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 June 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 33-60105
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 June 30, 1995
Common Stock, no par-value 2,000
Participating Stock, no par-value 23,400
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 I. FINANCIAL INFORMATION
Item 1. Financial Statements
1. Balance Sheets, June 30, 1995 and December 31,
1994.
2. Statements of Income and Retained Earnings for the
three month periods ended June 30, 1995 and 1994
and the six month periods ended June 30, 1995 and
1994.
3. Statements of Cash Flows for the six month periods
ended June 30, 1995 and 1994.
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 1995 presentation.
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
BALANCE SHEETS
(Expressed in U.S. Dollars)
June 30,
1995 December 31,
(unaudited) 1994
_____________ ____________
ASSETS
Investments $51,115,571 $42,903,056
Cash and cash equivalents 4,688,276 3,303,060
Accrued investment income 1,578,729 1,559,195
Due from ceding company 3,918,070 3,315,506
Deferred acquisition costs 16,816,180 14,931,467
Prepaid expenses 1,250 0
___________ ___________
Total Assets $78,118,076 $66,012,284
___________ ___________
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Unearned premiums $64,713,396 $57,468,269
Loss reserves 2,983,654 2,660,270
Accrued liabilities 224,252 118,102
___________ ___________
Total liabilities 67,921,302 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 - 23,400 shares as of
June 30, 1995 and
22,200 shares as of
December 31, 1994 1,755,000 1,665,000
___________ ___________
1,955,000 1,865,000
Retained Earnings 7,631,714 5,796,732
Unrealized appreciation
(depreciation) on
investments 610,060 (1,896,089)
___________ __________
Total Stockholders' Equity 10,196,774 5,765,643
___________ ___________
Total Liabilities and
Stockholders' Equity $78,118,076 $66,012,284
___________ ___________
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE THREE
MONTH PERIODS ENDED JUNE 30, 1995 AND JUNE 30, 1994 AND THE
SIX MONTH PERIODS ENDED JUNE 30, 1995 AND JUNE 30, 1994
(UNAUDITED)
(Expressed in U.S. Dollars)
Three Month Periods Six Month Periods
Ended June 30, Ended June 30,
1995 1994 1995 1994
__________ __________ __________ ___________
INCOME
Reinsurance premiums
assumed $10,763,438 $10,152,109 $20,406,164 $18,968,440
Increase in unearned
premiums 3,914,790 5,030,453 7,245,127 9,274,878
__________ __________ __________ __________
Premiums earned 6,848,648 5,121,656 13,161,037 9,693,562
__________ __________ __________ __________
Investment income
Interest earned 977,405 676,507 1,876,395 1,247,199
Realized gains
(losses) on
investments 1,121,995 (741,750) 592,286 (1,045,139)
__________ __________ __________ __________
Investment income
(loss) 2,099,400 (65,243) 2,468,681 202,060
__________ __________ __________ __________
TOTAL INCOME 8,948,048 5,056,413 15,629,718 9,895,622
__________ __________ __________ __________
EXPENSES
Acquisition costs 1,780,169 1,331,276 3,420,943 2,519,485
Losses paid 4,230,423 3,297,976 8,502,072 6,299,826
Increase in
loss reserves 227,225 256,845 323,384 444,054
Administrative
expenses
- Related Parties 50,263 47,709 119,780 101,154
- Other 126,789 97,625 239,943 183,303
__________ __________ __________ __________
TOTAL EXPENSES 6,414,869 5,031,431 12,606,122 9,547,822
__________ __________ __________ __________
NET INCOME 2,533,179 24,982 3,023,596 347,800
RETAINED EARNINGS,
beginning of period 6,287,149 6,534,796 5,796,732 6,211,978
LESS: DIVIDENDS (1,188,614) (2,156,304) (1,188,614) (2,156,304)
ADD: TRANSFERS FROM
PARTICIPATING STOCK 0 22,500 0 22,500
___________ __________ __________ __________
RETAINED EARNINGS,
end of period $7,631,714 $4,425,974 $7,631,714 $4,425,974
__________ __________ __________ __________
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
STATEMENTS OF CASH FLOWS FOR THE SIX MONTH PERIODS ENDED
JUNE 30, 1995 AND JUNE 30, 1994 (UNAUDITED)
(Expressed in U.S. Dollars)
Six month periods ended
June 30,
1995 1994
___________ ___________
Cash flows from operating activities:
Reinsurance premiums assumed $19,495,823 $15,878,476
