SECURITIES AND EXCHANGE COMMISSION
WASHINGTON. D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For quarterly period ended September 30, 1996
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number 33-6534
Motors Mechanical Reinsurance Company, Limited
(Exact name of registrant as specified in its charter)
Barbados NA
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Bishops Court Hill, St. Michael, Barbados NA
(Address of principle executive offices) (Zip Code)
(246) 436-4895
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
Class As of September 30, 1996
Common Stock, no par-value 2,000
Participating Stock, no par-value 25,100
This quarterly report, filed pursuant to Rule 13a-13 of the General Rules
and Regulations under the Securities Exchange Act of 1934, consists of the
following information as specified in Form 10-Q:
Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements
1. Balance Sheets, September 30, 1996 and December 31, 1995.
2. Statements of Income and Retained Earnings for the three month periods
ended September 30, 1996 and 1995 and the nine month periods ended
September 30, 1996 and 1995.
3. Statements of Cash Flows for the nine month periods ended September 30,
1996 and 1995.
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 1995 financial statements have been reclassified to
conform with the 1996 presentation.
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
BALANCE SHEETS
(Expressed in U.S. Dollars)
September 30, 1996 December 31,
(Unaudited) 1995
------------------ ------------
ASSETS
Investments $71,311,446 $59,898,265
Cash and cash equivalents 3,722,725 7,093,106
Accrued investment income 1,019,916 2,532,813
Due from Motors Insurance Corporation 2,709,101 3,095,587
Deferred acquisition costs 21,153,276 18,907,205
Prepaid expenses 625 0
----------- -----------
Total Assets $99,917,089 $91,526,976
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Unearned premiums $81,386,325 $72,752,532
Loss reserves 4,048,296 3,480,334
Accrued liabilities 134,453 117,447
----------- -----------
Total liabilities 85,569,074 76,350,313
----------- -----------
STOCKHOLDERS' EQUITY
Share Capital
Common Stock - no par value;
Authorized - 2,000 shares;
issued and outstanding -
2,000 200,000 200,000
Participating Stock - no par value;
Authorized - 100,000 shares;
issued and outstanding - 25,100
shares as of September 30,
1996 and 24,100 shares as of
December 31, 1995 1,882,500 1,807,500
----------- -----------
2,082,500 2,007,500
Retained Earnings 12,222,613 11,517,542
Unrealized appreciation on investments 42,902 1,651,621
----------- -----------
Total Stockholders' Equity 14,348,015 15,176,663
----------- -----------
Total Liabilities and Stockholders' Equity $99,917,089 $91,526,976
=========== ===========
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE THREE
MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995 AND THE
NINE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
(UNAUDITED)
(Expressed in U.S. Dollars)
Three Month Periods Nine Month Periods
Ended September 30, Ended September 30,
INCOME 1996 1995 1996 1995
----------- ----------- ----------- -----------
Reinsurance premiums
assumed $11,888,323 $12,559,368 $34,912,576 $32,965,532
Increase in unearned
premiums 2,619,252 4,965,323 8,633,792 12,210,450
----------- ----------- ----------- -----------
Premiums earned 9,269,071 7,594,045 26,278,784 20,755,082
----------- ----------- ----------- -----------
Investment income
Interest earned 1,696,455 875,827 4,055,783 2,752,222
Realized gains
(losses) on
investments (622,769) 655,822 (591,667) 1,248,108
----------- ----------- ----------- -----------
Investment income 1,073,686 1,531,649 3,464,116 4,000,330
----------- ----------- ----------- -----------
TOTAL INCOME 10,342,757 9,125,694 29,742,900 24,755,412
EXPENSES
Acquisition costs 2,409,510 1,974,023 6,831,299 5,394,966
Losses paid 6,143,524 4,908,187 17,133,296 13,410,259
Increase in
loss reserves 221,887 322,583 567,963 645,967
Administrative
expenses
- Related Parties 50,937 30,676 159,366 141,846
- Other 53,987 70,305 286,893 318,858
----------- ----------- ----------- -----------
TOTAL EXPENSES 8,879,845 7,305,774 24,978,817 19,911,896
----------- ----------- ----------- -----------
NET INCOME 1,462,912 1,819,920 4,764,083 4,843,516
RETAINED EARNINGS,
beginning of period 10,759,701 7,631,714 11,517,542 5,796,732
LESS: DIVIDENDS 0 0 (4,007,483) (1,188,614)
LESS: REDEMPTIONS OF
PARTICIPATING STOCK 0 7,500 (51,529) 7,500
----------- ----------- ----------- -----------
RETAINED EARNINGS,
end of period $12,222,613 $9,459,134 $12,222,613 $9,459,134
=========== ========== =========== ==========
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
STATEMENTS OF CASH FLOWS FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995 (UNAUDITED)
(Expressed in U.S. Dollars)
Nine Month Periods Ended
September 30,
1996 1995
------------ ------------
Cash flows from operating activities:
Reinsurance premiums assumed $34,143,674 $30,259,260
Losses and underwriting expenses paid (25,067,930) (20,425,770)
Administrative expenses paid (418,202) (435,624)
Investment income received 5,116,370 2,112,248
------------ ------------
Net cash provided by operating activities 13,773,912 11,510,114
------------ ------------
Cash flows from investing activities:
Purchases of investment securities (191,038,040) (139,957,512)
Sales and maturities of investment
securities 177,877,759 130,500,713
------------ ------------
Net cash invested (13,160,281) (9,456,799)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of Participating
stock 23,471 112,500
Redemptions of Participating stock 0 0
Dividends paid (4,007,483) (1,188,614)
------------ ------------
Net cash used in financing activities (3,984,012) (1,076,114)
------------ ------------
Increase in cash and cash equivalents (3,370,381) 977,201
Cash and cash equivalents, beginning
of period 7,093,106 3,303,060
------------ ------------
Cash and cash equivalents, end of period $ 3,722,725 $ 4,280,261
============ ============
Reconciliation of net income to net cash
provided by operating activities:
Net income 4,764,083 4,843,516
Realized losses/(gains) on investments 116,287 (1,162,950)
Foreign exchange losses/(gains) on
investments 22,094 (85,157)
Change in:
Accrued investment income 1,512,897 (645,016)
Due from Motors Insurance Corporation 386,486 (1,130,055)
Deferred acquisition costs (2,246,071) (3,176,161)
Prepaid expenses (625) (625)
Unearned premiums 8,633,793 12,210,450
Loss reserves 567,962 645,967
Accrued liabilities 17,006 10,145
------------ ------------
Net cash provided by operating activities $13,773,912 $11,510,114
============ ============
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 in the foreseeable future.
