporated in Barbados in 1984, and is an affiliate of
Alexander and Alexander, an international insurance brokerage and insurance
consulting firm. The Manager performs services similar to those performed for
the Company for several other entities. The Manager has nine employes. In
addition, the Manager may draw upon the resources of its affiliates as needed
to provide the services contemplated under the Management Agreement. No
employe of the Manager devotes all of his or her time to the business of the
Company. However, the Manager is obligated to devote all employe time neces-
sary to ensure the performance of the Manager's duties under the Management
Agreement. The Manager is subject to the control and direction of the Board.
The Manager has served in that capacity since 1986. The current Management
Agreement became effective on March 19, 1992 and may be terminated by either
party as of the end of the then current fiscal year by the giving of written
notice to the other party by September 1 of that year.
BARBADOS REGULATION AND TAXES
The Company's business is conducted outside of the United States and is subject
to regulation under the Barbados Exempt Insurance Act, 1983, as amended (the
"Exempt Insurance Act"). The principal requirements of the Exempt Insurance
Act require the Company to maintain its principal office in Barbados, appoint
various professional advisors, and to meet certain capitalization and annual
reporting requirements with respect to its operating activities and solvency
requirements.
Under the Exempt Insurance Act, no income tax, capital gains tax or other
direct tax or impost is levied in Barbados on the results of the Company's
operations, or transfers of securities or assets of the Company to any person
who is not a resident of Barbados. The Company has received a guarantee from
the Minister of Finance of Barbados that such benefits and exemptions will be
available for a period ending January 31, 2001.
Item 2. PROPERTIES
The Company neither owns nor maintains any office space or facilities. Rather,
the business office for the Company is provided by the Manager and is located
at Financial Services Centre, Bishops Court Hill, St. Michael, Barbados. The
Company believes that these facilities are adequate for its current and
anticipated future needs. In addition, the Manager supplies all equipment for
the Company, and maintains all insurance records for the Company.
Item 3. LEGAL PROCEEDINGS
The Company is not involved in any legal proceedings.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
quarter ended December 31, 1993.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) There is no public market for the Shares or the other capital stock of the
Company, and none is expected to develop. Transfer of the Shares is restricted
by the terms of a Stock Purchase Agreement.
(b) All of the common stock of the Company is held by MIC. As of March 1,
1994 there were 335 holders of Shares of record, representing 197 series of
Shares.
(c) Under the Articles of Incorporation, the holders of Shares are entitled to
receive minimum dividends equal to their pro-rata share of 20% of net income
attributable to the associated Subsidiary Capital Account provided (i) the
Company meets the Barbados regulatory requirements without regard to any letter
of credit or guarantee, and (ii) the related Subsidiary Capital Account would
also meet those requirements after giving effect to the dividend. In 1990 and
1991, the Company declared minimum dividends as described above in the
aggregate amounts of $114,376 and $150,317, respectively. In April of 1992,
the Company declared a dividend in the aggregate amount of $1,021,705, which
exceeded the required minimum dividend. In April of 1993, the Company declared
a dividend in the aggregate amount of $2,021,504, which also exceeded the
required minimum dividend.
Item 6. SELECTED FINANCIAL DATA
The following selected financial data for the fiscal years ended December 31,
1993, 1992, 1991, the eleven month period ended December 31, 1990 and the
fiscal year ended January 31, 1990 have been derived from financial statements
audited by Deloitte & Touche, independent chartered accountants, whose report
with respect to their audits of the financial statements as of December 31,
1993 and 1992 and for each of the three years in the period ended December 31,
1993 is included elsewhere herein.
December 31** January 31
1993 1992 1991 1990 1990
Premiums
Assumed $27,779,063 $19,386,455 $16,784,405 $12,957,759 $10,032,140
Premiums
Earned 15,429,611 13,005,184 10,292,788 8,177,525 5,183,768
Net Investment
Income 2,700,242 2,522,712 1,792,947 843,021 727,844
Total Income 18,129,853 15,527,896 12,085,735 9,020,546 5,911,612
Less Losses and
Expenses 15,425,146 12,020,682 10,165,350 8,280,612 5,297,836
Net Income* 2,704,707 3,507,214 1,920,385 739,934 613,776
Dividends Per
Common Share 0 0 0 0 0
Total Assets 50,359,633 36,847,490 28,124,056 18,759,382 12,507,645
Total Policy
Reserves and
Other
Liabilities 42,430,269 29,777,783 23,148,003 16,347,245 11,238,143
Stockholders'
Equity 7,929,364 7,069,707 4,976,053 2,412,137 1,269,502
Dividends Paid on
Participating
Shares 2,021,504 1,021,705 150,317 114,376 0
*/ Information as to earnings per share is not provided inasmuch as the
results for each series of stock will vary with the underwriting experience
attributable to each Subsidiary Capital Account established with respect to
that series. See Note 2(f) to the financial statements.
**/ In May of 1990, the Company changed its fiscal year end from January 31 to
December 31.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity. The Company expects to generate sufficient funds from operations to
cover current liquidity needs. Premiums generated by the Company's reinsurance
business, combined with proceeds from the sale of Shares, will continue to be
the principal sources of funds for investment by the Company. Such funds, and
investment earnings thereon, will be available to meet the Company's liquidity
requirements. No capital expenditures are expected during the next few years.
Capital Resources. Capitalization of the Company, as of December 31, 1993, is
comprised of paid-in capital with respect to the Common Stock of $200,000,
paid-in capital with respect to the Shares of $1,417,500 (compared with
$1,072,500 and $817,500 as of December 31, 1992 and 1991, respectively), and
earnings retained for use in the business. Barbados law requires that the
Company's net assets equal at least the aggregate of $1,000,000 and 10% of the
amount by which the earned premium exceeded $5,000,000 in the previous fiscal
year. If the Company's net asset ratio is less than mandated by Barbados law,
the Company has the right to reduce the business related to a Subsidiary
Capital Account by retrocession or any other means to the extent necessary to
permit the Subsidiary Capital Account to meet its pro rata share of the
Company's required capital and surplus. At January 1, 1994, the Company's
required minimum net assets computed in accordance with Barbados law was
approximately $2,042,961, compared to total capital and retained earnings of
$7,929,364.
Results of Operations. The Company became operational during the fiscal year
ended January 31, 1988. The Company's first year of full operation was the
fiscal year ended January 31, 1989. In May of 1990, the Company changed its
fiscal year end from January 31 to December 31. A full 12 months of
underwriting activity are reflected in the financial statements for all periods
presented. The results of operations for the 11-month period ended December
31, 1990, however, include only 11 months' investment income and administrative
expense. Accordingly, results for the 11-month period ended December 31, 1990
are not fully comparable with results for full fiscal years.<F1>
____________________
<F1>For the 11-month period ended December 31, 1989, the Company had $5,183,768
of earned premium, $673,785 of investment income and incurred $5,278,717 of
losses and expenses. The net income of the Company for the period was
$578,836.
During the fiscal year ended December 31, 1993, the Company had net income of
$2,704,707 compared to $3,507,214 and $1,920,385 for the fiscal years ended
December 31, 1992 and 1991, respectively. The reduction in net income during
1993 compared to the previous year is the result primarily of an increase in
losses incurred as discussed below. The Company had earned premiums of
$15,429,611 compared to $13,005,184 and $10,292,788 for the fiscal years ended
December 31, 1992 and 1991, respectively. Increased premium income has been
generated by the addition of 46 new series during the year ended December 31,
1993, and the continuing flow of reinsurance premiums from series issued in
prior fiscal years. There were 189 series of Shares outstanding at
December 31, 1993 compared to 143 and 109 series of Shares outstanding at
December 31, 1992 and 1991, respectively. Investment income during the period
totaled $2,700,242 compared to $2,522,712 and $1,792,947 for the fiscal years
ended December 31, 1992 and 1991, respectively. These gains are attributable
to an increase in assets under management which were partially offset by lower
interest rates.
