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
For the fiscal year ended December 31, 1994
Or
Transition Report Pursuant to Section 13 or 15(d) of The Securities
_____ Exchange Act of 1934
Commission file number 33-6534
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, 1995, was $1,717,500<F1>.
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, 1995
_____ ___________________
Common Stock, no-par value 2,000
Participating Stock, no-par value 22,900
<F1> 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 established
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 established after an annual actuarial review, 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, 1994, 1993 and 1992 were 69.6%, 70.7% and 62.8% respectively.
The following table sets forth an analysis of changes in the loss reserves for
the fiscal years ended December 31, 1994, 1993 and 1992:
Period Ended
12/31/92 12/31/93 12/31/94
Beginning balance in
reserves for losses......... $1,396,542 $1,622,855 $1,910,030
__________ __________ __________
Add-provision for losses
incurred related to:
Current claim year........ $8,461,984 $11,046,932 $14,893,890
Prior claim years......... $ (297,535) $ (134,249) (63,724)
__________ ___________ __________
Total................. $8,164,449 $10,912,683 $14,830,166
__________ ___________ ___________
Deduct-paid losses
attributable to:
Current claim
year...................... $7,025,671 $9,363,720 $12,527,026
Prior claim
years..................... $ 912,465 $ 1,261,788 1,552,900
__________ ___________ ___________
Total..................... $7,938,136 $10,625,508 $14,079,926
__________ ___________ ___________
Ending balance in reserves
for losses.................. $1,622,855 $1,910,030 $2,660,270
__________ ____________ ___________
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 12/31/94
_______ ________ ________ ________ ________ ________
Liability for
unpaid claims
and claims
adjustment
expense $ 766,912 $1,075,123 $1,396,542 $1,622,855 $1,910,030 $2,660,270
__________ __________ __________ __________ __________ __________
Paid
(cumulative)
in subsequent
year(s) $ 666,866 $ 748,557 $ 912,465 $1,261,788 $1,552,900
Estimated
unpaid
liability
as of year
end.<F2> 2,393 43,840 186,542 226,818 293,406
__________ __________ __________ __________ __________
Cumulative
Deficiency
(Redun-
dancy) $ (97,653) $ (282,726) $ (297,535) $ (134,249) $ (63,724)
__________ __________ __________ __________ __________
<F2> 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, 1994, 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 are established by the Board. Under the guidelines in effect
prior to April, 1994, the Company was 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. Subject
to the satisfaction of certain conditions, the Board authorized, in April, 1994,
limited investments in non-dollar denominated bonds, on a fully currency-hedged
basis. The Company may invest only in securities and certificates which are
rated at least Aa3 by Moody's or AA- by Standard & Poor's or the equivalent, or
are guaranteed by such an issuer. As of April, 1994, certain unrated securities
may also be held if, in the opinion of the investment manager, they have at
least equivalent credit standing to the above rating standard. The Board
reviews on a regular basis and, where appropriate, revises the investment
objectives and guidelines for the Company's funds. There can be no assurance,
however, as to whether a particular investment objective, once adopted, can be
achieved or that adverse factors would not cause a decrease in the overall value
of the Company's investment portfolio.
Investments in non-U.S. securities, particularly those of non-governmental
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; provided, however, that a net
deficit for any such period is allocated to the Subsidiary Capital Account for
the Common Stock (to the extent of Restricted Earned Surplus) before allocating
any remaining deficits to the Subsidiary Capital Accounts for the participating
series.
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, 1994, $945,980 of net
underwriting gains and $455,238 of administrative expenses were allocated among
the 222 series of Shares outstanding as of December 31, 1994, and $1,227,816 of
net investment income was allocated among such series of Shares and the Common
Stock.
As of December 31, 1994, 189 such series had balances greater than $7,500
(ranging from $7,501 to $182,943) and 33 series had balances less than $7,500
(ranging from $7,351 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, 1994, an aggregate of $943,252
had been advanced from the Restricted Earned Surplus (which forms a portion of
the Account established for the Common Stock owned by MIC) to 23 Subsidiary
Capital Accounts and remained outstanding at that date. In addition, at
December 31, 1994, net deficits of $379,636 associated with 3 series of Shares
that have been redeemed had been charged against Restricted Earned Surplus and
remained outstanding at that date. Aggregate deficits reallocated among the
Subsidiary Capital Accounts of the Shares through December 31, 1994 were
$697,448.
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 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.
