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, 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
(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, 1998
Common Stock, no par-value 2,000
Participating Stock, no par-value 30,700
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:
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<PAGE>
Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements
1. Balance Sheets, June 30, 1998 and December 31, 1997.
2. Statements of Income and Retained Earnings for the three month
periods ended June 30, 1998 and 1997 and the six month periods
ended June 30, 1998 and 1997.
3. Statements of Cash Flows for the six month periods ended June 30,
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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<PAGE>
<TABLE>
<CAPTION>
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
BALANCE SHEETS
(Expressed in U.S. Dollars)
June 30, 1998 December 31,
(unaudited) 1997
------------- -------------
<S> <C> <C>
ASSETS
Investments $ 90,543,992 $ 88,585,513
Cash and cash equivalents 7,839,371 5,645,482
Accrued investment income 1,717,091 3,178,446
Due from Motors Insurance Corporation 3,425,754 841,927
Deferred acquisition costs 27,007,839 24,813,918
Prepaid expenses 35,686 0
------------ ------------
Total Assets $130,569,733 $123,065,286
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Unearned premiums $103,890,284 $ 95,454,588
Loss reserves 4,854,766 5,421,160
Accrued liabilities 161,171 123,569
------------ ------------
Total liabilities 108,906,221 100,999,317
------------ ------------
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 -
30,700 shares as of June 30, 1998
and 28,200 shares as of
December 31, 1997 2,302,500 2,115,000
------------ ------------
2,502,500 2,315,000
Retained Earnings 18,356,403 18,615,768
Unrealized appreciation
on investments 804,609 1,135,201
------------ ------------
Total Stockholders' Equity 21,663,512 22,065,969
------------ ------------
Total Liabilities and Stockholders'
Equity $130,569,733 $123,065,286
============ ============
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE THREE
MONTH PERIODS ENDED JUNE 30, 1998 AND JUNE 30, 1997 AND THE
SIX MONTH PERIODS ENDED JUNE 30, 1998 AND JUNE 30, 1997
(UNAUDITED)
(Expressed in U.S. Dollars)
Three Month Periods Six Month Periods
Ended June 30, Ended June 30,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCOME
Reinsurance premiums
assumed $18,478,223 $15,112,998 $36,057,933 $27,891,709
Increase in unearned
premiums 4,149,151 3,719,483 8,435,696 6,305,342
---------- ---------- ---------- ----------
Premiums earned 14,329,072 11,393,515 27,622,237 21,586,367
---------- ---------- ---------- ----------
Investment income
Interest earned 1,445,457 1,259,529 2,806,090 2,474,926
Realized gains/(losses)
on investments (173,662) (45,149) 1,105,735 (611,257)
---------- ---------- ---------- ----------
Investment income 1,271,795 1,214,380 3,911,825 1,863,669
---------- ---------- ---------- ----------
TOTAL INCOME 15,600,867 12,607,895 31,534,062 23,450,036
---------- ---------- ---------- ----------
EXPENSES
Acquisition costs 3,606,295 2,961,947 7,062,828 5,611,862
Losses paid 10,432,562 7,009,616 19,816,761 13,297,542
Increase in
loss reserves 203,478 524,760 (566,394) 688,662
Administrative
expenses
- Related Parties 57,588 54,915 110,232 111,578
- Other 116,874 61,289 198,044 162,844
---------- ---------- ---------- ----------
TOTAL EXPENSES 14,416,797 10,612,527 26,621,471 19,872,488
---------- ---------- ---------- ----------
NET INCOME 1,184,070 1,995,368 4,912,591 3,577,548
RETAINED EARNINGS,
beginning of period 17,172,333 12,298,503 18,615,768 14,913,053
LESS: DIVIDENDS 0 0 (5,171,956) (4,196,730)
---------- ----------- ---------- ----------
RETAINED EARNINGS,
end of period $18,356,403 $14,293,871 $18,356,403 $14,293,871
========== ========== ========== ==========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
STATEMENTS OF CASH FLOWS FOR THE SIX MONTH PERIODS ENDED
JUNE 30, 1998 AND JUNE 30, 1997 (UNAUDITED)
(Expressed in U.S. Dollars)
Six Month Periods
Ended June 30,
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Reinsurance premiums collected $30,134,340 $25,276,172
Losses and acquisition expenses paid (25,691,013) (18,960,372)
Administrative expenses paid (351,091) (327,770)
Investment income received 4,269,445 2,793,370
----------- -----------
Net cash provided by operating activities 8,361,681 8,781,400
----------- -----------
Cash flows from investing activities:
Purchases of investments (154,108,002) (181,563,781)
Sales and maturities of investments 152,924,666 175,749,235
----------- -----------
Net cash invested (1,183,336) (5,814,546)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of Participating
Stock 187,500 127,500
Redemption of participating stock 0 0
Dividends paid (5,171,956) (4,196,730)
----------- ----------
Net cash (used in) provided by
financing activities (4,984,456) 4,069,230
----------- ----------
(Decrease) increase in cash and cash
equivalents 2,193,889 (1,102,376)
Cash and cash equivalents, beginning
of period 5,645,482 12,926,272
----------- -----------
Cash and cash equivalents, end
of period $ 7,839,371 $11,823,896
=========== ===========
Reconciliation of net income to net cash
provided by operating activities:
Net income 4,912,591 3,577,548
Realized losses(gains) on investments (1,105,735) 611,257
Change in:
Accrued investment income 1,461,355 314,444
Due from Motors Insurance Corporation (2,583,827) (1,080,770)
Deferred acquisition costs (2,193,921) (1,640,067)
Prepaid expenses (35,686) (32,958)
Unearned premiums 8,435,696 6,405,342
Loss reserves (566,394) 688,661
Accrued liabilities 37,602 37,943
----------- -----------
Net cash provided by operating activities $ 8,361,681 $ 8,781,400
=========== ===========
</TABLE>
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<PAGE>
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 June 30, 1998, 16 new series of
Shares were added bringing the total number of series issued and outstanding to
307 as of the end of the quarter. As of June 30, 1998, the share capital of the
Company was $2,502,500 (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 $2,302,500 (compared
with $2,115,000 as of December 31, 1997). In addition, the Company had surplus
from retained earnings in the amount of $18,356,403 as of June 30, 1998 compared
with $18,615,768 as of December 31, 1997.
