-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KBSE9m8/6ZSz6igjNpGU/WoqSnbWIq7oCa4M/wAwSvneKcwyi74xfOqSRyr5ikru Rbkj9NEFFQIcmBW6C4Pvgg== 0000898080-00-000177.txt : 20000516 0000898080-00-000177.hdr.sgml : 20000516 ACCESSION NUMBER: 0000898080-00-000177 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MOTORS MECHANICAL REINSURANCE CO LTD CENTRAL INDEX KEY: 0000790381 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-06534 FILM NUMBER: 633711 BUSINESS ADDRESS: STREET 1: TRIDENT HOUSE CITY: BRIDGETOWN BARBADOS STATE: C8 ZIP: 00000 BUSINESS PHONE: 8094364895 MAIL ADDRESS: STREET 1: SUTHERLAND ASBILL & STREET 2: 1275 PENNSYLVANIA AVE N W CITY: WASHINGTON STATE: DC ZIP: 20004-2404 10-Q 1 QUARTERLY REPORT 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, 2000 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 March 31, 2000 ---------- -------------------- Common Stock, no par-value 2,000 Participating Stock, no par-value 26,500 -1- PAGE 2 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, 2000 and December 31, 1999. 2. Statements of Operations and Retained Earnings for the three month periods ended March 31, 2000 and 1999. 3. Statements of Cash Flows for the three month periods ended March 31, 2000 and 1999. 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. -2- PAGE 3 MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED BALANCE SHEETS (Expressed in U.S. Dollars)
March 31, 2000 December 31, (unaudited) 1999 ---------------- ---------------- ASSETS Investments $ 75,610,406 $ 79,184,187 Cash and cash equivalents 13,544,143 26,602,226 Accrued investment income 1,309,271 2,253,779 Deferred acquisition costs 24,574,879 24,418,570 Prepaid expenses 46,236 46,000 ------------ ------------ Total Assets $115,084,935 $132,504,762 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Unearned premiums $ 94,518,766 $ 93,941,365 Loss reserves 4,715,923 4,725,239 Accrued liabilities 134,554 276,116 Due to Motors Insurance Corporation 360,962 18,338,925 ------------ ------------ Total liabilities 99,730,205 117,281,645 ------------ ------------ 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 - 26,500 shares as of March 31, 2000 and 26,600 shares as of December 31, 1999 1,987,500 1,995,000 ------------ ------------ 2,187,500 2,195,000 Retained Earnings 12,543,156 13,190,576 Accumulated other comprehensive income\(loss) 624,074 (162,459) ------------ ------------ Total Stockholders' Equity 15,354,730 15,223,117 ------------ ------------ Total Liabilities and Stockholders' $115,084,935 $132,504,762 Equity ============ ============
-3- PAGE 4 MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2000 AND MARCH 31, 1999 (UNAUDITED) (Expressed in U.S. Dollars) Three Month Periods Ended March 31, 2000 1999 ------------ ------------ INCOME Reinsurance premiums assumed $14,051,229 $17,861,028 Increase in unearned premiums 577,401 2,351,624 ----------- ----------- Premiums earned 13,473,828 15,509,404 ----------- ----------- Investment income Interest earned 1,319,822 1,379,290 Realized losses on investments (989,908) (1,155,006) ----------- ----------- Investment income 329,914 224,284 ----------- ----------- TOTAL INCOME 13,803,742 15,733,688 ----------- ----------- EXPENSES Acquisition costs 3,506,888 4,032,443 Losses paid 10,781,962 11,884,161 (Decrease)\Increase in loss reserves (9,316) 34,092 Administrative expenses - Related Parties 54,187 61,251 - Other 116,129 104,512 ----------- ----------- TOTAL EXPENSES 14,449,840 16,116,459 ----------- ----------- NET (LOSS) (646,108) (382,771) RETAINED EARNINGS, beginning of period 13,190,576 20,629,009 LESS: DIVIDENDS 0 (4,066,464) REDEMPTION OF PARTICIPATING STOCK (1,312) 2,646 ----------- ----------- RETAINED EARNINGS, end of period $12,543,156 $16,182,420 =========== =========== -4- PAGE 5 MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED STATEMENTS OF CASH FLOWS FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2000 AND MARCH 31, 1999 UNAUDITED (Expressed in U.S. Dollars)