Barbados insurance law requires that the Company maintain certain levels of net
assets, calculated without regard to unrealized gains or losses. The Company is
currently in compliance with these requirements. 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 Colybrand Company 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 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, 1994, the Company paid fees
to the Manager in the amount of $176,154.
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 necessary 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 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 December 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, 1994.
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, 1995
there were 392 holders of Shares of record, representing 229 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, 1993 and
1994, the Company declared dividends of $1,021,705, $2,021,504 and $2,156,304,
respectively, which in each case exceeded the required minimum dividend.
Item 6. SELECTED FINANCIAL DATA
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.<F3>
<F3> 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.
The following selected financial data for the fiscal years ended December 31,
1994, 1993, 1992, 1991 and the eleven month period ended December 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, 1994 and 1993 and for each of the three
years in the period ended December 31, 1994 is included elsewhere herein.
December 31<F4>
____________________________________________________________
1994 1993 1992 1991 1990
____ ____ ____ ____ ____
Premiums Assumed $38,371,896 $27,779,063 $19,386,455 $16,784,405 $12,957,759
___________ ___________ ___________ ___________ ___________
Premiums Earned 21,316,685 15,429,611 13,005,184 10,292,788 8,177,525
Net Investment
Income 1,227,816 2,700,242 2,522,712 1,792,947 843,021
__________ ___________ ___________ ___________ __________
Total Income 22,544,501 18,129,853 15,527,896 12,085,735 9,020,546
Less Losses and
Expenses 20,825,943 15,425,146 12,020,682 10,165,350 8,280,612
__________ ___________ ___________ ___________ __________
Net Income<F5> 1,718,558 2,704,707 3,507,214 1,920,385 739,934
__________ ___________ ___________ ___________ __________
Dividends Per
Common Share 0 0 0 0 0
Total Assets 66,012,284 50,359,633 36,847,490 28,124,056 18,759,382
Total Policy
Reserves
and Other
Liabilities 60,246,641 42,430,269 29,777,783 23,148,003 16,347,245
Stockholders'
Equity 5,765,643 7,929,364 7,069,707 4,976,053 2,412,137
Dividends
Paid on
Participating
Shares 2,156,304 2,021,504 1,021,705 150,317 114,376
<F4> In May of 1990, the Company changed its fiscal year end from January 31 to
December 31.
<F5> 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.
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. The Company's liquidity requirements are
related to payment of insurance losses, administrative expenses, and dividends.
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 the Company. Although losses are expected to
increase due to the increased level of premiums assumed in each preceding year
and the anticipated incidence of claims following the expiration of
manufacturers' warranties, available funds from the sources identified above
have also grown. Net cash provided by operating activities has increased from
$6,734,218 in 1992 and $11,550,335 in 1993 to $14,960,494 in 1994. The Company
believes that such funds will be sufficient to meet its liquidity requirements
in 1995 and in future years to which its reinsurance liabilities extend. No
capital expenditures are expected during the next few years.
The Company had unearned premium reserves of $57,468,269 as of December 31,
1994, and $40,413,058 as of December 31, 1993. These amounts are attributable
to the long-term nature of the contracts sold. Such contracts may extend for up
to 72 months from date of issue. In addition, the risk of loss to the Company
under the contract arises primarily after the underlying manufacturer's warranty
expires. For new vehicles, the warranty generally covers 36 months or 36,000
miles. For used vehicles, the applicable warranty period depends on the
unexpired portion of the original manufacturer's warranty at the time of
purchase of the vehicle. Because the Company has little risk of loss prior to
expiration of the underlying manufacturer's warranty, most premium is not
recognized as earned until such expiration. Since very little premium is
recognized as earned until the expiration of the underlying warranty, most of
the premium written in any year is recorded as unearned.
See "Market For Registrant's Common Equity And Related Stockholder Matters" for
a discussion of dividends paid and legal restrictions on the payment of
dividends.
On April 8, 1994, the Board of Directors authorized the payment of dividends to
eligible holders of Participating Shares aggregating $2,156,304.
Capital Resources. Capitalization of the Company, as of December 31, 1994, is
comprised of paid-in capital with respect to the Common Stock of $200,000,
paid-in capital with respect to the Shares of $1,665,000 (compared with
$1,417,500 and $1,072,500 as of December 31, 1993 and 1992, respectively), and
earnings retained for use in the business of $5,796,732. 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 assets are 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, 1995, the Company's
required minimum net assets computed in accordance with Barbados law was
approximately $2,631,669, compared to total capital and retained earnings
computed for purpose of Barbados law of $7,661,732.