The Company incurred losses and expenses during the fiscal year ended
December 31, 1993 of $15,425,146 compared with $12,020,682 and $10,165,350 for
the fiscal years ended December 31, 1992 and 1991, respectively. This was
comprised of provisions for losses incurred during the period of $10,912,683,
ceding commissions and excise taxes of $4,009,285 and operating expenses of
$503,178. Losses incurred in 1992 and 1991 were $8,164,449 and $7,018,928,
respectively. The ratio of losses incurred to premiums earned for the fiscal
year ended December 31, 1993 was 70.7% compared to 62.8% and 68.2% for the
fiscal years ended December 31, 1992 and 1991, respectively. Management
believes the Company's increased loss experience in 1993 reflects the effects
of changes in underlying manufacturer's warranties. The favorable ratio
experienced in 1992 was attributable to a combination of factors including the
expiration during that year of certain unlimited mileage mechanical plans that
are retroceded to the Company.
The Company incurred operating expenses during the fiscal year ended December
31, 1993 of $503,178 compared to $478,475 for the fiscal year ended December
31, 1992 and $307,301 in 1991. In 1993 and 1992, the Company paid share
issuance costs and allocated such costs to the Subsidiary Capital Account for
the Common Stock. In previous years, these expenses had been paid by MIC
pursuant to an agreement by which MIC agreed to pay the costs of issuing shares
until such costs could be allocated to the Subsidiary Capital Account for the
Common Stock. Share issuance costs for the fiscal year ended December 31,
1993, which were paid by the Company and charged to the Subsidiary Capital
Account for the Common Stock, were $74,461 compared to $80,298 for the
fiscal year ended December 31, 1992.
Pursuant to the Retrocession Agreement, the Company must furnish to MIC
collateral in the form of an irrevocable letter of credit of at least 12 months
duration equal in amount to the unearned premium in respect of risks retroceded
and unpaid loss reserves (including reserves for losses incurred but not
reported) otherwise required to be maintained by MIC in respect of the
Policies. As of December 31, 1993, the Company had furnished such a letter of
credit in the amount of $32,250,000.
FASB Statement No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" is effective for years beginning after December 15, 1993 and will
require the Company to classify its securities holdings into three categories
(trading, available for sale, and held to maturity). The Company intends to
adopt Statement No. 115 in 1994 and believes that the Statement will not have a
material effect on the Company's financial position and results of operations.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
1. Independent Auditors' Report................... __
2. Balance Sheets, December 31
1993 and 1992................................ __
3. Statements of Income and Retained
Earnings for the years ended
December 31, 1993, 1992 and 1991............. __
4. Statements of Cash Flows for the years ended
December 31, 1993, 1992 and 1991............. __
5. Notes to Financial Statements.................. __
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Motors Mechanical Reinsurance Company, Limited
Financial Services Centre
Bishops Court Hill
St. Michael, Barbados
We have audited the accompanying balance sheet of Motors Mechanical Reinsurance
Company, Limited as of December 31, 1993 and 1992 and the related statements of
income and retained earnings and cash flows for each of the three years in the
period ended December 31, 1993. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Motors Mechanical Reinsurance
Company, Limited as of December 31, 1993 and 1992 and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1993 in accordance with the accounting principles generally
accepted in the United States of America.
s/DELOITTE & TOUCHE
CHARTERED ACCOUNTANTS
Bridgetown, Barbados
March 11, 1994
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
BALANCE SHEETS
DECEMBER 31, 1993 AND 1992
(Expressed in U.S. Dollars)
December 31 December 31
Notes 1993 1992
ASSETS
Investments (c),3,6 $29,882,488 $24,382,923
Cash and cash equivalents 2(c),6 6,788,771 1,710,738
Accrued investment income 861,190 1,115,367
Due from ceding company 2,331,978 2,356,608
Deferred acquisition costs 2(b) 10,495,206 7,281,854
Total Assets $50,359,633 $36,847,490
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Unearned premiums 2(b) 40,413,058 28,063,606
Loss reserves 2(d) 1,910,030 1,622,855
Accrued liabilities 107,181 91,322
Total Liabilities 42,430,269 29,777,783
COMMITMENTS AND CONTINGENCIES 6
STOCKHOLDERS' EQUITY
Share capital
Common stock - no par value;
Authorized - 2,000 shares;
issued and outstanding -
2,000 shares 200,000 200,000
Participating - no par value;
Authorized - 100,000 shares;
issued and outstanding -
18,900 shares at December 31,
1993 and 14,300 shares at
December 31, 1992 4 1,417,500 1,072,500
1,617,500 1,272,500
Retained earnings 7 6,211,978 5,528,775
Unrealized appreciation
on investments 3 99,886 268,432
Total Stockholders' Equity 7,929,364 7,069,707
Total Liabilities and
Stockholders' Equity $50,359,633 $36,847,490
The accompanying notes form an integral part of these financial statements.
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(Expressed in U.S. Dollars)
December 31 December 31 December 31
Notes 1993 1992 1991
INCOME
Reinsurance
premiums assumed 2(b),5 $27,779,063 $19,386,455 $16,784,405
Increase in
unearned premiums (12,349,452) (6,381,271) (6,491,617)
Premiums earned 15,429,611 13,005,184 10,292,788
Investment income:
Interest earned 1,827,955 1,658,430 1,300,603
Realized gains
on investments 872,287 864,282 492,344
Investment income - net 2,700,242 2,522,712 1,792,947
TOTAL INCOME 18,129,853 15,527,896 12,085,735
EXPENSES
Acquisition costs 2(b) 4,009,285 3,377,758 2,839,121
Losses paid 10,625,508 7,938,136 6,697,509
Increase in loss
reserves 287,175 226,313 321,419
Administrative expenses 503,178 478,475 307,301
TOTAL EXPENSES 15,425,146 12,020,682 10,165,350
NET INCOME 2,704,707 3,507,214 1,920,385
RETAINED EARNINGS,
beginning of period 5,528,775 3,043,266 1,273,198
DIVIDENDS (2,021,504) (1,021,705) (150,317)
RETAINED EARNINGS, end of period $ 6,211,978 $ 5,528,775 $ 3,043,266
The accompanying notes form an integral part of these financial statements.
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(Expressed in U.S. dollars)
December 31 December 31 December 31
1993 1992 1991
Cash flows from operating activities:
Reinsurance premiums collected $26,933,330 $17,624,088 $14,709,039
Losses and underwriting expenses
paid (16,977,784) (11,898,682) (10,575,830)
Administrative expenses paid (490,616) (429,735) (288,593)
Investment income received 2,957,718 2,302,829 1,542,361
Net cash provided by operating
activities 12,422,648 7,598,500 5,386,977
Cash flows from investing activities:
Purchases of investment securities (49,834,608) (60,877,408) (32,306,550)
Sales of investment securities 44,166,497 52,166,918 30,252,467
Net cash invested (5,668,111) (8,710,490) (2,054,083)
Cash flows from financing activities:
Proceeds from issuance of
Participating Stock 345,000 255,000 120,000
Dividends paid (2,021,504) (1,021,705) (150,317)
Net cash used in financing
activities (1,676,504) (766,705) (30,317)
Increase (decrease) in cash and cash
equivalents 5,078,033 (1,878,695) 3,302,577
Cash and cash equivalents, beginning
of period 1,710,738 3,589,433 286,856
Cash and cash equivalents, end of
period $ 6,788,771 $ 1,710,738 $ 3,589,433
Reconciliation of net income to
net cash provided by operating
activities:
Net income $ 2,704,707 $ 3,507,214 $ 1,920,385
Change in:
Accrued investment income 254,177 (222,446) (277,412)
Due from ceding company 24,630 (653,270) (1,529,537)
Deferred acquisition costs (3,213,352) (1,662,778) (1,527,217)
Unearned premiums 12,349,452 6,381,271 6,491,617
Loss reserves 287,175 226,313 321,419
Accrued liabilities 15,859 22,196 (12,278)
Net cash provided by operating
activities $12,422,648 $ 7,598,500 $ 5,386,977
The accompanying notes form an integral part of these financial statements.
