PAGE 1
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 March 31, 1998
--------------------------------------
____ 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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Bishops Court Hill, St. Michael, Barbados N/A
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(Address of principle executive offices) (Zip Code)
(246) 436-4895
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(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 March 31, 1998
----- --------------------
Common Stock, no par-value 2,000
Participating Stock, no par-value 29,100
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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, March 31, 1998 and December 31, 1997.
2. Statements of Income and Retained Earnings for the three
month periods ended March 31, 1998 and 1997.
3. Statements of Cash Flows for the three month periods ended
March 31, 1998 and 1997.
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.
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MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
BALANCE SHEETS
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
March 31, 1998 December 31,
(unaudited) 1997
-------------- ------------
<S> <C> <C>
ASSETS
Investments $ 86,196,800 $ 88,585,513
Cash and cash equivalents 6,699,267 5,645,482
Accrued investment income 1,684,069 3,178,446
Due from Motors Insurance Corporation 3,659,705 841,927
Deferred acquisition costs 25,928,588 24,813,918
Prepaid expenses 3,189 -
----------- ------------
Total Assets $124,171,618 $123,065,286
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Unearned premiums $ 99,741,133 $ 95,454,588
Loss reserves 4,651,288 5,421,160
Accrued liabilities 132,760 123,569
------------ ------------
Total liabilities 104,525,181 100,999,317
------------ ------------
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 -
29,100 shares as of March 31,
1998 and 28,200 shares as of
December 31, 1997 2,182,500 2,115,000
------------ ------------
2,382,500 2,315,000
Retained Earnings 17,172,333 18,615,768
Unrealized appreciation
on investments 91,604 1,135,201
------------ ------------
Total Stockholders' Equity 19,646,437 22,065,969
------------ ------------
Total Liabilities and Stockholders'
Equity $124,171,618 $123,065,286
============ ============
</TABLE>
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MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE THREE
MONTH PERIODS ENDED MARCH 31, 1998 AND MARCH 31, 1997
(UNAUDITED)
(Expressed in U.S. Dollars)
Three Month Periods
Ended March 31,
1998 1997
------------ -----------
INCOME
Reinsurance premiums assumed $17,579,710 $12,778,711
Increase in unearned premiums 4,286,545 2,585,859
----------- -----------
Premiums earned 13,293,165 10,192,852
----------- -----------
Investment income
Interest earned 1,360,633 1,215,397
Realized gains (losses)
on investments 1,279,397 (566,108)
----------- -----------
Investment income 2,640,030 649,289
----------- -----------
TOTAL INCOME 15,933,195 10,842,141
----------- -----------
EXPENSES
Acquisition costs 3,456,533 2,649,915
Losses paid 9,384,199 6,287,926
(Decrease) increase in loss reserves (769,872) 163,902
Administrative expenses
- Related Parties 52,644 56,663
- Other 81,170 101,555
----------- -----------
TOTAL EXPENSES 12,204,674 9,259,961
----------- -----------
NET INCOME 3,728,521 1,582,180
RETAINED EARNINGS,
beginning of period 18,615,768 14,913,053
LESS: DIVIDENDS (5,171,956) (4,196,730)
----------- -----------
RETAINED EARNINGS,
end of period $17,172,333 $12,298,503
=========== ===========
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MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
STATEMENTS OF CASH FLOWS FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 1998 AND MARCH 31, 1997 (UNAUDITED)
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Three Month Periods Ended
March 31,
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Reinsurance premiums collected $12,554,630 $12,497,461
Losses and acquisition expenses paid (11,735,610) (9,349,941)
Administrative expenses paid (142,302) (127,667)
Investment income received 2,857,010 1,475,351
------------ ------------
Net cash provided by operating activities 3,533,728 4,495,204
------------ ------------
Cash flows from investing activities:
Purchases of investments (97,764,585) (103,071,845)
Sales and maturities of investments 100,389,098 94,741,543
------------ -----------
Net cash invested 2,624,513 (8,330,302)
------------ -----------
Cash flows from financing activities:
Proceeds from issuance of Participating Stock 67,500 60,000
Dividends paid (5,171,956) (4,196,730)
------------ ------------
Net cash (used in) provided by
financing activities (5,104,456) (4,136,730)
----------- ------------
Increase (decrease) in cash and cash
equivalents 1,053,785 (7,971,828)
Cash and cash equivalents, beginning
of period 5,645,482 12,926,272
------------ ------------
Cash and cash equivalents, end
of period $ 6,699,267 $ 4,954,444
============ ============
Reconciliation of net income to net cash
provided by operating activities:
Net income 3,728,521 1,582,180
Realized (gains) losses on investments (1,279,397) 566,108
Change in:
Accrued investment income 1,494,377 257,954
Due from Motors Insurance Corporation (2,817,778) (37,524)
Deferred acquisition costs (1,114,670) (672,589)
Prepaid expenses (3,189) (32,045)
Unearned premiums 4,286,545 2,585,859
Loss reserves (769,872) 163,902
Accrued liabilities 9,191 81,359
------------ ------------
Net cash provided by operating activities $ 3,533,728 $ 4,495,204
============ ============
</TABLE>
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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.