Results of Operations. During the fiscal year ended December 31, 1994, the
Company had net income of $1,718,558 compared to $2,704,707 and $3,507,214 for
the fiscal years ended December 31, 1993 and 1992, respectively. The reduction
in net income during 1994 compared to the previous year is the result primarily
of realized losses on the sale of investments as discussed below. 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 net underwriting income of approximately $490,742 in 1994
compared to $4,465 and $984,502 during 1993 and 1992 respectively. During 1994,
the Company had earned premiums of $21,316,685 compared to $15,429,611 and
$13,005,184 for the fiscal years ended December 31, 1993 and 1992, respectively.
Increased premium income has been generated by the issuance of additional series
of Shares during the year ended December 31, 1994, and the continuing flow of
reinsurance premiums from series issued in prior fiscal years. During 1994, the
Company issued 36 new series of Shares and redeemed 3 series of Shares for a net
increase of 33 series. There were 222 series of Shares outstanding at
December 31, 1994 compared to 189 and 143 series of Shares outstanding at
December 31, 1993 and 1992, respectively.
The Company incurred losses and expenses during the fiscal year ended
December 31, 1994 of $20,825,943 compared with $15,425,146 and $12,020,682 for
the fiscal years ended December 31, 1993 and 1992, respectively. This was
comprised of provisions for losses incurred during the period of $14,830,166,
ceding commissions and excise taxes of $5,540,539 and operating expenses of
$455,238. Losses incurred in 1993 and 1992 were $10,912,683 and $8,164,449,
respectively. The ratio of losses incurred to premiums earned for the fiscal
year ended December 31, 1994 was 69.6% compared to 70.7% and 62.8% for the
fiscal years ended December 31, 1993 and 1992, respectively. Management
believes the Company's increased loss experience in 1994 and 1993 compared to
1992, and the reduction in the Company's net income during 1993 compared to
1992, reflects the effects of changes in underlying manufacturer's warranties.
The expiration during 1992 of certain unlimited mileage mechanical plans that
had been retroceded to the Company and the elimination of certain deductibles
under the manufacturer's warranties for certain 1992 model vehicles had a
favorable impact on 1992 loss experience. On the other hand, the reduction of
the manufacturer's warranties from 50,000 to 36,000 miles for certain vehicles
beginning with the 1992 model year adversely affected 1993 and 1994 losses.
The Company incurred operating expenses during the fiscal year ended December
31, 1994 of $455,238 compared to $503,178 and $478,475 for the years ended
December 31, 1993 and 1992. MIC has agreed to pay certain costs of issuing
shares if such costs could not be allocated to the Subsidiary Capital Account
for the Common Stock. In 1994, MIC paid directly, $162,989 of costs to register
and issue shares. For fiscal years ended December 31, 1993 and 1992, share
issuance costs which totalled $74,461 and $80,298, respectively, were paid by
the Company and allocated to the Subsidiary Capital Account for the Common
Stock.
The increase of net underwriting income during the year ended December 31, 1994
was offset by a decrease in investment income which declined in 1994 to
$1,227,816 compared to $2,700,242 and $2,522,712 for the fiscal years ended
December 31, 1993 and 1992, respectively. The reduction in investment income
during 1994 compared to prior periods is primarily attributable to changes in
interest rates which adversely affected the market values of the Company's
investment portfolio and resulted in realized losses on the sale of investment
securities. These losses offset interest earnings which increased approximately
52% during 1994 over the prior year, largely as a result of an increase in the
amount of assets under management.
Realized losses on the sale of investment securities in the year ended December
31, 1994 were $1,543,358 compared to realized gains of $872,313 and $864,282 for
the years ended December 31, 1993 and 1992, respectively. The realized losses
during 1994 resulted in large part from a repositioning of the Company's
investment portfolio away from longer term issues toward medium term
investments. Unrealized losses on investment securities held at December 31,
1994 were $1,896,089 compared to unrealized gains at December 31, 1993 of
$99,886. Unrealized losses as of December 31, 1994 include amounts attributable
to decreases in value of securities purchased at a premium. As of February 28,
1995, substantially all of these unrealized losses were eliminated as a result
of improved market conditions.
At present, the Company's investments are comprised entirely of U.S.-dollar
denominated fixed-income securities. In the future, the Company may invest in
foreign denominated bonds, on a fully U.S. dollar-hedged basis, in situations
where the investment manager anticipates a higher rate of return (net of hedging
costs) than would be available in the market for similarly rated U.S.-dollar
denominated bonds. The Company's investment guidelines do not permit the use of
financial instrument derivatives in managing interest rate risk.