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
Note 1. OPERATIONS
The Company is incorporated under the laws of Barbados and is a
licensed insurer under the Exempt Insurance Act, 1983.
All of the common stock of the Company is owned by Motors Insurance
Corporation ("MIC"). MIC is an indirect wholly-owned subsidiary of
General Motors Corporation. The principal activity of the Company is
the assumption of certain automobile mechanical breakdown risks
arising under insurance policies reinsured by MIC and attributable to
an MIC Agency Account in respect of which shares of Participating
Stock are issued and outstanding. All premiums received were derived
from MIC.
Note 2. PRINCIPAL ACCOUNTING POLICIES
(a) Basis of Presentation
The financial statements are stated in United States dollars and are
prepared generally in conformity with accounting principles generally
accepted within the United States of America. Reinsurance premiums
assumed by the Company represent policies ceded by MIC during the
twelve months ended December 31 of each fiscal year.
(b) Premium Income and Acquisition Costs
Reinsurance premiums are based on the Company assuming (after ceding
commission) 75% of the original policy premium written by the direct
insurer. Of these reinsurance premiums, 75% is retroceded to the
Company when written and 25% when earned.
Premiums are taken into income on the basis of quarterly cessions and
are related to anticipated loss exposures. Acquisition costs,
consisting of ceding commissions and excise taxes, are taken into
income on the basis of premiums earned.
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
Note 2. PRINCIPAL ACCOUNTING POLICIES (Cont'd)
(c) Investments
Investments are comprised of interest-bearing marketable securities
which are carried at fair value, based on quoted market prices and
dealer quotes obtained from an external pricing service. Investments
with original maturities of less than 90 days are classified as cash
equivalents. Unrealized appreciation (depreciation) is included in
stockholders' equity.
Realized gains and losses on the sale of investments are included as
investment income. During 1991, the basis of determining the cost of
securities sold was changed from the specific identification method
to the average cost method. The effect of the change was not
material.
(d) Loss Reserves
The Company provides for unsettled, reported losses based on
estimates of the final settlement, with an experience factor added to
provide for losses incurred but not reported. The final settlement
may be greater or less than the amounts provided. Any such
differences, when they become known, are recognized in current
operations.
(e) Taxation
The Company has received an undertaking from the Barbados Government
exempting it from all local income, profits and capital gains taxes
for a period ending January 31, 2001.
Stockholders who are United States residents are taxed on their share
of the Company's income on a deemed distribution basis.
(f) Earnings Per Share
No amount has been reported as earnings per share as the earnings
applicable to the Participating Stockholders vary with the
underwriting results of each series. Retained earnings applicable to
the Common Stockholder include allocated investment income and
operating expenses and amounts restricted for advances to
Participating Stockholders (see Note 7).
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
Note 3. INVESTMENTS
The cost and estimated fair value of investments in debt securities
are as follows:
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Appreciation Depreciation Value
December 31, 1993:
Debt securities
issued by
foreign
governments
and their
agencies $16,327,184 $72,332 $(135,761) $16,263,755
Debt securities
issued by
supra-nationals 7,182,454 103,034 (25,925) 7,259,563
Corporate
securities 6,272,964 109,193 (22,987) 6,359,170
Total $29,782,602 $284,559 $(184,673) $29,882,488
December 31, 1992:
Debt securities
issued by
foreign
governments
and their
agencies $ 14,080,561 $204,554 $(43,057) $14,242,058
Debt securities
issued by
supra-nationals 9,826,630 107,771 (5,087) 9,929,314
Corporate
securities 207,300 4,251 - 211,551
Total $24,114,491 $316,576 $(48,144) $24,382,923
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
Note 3. INVESTMENTS (Cont'd)
The cost and estimated fair value of debt securities at December 31,
1993, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or
prepayment penalties.
Estimated
Fair
Cost Value
Due after one year
through five years $15,463,270 $15,575,893
Due after five years
through ten years 14,319,332 14,306,595
$29,782,602 $29,882,488
Proceeds from sales of investments in debt securities during the
years ended December 31, 1993 and 1992 were $44,166,497 and
$52,166,918 respectively. In 1993, gross gains of $964,613 and gross
losses of $92,326 were realized. In 1992, gross gains of $1,008,932
and gross losses of $144,650 were realized. In 1991, gross gains of
$538,996 and gross losses of $46,652 were realized.
The following summarizes net unrealized appreciation (depreciation)
on investments:
Balance, December 31, 1990 $ 241,439
Net appreciation 673,848
Balance, December 31, 1991 $ 915,287
Net depreciation (646,855)
Balance, December 31, 1992 $ 268,432
Net depreciation (168,546)
Balance, December 31, 1993 $ 99,886
The investment portfolio is comprised of diverse U.S. dollar-
denominated debt securities which do not result in any concentration
in credit risks.
FASB Statement No. 115, "Accounting for Certain Investments in Debt
and Equity Securities" is effective for years beginning after
December 15, 1993 and will require the Company to classify its
securities holdings into three categories (trading, available for
sale, and held to maturity). The Company intends to adopt Statement
No. 115 in 1994 and believes that the Statement will not have a
material effect on the Company's financial position and results of
operations.
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
Note 4. STOCKHOLDERS' EQUITY
All of the Company's Common Stock is held by MIC. A prospectus dated
June 4, 1993 is offering 26,500 shares of Participating Stock to
persons certified by owners of certain motor vehicle franchises. The
offering consists of 265 series of 100 shares each at a price of $75
per share.
During 1993, 46 additional series of 100 shares of Participating
Stock were issued as compared with 34 and 16 series for the years
ended December 31, 1992 and 1991, respectively. In the years ended
December 31, 1993 and 1992, costs in the amount of $74,461 and
$80,298, respectively, were incurred in the sale of Participating
Stock and were charged to the account of the Common Stockholder. In
1991, $74,589 of costs incurred in the sale of Participating Stock
were paid by MIC.
The holders of Common Stock as a class are entitled to elect five
directors, at least one of whom must be a resident of Barbados. They
generally have no right to vote with respect to liquidation of the
Company, but can effect a liquidation in certain circumstances. As a
class, these holders generally have the sole right to vote on matters
not specifically reserved to Participating Stock. Any redemption of
Common Stock must be approved by a majority of the holders of
Participating Stock issued and outstanding and by the Board.
The holders of Participating Stock as a class are entitled to
elect one director. Generally, liquidation of the Company
requires approval by at least 75% of the outstanding shares of
this class. Any redemption of a series of shares requires a
vote of the Board provided that the director representing
holders of the Participating Stock votes in favor of the
redemption. Any changes in the Company's Articles or By-Laws
require the approval of a majority of the holders of
Participating Stock present and voting together with a majority
of the holders of Common Stock.
From time to time, funds are held in escrow on account of Participat-
ing Stock applications. Such amounts are not included in cash and
cash equivalents in the accompanying financial statements. At
December 31, 1993 and 1992, there were no amounts held in escrow.
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
Note 5. REINSURANCE PREMIUMS
Under the provisions of the retrocession agreement, the Company will
receive additional cessions of 13,471,019 ($9,354,534 at December 31,
1992) relating to premiums written by the ceding insurer but unearned
at the respective period ends. The amounts will be received as the
premiums are earned, net of related acquisition costs.
Note 6. LETTERS OF CREDIT
As of December 31, 1993, the Company has provided an irrevocable
letter of credit to MIC, in the sum of $32,250,000 which is secured
by cash equivalents and investments to secure the amounts recoverable
from the Company related to the business ceded.