Losses and underwriting expenses paid (13,396,827) (10,024,288)
Administrative expenses paid (361,447) (339,020)
Investment income received 1,722,432 1,012,943
___________ ___________
Net cash provided by
operating activities 7,459,981 6,528,111
___________ ___________
Cash flows from investing activities:
Purchases of investment securities (85,402,614) (46,461,178)
Sales of investment securities 80,426,463 41,294,093
___________ ___________
Net cash invested (4,976,151) (5,167,085)
___________ ___________
Cash flows from financing activities:
Proceeds from issuance of
Participating stock 90,000 112,500
Dividends paid (1,188,614) (2,156,304)
___________ ___________
Net cash used in financing
activities (1,098,614) (2,043,804)
___________ ___________
Increase (decrease)
in cash and cash equivalents 1,385,216 (682,778)
Cash and cash equivalents, beginning
of period 3,303,060 6,788,771
___________ ___________
Cash and cash equivalents, end
of period $ 4,688,276 $ 6,105,993
___________ ___________
Reconciliation of net income to net cash
provided by operating activities:
Net income 3,023,596 347,800
Realized losses (gains) on investments (592,286) 1,045,139
Foreign exchange losses on investments (137,929) 0
Change in:
Accrued investment income (19,534) (234,253)
Due from ceding company (602,564) (1,964,035)
Deferred acquisition costs (1,884,713) (2,412,362)
Prepaid expenses (1,250) (1,250)
Unearned premiums 7,245,127 9,274,878
Loss reserves 323,384 444,054
Accrued liabilities 106,150 28,140
___________ ___________
Net cash provided by operating
activities $ 7,459,981 $ 6,528,111
___________ ___________
Item 2. Management's Discussion And Analysis of Financial
Condition And Results of Operations
Liquidity. It is anticipated that the Company will continue to
be able 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 significant amounts of unearned premium on the balance sheet
at each balance sheet date are attributable to the long-term
nature of the contracts sold. The risk of loss to the Company
under the contract 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 premium written in any period is recorded
as unearned.
Cash, cash equivalents and investments valued at market have
increased from $46,206,116 at the beginning of the year to
$55,803,847 at June 30, 1995.
On April 6, 1995, the Board of Directors authorized the payment
of dividends to eligible holders of Participating Shares
aggregating $1,188,614.
Capital Resources. As of June 30, 1995, the share capital of the
Company was $1,955,000 (compared with $1,865,000 as of December
31, 1994) comprised of paid in capital with respect to the Common
Stock of $200,000 and paid in capital with respect to
Participating Shares of $1,755,000 (compared with $1,665,000 as
of December 31, 1994). In addition, the Company had surplus from
retained earnings in the amount of $7,631,714 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 June 30,
1995, the Company's minimum required net assets computed in
accordance with Barbados law was approximately $2,631,669,
compared to total capital and retained earnings computed for
purposes of Barbados law of $9,586,714.
Results of Operations. During the quarter ended June 30, 1995,
the Company had net income of $2,533,179, compared to $24,982 for
the quarter ended June 30, 1994. For the six month period ended
June 30, 1995, the Company had net income of $3,023,596 compared
to $347,800 for the comparable period of 1994. These increases
are the result of gains on the sale of investment securities
during the quarter under review as discussed below and a modest
improvement in underwriting results.
For the quarter ended June 30, 1995, premiums earned increased
$1,726,992 to $6,848,648, compared to $5,121,656 for the
comparable period of 1994. Expenses (including losses) increased
$1,383,438, from $5,031,431 in the second quarter of 1994 to
$6,414,869 in the second quarter of 1995. As a result, net
underwriting income increased from $90,225 in the second quarter
of 1994 to $433,779 in the second quarter of 1995. The loss
ratio in the second quarter of 1995 was 65.1%, compared to 69.4%
in the second quarter of 1994.