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, 1994, the Company had furnished such a letter of credit in
the amount of $42,900,000.
Accounting Change. FASB Statement No. 115, "Accounting for Certain Investments
in Debt and Equity Securities" is effective for years beginning after December
15, 1993 and requires the Company to classify its securities holdings into three
categories (trading, available for sale, and held to maturity). The Company
adopted Statement No. 115 in 1994 and classified its securities portfolio as
available for sale. Adoption of the statement did 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................... 27
2. Balance Sheets, December 31
1994 and 1993................................ 28
3. Statements of Income and Retained
Earnings for the years ended
December 31, 1994, 1993 and 1992 ............ 29
4. Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992 ............ 30
5. Notes to Financial Statements.................. 31
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 sheets of Motors Mechanical Reinsurance
Company, Limited as of December 31, 1994 and 1993 and the related statements of
income and retained earnings and cash flows for each of the three years in the
period ended December 31, 1994. 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 auditing standards generally accepted
in the United States of America. 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, 1994 and 1993 and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1994 in conformity with accounting principles generally accepted in
the United States of America.
s/DELOITTE & TOUCHE
CHARTERED ACCOUNTANTS
Bridgetown, Barbados
February 27, 1995
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
(Expressed in U.S. Dollars)
Notes 1994 1993
_____ ___________ ___________
ASSETS
Investments 3,7 $42,903,056 $29,882,488
Cash and cash equivalents 7 3,303,060 6,788,771
Accrued investment income 1,559,195 861,190
Due from ceding company 3,315,506 2,331,978
Deferred acquisition costs 14,931,467 10,495,206
___________ ___________
Total Assets $66,012,284 $50,359,633
___________ ___________
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Unearned premiums 57,468,269 40,413,058
Loss reserves 4 2,660,270 1,910,030
Accrued liabilities 118,102 107,181
___________ ___________
Total Liabilities 60,246,641 42,430,269
___________ ___________
COMMITMENTS AND CONTINGENCIES 7
STOCKHOLDERS' EQUITY 5
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 outstanding -
22,200 shares at December 31,
1994 and 18,900 shares at
December 31, 1993 1,665,000 1,417,500
___________ ___________
1,865,000 1,617,500
Retained earnings 8 5,796,732 6,211,978
Unrealized (depreciation)
appreciation on investments 3 (1,896,089) 99,886
___________ ___________
Total Stockholders' Equity 5,765,643 7,929,364
___________ ___________
Total Liabilities and
Stockholders' Equity $66,012,284 $50,359,633
___________ ___________
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, 1994, 1993 AND 1992
(Expressed in U.S. Dollars)
Years Ended December 31
_________________________________________________
Notes 1994 1993 1992
_____ ___________ ___________ ___________
INCOME
Reinsurance
premiums assumed 6 $38,371,896 $27,779,063 $19,386,455
Increase in
unearned premiums (17,055,211) (12,349,452) (6,381,271)
___________ ___________ __________
Premiums earned 21,316,685 15,429,611 13,005,184
___________ ___________ __________
Investment income:
Interest earned 2,771,174 1,827,929 1,658,430
Realized (losses) gains
on investments (1,543,358) 872,313 864,282
___________ ___________ __________
Investment income - net 1,227,816 2,700,242 2,522,712
___________ ___________ __________
TOTAL INCOME 22,544,501 18,129,853 15,527,896
___________ ___________ ___________
EXPENSES
Acquisition costs 5,540,539 4,009,285 3,377,758
Losses paid 14,079,926 10,625,508 7,938,136
Increase in loss
reserves 750,240 287,175 226,313
Administrative expenses:
Related Parties 171,135 168,933 160,858
Other 284,103 334,245 317,617
___________ ___________ __________
TOTAL EXPENSES 20,825,943 15,425,146 12,020,682
___________ ___________ __________
NET INCOME 1,718,558 2,704,707 3,507,214
RETAINED EARNINGS,
beginning of year 6,211,978 5,528,775 3,043,266
LESS: DIVIDENDS (2,156,304) (2,021,504) (1,021,705)
ADD: REDEMPTION OF
PARTICIPATING STOCK 22,500 - -
___________ ___________ ___________
RETAINED EARNINGS, end of year $ 5,796,732 $ 6,211,978 $ 5,528,775
___________ ___________ ___________
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, 1994, 1993, AND 1992
(Expressed in U.S. dollars)
Year Ended December 31
