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, 1997
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 N/A
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Bishops Court Hill, St. Michael, Barbados N/A
(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 June 30, 1997
Common Stock, no par-value 2,000
Participating Stock, no par-value 27,100
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, June 30, 1997 and December 31,
1996.
2. Statements of Income and Retained Earnings for the
three month periods ended June 30, 1997 and 1996 and
the six month periods ended June 30, 1997 and 1996.
3. Statements of Cash Flows for the six month periods
ended June 30, 1997 and 1996.
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.
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
BALANCE SHEETS
(Expressed in U.S. Dollars)
<TABLE>
<S> <C> <C>
June 30, 1997 December 31,
(unaudited) 1996
ASSETS
Investments $ 71,804,974 $ 66,647,930
Cash and cash equivalents 11,823,896 12,926,272
Accrued investment income 1,139,247 1,453,691
Due from Motors Insurance Corporation 4,238,834 3,158,064
Deferred acquisition costs 23,495,274 21,855,207
Prepaid expenses 32,958 0
------------ ------------
Total Assets $112,535,183 $106,041,164
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Unearned premiums $ 90,390,212 $ 84,084,870
Loss reserves 4,972,965 4,284,304
Accrued liabilities 148,359 110,416
------------ ------------
Total liabilities 95,511,536 88,479,590
------------ ------------
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 -
27,100 shares as of June 30,
1997 and 25,400 shares as of
December 31, 1996 2,032,500 1,905,000
------------ ------------
2,232,500 2,105,000
Retained Earnings 14,293,871 14,913,053
Unrealized appreciation
on investments 497,276 543,521
------------ ------------
Total Stockholders' Equity 17,023,647 17,561,574
------------ ------------
Total Liabilities and Stockholders'
Equity $112,535,183 $106,041,164
============ ============
</TABLE>
<TABLE>
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE THREE
MONTH PERIODS ENDED JUNE 30, 1997 AND JUNE 30, 1996 AND THE
SIX MONTH PERIODS ENDED JUNE 30, 1997 AND JUNE 30, 1996
(UNAUDITED)
(Expressed in U.S. Dollars)
<S> <C> <C> <C> <C>
Three Month Periods Six Month Periods
Ended June 30, Ended June 30,
INCOME 1997 1996 1997 1996
Reinsurance premiums
assumed $15,112,998 $11,911,576 $27,891,709 $23,024,253
Increase in unearned
premiums $ 3,719,483 3,139,214 6,305,342 6,014,540
----------- ----------- ----------- -----------
Premiums earned 11,393,515 8,772,362 21,586,367 17,009,713
----------- ----------- ----------- -----------
Investment income
Interest earned 1,259,529 1,375,216 2,474,926 2,359,328
Realized gains
(losses) on
investments (45,149) (722,359) (611,257) 31,102
----------- ----------- ----------- -----------
Investment income 1,214,380 652,857 1,863,669 2,390,430
----------- ----------- ----------- -----------
TOTAL INCOME 12,607,895 9,425,219 23,450,036 19,400,143
----------- ----------- ----------- -----------
EXPENSES
Acquisition costs 2,961,947 2,280,495 5,611,862 4,421,789
Losses paid 7,009,616 5,455,423 13,297,542 10,989,772
Increase in
loss reserves 524,760 233,949 688,662 346,076
Administrative
expenses
- Related Parties 54,915 59,638 111,578 108,429
- Other 61,289 110,911 162,844 232,906
----------- ----------- ----------- -----------
TOTAL EXPENSES 10,612,527 8,140,416 19,872,488 16,098,972
----------- ----------- ----------- -----------
NET INCOME 1,995,368 1,284,803 3,577,548 3,301,171
RETAINED EARNINGS,
beginning of period 12,298,503 13,533,910 14,913,053 11,517,542
LESS: DIVIDENDS 0 (4,007,483) (4,196,730) (4,007,483)
LESS: REDEMPTION OF
PARTICIPATING STOCK 0 (51,529) 0 (51,529)
----------- ----------- ----------- -----------
RETAINED EARNINGS,
end of period $14,293,871 $10,759,701 $14,293,871 $10,759,701
=========== =========== =========== ===========
</TABLE>
<TABLE>
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
STATEMENTS OF CASH FLOWS FOR THE SIX MONTH PERIODS ENDED
JUNE 30, 1997 AND JUNE 30, 1996 (UNAUDITED)
(Expressed in U.S. Dollars)
<S> <C> <C>
Six Month Periods
Ended June 30,
1997 1996
Cash flows from operating activities:
Reinsurance premiums collected $25,276,172 $ 22,232,098
Losses and acquisition expenses paid (18,960,372) (16,515,466)
Administrative expenses paid (327,770) (290,861)
Investment income received 2,793,370 3,129,659
------------ -----------
Net cash provided by operating activities 8,781,400 8,555,430
------------ -----------
Cash flows from investing activities:
Purchases of investments (181,563,781) (115,555,008)
Sales and maturities of investments 175,749,235 115,120,580
------------ -----------
Net cash invested (5,814,546) (434,428)
------------ -----------
Cash flows from financing activities:
Proceeds from issuance of Participating Stock 127,500 52,500
Redemption of participating stock 0 (74,029)
Dividends paid (4,196,730) (4,007,483)
------------ -----------
Net cash (used in) provided by financing activities (4,069,230) 4,029,012
------------
(Decrease) increase in cash and cash equivalents (1,102,376) 4,091,990
Cash and cash equivalents, beginning of period 12,926,272 7,093,106
------------ -----------
Cash and cash equivalents, end of period $11,823,896 $11,185,096
Reconciliation of net income to net cash
provided by operating activities:
Net income 3,577,548 3,301,171
Realized losses(gains) on investments 611,257 (31,102)
Change in:
Accrued investment income 314,444 769,355
Due from Motors Insurance Corporation (1,080,770) (297,802)
Deferred acquisition costs (1,640,067) (1,564,582)
Prepaid expenses (32,958) (28,223)
Unearned premiums 6,305,342 6,014,540
Loss reserves 688,661 346,076
Accrued liabilities 37,943 45,997
---------- ----------
Net cash provided by operating activities $ 8,781,400 $ 8,555,430
========== ==========
</TABLE>
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 forseeable future.