Note 7. RETAINED EARNINGS
Items of income or loss and expenses attributable to insurance
underwriting activities are determined as of the end of each calendar
quarter and are allocated to the Participating Stockholders' capital
accounts.
An amount equal to 1-1/3 percent of assumed premiums (net of related
ceding commissions) is allocated to the capital account of the Common
Stockholder. Such allocations accumulate as restricted retained
earnings and may be used to advance capital to any Participating
Stockholders who incur a deficit in their capital accounts; any such
advances are repayable out of future profitable operations of the
respective Participating Stockholder.
Dividends may be declared and paid at the discretion of the Company's
Board of Directors, except that dividends may not be paid out of
unrealized investment gains. Barbados law requires that the Company
maintain a minimum capitalization based generally on the amount of
premiums earned in the preceding fiscal year. On January 1, 1994 the
Company's required minimum capital computed in accordance with
Barbados law was approximately $2,042,961.
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
Note 7. RETAINED EARNINGS (Cont'd)
Amounts of retained earnings applicable to the Common and
Participating Stockholders are comprised of the following:
Common Participating Total
Balance, December 31, 1990 $ 14,944 $1,258,254 $1,273,198
Net income for the year 23,911 1,896,474 1,920,385
Net transfers 38,702 (38,702) -
Dividends paid - (150,317) (150,317)
Balance, December 31, 1991 77,557 2,965,709 3,043,266
Net income (loss) for the
year (42,631) 3,549,845 3,507,214
Net transfers 173,954 (173,954) -
Dividends paid - (1,021,705) (1,021,705)
Balance, December 31, 1992 208,880 5,319,895 5,528,775
Net income (loss)
for the year (41,909) 2,746,616 2,704,707
Net transfers (175,245) 175,245 -
Dividends paid - (2,021,504) (2,021,504)
Balance (Deficit),
December 31, 1993 $ (8,274) $6,220,252 $6,211,978
PART III
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Five of the current directors of the Company were elected by MIC through its
ownership of the Common Stock. One director was elected by the holders of the
Shares at the Annual Shareholders' Meeting held on April 29, 1993. The
directors and officers of the Company are as follows:
POSITION WITH THE COMPANY
(AND OTHER EMPLOYMENT DURING
NAME AGE PAST FIVE YEARS)
Robert T. O'Connell ....... 55 Chairman and Chief Executive Officer and
Director (Chairman of the Board, General
Motors Acceptance Corporation ("GMAC"), and
Motors Insurance Corporation ("MIC"); Senior
Vice-President, General Motors.
Mr. O'Connell became a Director and was
appointed Chairman and Chief Executive
Officer in April of 1992.
Joseph J. Pero ............ 54 President and Director (President and
Director, MIC).
Mr. Pero has been a director since 1986. He
served as Vice-President from 1986 until
1987 when he was appointed President.
Vincent K. Quinn .......... 62 Executive Vice-President and Director
(Executive Vice-President and Director,
MIC).
Mr. Quinn has been a Director since 1986 and
was appointed Executive Vice-President in
April of 1992.
Louis S. Carrio, Jr........ 50 Vice-President and Director (Vice-President,
MIC).
Mr. Carrio became a Director and was
appointed Vice-President in 1991.
Peter R. P. Evelyn ........ 52 Director (Attorney, Evelyn, Gittens &
Farmer, a Barbados law firm).
Mr. Evelyn has been a Director since 1986.
Mark Miller................ 43 Director (President, Mark Miller Pontiac,
Inc.).
Mr. Miller has been a Director since 1993.
Ronald W. Jones ........... 41 Vice-President, Finance (Managing Director,
Alexander Insurance Managers (Barbados)
Ltd.).
Mr. Jones has served as Vice-President,
Finance since 1987.
Robert S. Kirby ........... 53 Secretary (Senior Partner, Price Waterhouse,
Eastern Caribbean).
Mr. Kirby has served as Secretary since
1986.
The directors and officers named above serve in those capacities until the
annual meeting of shareholders next following their election.
Item 11. EXECUTIVE COMPENSATION
No director or officer of the Company is compensated directly for his services
as such. However, each director and officer of the Company is reimbursed for
expenses incurred for attendance at Board, committee, and shareholder meetings.
In addition, Mr. Jones is an officer of the Manager, which receives management
fees and compensation for data processing services. Mr. Evelyn is a member of
the law firm of Evelyn, Gittens & Farmer, which serves as the Company's
Barbados counsel; and Mr. Kirby is affiliated with Corporate Services Limited,
Bridgetown, Barbados, which receives compensation for corporate secretarial
services provided to the Company.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
MIC owns all of the issued and outstanding shares of the Common Stock of the
Company, which consists of 2,000 shares. Mark Miller, a director, owns 100
shares of Participating Stock.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Item 1, THE RETROCESSION, INSURANCE MANAGEMENT AGREEMENT and Item 11,
EXECUTIVE COMPENSATION
Part IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Index to Document List
(1) Financial Statements
The following are included in Item 8:
(i) Independent Auditors' Report.
(ii) Balance Sheets, December 31, 1993 and 1992.
(iii) Statements of Income and Retained Earnings for
the years ended December 31, 1993, 1992 and 1991.
(iv) Statements of Cash Flows for the years ended
December 31, 1993, 1992, and 1991.
(v) Notes to Financial Statements.
(2) Financial Statement Schedules. Schedules are omitted because
of the absence of the conditions under which they are required
or because the information required is presented in the
financial statements or related notes.
(3) Exhibits. The following exhibits are included in response to
Item 14(c):
3(a) Restated Articles of Incorporation dated January 29,
1987, as amended, filed by reference to Exhibit 3(a) to
Post Effective Amendment No. 7 to Registration Statement
on Form S-1, File No. 33-6534, dated April 29, 1993.
3(b) By-laws of the Company dated June 6, 1986 filed by
reference to Exhibit 3(b) of the Registration Statement
on Form S-1, File No. 33-6534, dated June 18, 1986.
4 Specimen Participating Stock Certificate filed by
reference to Exhibit 4 of Amendment No. 1 to
Registration Statement on Form S-1, File No. 33-6534,
dated February 12, 1987.
10(a) Form of Principal Retrocession Agreement between Motors
Insurance Corporation and Registrant filed by reference
to Exhibit 10(a) of the Registration Statement on Form
S-1, File No. 33-6534, dated June 18, 1986.
10(b) Form of Supplemental Retrocession Agreement between
Motors Insurance Corporation and Registrant filed by
reference to Exhibit 10(b) of the Registration Statement
on Form S-1, File No. 33-6534 dated June 18, 1986.
10(c) Specimen Stock Purchase Agreement filed by reference to
Exhibit 10(c) to Amendment No. 2 to Registration
Statement on Form S-1, File No. 33-6534, dated May 22,
1987.
10(d) Amended and Restated Stock Purchase Agreement between
Registrant and Motors Insurance Corporation filed by
reference to Exhibit 10(d) to Amendment No. 1 to
Registration Statement on Form S-1, File No. 33-6534,
dated February 12, 1987.
10(e) Insurance Management Agreement between Registrant and
Insurance Managers (Barbados) Ltd. filed by reference to
Exhibit 10(e) to Registration Statement on Form S-1,
File No. 33-6534, dated June 18, 1986.
10(f) Insurance Management Agreement between Alexander
Insurance Managers (Barbados) and MIC Life Reinsurance
Company, Ltd., dated March 12, 1992.
20(a) Proxy solicitation materials sent to shareholders in
connection with annual meeting held on April 29,
1993.
20(b) Proxy solicitation materials sent to shareholders in
connection with annual meeting to be held on April 8,
1994.
28(a) Certification Form filed by reference to Exhibit 28(a)
to Amendment No. 2 to Registration Statement on Form
S-1, File No. 33-6534, dated June 18, 1986.