Results of Operations. During the quarter ended June 30, 1998, the Company had
net income of $1,184,070, compared with net income of $1,995,368 for the quarter
ended June 30, 1997. For the six month period ended June 30, 1998, the Company
had net income of $4,912,591, compared with net income of $3,577,548 for the
comparable period in 1997. As discussed below the decrease in net income for the
quarter ended June 30, 1998 compared to the comparable period of 1997 is
primarily attributable to less favourable underwriting performance. The increase
in net income for the six months ended June 30, 1998 compared to the comparable
period of 1997 is primarily attributable to improved investment results which
were partially offset by a decline in underwriting performance.
Premiums earned increased to $14,329,072 during the quarter ended June 30, 1998
compared to $11,393,515 for the same period in 1997. Expenses incurred during
the quarter ended June 30, 1998 were $14,416,797 compared to $10,612,527 for the
comparable quarter of 1997. The Company experienced a net underwriting loss for
the quarter ended June 30, 1998 of $87,725 compared to an underwriting gain of
$780,988 for the comparable period in 1997. The ratio of losses incurred to
premiums earned for the quarter ended June 30, 1998 was 74.2% compared to 66.1%
for the comparable period in 1997 primarily as a result of increases in losses
paid. Losses emerging during the current financial year arise from contracts
issued by the ceding company during the preceding 6 year period. The increase in
the loss ratio of the Company during 1998 reflects pricing actions taken by the
ceding company during that 6 year period.
For the six month period ended June 30, 1998, the Company had earned premiums of
$27,622,237 compared to $21,586,367 for the comparable period of 1997. Expenses
incurred during the six month period ended June 30, 1998 were $26,621,471
compared to $19,872,488 for the comparable period in 1997. Net
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<PAGE>
underwriting income for the Company was $1,000,766 for the six month period
ended June 30, 1998 compared to $1,713,879 for the comparable period in 1997.
The loss ratio for the six month period ended June 30, 1998 was 69.7%, compared
to 64.8% for the six month period ended June 30, 1997.
Investment income for the quarter ended June 30, 1998 was $1,271,795 compared to
$1,214,380 for the comparable period of 1997. Investment income for the six
month period ended June 30, 1998 was $3,911,825 compared to $1,863,669 for the
comparable period of 1997. During the quarter ended June 30, 1998, the Company
realised losses on the sale of investment securities of $173,662, compared to
realised losses of $45,149 during the comparable period of 1997. 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. The Company realised gains on sales of securities
during the six months ended June 30, 1998 in response to declining interest
rates in the U.S. During the quarter ended June 30, 1998 the unrealised
appreciation on investments increased from $91,604 at March 31, 1998 to $804,609
at June 30, 1998. The increase in the unrealised position during the quarter
ended June 30, 1998 resulted primarily from unrealised gains on non US dollar
denominated securities purchased during the quarter. As of June 30, 1998, the
Company had net unrealised appreciation of $804,609 on its investments compared
to unrealised appreciation of $1,135,201 as of December 31, 1997.
For the quarter ended June 30, 1998, the Company had interest income of
$1,445,457 compared to $1,259,529 for the comparable period of 1997. For the six
month period ended June 30, 1998, the Company had interest income of $2,806,090
compared to $2,474,926 for the comparable period of 1997. These increases were
largely attributable to 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.
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<PAGE>
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 14, 1998
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<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, 1998 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCES TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<DEBT-HELD-FOR-SALE> 90,543,992
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 90,543,992
<CASH> 7,839,371
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 27,007,839
<TOTAL-ASSETS> 130,569,733
<POLICY-LOSSES> 4,854,766
<UNEARNED-PREMIUMS> 103,890,284
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 200,000
<OTHER-SE> 21,463,512
<TOTAL-LIABILITY-AND-EQUITY> 130,569,733
27,622,237
<INVESTMENT-INCOME> 2,806,090
<INVESTMENT-GAINS> 1,105,735
<OTHER-INCOME> 0
<BENEFITS> 19,250,367
<UNDERWRITING-AMORTIZATION> 7,062,828
<UNDERWRITING-OTHER> 308,276
<INCOME-PRETAX> 4,912,591
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,912,591
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,912,591
<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>
