-----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, HIkVLL5cvqH76waz9jVCLtR4Fqh+SvgYAVXQixIJT56PE1HimL7JvsWckwNhRpvP 9clxk35GhnqT5C/3z7S1hg== /in/edgar/work/20000814/0000898080-00-000284/0000898080-00-000284.txt : 20000921 0000898080-00-000284.hdr.sgml : 20000921 ACCESSION NUMBER: 0000898080-00-000284 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MOTORS MECHANICAL REINSURANCE CO LTD CENTRAL INDEX KEY: 0000790381 STANDARD INDUSTRIAL CLASSIFICATION: [6331 ] STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-06534 FILM NUMBER: 701114 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 0001.txt 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 June 30, 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 June 30, 2000 ----- ------------------- Common Stock, no par-value 2,000 Participating Stock, no par-value 26,300 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, 2000 and December 31, 1999. -1- PAGE 2 2. Statements of Income and Retained Earnings for the three month periods ended June 30, 2000 and 1999 and the six month periods ended June 30, 2000 and 1999. 3. Statements of Cash Flows for the six month periods ended June 30, 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) June 30, 2000 December 31, (unaudited) 1999 ------------- ------------- ASSETS Investments $ 83,848,656 $ 79,184,187 Cash and cash equivalents 6,299,566 26,602,226 Accrued investment income 1,026,825 2,253,779 Due from (to) Motors Insurance Corporation 110,904 (18,338,925) Deferred acquisition costs 24,721,929 24,418,570 Prepaid expenses 44,539 46,000 ------------ ------------ Total Assets $116,052,419 $114,165,837 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Unearned premiums $ 95,084,339 $ 93,941,365 Loss reserves 4,728,906 4,725,239 Accrued liabilities 345,249 276,116 ------------ ------------ Total liabilities 100,158,494 98,942,720 ------------ ------------ 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 - 26,300 shares as of June 30, 2000 and 26,600 shares as of December 31, 1999 1,972,500 1,995,000 ------------ ------------ 2,172,500 2,195,000 Retained Earnings 12,659,905 13,190,576 Accumulated other comprehensive income (loss) 1,061,520 (162,459) ------------ ------------ Total Stockholders' Equity 15,893,925 15,223,117 ------------ ------------ Total Liabilities and Stockholders' Equity $116,052,419 $114,165,837 ============ ============ MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE THREE MONTH PERIODS ENDED JUNE 30, 2000 AND JUNE 30, 1999 AND THE SIX MONTH PERIODS ENDED JUNE 30, 2000 AND JUNE 30, 1999 (UNAUDITED) (Expressed in U.S. Dollars) -3- Three Month Periods Six Month Periods Ended June 30, Ended June 30, 2000 1999 2000 1999 ----------- ----------- ----------- ----------- INCOME Reinsurance premiums assumed $14,080,473 $19,179,918 $28,131,702 $37,040,946 Increase in unearned premiums 565,573 2,974,128 1,142,974 5,325,752 ----------- ----------- ----------- ----------- Premiums earned 13,514,900 16,205,790 26,988,728 31,715,194 ----------- ----------- ----------- ----------- Investment income Interest earned 1,298,537 1,401,694 2,618,359 2,780,984 Realized losses on investments ( 177,110) (1,550,151) (1,167,018) (2,705,157) ----------- ----------- ----------- ----------- Investment income (loss) 1,121,427 (148,457) 1,451,341 75,827 ----------- ----------- ----------- ----------- TOTAL INCOME 14,636,327 16,057,333 28,440,069 31,791,021 ----------- ----------- ----------- ----------- EXPENSES Acquisition costs 3,514,579 4,237,534 7,021,467 8,269,977 Losses paid 9,981,591 13,370,567 20,763,553 25,254,728 Increase in loss reserves 12,983 243,736 3,667 277,828 Administrative expenses - Related Parties 83,805 65,816 137,992 127,067 - Other 128,486 99,828 244,615 204,340 ----------- ----------- ----------- ----------- TOTAL EXPENSES 13,721,444 18,017,481 28,171,294 34,133,940 ----------- ----------- ----------- ----------- NET INCOME (LOSS) 914,883 (1,960,148) 268,775 (2,342,919) RETAINED EARNINGS, beginning of period 12,543,156 16,182,420 13,190,576 20,629,009 LESS: DIVIDENDS (673,134) 0 (673,134) (4,066,464) LESS: REDEMPTION OF PARTICIPATING STOCK (125,000) (76,162) (126,312) (73,516) ----------- ----------- ----------- ----------- RETAINED EARNINGS, $12,659,905 $14,146,110 $12,659,905 $14,146,110 =========== =========== =========== =========== end of period -4- PAGE 5 MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED STATEMENTS