In the six month period ended June 30, 1995, the Company reported
premiums earned of $13,161,037, an increase of $3,467,475 over
the six month period ended June 30, 1994. Net underwriting
income in the first six months of 1995 was $554,915, which
represents an increase of $409,175 over the six month period
ended June 30, 1994. The loss ratio for the six month period
ended June 30, 1995 was 67.1%, compared to 69.6% for the six
month period ended June 30, 1994.
Investment income for the quarter ended June 30, 1995 was
$2,099,400 compared to a net loss of $65,243 for the comparable
period of 1994. Investment income for the six month period ended
June 30, 1995 was $2,468,681 compared to $202,060 for the
comparable period of 1994. Declines in long term interest rates
during the quarter ended June 30, 1995 resulted in increases in
the market value of the Company's investment portfolio. During
the quarter, the Company realized gains on the sale of investment
securities of $1,121,995, compared to losses of $741,750 on
securities sales during the comparable period of 1994. For the
six month period ended June 30, 1995, realized gains on the sale
of investment securities were $592,286, compared to losses of
$1,045,139 during the comparable period of 1994. As of June 30,
1995, the Company had net unrealized appreciation of $610,060 on
its investments compared to unrealized depreciation of $1,896,089
as of December 31, 1994.
For the quarter under review, the Company had interest income of
$977,405 compared to $676,507 for the comparable period of 1994.
For the six month period ended June 30, 1995, the Company had
interest income of $1,876,395 compared to $1,247,199 during the
comparable period of 1994. These increases were largely
attributable to increases in the amount of assets under
management.
In 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 June 30, 1995, the Company had
non-U.S. dollar-denominated investments with an aggregate market
value of $13,051,000 based on June 30, 1995 exchange rates.
Cumulative exchange losses under the hedging program at June 30, 1995,
were approximately $138,000.
PART II. OTHER INFORMATION
Item 2. Changes in Securities
At the annual meeting of shareholders of the Company held on
April 6, 1995, the Company's Restated Articles of Incorporation
were amended to provide that any deficits with respect to a
Subsidiary Capital Account for a series of Participating Shares
that are charged against the Subsidiary Capital Accounts for
other series of Participating Shares will be restored if such
Subsidiary Capital Account with prior deficits returns to a
positive balance, provided that all deficits with respect to such
Subsidiary Capital Account previously charged against Restricted
Earned Surplus have been restored. (See Item 4.)
Item 4. Submission of Matters to a Vote of Security-Holders
On April 6, 1995, the holder of the Common Stock elected three
directors, John D. Finnegan, William B. Noll and Bernard J.
Buselmeier, and re-elected two directors, Louis S. Carrio, Jr.,
and Peter R.P. Evelyn. The holders of Participating Shares
unanimously elected the sixth director, Henry Faulkner, III. In
addition, the holder of the Common Shares elected Robert E.
Capstack as alternate director for Mr. Carrio.
The shareholders also voted unanimously to amend the Restated
Articles of Incorporation of the Company as discussed in Item 2
of this Part II.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3(i) Restated Articles of Incorporation filed by
reference to Exhibit 4 to the Registration
Statement on Form S-2, File No. 33-60105, dated
June 9, 1995.
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter
for which this report is filed.
SIGNATURES
Pursuant to the requirements 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
Signing on behalf of
the Registrant, and
Principal Financial Officer
Dated: August 1, 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 June 30, 1995 and is qualified in its entirety
by references to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<DEBT-HELD-FOR-SALE> 51,115,571
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 51,115,571
<CASH> 4,688,276
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 16,816,180
<TOTAL-ASSETS> 78,118,076
<POLICY-LOSSES> 2,983,654
<UNEARNED-PREMIUMS> 64,713,396
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
<COMMON> 200,000
0
0
<OTHER-SE> 9,996,774
<TOTAL-LIABILITY-AND-EQUITY> 78,118,076
13,161,037
<INVESTMENT-INCOME> 1,876,395
<INVESTMENT-GAINS> 592,286
<OTHER-INCOME> 0
<BENEFITS> 8,825,456
<UNDERWRITING-AMORTIZATION> 3,420,943
<UNDERWRITING-OTHER> 359,723
<INCOME-PRETAX> 3,023,596
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,023,596
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,023,596
<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>
