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, 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 September 30, 1997
Common Stock, no par-value 2,000
Participating Stock, no par-value 27,900
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 as at September 30, 1997 and
December 31, 1996.
2. Statements of Income and Retained Earnings for the
three month periods ended September 30, 1997 and
1996 and the nine month periods ended September
30, 1997 and 1996.
3. Statements of Cash Flows for the nine month
periods ended September 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>
<CAPTION>
September 30, 1997 December 31,
(unaudited) 1996
<S> <C> <C>
ASSETS
Investments $ 83,224,737 $ 66,647,930
Cash and cash equivalents 5,897,024 12,926,272
Accrued investment income 2,070,282 1,453,691
Due from Motors Insurance Corporation 4,166,156 3,158,064
Deferred acquisition costs 24,791,331 21,855,207
Prepaid expenses 34,085 0
------------ ------------
Total Assets $120,183,615 $106,041,164
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Unearned premiums $ 95,370,255 $ 84,084,870
Loss reserves 5,206,710 4,284,304
Accrued liabilities 110,949 110,416
Total liabilities 100,687,914 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 -
27,900 shares as of September 30,
1997 and 25,400 shares as of
December 31, 1996 2,092,500 1,905,000
------------ ------------
2,105,000
Retained Earnings 16,471,791 14,913,053
Unrealized appreciation
on investments 731,410 543,521
Total Stockholders' Equity 19,495,701 17,561,574
------------ ------------
Total Liabilities and Stockholders'
Equity $120,183,615 $106,041,164
============ ============
</TABLE>
<TABLE>
<CAPTION>
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE THREE
MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996 AND
THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
(UNAUDITED)
(Expressed in U.S. Dollars)
Three Month Periods Nine Month Periods
Ended September 30, Ended September 30,
INCOME 1997 1996 1997 1996
<S> <C> <C> <C> <C>
Reinsurance premiums
assumed $16,624,973 $11,888,323 $44,516,682 $34,912,576
Increase in unearned
premiums 4,980,043 2,619,252 11,285,385 8,633,792
Premiums earned 11,644,930 9,269,071 33,231,297 26,278,784
Investment income
Interest earned 1,322,355 1,696,455 3,797,281 4,055,783
Realized gains
(losses) on
investments 802,776 (622,769) 191,518 (591,667)
Investment income 2,125,131 1,073,686 3,988,799 3,464,116
TOTAL INCOME 13,770,061 10,342,757 37,220,096 29,742,900
EXPENSES
Acquisition costs 3,027,845 2,409,510 8,639,707 6,831,299
Losses paid 8,213,214 6,143,524 21,510,756 17,133,296
Increase in
loss reserves 233,745 221,887 922,406 567,963
Administrative
expenses
- Related Parties 53,356 50,937 164,934 159,366
- Other 63,981 53,987 226,825 286,893
TOTAL EXPENSES 11,592,141 8,879,845 31,464,628 24,978,817
NET INCOME 2,177,920 1,462,912 5,755,468 4,764,083
RETAINED EARNINGS,
beginning of period 14,293,871 10,759,701 14,913,053 11,517,542
LESS: DIVIDENDS 0 0 (4,196,730) (4,007,483)
LESS: REDEMPTION OF
PARTICIPATING STOCK 0 0 0 (51,529)
RETAINED EARNINGS,
end of period $16,471,791 $12,222,613 $16,471,791 $12,222,613
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
STATEMENTS OF CASH FLOWS FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996 (UNAUDITED)
(Expressed in U.S. Dollars)
Nine Month Periods
Ended September 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Reinsurance premiums collected $ 40,389,171 $ 34,143,674
Losses and acquisition expenses paid (29,899,413) (25,067,930)
Administrative expenses paid (497,066) (418,202)
Investment income received 3,184,690 5,116,370
Net cash provided by operating activities 13,177,382 13,773,912
Cash flows from investing activities:
Purchases of investments (229,247,631) (191,038,040)
Sales and maturities of investments 213,050,231 177,877,759
Net cash invested (16,197,400) (13,160,281)
Cash flows from financing activities:
Proceeds from issuance of Participating
Stock 187,500 23,471
Redemption of participating stock 0 0
Dividends paid (4,196,730) (4,007,483)
Net cash (used in) provided by
financing activities (4,009,230) 3,984,012
(Decrease) increase in cash and cash
equivalents (7,029,248) (3,370,381)
Cash and cash equivalents, beginning
of period 12,926,272 7,093,106
Cash and cash equivalents, end
of period $ 5,897,024 $ 3,722,725
============ ============
Reconciliation of net income to net cash
provided by operating activities:
Net income 5,755,468 4,764,083
Realized losses(gains) on investments (191,518) 138,381
Change in:
Accrued investment income (616,591) 1,512,897
Due from Motors Insurance Corporation (1,008,092) 386,486
Deferred acquisition costs (2,936,124) (2,246,071)
Prepaid expenses (34,085) (625)
Unearned premiums 11,285,385 8,633,793
Loss reserves 922,406 567,962
Accrued liabilities 533 17,006
------------
Net cash provided by operating activities $ 13,177,382 $ 13,773,912
============ ============
</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 September 30, 1997, 8 new series of
Shares were added bringing the total number of series issued and outstanding to
279 as of the end of the quarter. As of September 30, 1997, the share capital of
the Company was $2,292,500 (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 $2,092,500 (compared
with $1,905,000 as of December 31, 1996). In addition, the Company had surplus
from retained earnings in the amount of $16,471,791 as of September 30, 1997
compared with $14,913,053 as of December 31, 1996.