28(b) Guarantee issued by the Minister of Finance of Barbados
filed by reference to Exhibit 28(b) to Amendment No. 1
to Registration Statement on Form S-1, File No. 33-6534,
dated June 18, 1986.
28(c) Certificate of Barbados Residency filed by reference to
Exhibit 28(c) to Amendment No. 1 to Registration
Statement on Form S-1, File No. 33-6534, dated June 18,
1986.
(b) Reports on Form 8-K. No reports on Form 8-K for the quarter
ended December 31, 1993 have been filed.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
(Registrant)
By s/Ronald W. Jones
Ronald W. Jones
Vice-President, Finance
Date: March ---, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated.
Signature Title Date
s/Robert T. O'Connell Chairman and Chief March 30, 1994
Robert T. O'Connell Executive Officer
and Director
s/Joseph J. Pero President and March 30, 1994
Joseph J. Pero Director
s/Vincent K. Quinn Executive Vice- March 30, 1994
Vincent K. Quinn President and Director
s/Louis S. Carrio, Jr. Vice-President and March 30, 1994
Louis S. Carrio, Jr. Director
s/Peter R. P. Evelyn Director March 30, 1994
Peter R. P. Evelyn
Director
Mark Miller
s/Ronald W. Jones Vice-President, March 30, 1994
Ronald W. Jones Finance, Principal
Financial and
Accounting Officer
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANT WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT
Proxy solicitation materials were sent to shareholders in connection with
the annual meeting held on April 29, 1993, and in connection with the 1994
annual meeting, to be held on April 8, 1994.
MANAGEMENT AGREEMENT
BETWEEN
ALEXANDER INSURANCE MANAGERS (BARBADOS) LTD.
AND
MIC LIFE REINSURANCE COMPANY, LTD.
MANAGEMENT AGREEMENT BETWEEN
ALEXANDER INSURANCE MANAGERS (BARBADOS) LTD.
AND
MIC LIFE REINSURANCE COMPANY, LTD.
THIS AGREEMENT (hereinafter referred to as the
"Agreement") by and between ALEXANDER INSURANCE MANAGERS
(BARBADOS) LTD (hereinafter referred to as "AIM"), a Barbados
corporation having its principal office in St. Michael, Barbados
and MIC LIFE REINSURANCE COMPANY, LIMITED (hereinafter referred
to as the "Company"), a Barbados corporation having its principal
office in St. Michael, Barbados.
WITNESSETH
WHEREAS, AIM is a corporation engaged in providing
certain management and administrative services to insurance and
reinsurance companies; and
WHEREAS, the Company plans to secure a license to
engage in exempt insurance business as defined under the laws of
Barbados and desires to employ AIM to perform certain management
and administrative services on its behalf;
NOW, THEREFORE, in consideration of their respective
promises and covenants hereinafter contained, AIM and the Company
agree as follows:
1. Obligations of AIM. Subject to such written
instructions and restrictions as the Company may issue, AIM shall
provide the following services in connection with the Company's
business. Such services shall include, but are not limited to:
(a) Issuance and endorsement of reinsurance contracts
for which approval of the Company has been secured;
(b) Opening and maintenance of such books of account
as will provide a complete and current record which will present
fairly at all times the financial position and results of
operations of the Company and its shareholder accounts, as
provided under the Company's Articles of Incorporation as amended
from time to time, in accordance with U.S. generally accepted
accounting principles applicable to the Company's business;
(c) Not later than the thirtieth (30th) day of the
month following the close of the calendar quarter, submission to
the Company of a balance sheet and statement of profit and loss
for the preceding quarter, prepared in accordance with U.S.
generally accepted accounting principles applied on a basis
consistent with that of preceding periods and which present
fairly the financial information they purport to reflect;
(d) Preparation of statistical, accounting and other
quarterly, or more frequent reports as may be required, and
provided under the Company's Articles of Incorporation as amended
from time to time, for the Company's shareholders in accordance
with reporting deadlines to be mutually agreed upon by both
parties;
(e) Preparation of all statutory and other reports as
may be required by the Barbados insurance and/or other regulatory
authorities, including filings with the Securities and Exchange
Commission of the United States of America;
(f) Management and investment of Company funds under
AIM's control, pending transfer of available funds to such
Investment Manager as the Board shall from time to time appoint;
(g) Advising the Company quarterly as to investment
results on funds under the control of AIM;
(h) Receipt and deposit of reinsurance premiums paid,
and payment of claims, under the Reinsurance Agreement;
(i) Provision of bookkeeping, clerical, telephone,
telex and other services for the Company, and advice and consult
with the Company with regard to all aspects of the Company's
activities;
(j) Maintenance of an office in Barbados, sufficiently
staffed and equipped, to perform its duties hereunder; and
(k) Performance of all other activities necessary to
the Company's business.
It is agreed that AIM will not provide legal or tax counsel,
investment advice, secretarial services or independent auditing
services under this Agreement.
It is agreed that AIM shall have no power to enter into any
contract on behalf of the Company unless specifically authorized
by the Company to do so.
2. Obligations of the Company. The Company hereby:
(a) Authorizes AIM to perform for and on its behalf
all the duties described herein and the execution of any of the
aforesaid documents or contracts entered into pursuant to the
specific terms of this Agreement, and if called upon to do so,
will ratify and confirm the performance of such duties;
(b) Shall pay monthly, or at such other interval as
may be agreed to by the parties, to AIM as compensation in full
for all services as described in Section 1 of this Agreement, a
management fee to be computed at the rate of U.S.$95 per hour for
professional employees, based on a statement of time and expense
charges, related to AIM's management functions for the period
from the signing of this Agreement until December 31, 1992. AIM
shall give the Company a monthly statement of its time and
expense charges within thirty (30) days of the end of the month.
Each year, commencing in 1992, the parties shall begin good faith
negotiation of the next year's hourly rate by September 1. If
the parties are unable to agree on this amount by December 1 of
that year, it shall be established by arbitration as provided in
Section 12;
(c) Shall, within a reasonable period of time, comply
with any request for instructions or information made by AIM in
order that AIM may efficiently perform its duties under this
Agreement; and
(d) Shall monthly, or at such other interval as may be
agreed to by the parties, reimburse AIM against receipts, for its
reasonable and necessary out-of-pocket expense incurred on behalf
of, and with the prior approval of, the Company.
3. Access to Records. The Company, or its duly
authorized representative(s), may at any reasonable time inspect
the records maintained on its behalf by AIM.
4. Termination. This Agreement may be terminated by
mutual consent of the parties or for cause upon thirty (30) days
advance written notice. This Agreement may be terminated
unilaterally by either party as of the end of the current fiscal
year by giving written notice to the other party by September 1
of such year.
(a) Termination of this Agreement shall not relieve
either party of liability for performance of any obligations
imposed upon said party with respect to business entered into
pursuant to this Agreement, which have not been performed at the
time of termination, provided that AIM shall be reimbursed in
full for services rendered and expenses incurred subsequent to
the effective date of termination under such terms and conditions
as may be agreed upon by both parties to ensure the proper and
timely completion of their obligations under this contract.
(b) Termination of this Agreement shall be automatic
and without notice upon the insolvency, receivership, bankruptcy,
or liquidation of either the Company of AIM.
5. Non-Competition. During the period that this
Agreement is in effect, and for a period of one (1) year after
the termination of this Agreement (unless the termination is by
mutual consent, by the Company without cause, or by AIM for
cause), AIM agrees not to provide management or accounting
services for any other company, other than a Canadian credit life
and credit disability reinsurer, to be formed by MIC Life
Insurance Corporation, which, by the nature of its operations, is
offering, insuring or reinsuring credit life, credit disability
or related coverages on a multi-state basis in the United States
of America or Canada, with respect to the sale of motor vehicles
by franchised General Motors dealerships.