Capital Resources. During the quarter ended June 30, 1997, 9 new series of
Shares were added bringing the total number of series issued and outstanding to
271 as of the end of the quarter. As of June 30, 1997, the share capital of the
Company was $2,232,500 (compared with $2,105,000 as of December 31, 1996)
comprised of paid in capital with respect to the Common Stock of $200,000 and
paid in capital with respect to Participating Shares of $2,032,500 (compared
with $1,905,000 as of December 31, 1996). In addition, the Company had surplus
from retained earnings in the amount of $14,293,871 as of June 30, 1997 compared
with $14,913,053 as of December 31, 1996.
Results of Operations. During the quarter ended June 30, 1997, the Company had
net income of $1,995,368, compared with net income of $1,284,803 for the quarter
ended June 30, 1996. For the six month period ended June 30, 1997, the Company
had net income of $3,577,548, compared with net income of $3,301,171 for the
comparable period in 1996. As discussed below the increase in net income for the
quarter ended June 30, 1997 compared to the comparable period of 1996 is
primarily attributable to improved underwriting results and a smaller loss on
the sale of investments. The increase in net income for the six months ended
June 30, 1997 compared to the comparable period of 1996 is primarily
attributable to improved underwriting results which offset a decline in
investment income.
Premium earned increased to $11,393,515 during the quarter ended June 30, 1997
compared to $8,772,362 for the same period in 1996. Expenses incurred during the
quarter ended June 30, 1997 were $10,612,527 compared to $8,140,416 for the
comparable quarter of 1996. Net underwriting income for the quarter ended June
30, 1997 was $780,988 compared to $631,946 for the comparable period in 1996.
The ratio of losses incurred to premiums earned for the quarter ended June 30,
1997 was 66.1% compared to 64.9% for the comparable period in 1996.
For the six month period ended June 30, 1997, the Company had earned premiums of
$21,586,367 compared to $17,009,713 for the comparable period of 1996. Expenses
incurred during the six month period ended June 30, 1997 were $19,872,488
compared to $16,098,972 for the comparable period in 1996. Net underwriting
income for the Company was $1,713,879 for the six month period ended June 30,
1997 compared to $910,741 for the comparable period in 1996. The loss ratio for
the six month period ended June 30, 1997 was 64.8%, compared to 66.6% for the
six month period ended June 30, 1996.
Investment income for the quarter ended June 30, 1997 was $1,214,380 compared to
$652,857 for the comparable period of 1996. Investment income for the six month
period ended June 30, 1997 was $1,863,669 compared to $2,390,430 for the
comparable period of 1996. During the quarter ended June 30, 1997, the Company
realised losses on the sale of investment securities of $45,149, compared to
losses of $722,359 during the comparable period of 1996. During the six month
period ended June 30, 1997, the Company realized net losses on the sale of
investment securities of $611,257 compared to gains of $31,102 during the
comparable period of 1996. During the six month period ended June 30, 1996,
the Company sold investment securities in anticipation of increases in interest
rates. These sales resulted in realized gains during the first quarter of 1996
which gains were largely offset by realized losses during the second quarter of
1996 with the Company realizing a modest net gain for the six month period ended
June 30, 1996. The Company realized losses on the sale of investment securities
during the quarter and the six month period ended June 30, 1997, as a result of
sales made in anticipation of higher interest rates. As of June 30, 1997, the
Company had net unrealized appreciation of $497,276 on its investments compared
to unrealized appreciation of $543,521 as of December 31, 1996.
For the quarter ended June 30, 1997, the Company had interest income of
$1,259,529 compared to $1,375,216 for the comparable period of 1996. For the six
month period ended June 30, 1997, the Company had interest income of $2,474,926
compared to $2,359,328 for the comparable period of 1996. These increases were
largely attributable to an increase in funds available for investment which was
partially offset by reductions in portfolio yields and coupon rates on invested
assets.
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: August 7, 1997
<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, 1997 AND IS QUALIFED IN ITS ENTIRETY BY
REFERENCES TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<DEBT-HELD-FOR-SALE> 71,804,974
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 71,804,974
<CASH> 11,823,896
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 23,495,274
<TOTAL-ASSETS> 112,535,183
<POLICY-LOSSES> 4,972,965
<UNEARNED-PREMIUMS> 90,390,212
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 200,000
<OTHER-SE> 16,823,647
<TOTAL-LIABILITY-AND-EQUITY> 112,535,183
21,586,367
<INVESTMENT-INCOME> 2,474,926
<INVESTMENT-GAINS> (611,257)
<OTHER-INCOME> 0
<BENEFITS> 13,986,204
<UNDERWRITING-AMORTIZATION> 5,611,862
<UNDERWRITING-OTHER> 274,422
<INCOME-PRETAX> 3,577,548
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,577,548
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,577,548
<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>