_______________________________________
1994 1993 1992
___________ ___________ ___________
CASH FLOWS FROM OPERATING ACTIVITIES:
Reinsurance premiums collected $35,580,944 $26,933,330 $17,624,088
Losses and underwriting
expenses paid (22,168,851) (16,977,784) (11,898,682)
Administrative expenses paid (527,767) (490,616) (429,735)
Investment income received 2,076,168 2,085,405 1,438,547
___________ ___________ ___________
Net cash provided by operating
activities 14,960,494 11,550,335 6,734,218
___________ __________ ___________
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment securities (70,748,944) (49,834,608) (60,877,408)
Sales of investment securities 54,189,043 45,038,810 53,031,200
___________ ___________ ___________
Net cash invested (16,559,901) (4,795,798) (7,846,208)
___________ ___________ ___________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of
Participating Stock 270,000 345,000 255,000
Dividends paid (2,156,304) (2,021,504) (1,021,705)
___________ ___________ ____________
Net cash used in financing
activities (1,886,304) (1,676,504) (766,705)
___________ ___________ ___________
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (3,485,711) 5,078,033 (1,878,695)
CASH AND CASH EQUIVALENTS, beginning
of year 6,788,771 1,710,738 3,589,433
___________ ___________ ___________
CASH AND CASH EQUIVALENTS, end of
year $ 3,303,060 $ 6,788,771 $ 1,710,738
___________ ___________ ___________
RECONCILIATION OF NET INCOME TO
NET CASH PROVIDED BY OPERATING
ACTIVITIES:
Net income $ 1,718,558 $ 2,704,707 $ 3,507,214
Realized losses (gains) on
investments 1,543,358 (872,313) (864,282)
Change in:
Accrued investment income (698,005) 254,177 (222,446)
Due from ceding company (983,528) 24,630 (653,270)
Deferred acquisition costs (4,436,261) (3,213,352) (1,662,778)
Prepaid expenses - - -
Unearned premiums 17,055,211 12,349,452 6,381,271
Loss reserves 750,240 287,175 226,313
Accrued liabilities 10,921 15,859 22,196
___________ ___________ ___________
NET CASH PROVIDED BY OPERATING
ACTIVITIES $14,960,494 $11,550,335 $ 6,734,218
___________ ___________ ___________
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 in conformity with accounting principles generally accepted
in 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.
Certain amounts in the 1993 and 1992 financial statements have been
reclassified to conform with the 1994 presentation.
(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 and are calculated based on average costs.
(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 December 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 8).
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
Note 3. INVESTMENTS
Effective January 1, 1994, the Company adopted the requirements of
Financial Accounting Standards Board Statement No. 115 "Accounting for
Certain Investments in Debt and Equity Securities" and the Company's
investments have been classified as available for sale. The Company
had previously accounted for its investment securities at market
value, with the resulting unrealized gains and losses included as a
separate component of stockholders' equity. Accordingly, the adoption
of Statement No. 115 had no material effect on the Company's financial
position and results of operations.
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, 1994:
Debt securities
issued by
foreign
governments
and their
agencies $31,233,934 $23,323 $(1,324,106) $29,933,151
Debt securities
issued by
supra-nationals 13,565,211 - (595,306) 12,969,905
____________ _______ ___________ __________
Total $44,799,145 $23,323 $(1,919,412) $42,903,056
___________ _______ ___________ ___________
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
___________ ________ _________ ___________
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,
1994, 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 $18,203,680 $17,241,088
Due after five years
through ten years 26,595,465 25,661,968
___________ ___________
$44,799,145 $42,903,056
___________ ___________
In 1994, gross gains of $150,704 and gross losses of $1,694,062 were
realized. In 1993, gross gains of $964,613 and gross losses of
$92,300 were realized. In 1992, gross gains of $1,008,932 and gross
losses of $144,650 were realized.
The following summarizes net unrealized appreciation (depreciation) on
investments:
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
Net depreciation (1,995,975)
_________
Balance, December 31, 1994 $(1,896,089)
___________
The investment portfolio is comprised of diverse U.S. dollar-
denominated debt securities which do not result in any concentration
in credit risks.