6. Ownership of Books, Records, Etc. The Company
retains ownership of all books, records, reports, statistics, and
other materials produced by AIM in rendering services under his
Agreement to the Company. In addition, the Company and AIM agree
to enter into prompt negotiations in good faith for the
uninterrupted use by the Company of all software applicable to
the Company's operations, in the event of termination of this
Agreement.
7. Assignment. This Agreement may not be assigned in
whole or in part, whether by operation of law or otherwise, by
either party without the consent of the other party.
8. Choice of Law. This Agreement shall be governed
by, and construed in accordance with, the laws of Barbados as
applied to contracts executed and performed wholly within such
Island.
9. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the
same instrument.
10. Insurance. AIM shall at all times during the term
of this Agreement maintain:
(a) An errors and omissions insurance policy issued by
an insurer reasonably acceptable to the Company in an amount not
less than U.S.$5,000,000.00; and
(b) A fidelity bond, issued by a company reasonably
acceptable to the Company, providing coverage for all officers
and other employees of AIM and its affiliates (including "money
and securities" coverage) in an amount not less than
U.S.$1,000,000.00.
Such amount of required insurance coverage is to be negotiated
concurrently with compensation under Section 2(b) of this
Agreement.
11. Indemnification. AIM agrees to hold harmless and
indemnify the Company for losses arising out of negligence or
reckless conduct of its employees and affiliates' employees in
performing services on behalf of the Company under this
Agreement.
12. Miscellaneous.
(a) It is the intention of the Company and AIM that
the customs and practices of the insurance industry shall be
given full effect in the operation and interpretation of this
Agreement. The parties agree to act in all things with the
highest good faith. If the Company and AIM cannot mutually
resolve any dispute that arises out of or relates to this
Agreement, whether such dispute arises before or after
termination of this Agreement, the disputes shall be decided
through arbitration.
(b) This Agreement and the performance of the parties
hereunder shall be interpreted, construed and enforced in
accordance with the laws of Barbados. The arbitrators shall
consider this Agreement as an honorable engagement rather than as
a mere legal obligation and they shall reach their decision from
the standpoint of equity and the customs and practices of the
insurance interpretation of the applicable substantive and
procedural law.
(c) In initiating arbitration, either the Company or
AIM shall notify the other in writing of its desire to arbitrate,
stating the nature of its dispute and the remedy sought. The
party to which the notice is sent shall respond to the
notification in writing within ten (10) working days of its
receipt. At that time, the party also shall assert any dispute
it may have that arises out of or relates to this Agreement.
(d) The arbitration hearing shall be before a panel of
three (3) arbitrators, each of whom must be a present or former
officer of a credit life, disability insurance company, other
than the Company or AIM or either's affiliates. The Company and
AIM shall each appoint one arbitrator by written notification to
the other within twenty-five (25) days of the date of the mailing
of the notification initiating the arbitration. These two (2)
arbitrators shall then select the third arbitrator within
fourteen (14) days after their selection. Should either the
Company or AIM fail to appoint an arbitrator, or should the two
(2) arbitrators be unable to agree upon the choice of a third
arbitrator, such appointment shall be left to the President for
the time being, of the Barbados Bar Association. Once selected,
the arbitrators are to decide all substantive and procedural
issues involved by a majority of votes.
(e) The arbitration hearing shall be held on the date
fixed by the arbitrators in the city of St. Michael, Barbados,
unless some other location is mutually agreed on by the parties.
In no event shall this date be later than six (6) months after
the appointment of the third arbitrator. The arbitrators shall
establish pre-arbitration procedures as warranted by the facts
and issues of the particular case. Within twenty (20) days after
the end of the arbitration hearing, the arbitrators shall issue a
written award, from which there shall be no appeal and which any
court having jurisdiction of the subject matter and the parties
may reduce to judgment.
(f) In their award, the arbitrators shall apportion
the costs of arbitration including, but not limited to, their own
fees and expenses, as they deem appropriate.
IN WITNESS WHEREOF, the parties hereunto set their hand
to duplicate originals hereof this 19th day of March, 1992.
ATTEST: ALEXANDER INSURANCE MANAGERS
(BARBADOS) LTD.
(signature illegible) By s/Ronald W. Jones
RONALD W. JONES
Print Name
ATTEST: MIC LIFE REINSURANCE COMPANY,
LIMITED
(signature illegible) By s/Louis C. Carrio, Jr,
LOUIS S. CARRIO, JR.
Print Name
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
Annual Meeting April 29, 1993
PROXY STATEMENT
April 2nd, 1993
This proxy statement is furnished by management of
Motors Mechanical Reinsurance Company, Limited (the "Company") in
connection with the solicitation of proxies for use at the annual
meeting of the company on April 29, 1993 at 12:00 noon at the
Miramar Conference Centre, Royal Pavilion Hotel, St. James,
Barbados. Please complete and return the attached proxy whether
or not you plan to attend the meeting. A proxy may be revoked at
any time prior to the meeting in writing or by attendance of the
shareholder at the meeting.
Shareholders of record as of the date of this proxy
statement are entitled to notice and to vote at the meeting. As
of such date, there were 15,000 participating shares outstanding,
held by 250 persons representing 150 series. All the common
stock is held by Motors Insurance Corporation ("MIC"), which
organized the Company. Each share entitles the holder to one
vote on matters on which that class of stock is entitled to vote.
This proxy statement is accompanied by notice of the
meeting, financial statements for the year ended December 31,
1992 and a form of proxy.
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
NOTICE
NOTICE is hereby given that the Sixth Annual Meeting of the
Shareholders of MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
will be held at the Miramar Conference Centre, Royal Pavilion
Hotel, St. James, Barbados on Thursday the 29th day of April,
1993 at 12:00 noon for the following purposes:
1. Adoption of minutes of previous meeting.
2. To receive and consider the financial statements of the
Company for the twelve month period ended December 31, 1992
together with the auditors report thereon.
3. To elect directors and alternate directors.
4. To consider proposals to amend the Articles of
Incorporation.
5. To consider the proposal that Deloitte & Touche continue as
the Company's auditors until the next Annual Meeting of the
shareholders.
6. To conduct any other business that may properly be
transacted at an annual meeting.
DATED THE 2ND DAY OF APRIL, 1993
BY ORDER OF THE BOARD
Robert S. Kirby
AS SECRETARY OF
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
PROXY
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
I/We, , a member of the above-named company
hereby appoint Ronald W. Jones, Vice President-Finance of the
Company as my/our proxy to vote for me/us on my/our behalf at the
shareholders meeting to be held on the 29th day of April, 1993 or
at any adjournment thereof and in particular to vote for:
(i) The election of Mark Miller to serve as a director
representing the participating shareholders;
(ii) The approval of the amendments of the Company's
Articles of Incorporation as contained in the
proxy statement dated April 2nd, 1993; and
(iii) The confirmation of Deloitte & Touche as the
auditors of the Company for the current fiscal
year.
Dated this _____ day of April, 1993.
ELECTION OF DIRECTORS
The Company has a board of directors of six members.
Five directors, of whom one is a resident of Barbados, are
elected by the holder of the common shares and one director is
elected by holders of the participating shares. Directors serve
without compensation other than reimbursement of actual expenses.
They are elected for one year terms.
Mark Miller has been nominated to stand for election as
director by the participating shareholders. Other nominations
can be made by the holders of at least two series of
participating shares by notifying the secretary in writing at
least ten days prior to the meeting. The nominee receiving the
highest number of votes will be elected.
In addition, five directors will be elected by the
common shareholder. It is anticipated that MIC will choose to
re-elect the incumbent directors.
Information regarding the age and current occupation of
directors to be re-elected by the common shareholder and the
person nominated as director to be elected by the participating
shareholders is set forth below.