Capital Resources. During the quarter ended September 30, 1996, 6 new
series of Shares were added bringing the total number of series issued and
outstanding to 251 as of the end of the quarter. As of September 30, 1996, the
share capital of the Company was $2,082,500 (compared with $2,007,500 as of
December 31, 1995) comprised of paid in capital with respect to the Common Stock
of $200,000 and paid in capital with respect to Participating Shares of
$1,882,500 (compared with $1,807,500 as of December 31, 1995). In addition, the
Company had surplus from retained earnings in the amount of $12,222,613 as of
September 30, 1996 compared with $11,517,542 as of December 31, 1995.
Results of Operations. During the quarter ended September 30, 1996, the
Company had net income of $1,462,912, compared with net income of $1,819,920 for
the quarter ended September 30, 1995. For the nine month period ended September
30, 1996, the Company had net income of $4,764,083, compared with net income of
$4,843,516 for the comparable period in 1995. As discussed below, the decrease
in net income for the quarter ended September 30, 1996 compared to the
comparable period of 1995 is the result of losses on the sale of investment
securities which offset increases in interest earned and underwriting income.
Premiums earned increased to $9,269,071 during the quarter ended September
30, 1996 compared to $7,594,045 for the same period in 1995. Expenses incurred
during the quarter ended September 30, 1996 were $8,879,845 compared to
$7,305,774 for the comparable quarter of 1995. Net underwriting income for the
quarter ended September 30, 1996 was $389,226 compared to $288,271 for the
comparable period in 1995. The ratio of losses incurred to premiums earned for
the quarter under review was 68.7% compared to 68.9% for the comparable period
in 1995.
For the nine month period ended September 30, 1996, the Company had earned
premiums of $26,278,784 compared to $20,755,082 for the comparable period of
1995. Expenses incurred during the nine month period under review were
$24,978,817 compared to $19,911,896 for the comparable period in 1995. The
increase in expenses is attributable to increased policy acquisition costs
resulting from increased premium volume. As a result, net underwriting income
for the Company was $1,299,967 for the nine month period under review compared
to $843,186 for the comparable period in 1995. The loss ratio for the nine month
period ended September 30, 1996 was 67.4%, compared to 67.7% for the nine month
period ended September 30, 1995.
Investment income for the quarter ended September 30, 1996 was $1,073,686
compared to $1,531,649 for the comparable period of 1995. Investment income for
the nine month period under review was $3,464,116 compared to $4,000,330 for the
comparable period of 1995. During the quarter under review, the Company incurred
losses on the sale of investment securities of $622,769, compared to gains of
$655,822 during the comparable period of 1995. During the nine month period
under review, the Company realized net losses on the sale of investment
securities of $591,667 compared to gains of $1,248,108 during the comparable
period of 1995. As of September 30, 1996, the Company had net unrealized
appreciation of $42,902 on its investments compared to unrealized appreciation
of $1,651,621 as of December 31, 1995. The losses on the sale of investment
assets during the quarter under review and the decrease in net gains during the
nine month period under review compared to the corresponding periods in 1995 and
the change in the amount of unrealized appreciation as of September 30, 1996
compared to December 31, 1995 are in large part attributable to increases in
long term interest rates during the respective reporting periods which resulted
in decreases in the market value of the Company's investment portfolio.
For the quarter ended September 30, 1996, the Company had interest income
of $1,696,455 compared to $875,827 for the comparable period of 1995. For the
nine month period under review, the Company had interest income of $4,055,783
compared to $2,752,222 for the comparable period of 1995. These increases were
largely attributable to increases in the amount of assets under management
combined with higher interest rates.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) 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, Finance
Signing on behalf of
the Registrant, and
Principal Financial Officer
Dated: October 17, 1996
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited financial statements contained in the Company's quarterly report on
Form 10-Q for the quarter ended September 30, 1996 and is qualified in its
entirety by references to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<DEBT-HELD-FOR-SALE> 71,311,446
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 71,311,446
<CASH> 3,722,725
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 21,153,276
<TOTAL-ASSETS> 99,917,089
<POLICY-LOSSES> 4,048,296
<UNEARNED-PREMIUMS> 81,386,325
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 200,000
<OTHER-SE> 14,148,015
<TOTAL-LIABILITY-AND-EQUITY> 99,917,089
26,278,784
<INVESTMENT-INCOME> 4,055,783
<INVESTMENT-GAINS> (591,667)
<OTHER-INCOME> 0
<BENEFITS> 17,701,259
<UNDERWRITING-AMORTIZATION> 6,831,299
<UNDERWRITING-OTHER> 446,259
<INCOME-PRETAX> 4,764,083
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,764,083
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,764,083
<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>
