SECURITIES AND EXCHANGE COMMISSION
WASHINGTON. D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For quarterly period ended September 30, 1995
Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number 33-6534
Motors Mechanical Reinsurance Company, Limited
(Exact name of registrant as specified in its charter)
Barbados NA
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Bishops Court Hill, St. Michael, Barbados NA
(Address of principle executive offices) (Zip Code)
(809) 436-4895
(Registrant's telephone number, including area code)
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 for 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 the number of shares outstanding of each of
the issuer's classes of common stock as of the latest practicable
date.
Class As of September 30, 1995
_____ ________________________
Common Stock, no par-value 2,000
Participating Stock, no par-value 23,600
This quarterly report, filed pursuant to Rule 13a-13 of
the General Rules and Regulations under the Securities Exchange
Act of 1934, consists of the following information as specified
in Form 10-Q:
Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements
1. Balance Sheets, September 30, 1995 and December
31, 1994.
2. Statements of Income and Retained Earnings for the
three month periods ended September 30, 1995 and
1994, and the nine month periods ended September
30, 1995 and 1994.
3. Statements of Cash Flows for the nine month
periods ended September 30, 1994 and September 30,
1993.
In the opinion of Management, the accompanying
financial statements reflect all adjustments, consisting of
normal recurring accruals, which are necessary for a fair
presentation of the results for the interim periods presented.
Certain amounts in the 1994 financial statements have been
reclassified to conform with the 1995 presentation.
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
BALANCE SHEETS
(Expressed in U.S. Dollars)
September 30,
1995 December 31,
(unaudited) 1994
_____________ ____________
ASSETS
Investments $56,124,220 $42,903,056
Cash and cash equivalents 4,280,261 3,303,060
Accrued investment income 2,204,211 1,559,195
Due from ceding company 4,445,561 3,315,506
Deferred acquisition costs 18,107,628 14,931,467
Prepaid expenses 625 0
___________ ___________
Total Assets $85,162,506 $66,012,284
___________ ___________
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Unearned premium $69,678,719 $57,468,269
Loss reserves 3,306,237 2,660,270
Accrued liabilities 128,247 118,102
___________ ___________
Total liabilities 73,113,203 60,246,641
___________ ___________
STOCKHOLDERS' EQUITY
Share Capital
Common Stock - no par value;
Authorized - 2,000 shares;
issued and outstanding -
2,000 shares 200,000 200,000
Participating Stock - no par
value; Authorized - 100,000
shares; issued and outstand-
ing - 23,600 shares as of
September 30, 1995 and
22,200 shares as of
December 31, 1994 1,770,000 1,665,000
___________ ___________
1,970,000 1,865,000
Retained Earnings 9,459,134 5,796,732
Unrealized appreciation
(depreciation) on
investments 620,169 (1,896,089)
___________ ___________
Total Stockholders' Equity 12,049,303 5,765,643
___________ ___________
Total Liabilities and
Stockholders' Equity $85,162,506 $66,012,284
___________ ___________
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE THREE
MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994
AND THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
(Expressed in U.S. Dollars)
Three Month Periods Nine Month Periods
Ended September 30, Ended September 30,
1995 1994 1995 1994
__________ __________ __________ __________
INCOME
Reinsurance premiums
assumed $12,559,368 $9,550,359 $32,965,532 $28,518,799
Increase in unearned
premiums 4,965,323 4,011,675 12,210,450 13,286,553
__________ __________ __________ __________
Premiums earned 7,594,045 5,538,684 20,755,082 15,232,246
__________ __________ __________ __________
Investment income
Interest earned 875,827 691,237 2,752,222 1,938,436
Realized gains
(losses) on
investments 655,822 (67,025) 1,248,108 (1,112,164)
__________ __________ __________ __________
Investment income 1,531,649 624,212 4,000,330 826,272
__________ __________ __________ __________
TOTAL INCOME 9,125,694 6,162,896 24,755,412 16,058,518
__________ __________ __________ __________
EXPENSES
Acquisition costs 1,974,023 1,439,392 5,394,966 3,958,877
Losses paid 4,908,187 3,723,890 13,410,259 10,023,716
Increase in loss
reserves 322,583 195,499 645,967 639,553
Administrative
expenses
- Related parties 30,676 37,625 141,846 138,779
- Other 70,305 49,763 318,858 233,066