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
Note 4. RESERVES FOR UNPAID LOSSES
The following table sets forth an analysis of changes in the loss reserves for
the years ended December 31, 1994, 1993 and 1992:
1994 1993 1992
____ ____ ____
Beginning balance in
reserves for losses $ 1,910,030 $ 1,622,855 $1,396,542
____________ ____________ __________
Add-provision for losses
incurred related to:
Current claim year $ 14,893,890 $ 11,046,932 $8,461,984
Prior claim years $ (63,724) $ (134,249) $ (297,535)
____________ ____________ __________
Total $ 14,830,166 $ 10,912,683 $8,164,449
____________ ____________ __________
Deduct-paid losses
attributable to:
Current claim year $ 12,527,026 $ 9,363,720 $7,025,671
Prior claim years $ 1,552,900 $ 1,261,788 $ 912,465
____________ ____________ __________
Total $ 14,079,926 $ 10,625,508 $7,938,136
____________ ____________ __________
Ending balance in reserves
for losses $ 2,660,270 $ 1,910,030 $1,622,855
____________ ____________ __________
As a result of change in estimates of losses incurred in prior years, the
provisions for losses incurred in 1994, 1993 and 1992 decreased by $63,724,
$134,249, and $297,535, respectively, because of lower than expected claims.
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
Note 5. STOCKHOLDERS' EQUITY
All of the Company's Common Stock is held by MIC. A prospectus dated
July 14, 1994 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 1994, 36 additional series of 100 shares of Participating Stock
were issued as compared with 46 for the year ended December 31, 1993.
In addition, in 1994 the Board of Directors redeemed 3 series of 100
shares each that had substantial accumulated deficits. As a result of
the redemption, $22,500 was transferred from Participating Stock to
retained earnings to eliminate the capital accounts and accumulated
deficits of those series.
In the years ended December 31, 1994, 1993 and 1992, costs in the
amount of $162,989, $74,461 and $80,298, respectively, were incurred
in the sale of Participating Stock. The Common Stockholder reimbursed
the Company directly for these expenses in 1994. During 1993 and
1992, these amounts were expensed by the Company and allocated to the
account of the Common Stockholder.
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
have no right to vote with respect to liquidation of the Company. As
a class, these holders generally have the sole right to vote on
matters not specifically reserved to Participating Stock.
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, 1994, $7,500 was held in escrow and at December 31, 1993,
there were no amounts held in escrow.
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
Note 6. REINSURANCE PREMIUMS
Under the provisions of the retrocession agreement, the Company will
receive additional cessions of $19,156,090 ($13,471,019 at December
31, 1993) 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 7. LETTERS OF CREDIT
As of December 31, 1994, the Company has provided an irrevocable
letter of credit to MIC, in the amount of $42,900,000 to secure the
amounts recoverable from the Company related to the business ceded.
Cash equivalents and investments are assigned to secure the letter of
credit.
Note 8. 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. Amounts allocated to the Common
Stockholder, net of advances to Participating Stockholders, are
presented in the table below as "net transfers."
Dividends may be declared and paid at the discretion of the Company's
Board of Directors subject to the right of holders of participating
stock to receive minimum dividends. The minimum annual dividend
payable on each share shall be such shares pro rata portion of an
amount equal to twenty percent (20%) of the net income, if any, for
the preceding fiscal year attributable to the subsidiary capital
account associated with the series of which that share is part.
Barbados law requires that the Company maintain a minimum
capitalization based generally on the amount of premiums earned in the
preceding fiscal year. At January 1, 1995, the Company's required
minimum capital computed in accordance with Barbados law was
approximately $2,631,669.
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
Note 8. 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, 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
Net income (loss) for the year (7,536) 1,726,094 1,718,558
Net transfers (37,410) 37,410
Dividends paid - (2,156,304) (2,156,304)
Redemption of participating
stock - 22,500 22,500
_________ __________ __________
Balance (Deficit)
December 31, 1994 $ (53,220) $5,849,952 $5,796,732
_________ __________ __________
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
Two of the current directors of the Company were elected by MIC through its
ownership of the Common Stock. Three additional directors, who each retired
during 1994, were also elected by MIC: Robert T. O'Connell, who also served as
Chairman and Chief Executive Officer of the Company and Chairman of the Board of
General Motors Acceptance Corporation and MIC; Joseph J. Pero, who also served
as President of the Company and President and Director of MIC; and Vincent K.
Quinn, who also served as Executive Vice President of the Company and Executive
Vice President and Director of MIC. One director was elected by the holders of
the Shares at the Annual Shareholders' Meeting held on April 8, 1994. The
directors and officers of the Company are as follows:
POSITION WITH THE COMPANY
AGE (AND OTHER EMPLOYMENT DURING
NAME PAST FIVE YEARS)
Louis S. Carrio, Jr........ 51 Vice-President and Director (Vice-President,
MIC).
Mr. Carrio became a Director and was
appointed Vice-President in 1991.