Name Age Position with the Company and Other
Employment During the Past Five Years
Robert T. O'Connell 54 Chairman and Chief Executive Officer
and Director (Chairman of the Board,
General Motors Acceptance
Corporation, and MIC)
Mr. O'Connell has been Chairman and
Chief Executive Officer and a
Director since 1992.
Joseph J. Pero 53 President and Director (President and
Director, MIC).
Mr. Pero has been a Director since
1986. He served as Vice-president
from 1986 until 1987 when he was
appointed President.
Vincent K. Quinn 61 Executive Vice-President and Director
(Executive Vice-President and
Director, MIC).
Mr. Quinn has been a Director since
1986. He was appointed Executive
Vice-President in 1992.
Louis S. Carrio, Jr. 49 Vice-President and Director (Vice-
President, MIC).
Mr. Carrio has been a Vice-President
& Director since 1991.
Peter R.P. Evelyn 51 Director (Attorney, Evelyn Gittens &
Farmer, a Barbados Law firm).
Mr. Evelyn has been a Director since
1986.
Mark Miller
(Replacing James F. Wood) 43 Nominee for Director to be elected by
the participating shareholder
(President, Mark Miller Pontiac
Inc.).
ELECTION OF ALTERNATE DIRECTORS
The Company's Bylaws allow for the election of an alternate
director for a director. An alternate director may attend
meetings of directors and vote in respect of any matters
presented if the director for whom he is alternate is not
present. Alternate directors are elected for one year terms.
The common shareholder plans to elect Richard N. Carlson as the
alternate director for Vincent K. Quinn and Robert E. Capstack as
the alternate director for Louis S. Carrio, Jr. Mr. Carlson and
Mr. Capstack are both employes of MIC.
AMENDMENTS OF ARTICLES OF INCORPORATION
1. Dividends
The Company's Articles of Incorporation currently provide that
dividends, other than minimum dividends, may be declared and paid
only as a uniform percentage of the earned surplus attributable
to each series of shares. Management recommends that the
dividend section of the Company's Articles of Incorporation be
amended to permit dividends, other than minimum dividends, to be
declared and paid based on a varying percentage of earned surplus
and/or net income attributable to each series. This would give
the Board of Directors of the Company greater flexibility in
declaring dividends in two respects. First, it would permit the
Board of Directors of the Company to declare and pay dividends,
other than minimum dividends, based on earned surplus and/or net
income. Second, it would permit the percentage used in
calculating dividends to vary with the level of earned surplus
and/or net income of each series of shares. Accordingly,
Management proposes that the dividend section of the Company's
Articles of Incorporation be amended by replacing section 3(5)(b)
of the Articles with the following:
(b) Dividends, payable in cash or such other property
as the Board may determine, on a series of Shares or on
common shares, shall be declared and payable only if
the Company shall have, after giving effect to the
dividend, sufficient net assets, without regard to any
Letter of Credit or Guarantee, to meet the general
business solvency margin prescribed by the Exempt
Insurance Act and Section 51 of the Act; provided that
dividends with respect to any series of Shares may be
paid only out of earned surplus attributable to the
Subsidiary Capital Account identified with those
Shares, and only to the extent that, after giving
effect to the dividend, the capital and surplus
identified with that Subsidiary Capital Account
(without regard to any Guarantee or Letter of Credit)
would meet its pro rata share, based on allocable
premium income, of the minimum net assets required of
the Company under the Exempt Insurance Act. Subject to
the right of the holders of Shares to receive minimum
dividends pursuant to the following paragraph, to the
extent a dividend is declared on the Shares, it shall
be declared and paid subject to the foregoing
limitations for each series of Shares as a percentage
of the net income for the preceding calendar year
and/or earned surplus as of the end of the preceding
calendar year, attributable to each series, provided
that such percentage may vary among series of Shares
with the level of net income and/or earned surplus.
Dividends shall only be declared and paid on Common
shares to the extent that the earned surplus
attributable to Common shares exceeds Restricted Earned
Surplus.
2. Redemptions
The Company's Articles of Incorporation currently provide that,
in certain circumstances, participating shareholders have a right
to have their shares redeemed by the Company without approval of
the Board of Directors. Management recommends that the
redemption section of the Company's Articles of Incorporation be
amended to require approval by the Board of Directors of all
redemptions of shares. This would give the Board of Directors
the flexibility to prevent redemptions in circumstances where,
for example, unexpired risks attributable to the shares for which
redemption is sought appear likely to generate underwriting
losses that would be borne entirely by other shareholders if
redemption were permitted. Accordingly, Management proposes that
the redemption section of the Company's Articles of Incorporation
be amended by replacing section 3(6) of the Articles with the
following:
(6) REDEMPTION
Subject to compliance with any applicable statute or
act, the Company may redeem any of its issued and
outstanding Common shares and/or Shares if:
(a) In the case of a redemption of Shares, all Shares
of the series involved are redeemed and the redemption
of such Shares is approved by a majority of the Board,
provided that the Director representing holders of the
Shares votes in favor of the redemption.
(b) In the case of a redemption of Common shares, such
redemption is approved by a majority of all Shares
issued and outstanding and a majority of the Board.
The redemption of Shares and Common shares shall be
effective on the last business day of the calendar year
in which the redemption was approved by the Board, and
in the case of a redemption of Common Shares, by
holders of the Shares. Such date is herein called the
"Redemption Date."
The consideration payable to the holders of redeemed
Shares or Common shares shall be the Subsidiary Capital
Account balance of such shares as of the Redemption
Date, as adjusted by the Board to reflect unrealized
gains and losses on investments held by the Company and
any contingent liabilities allocable to such account.
Such consideration shall be paid within five (5) months
of the Redemption Date, provided that the holder of the
redeemed Shares or Common shares shall have delivered
to the Company, certificates representing the shares
being redeemed duly endorsed and accompanied by such
other documents as the Company may require. Such
consideration shall bear interest from the Redemption
Date until the earlier of the date of payment or the
date that is five (5) months from the Redemption Date,
at a rate equal to the rate of interest paid on 26-week
United States Treasury Bills for the issue following
the Redemption Date.
Upon redemption of the shares as aforesaid, the
holder(s) thereof shall cease to have any further
interest in the shares being redeemed. Shares of any
class redeemed pursuant to this Section 3(6) shall
return to the status of authorized but unissued shares
of such class.
ELECTION OF AUDITORS
It is proposed to confirm the selection of Deloitte &
Touche, Bridgetown, Barbados as the auditors of the Company for
the current fiscal year. The auditors through their Detroit
office also serve as auditors of MIC.
PROXY
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
MOTORS INSURANCE CORPORATION ("MIC"), a shareholder of
Motors Mechanical Reinsurance Company, Limited, a Barbados
Corporation (the "Corporation"), hereby appoints RICHARD N.
CARLSON as its proxy to vote for it and on its behalf, with
respect to all shares in the Corporation owned by MIC, at (i) the
special meeting of shareholders of the Corporation to be held on
April 29, 1993, and at any meeting or meetings held in lieu of,
or in substitution for said special meeting, and any adjournment
thereof, and (ii) the annual meeting of shareholders of the
Corporation to be held on April 29, 1993, and any adjournments
thereof.
Dated April , 1993
MOTORS INSURANCE CORPORATION
By:
Joseph J. Pero, President
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
Annual Meeting April 8, 1994
PROXY STATEMENT
March 15, 1994
This proxy statement is furnished by management of
Motors Mechanical Reinsurance Company, Limited (the "Company") in
connection with the solicitation of proxies for use at the annual
meeting of the company on April 8, 1994 at 12:00 noon at the
Miramar Conference Centre, Royal Pavilion Hotel, St. James,
Barbados. Please complete and return the attached proxy whether
or not you plan to attend the meeting. A proxy may be revoked at
any time prior to the meeting in writing or by attendance of the
shareholder at the meeting.