__________ _________ __________ __________
TOTAL EXPENSES 7,305,774 5,446,169 19,911,896 14,993,991
__________ __________ __________ __________
NET INCOME 1,819,920 716,727 4,843,516 1,064,527
RETAINED EARNINGS,
beginning of period 7,631,714 4,425,974 5,796,732 6,211,978
LESS: DIVIDENDS PAID 0 0 (1,188,614) (2,156,304)
ADD: TRANSFERS FROM
PARTICIPATING STOCK 7,500 0 7,500 22,500
_________ _________ __________ __________
RETAINED EARNINGS,
end of period $9,459,134 $5,142,701 $9,459,134 $5,142,701
__________ __________ __________ __________
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
STATEMENTS OF CASH FLOWS FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994 (UNAUDITED)
(Expressed in U.S. Dollars)
Nine month periods ended
September 30,
1995 1994
__________ ___________
Cash flows from operating activities:
Reinsurance premiums assumed $30,259,260 $26,030,586
Losses and underwriting
expenses paid (20,425,770) (15,961,841)
Administrative expenses paid (435,624) (429,480)
Investment income received 2,197,405 1,290,037
___________ ___________
Net cash provided by operating activities 11,595,271 10,929,302
___________ ___________
Cash flows from investing activities:
Purchases of investment securities (139,957,512) (52,638,048)
Sales of investment securities 130,415,556 42,641,973
Maturities of investment securities 0 0
____________ ___________
Net cash invested (9,541,956) (9,996,075)
____________ __________
Cash flows from financing activities:
Proceeds from issuance of
Participating stock 112,500 210,000
Dividends paid (1,188,614) (2,156,304)
___________ __________
Net cash used in financing
activities (1,076,114) (1,946,304)
___________ __________
Increase (decrease) in cash and
cash equivalents 977,201 (1,013,077)
Cash and cash equivalents, beginning
of period 3,303,060 6,788,771
___________ ___________
Cash and cash equivalents, end
of period $4,280,261 $ 5,775,694
___________ ___________
Reconciliation of net income to net cash
provided by operating activities:
Net income $4,843,516 $1,064,527
Realized losses (gains) on investments (1,162,950) 1,112,164
Change in:
Accrued investment income (645,016) (648,398)
Due from ceding company (1,130,055) (1,071,203)
Deferred acquisition costs (3,176,161) (3,456,090)
Prepaid expenses (625) (625)
Unearned premiums 12,210,450 13,286,553
Loss reserves 645,967 639,553
Accrued liabilities 10,145 2,821
___________ __________
Net cash provided by
operating activities $11,595,271 $10,929,302
___________ ___________
Item 2. Management's Discussion And Analysis of Financial
Condition and Results of Operations
Liquidity. It is anticipated that the Company will continue to
generate sufficient funds from operations to meet current
liquidity needs. Premiums generated by the Company's reinsurance
business combined with investment earnings plus proceeds from the
sale of Shares will continue to be the principal sources of funds
for investment by the Company. Such funds will be available to
meet the Company's liquidity requirements. No capital
expenditures are expected during the next few years.
The unearned premiums on the balance sheet at each balance sheet
date are attributable to the long-term nature of the motor
vehicle mechanical breakdown insurance contracts that the Company
reinsures. The risk of loss to the Company under new vehicle
contracts arises primarily after the underlying manufacturer's
warranty expires -- usually after 36 months or 36,000 miles,
whichever occurs first. Since very little premium is recognized
as earned until the expiration of the underlying warranty, most
of the new vehicle premiums assumed in any period are recorded as
unearned.
Cash, cash equivalents and investments valued at market have
increased from $46,206,116 at the beginning of the year to
$60,404,481 at September 30, 1995.
Capital Resources. As of September 30, 1995, the share capital
of the Company was $1,970,000 (compared to $1,865,000 as of
December 31, 1994) comprised of paid in capital with respect to
Common Stock of $200,000 and paid in capital with respect to
Participating Shares of $1,770,000 (compared with $1,665,000 as
of December 31, 1994). In addition, the Company had surplus from
retained earnings in the amount of $9,459,134, compared with
$5,796,732 as of December 31, 1994.
Barbados law requires that the Company's net assets (excluding
unrealized gains and losses) 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. At September
30, 1995, the Company's minimum required net assets computed in
accordance with Barbados law was $2,631,669, compared to total
capital and retained earnings of $11,429,134.