Peter R. P. Evelyn ........ 53 Director (Attorney, Evelyn, Gittens & Farmer,
a Barbados law firm).
Mr. Evelyn has been a Director since 1986.
Donald C. Mealey............ 59 Director (President, Don Mealey, Chevrolet,
Inc.).
Mr. Mealey has been a Director since 1994.
Ronald W. Jones ........... 42 Vice-President, Finance (Managing Director,
Alexander Insurance Managers (Barbados)
Ltd.).
Mr. Jones has served as Vice-President,
Finance since 1987.
Michael B. Boyce........... 54 Secretary (Principal, Colybrand Company
Services, Limited, Barbados, since 1993;
previously principal, Price Waterhouse,
Eastern Caribbean).
Mr. Boyce has served as Secretary since 1994.
Mr. Boyce served previously as Assistant
Secretary to the Company.
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. Boyce is affiliated with Colybrand Company Services Limited,
St. Michael, 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. Don Mealey, a director, owns 140
shares of Participating Stock and is the president of a company that owns 10
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
1994 and 1993.
(iii) Statements of Income and Retained
Earnings for the years ended
December 31, 1994, 1993 and 1992.
(iv) Statements of Cash Flows for the
years ended December 31, 1994,
1993, and 1992.
(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
Alexander Insurance Managers (Barbados) Ltd., dated
March 19, 1992, filed by reference to Exhibit 10(f)
to Annual Report on Form 10-K, File No. 33-6534, for
the year ended December 31, 1993.
20(a) Proxy solicitation materials sent to shareholders in
connection with annual meeting held on April 8,
1994, filed by reference to Exhibit 20(b) to Annual
Report on Form 10-K, File No. 33-6534, for the year
ended December 31, 1993.
20(b) Proxy solicitation materials sent to shareholders in
connection with annual meeting to be held on April
6, 1995.
27 Financial Data Schedule.
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, 1994 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 28, 1995
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/Louis S. Carrio, Jr. Vice-President and March 24, 1995
Louis S. Carrio, Jr. Director
s/Peter R. P. Evelyn Director March 28, 1995
Peter R. P. Evelyn
Director
Donald C. Mealey
s/Ronald W. Jones Vice-President, March 28, 1995
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 8, 1994, and in connection with the 1995 annual
meeting, to be held on April 6, 1995.
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
NOTICE
NOTICE is hereby given that the Eighth 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 6th day of April, 1995
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, 1994
together with the auditors report thereon.
3. To elect directors.
4. To consider the proposal to amend the Restated 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 10th DAY OF MARCH, 1995
BY ORDER OF THE BOARD
Michael R. Boyce
AS SECRETARY OF
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
Annual Meeting April 6, 1995
PROXY STATEMENT
March 10, 1995
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 to be held on April 6, 1995 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 22,900 participating shares outstanding, held by 392
persons representing 229 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, 1994 and a
form of proxy.
ELECTION OF DIRECTORS
The Company has a board of directors consisting 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.
Henry Faulkner, III 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 elect
John D. Finnegan, William B. Noll and Bernard J. Buselmeier and
re elect Louis S. Carrio, Jr. and Peter R.P. Evelyn to serve as
directors.
Information regarding the age and current occupation of persons
nominated to be elected or re elected as directors by the common
shareholder and the person nominated to be elected as director by
the participating shareholders is set forth below.
Position with the Company and Other
Name Age Employment During the Past Five
Years
John D. Finnegan 46 Nominee for Director
(Executive Vice President & Chief
Financial Officer, General Motors
Acceptance Corporation, June 1992;
Assistant Treasurer and Funds
Officer, General Motors
Corporation, 1987 1992).
William B. Noll 52 Nominee for Director
(Executive Vice President & Chief
Financial Officer, MIC, March 1993;
Group Vice President, MIC,
1991 1993; Vice President, MIC,
1989 1990).
Louis S. Carrio, Jr. 51 Vice President and Director
(Vice President, MIC).
Mr. Carrio has been a Vice-
President & Director since 1991.
Bernard J. Buselmeier 39 Nominee for Director
(Vice President since 1993 and
Treasurer since 1989, MIC).
Peter R.P. Evelyn 53 Director
(Attorney, Evelyn Gittens & Farmer,
A Barbados Law firm).
Mr. Evelyn has been a Director
since 1986.
Henry Faulkner, III 45 Nominee for Director to be elected
by the participating shareholders
(President, Faulkner Saturn of
Trevose).