Three Month Periods Ended March 31, 2000 1999 ------------- ------------ Cash flows from operating activities: Reinsurance premiums collected $ 23,374,340 $ 0 Reinsurance premiums returned (24,934,234) 0 Losses and acquisition expenses paid (23,685,786) 0 Acquisition expenses reversed and returned premium 6,482,901 0 Administrative expenses paid (187,206) (141,175) Investment income received 2,170,308 1,411,896 ------------- ------------ Net cash (used in)/provided by operating activities (16,419,677) 1,270,721 ------------- ------------ Cash flows from investing activities: Purchases of investments (421,155,283) (114,998,010) Sales and maturities of investments 424,525,689 101,247,440 ------------- ------------ Net cash (invested)/provided 3,370,406 (13,750,570) ------------- ------------ Cash flows from financing activities: Proceeds from issuance of Participating Stock 0 7,500 Redemption of Participating Stock (8,812) (27,354) Dividends paid 0 (4,066,464) ------------- ------------ Net cash used in financing activities (8,812) (4,086,318) ------------- ------------ Decrease in cash and cash equivalents (13,058,083) (16,566,167) Cash and cash equivalents, beginning of period 26,602,226 19,504,563 ------------- ------------ Cash and cash equivalents, end of period $ 13,544,143 $ 2,938,396 ============ =========== Reconciliation of net loss to net cash provided by operating activities: Net loss (646,108) (382,771) Realized losses on Investments 989,908 1,155,006 Change in: Accrued investment income 944,508 30,606 Due from Motors Insurance Corporation (17,977,963) (1,298,678) Deferred acquisition costs (156,309) (611,541) Prepaid expenses (236) (36,875) Unearned premiums 577,401 2,351,624 Loss reserves (9,316) 34,092 Accrued liabilities (141,562) 29,258 ------------- ------------ Net cash (used in)/provided by operating activities $(16,419,677) $ 1,270,721 ============= ============
-5- PAGE 6 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. The payment of the 1999 fourth quarter reinsurance cession due to the ceding company during the first quarter of 2000 was deferred for settlement during the second quarter of 2000 resulting in zero cash flow activity for items of cash flow included herein. On May 10, 2000 the Board of Directors authorized the payment of dividends to eligible holders of Participating Shares aggregating $673,134. Capital Resources. During the quarter ended March 31, 2000, no new series of Shares were added and one series was redeemed bringing the total number of series issued and outstanding to 265 as of the end of the quarter. As of March 31, 2000, the share capital of the Company was $2,187,500 (compared with $2,195,000 as of December 31, 1999) comprised of paid in capital with respect to the Common Stock of $200,000 and paid in capital with respect to Participating Shares of $1,987,500 (compared with $1,995,000 as of December 31, 1999). In addition, the Company had surplus from retained earnings in the amount of $12,543,156 as of March 31, 2000 compared with $13,190,576 as of December 31, 1999. The net decrease in retained earnings is primarily attributable to underwriting losses incurred combined with low investment returns during the first quarter as more fully described below. Results of Operations. During the quarter ended March 31, 2000, the Company had a net loss of $646,108, compared with net loss of $382,711 for the quarter ended March 31, 1999. As discussed below, the increase in net loss for the quarter ended March 31, 2000 compared to the comparable period of 1999 is the result of realised losses on the sale of investment securities and continued underwriting losses. Premiums earned decreased to $13,473,828 during the quarter ended March 31, 2000 compared to $15,509,404 for the same period in 1999. Expenses incurred during the quarter ended March 31, 2000 were $14,449,840 compared to $16,116,459 for the comparable quarter of 1999. The decreases in premiums earned and expenses -6- PAGE 7 incurred was in large part attributable to the Redemption and the Recapture discussed below. Net underwriting loss for the quarter ended March 31, 2000 was $976,022 compared to $607,055 for the comparable period in 1999. The ratio of losses incurred to premiums earned for the quarter under review was 80% compared to 76.9% for the comparable period in 1999. During 1999, as a result of adverse underwriting results, the Company's board of directors voted to redeem 37 series of Shares that had consistently experienced adverse underwriting results and that the board determined were unlikely to experience favourable underwriting results in the future (the "Redemption"). In addition to the Redemption, Motors Insurance Corporation ("MIC"), the ceding company, agreed to commute the unearned premium and all unpaid losses as of the end of the second quarter of 1999 that were attributable to 37 series of Shares that the board voted to redeem (the "Recapture"). During the quarter ended March 31, 2000, the Company made a cash payment in the amount of $19,660,649 to MIC in full settlement of its obligation under this agreement. Notwithstanding the Redemption and the Recapture, there can be no assurances that the Company will not continue to experience significant adverse underwriting results. In addition, there can be no assurances that MIC would recapture additional business from the Company if the Company experiences significant adverse underwriting results in the future. Investment income for the quarter ended March 31, 2000 was $329,914 compared to $224,284 for the comparable period of 1999. During the quarter under review, the Company realised losses on the sale of investment securities of $989,908 compared to losses of $1,115,006, during the comparable period of 1999. As of March 31, 2000, the Company had net unrealized appreciation of $624,074 on its investments compared to unrealized depreciation of $162,459 as of December 31, 1999. The losses on the sale of investment assets during the quarter under review and the change in the amount of the unrealized position on the portfolio as of March 31, 2000 compared to December 31, 1999 are in large part attributable to a continued decline in value of bonds as a result of higher interest rates offset to some extent by unrealised gain on the Company's investment in an international equity fund. For the quarter ended March 31, 2000 the Company had interest income of $1,319,822 compared to $1,379,290 for the comparable period of 1999. During the period under review there was very little change in either the assets under management or the coupon rates on invested assets by comparison to the same period in the prior year. -7- PAGE 8 Year 2000. The Company does not separately own or license any computers or computer software applications. Accordingly, the Company had minimal exposure with respect to the transition to Year 2000 on its computerized systems and microprocessors. During 1999 the Company completed communications and assessments with the Manager and other service and technology providers, including those on which the Company is dependent, to ensure adequacy with the transition to Year 2000. Also during 1999, MIC successfully completed its assessment and remediation project to address the Year 2000. To date, the Company has not experienced any material adverse effect on its business, results of operations or financial condition as a result of the Year 2000 Issue. Furthermore, because the Company does not own or license any computers or computer software applications, it did not incur any expenses with respect to remediation of Year 2000. The Company will continue to monitor its operations, and the operations of third parties that are critical to its operations, for potential Year 2000-related problems. However, the Company does not anticipate that it will discover any future Year 2000 issues that will have a material effect on its business, results of operations, or financial condition. Forward Looking Statements. The foregoing Management Discussion and Analysis contains various forward looking statement within the meaning of applicable federal securities laws and are based upon Company's current expectations and assumptions concerning future events, which are subject to a number of risks and uncertainties that could cause actual results to differ materially form those anticipated. 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. -8- PAGE 9 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 10, 2000 -9- EX-27 2 FINANCIAL DATA SCHEDULE
7 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 THREE MONTHS ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCES TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 75,610,406 0 0 0 0 0 75,610,406 13,544,143 0 24,574,879 115,084,935 4,715,923 94,518,766 0 0 0 0 0 200,000 15,154,730 115,084,935 13,473,828 1,319,822 (989,908) 0 10,781,962 3,506,888 170,316 (646,108) 0 (646,108) 0 0 0 (646,108) 0 0 0 0 0 0 0 0 0 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.
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