Results of Operations. During the quarter ended September 30,
1995, the Company had net income of $1,819,920, compared to
$716,727 for the quarter ended September 30, 1994. For the nine
month period ended September 30, 1995, the Company had net income
of $4,843,516 compared to $1,064,527 for the comparable period of
1994. These increases are the result of gains on the sale of
investment securities as discussed below and a modest improvement
in underwriting results.
For the quarter ended September 30, 1995, premiums earned
increased $2,055,361 to $7,594,045, compared to $5,538,684 for
the comparable period of 1994. Expenses (including losses)
increased $1,859,605, from $5,446,169 in the third quarter of
1994 to $7,305,774 in the third quarter of 1995. As a result,
net underwriting income increased from $92,515 in the third
quarter of 1994 to $288,271 in the third quarter of 1995. The
loss ratio in the third quarter of 1995 was 68.9%, compared to
70.8% in the third quarter of 1994.
In the nine month period ended September 30, 1995, the Company
reported premiums earned of $20,755,082, an increase of
$5,522,836 over the nine month period ended September 30, 1994.
Net underwriting income in the first nine months of 1995 was
$843,186, which represents an increase of $604,931 over the nine
month period ended September 30, 1994. The loss ratio for the
nine month period ended September 30, 1995 was 67.7%, compared to
70.0% for the nine month period ended September 30, 1994. The
increases in earned premiums and losses reflect the expiration of
underlying manufacturers' warranties on new vehicle policies
written in 1990 through 1992. Consequently, in 1995 the Company
has begun earning those premiums and incurring losses.
Investment income for the quarter ended September 30, 1995 was
$1,531,649 compared to $624,212 for the comparable period of
1994. Investment income for the nine month period ended
September 30, 1995 was $4,000,330 compared to $826,272 for the
comparable period of 1994. During the quarter under review, the
Company realized gains on the sale of investment securities of
$655,822, compared to losses of $67,025 on securities sales
during the comparable period of 1994. For the nine month period
ended September 30, 1995, realized gains on the sale of
investment securities were $1,248,108, compared to losses of
$1,112,164 during the comparable period of 1994. As of September
30, 1995, the Company had net unrealized appreciation of $620,169
on its investments compared to unrealized depreciation of
$1,896,089 as of December 31, 1994. The increase in gains
realized on the sale of investment securities is due to increased
investment sales to take advantage of market opportunities
presented by fluctuations in interest rates. The unrealized
appreciation at September 30, 1995 compared to the unrealized
depreciation at December 31, 1994 is in large part attributable
to lower long term interest rates in effect during 1995 which
increased the market value of the Company's investment portfolio.
For the quarter under review, the Company had interest income of
$875,827 compared to $691,237 for the comparable period of 1994.
For the nine month period ended September 30, 1995, the Company
had interest income of $2,752,222 compared to $1,938,436 during
the comparable period of 1994. These increases were largely
attributable to increases in the amount of assets under
management which offset the impact of lower interest rates.
During the quarter ended June 30, 1995, the Company began
investing in non-U.S. dollar-denominated debt securities.
Forward foreign currency contracts were executed to hedge the
Company's investment in such securities. At September 30, 1995,
the Company had non-U.S. dollar-denominated investments with an
aggregate market value of $12,328,193 based on September 30, 1995
exchange rates.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) No reports on Form 8-K were filed during the
quarter for which this report is filed.
(b) Financial Data Schedule.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has 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
Signing on behalf of
the Registrant, and
Principal Financial Officer
Dated: November 13, 1995
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited financial statements contained in the Company's quarterly report on
Form 10-Q for the quarter ended September 30, 1995 and is qualified in its
entirety by references to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<DEBT-HELD-FOR-SALE> 56,124,220
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 56,124,220
<CASH> 4,280,261
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 18,107,628
<TOTAL-ASSETS> 85,162,506
<POLICY-LOSSES> 3,306,237
<UNEARNED-PREMIUMS> 69,678,719
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
<COMMON> 200,000
0
0
<OTHER-SE> 11,849,303
<TOTAL-LIABILITY-AND-EQUITY> 85,162,506
20,755,082
<INVESTMENT-INCOME> 2,752,222
<INVESTMENT-GAINS> 1,248,108
<OTHER-INCOME> 0
<BENEFITS> 14,056,226
<UNDERWRITING-AMORTIZATION> 5,394,966
<UNDERWRITING-OTHER> 460,704
<INCOME-PRETAX> 4,843,516
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,843,516
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,843,516
<EPS-PRIMARY> 0<F1>
<EPS-DILUTED> 0<F1>
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1>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.
</FN>
</TABLE>