Results of Operations. During the quarter ended September 30, 1997, the Company
had net income of $2,117,920, compared with net income of $1,462,912 for the
quarter ended September 30, 1996. For the nine month period ended September 30,
1997, the Company had net income of $5,755,468 compared with net income of
$4,764,083 for the corresponding period in 1996. As discussed below, the
increase in net income for the quarter ended September 30, 1997 compared to the
corresponding period of 1996 is attributable to improved investment performance
which offset a reduction in underwriting income. The increase in net income for
the nine month period ended September 30, 1997 compared to the corresponding
period in 1996 is due to increases in both underwriting and investment income.
Premiums earned increased to $11,644,930 during the quarter ended September 30,
1997 compared to $9,269,071 for the corresponding period in 1996. Expenses
incurred during the quarter ended September 30, 1997 were $11,592,141 compared
to $8,879,845 for the corresponding quarter of 1996. Net underwriting income for
the quarter ended September 30, 1997 was $52,789 compared to $389,226 for the
corresponding period in 1996. This decrease in net underwriting income was in
part attributable to an increase in the ratio of losses incurred to premiums
earned for the quarter ended September 30, 1997 to 72.5% from 68.7% for the
corresponding period in 1996.
For the nine month period ended September 30, 1997, the Company had earned
premiums of $33,231,297 compared to $26,278,784 for the corresponding period of
1996. Expenses incurred during the nine month period ended September 30, 1997
were $31,464,628 compared to $24,978,817 for the corresponding period in 1996.
Net underwriting income for the Company was $1,766,669 for the nine month period
ended September 30, 1997 compared to $1,299,967 for the corresponding period in
1996. The loss ratio for the nine month period ended September 30, 1997 was
67.5%, compared to 67.4% for the nine month period ended September 30, 1996.
Investment income for the quarter ended September 30, 1997 was $2,125,131
compared to $1,073,686 for the corresponding period of 1996. This increase was
largely attributable to an increase in gains realized on the sale of investments
which offset a reduction in interest income. Investment income for the nine
month period ended September 30, 1997 was $3,988,799 compared to $3,464,116 for
the corresponding period of 1996. During the quarter ended September 30, 1997,
the Company realised gains on the sale of investment securities of $802,776,
compared to losses of $622,769 during the corresponding period of 1996. As of
September 30, 1997, the Company had net unrealized appreciation of $731,410 on
its investments compared to unrealized appreciation of $543,521 as of December
31, 1996.
For the quarter ended September 30, 1997, the Company had interest income of
$1,322,355 compared to $1,696,455 for the corresponding period of 1996. For the
nine month period ended September 30, 1997, the Company had interest income of
$3,797,281 compared to $4,055,783 for the corresponding period of 1996. These
decreases were largely attributable to reductions in portfolio yields and coupon
rates on invested assets which were partially offset by an increase in funds
available for investment.
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: November 10, 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 SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCES TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<DEBT-HELD-FOR-SALE> 83,224,737
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 83,224,737
<CASH> 5,897,024
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 24,791,331
<TOTAL-ASSETS> 120,183,615
<POLICY-LOSSES> 5,206,710
<UNEARNED-PREMIUMS> 95,370,255
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 200,000
<OTHER-SE> 19,295,701
<TOTAL-LIABILITY-AND-EQUITY> 120,183,615
33,231,297
<INVESTMENT-INCOME> 3,797,281
<INVESTMENT-GAINS> 191,518
<OTHER-INCOME> 0
<BENEFITS> 22,433,162
<UNDERWRITING-AMORTIZATION> 8,639,707
<UNDERWRITING-OTHER> 391,759
<INCOME-PRETAX> 5,755,468
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,755,468
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,755,468
<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>