Shareholders of record as of the date of this proxy
statement are entitled to notice and to vote at the meeting. As
of such date, there were 19,700 participating shares outstanding,
held by 355 persons representing 197 series. All the common
stock is held by Motors Insurance Corporation ("MIC"), which
organized the Company. Each share entitles the holder to one
vote on matters on which that class of stock is entitled to vote.
This proxy statement is accompanied by notice of the
meeting, financial statements for the year ended December 31,
1993 and a form of proxy.
ELECTION OF DIRECTORS
The Company has a board of directors of six members.
Five directors, of whom one is a resident of Barbados, are
elected by the holder of the common shares and one director is
elected by holders of the participating shares. Directors serve
without compensation other than reimbursement of actual expenses.
They are elected for one year terms.
Donald C. Mealey has been nominated to stand for
election as director by the participating shareholders. Other
nominations can be made by the holders of at least two series of
participating shares by notifying the secretary in writing at
least ten days prior to the meeting. The nominee receiving the
highest number of votes will be elected.
In addition, five directors will be elected by the
common shareholder. It is anticipated that MIC will choose to
re-elect the incumbent directors.
Information regarding the age and current occupation of
directors to be re-elected by the common shareholder and the
person nominated as director to be elected by the participating
shareholders is set forth below.
Name Age Position with the Company and Other
Employment During the Past Five Years
Robert T. O'Connell 55 Chairman and Chief Executive Officer
and Director (Chairman of the Board,
General Motors Acceptance
Corporation, and MIC)
Mr. O'Connell has been Chairman and
Chief Executive Officer and a
Director since 1992.
Joseph J. Pero 54 President and Director (President and
Director, MIC).
Mr. Pero has been a Director since
1986. He served as Vice-president
from 1986 until 1987 when he was
appointed President.
Vincent K. Quinn 62 Executive Vice-President and Director
(Executive Vice-President and
Director, MIC).
Mr. Quinn has been a Director since
1986. He was appointed Executive
Vice-President in 1992.
Louis S. Carrio, Jr. 50 Vice-President and Director (Vice-
President, MIC).
Mr. Carrio has been a Vice-President
& Director since 1991.
Peter R.P. Evelyn 52 Director (Attorney, Evelyn Gittens &
Farmer, a Barbados Law firm).
Mr. Evelyn has been a Director since
1986.
Donald C. Mealey
(Replacing Mark Miller) 43 Nominee for Director to be elected by
the participating shareholders
(President, Don Mealey Chevrolet
Inc.).
ELECTION OF ALTERNATE DIRECTORS
The Company's Bylaws allow for the election of an
alternate director for a director. An alternate director may
attend meetings of directors and vote in respect of any matters
presented if the director for whom he is alternate is not
present. Alternate directors are elected for one year terms.
The common shareholder plans to elect Richard N.
Carlson as the alternate director for Vincent K. Quinn and Robert
E. Capstack as the alternate director for Louis S. Carrio, Jr.
Mr. Carlson and Mr. Capstack are both employes of MIC.
AMENDMENTS OF RESTATED ARTICLES OF INCORPORATION
The Company's Restated Articles of Incorporation were
recently amended to permit redemption of a series of
participating shares by the Board of Directors in its discretion
and to eliminate the right of participating shareholders to have
their shares redeemed in certain circumstances without approval
of the Board of Directors. Further review of the redemption
provisions has led Management to recommend further changes.
First, if the Board were to cause the redemption of a
series that was in a net deficit position and which generated
further run-off losses, the redemption would not be effective
until the end of the calendar year, and any run-off losses after
redemption would be allocated entirely to the subsidiary capital
accounts of the other series of participating shares. Management
proposes to amend the Articles (i) to give the Board authority to
make the redemption effective at any time prior to year end and
(ii) to allocate any net deficit in run-off first to the
subsidiary capital account for the common stock (to the extent of
"restricted earned surplus") before allocating any remaining
deficit to the accounts for the participating shares.
Second, management has been advised by legal counsel
that the Barbados Companies Act has been interpreted to require
that common stock must be non-redeemable in all circumstances.
Therefore, certain provisions of the Articles that had permitted
redemption of the common stock and had given the common
shareholder the right to force liquidation of the Company if its
request for redemption were not met, must be eliminated. Several
corresponding changes to the Articles are necessary to give full
effect to this change.
As a result of the cumulative amendments to the
Articles of Incorporation (if approved by the shareholders), the
redemption provisions generally will operate as follows. The
only class of stock that may be redeemed will be the
participating shares. Shares of an entire series may be redeemed
by vote of the Board of Directors, including the vote of the
Director elected by the participating shareholders. The
redemption will be effective on a date specified by the Board but
no later than the end of the calendar year. At the effective
date, any positive balance in the redeemed series' subsidiary
capital account (as determined by the Board) will be paid to the
holder(s) of the redeemed shares. After redemption, any
quarterly deficits in the run-off will be allocated first to the
common stock, up to the balance of restricted earned surplus, and
the remainder to the other participating shareholder's accounts.
Accordingly, Management proposes that the sections of
the Company's Restated Articles of Incorporation indicated below
be amended to read as follows:
Section 3(1)(8)(b) Allocation to Subsidiary Capital Accounts
Where all shares of a series of Shares are repurchased
by the Company pursuant to Section 4 below or redeemed
in accordance with the Company's procedures for
redemption set forth in Section 3(6) below, the
Subsidiary Capital Account for such series shall be
terminated as of the Repurchase Date or Redemption Date
(as those terms are defined in Sections 4 and 3(6)
respectively). Thereafter, all income, expenses, gains
and losses that would have been allocated to the
terminated account will be allocated among the
Subsidiary Capital Accounts of the existing series of
Shares pro rata based upon relative earned premiums
attributable to such accounts for the calendar quarter
in which the item was earned or incurred; provided,
however, that a net deficit for any such period shall
be allocated in accordance with the provisions of
Section 3(1)(7).
Section 3(4) Liquidation
The Company may be liquidated upon the vote of the
holders of at least seventy-five percent (75%) of the
Shares. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs
of the Company, after payment of all liabilities of the
Company, each holder of Shares of a series shall be
entitled to receive an amount equal to his share (based
on his proportionate ownership of such series) of the
Subsidiary Capital Account balance related to his
series of Shares before any distribution of the assets
of the Company shall be made to holders of the Common
shares. After such payment shall have been made in
full to the holders of the outstanding Shares, or funds
necessary for such payment shall have been set aside in
trust for the account of the holders of the outstanding
Shares so as to available therefor, the holders of the
outstanding Shares shall be entitled to no further
participation in the distribution of the assets of the
Company, and the remaining assets of the Company, if
any, shall be divided and distributed among the holders
of the Common shares then outstanding pro rata based on
their respective shares. A consolidation or merger of
the Company, or sale or transfer of all or
substantially all its assets, or any purchase or
redemption of shares of the Company of any class or
series, shall not be regarded as a "liquidation,
dissolution, or winding up" within the meaning of this
paragraph.
Section 3(5)(d) Dividends
In no event shall any dividend whatever be paid upon or
declared or set apart for the Common shares, unless and
until all minimum annual dividends required to be paid
on the then outstanding Shares for the then current
period shall have been paid or declared and set apart
for payment.
PROXY
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
I/We, , a member of the above-named company
hereby appoint Ronald W. Jones, Vice President-Finance of the
Company as my/our proxy to vote for me/us on my/our behalf at the
shareholders meeting to be held on the 8th day of April, 1994 or
at any adjournment thereof and in particular to vote for:
(i) The election of Donald C. Mealey to serve as a
director representing the participating
shareholders;
(ii) The approval of the amendments of the Company's
Restated Articles of Incorporation as contained in
the proxy statement dated March 15, 1994; and
(iii) The confirmation of Deloitte & Touche as the
auditors of the Company for the current fiscal
year.
Dated this _____ day of April, 1994.