On February 27, 1998, the Board of Directors authorized the payment of dividends
to eligible holders of Participating Shares aggregating $5,171,956.
Capital Resources. During the quarter ended March 31, 1998, 9 new series of
Shares were added bringing the total number of series issued and outstanding to
291 as of the end of the quarter. As of March 31, 1998, the share capital of the
Company was $2,382,500 (compared with $2,315,000 as of December 31, 1997)
comprised of paid in capital with respect to the Common Stock of $200,000 and
paid in capital with respect to Participating Shares of $2,182,500(compared with
$2,115,000 as of December 31, 1997). In addition, the Company had surplus from
retained earnings in the amount of $17,172,333 as of March 31, 1998 compared
with $18,615,768 as of December 31, 1997. The net decrease in retained earnings
is attributable to the dividend paid on February 27, 1998.
Results of Operations. During the quarter ended March 31, 1998, the Company had
net income of $3,728,521, compared with net income of $1,582,180 for the quarter
ended March 31, 1997. The increase in net income for the quarter ended March
31, 1998 compared to the comparable period of 1997 is the result of realised
gains on the sale of investment securities, as discussed below, and favourable
loss reserve development as advised by the ceding company.
Premiums earned increased to $13,293,165 during the quarter ended March 31, 1998
compared to $10,192,852 for the same period in 1997. Expenses incurred during
the quarter ended March 31, 1998 were $12,204,674 compared to $9,259,961 for the
comparable quarter of 1997. Net underwriting income for the quarter ended March
31, 1998 was $1,088,491 compared to $932,891 for the comparable period in 1997.
The ratio of losses incurred to premiums earned for the quarter under review was
64.8% compared to 63.3% for the comparable period in 1997.
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Investment income for the quarter ended March 31, 1998 was $2,640,030 compared
to $649,289 for the comparable period of 1997. During the quarter under review,
the Company realised gains on the sale of investment securities of $1,279,397,
compared to losses of $566,108 during the comparable period of 1997. As of March
31, 1998, the Company had net unrealized appreciation of $91,604 on its
investments compared to unrealized appreciation of $1,135,201 as of December 31,
1997. The gains on the sale of investment assets during the quarter under review
compared to the corresponding losses in 1997 and the change in the amount of the
unrealized position on the portfolio as of March 31, 1998 compared to December
31, 1997 are in large part attributable to declines in long term U.S. interest
rates during the quarter under review compared to increases in long term
interest rates for the comparable quarter in the prior year.
For the quarter ended March 31, 1998 the Company had interest income of
$1,360,633 compared to $1,215,397 for the comparable period of 1997. These
increases were largely attributable to increases in the amount of assets under
management.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
At the annual meeting of shareholders of the Company held on March 23, 1998,
(the "Annual Meeting") the holder of the Common Stock re-elected five directors,
William B. Noll, Louis S. Carrio, Jr., Bernard J. Buselmeier, John J. Dunn, Jr.,
and Peter R.P. Evelyn. The holders of Participating Shares unanimously elected
the sixth director, William Bradshaw. The holder of the Common Stock also
re-elected Robert E. Capstack as alternative director for Mr. Carrio.
At the Annual Meeting, the shareholders of the Company unanimously approved
amendments to the Company's Restated Articles of Incorporation to (i) provide
that no operating expenses shall be allocated to the Subsidiary Capital Account
for a series of Participating Shares for the first four fiscal quarters that end
after issuance of the Shares, and (ii) alter the method for calculating
Restricted Earned Surplus to provide that deficits shall be allocated to the
Subsidiary Capital Account for the Common Stock during the rolling five year
period used to calculate Restricted Earned Surplus only to the extent that such
deficits relate to premiums allocated to the Subsidiary Capital Account for the
Common Stock during such five year period.
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.
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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: May 12, 1998
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<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financal information extracted from the unaudited
financial statements contained in the Company's quarterly report on Form 10-Q
for the quarter ended March 31, 1998 and is qualified in its entirety by
references to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-30-1996
<DEBT-HELD-FOR-SALE> 86,196,800
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 86,196,800
<CASH> 6,699,267
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 25,928,588
<TOTAL-ASSETS> 124,171,618
<POLICY-LOSSES> 4,651,288
<UNEARNED-PREMIUMS> 99,741,133
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 200,000
<OTHER-SE> 19,446,437
<TOTAL-LIABILITY-AND-EQUITY> 124,171,618
13,293,165
<INVESTMENT-INCOME> 1,360,633
<INVESTMENT-GAINS> 1,279,397
<OTHER-INCOME> 0
<BENEFITS> 8,614,327
<UNDERWRITING-AMORTIZATION> 3,456,533
<UNDERWRITING-OTHER> 133,814
<INCOME-PRETAX> 3,728,521
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,728,521
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,728,521
<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>