AMENDMENT OF RESTATED ARTICLES OF INCORPORATION
The Company's Restated Articles of Incorporation currently
provide that deficits with respect to a Subsidiary Capital
Account for a series of participating shares are to be allocated
first to Restricted Earned Surplus and then to the Subsidiary
Capital Accounts of the other participating shares. If at any
time a Subsidiary Capital Account with prior deficits returns to
a positive balance, prior deficits charged against Restricted
Earned Surplus are restored. However, under the Company's
existing Articles, prior deficits charged against Subsidiary
Capital Accounts of the particapting shares are not restored.
Management proposes to amend the Company's Articles to provide
that deficits of a Subsidiary Capital Account that are charged
against Subsidiary Capital Accounts of participating shares are
to be restored, provided that all deficit amounts with respect to
that account previously charged against Restricted Earned Surplus
have been restored. This change shall apply only with respect to
deficits that are charged against Subsidiary Capital Accounts of
participating shares for periods after January 1, 1995.
Accordingly, Management proposes that the Company's Articles be
amended to read as follows:
Section 3(1)(7)(c)
(c) Although this paragraph (7) shall be applied in a manner
that does not result in a balance in any Subsidiary Capital
Account for a series of Shares that is less than zero, if any
such account had a deficit that was allocated to and charged
against the Subsidiary Capital Account of the Common shares
pursuant to Section 3(1)(7)(a)(i) hereof, or to the Subsidiary
Capital Account for any series of Shares pursuant to Section
3(1)(7)(a)(ii) or (iii) hereof (after taking into account the
provisions of Section 3(1)(7)(b)) after January 1, 1995, then at
the end of any succeeding fiscal quarter for which that account
otherwise would show an account balance greater than zero, such
balance will be reallocated and credited:
(i) first to the Subsidary Capital Account of the Common
shares until all reductions of such Subsidiary Capital
Account for the Common shares under Section 3(1)(7)(a)(i)
hereof with respect to said series of Shares have been
restored, and
(ii) then, with respect to any deficits charged against the
Subsidiary Capital Account for any series of Shares pursuant
to Section 3(1)(7)(a)(ii) or (iii) for periods after January
1, 1995, to the Subsidiary Capital Accounts for the Shares,
pro rata, based upon the relative amounts, through the end
of the fiscal quarter for which the reallocation hereunder
is being made, of deficits that were allocated to those
accounts (whether under Section 3(1)(7)(a)(ii) or (iii))
from the Subsidiary Capital Account for the series of Shares
for which the reallocation hereunder is being made and that
have not previously been restored, until all reductions of
such Subsidiary Capital Accounts after January 1, 1995 under
Section 3(1)(7)(a) with respect to said series of Shares
have been restored.
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.
P R O X Y
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 6th day of April, 1995 or
at any adjournment thereof and in particular to vote for:
(i) The election of Henry Faulkner, III to serve as a
director representing the participating shareholders;
(ii) The approval of the amendment of the Company's Restated
Articles of Incorporation as contained in the proxy
statement dated March 10, 1995; and
(iii) The confirmation of Deloitte & Touche as the auditors
of the Company for the current fiscal year.
Dated this ________ day of __________, 1995.
____________________________________________
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from audited
financial statements contained in the Company's annual report on Form 10-K for
the year ended December 31, 1994 and is qualified in its entirety by references
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<DEBT-HELD-FOR-SALE> 42,903,056
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 42,903,056
<CASH> 3,303,060
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 14,931,467
<TOTAL-ASSETS> 66,012,284
<POLICY-LOSSES> 2,660,270
<UNEARNED-PREMIUMS> 57,468,269
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
<COMMON> 200,000
0
0
<OTHER-SE> 5,565,643
<TOTAL-LIABILITY-AND-EQUITY> 66,012,284
21,316,685
<INVESTMENT-INCOME> 2,771,174
<INVESTMENT-GAINS> (1,543,358)
<OTHER-INCOME> 0
<BENEFITS> 14,830,166
<UNDERWRITING-AMORTIZATION> 5,540,539
<UNDERWRITING-OTHER> 455,238
<INCOME-PRETAX> 1,718,558
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,718,558
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,178,558
<EPS-PRIMARY> 0<F1>
<EPS-DILUTED> 0<F1>
<RESERVE-OPEN> 1,910,030
<PROVISION-CURRENT> 14,893,890
<PROVISION-PRIOR> (63,724)
<PAYMENTS-CURRENT> 12,527,026
<PAYMENTS-PRIOR> 1,552,900
<RESERVE-CLOSE> 2,660,270
<CUMULATIVE-DEFICIENCY> (63,724)
<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>