OF CASH FLOWS FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2000 AND JUNE 30, 1999 (UNAUDITED) (Expressed in U.S. Dollars) Six Month Periods Ended June 30, 2000 1999 ------------- ------------- Cash flows from operating activities: Reinsurance premiums collected $ 23,374,340 $ 35,756,436 Reinsurance Premiums returned (24,934,234) 0 Losses and acquisition expenses (16,842,885) (34,606,352) paid Administrative expenses paid (233,582) (356,321) Investment income received 3,763,155 2,603,289 ------------- ------------- Net cash (used in) provided by operating activities (14,873,206) 3,397,052 ------------- ------------- Cash flows from investing activities: Purchases of investments (109,326,134) (223,017,168) Sales and maturities of investments 104,718,626 207,221,883 ------------- ------------- Net cash invested (4,607,508) (15,795,285) ------------- ------------- Cash flows from financing activities: Proceeds from issuance of Participating Stock 0 30,000 Redemption of Participating Stock (148,812) (141,516) Dividends paid (673,134) (4,066,464) ------------- ------------- Net cash used in financing activities (821,946) (4,177,980) ------------- ------------- Decrease in cash and cash equivalents (20,302,660) (16,576,213) Cash and cash equivalents, beginning of period 26,602,226 19,504,563 ------------- ------------- Cash and cash equivalents, end of period $ 6,299,566 $ 2,928,350 ============= ============= Reconciliation of net income to net cash provided by operating activities: Net income (loss) 268,775 (2,342,919) Realized losses on investments 1,167,018 2,705,157 Change in: Accrued investment income 1,226,954 (179,695) Due from Motors Insurance Corporation (18,449,829) (1,022,096) Deferred acquisition costs (303,359) (1,360,915) Prepaid expenses 1,461 (24,250) Unearned premiums 1,142,974 5,325,752 Loss reserves 3,667 277,828 Accrued liabilities 69,133 18,190 Net cash (used in) provided by operating activities $ (14,873,206) $ 3,397,052 ============= ============= -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. On May 10, 2000 the Board of Directors authorised the payment of dividends to eligible holders of Participating Shares aggregating $673,134. Capital Resources. During the quarter ended June 30, 2000, no new series of Shares were added and 2 series of Shares were redeemed bringing the total number of series issued and outstanding to 263 as of the end of the quarter. As of June 30, 2000, the share capital of the Company was $2,172,500 (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 $1,972,500 (compared with $1,995,000 as of December 31, 1999). In addition, the Company had surplus from retained earnings in the amount of $12,659,905 as of June 30, 2000 compared with $13,190,576 as of December 31, 1999. The reduction in retained earnings has arisen primarily as a result of the dividend payment of $673,134 and net redemptions of participating stock of $126,312. Results of Operations. During the quarter ended June 30, 2000, the Company had net income of $914,883, compared with a net loss of $1,960,148 for the quarter ended June 30, 1999. For the six month period ended June 30, 2000, the Company had net income of $268,775, compared with a net loss of $2,342,919 for the comparable period in 1999. As discussed below, the increases in net income for the quarter and six month period ended June 30, 2000 compared to the comparable periods of 1999 are primarily attributable to more favourable underwriting performance and an increase in returns on the Company's investment portfolio. Premiums earned decreased to $13,514,900 during the quarter ended June 30, 2000 compared to $16,205,790 for the same period in 1999. Expenses incurred during the quarter ended June 30, 2000 were $13,721,444 compared to $18,017,481 for the comparable quarter of 1999. The Company experienced a net underwriting loss for the quarter ended June 30, 2000 of $206,544 compared to an underwriting loss of $1,811,691 for the comparable period in 1999. The ratio of losses incurred to premiums earned for the quarter ended June 30, 2000 was 74% compared to 84% for the comparable period in 1999. For the six month period ended June 30, 2000, the Company had earned premiums of $26,988,728 compared to $31,715,194 for the comparable period of 1999. Expenses incurred during the six month period ended June 30, 2000 were $28,171,294 compared to $34,133,940 for the -6- PAGE 7 comparable period in 1999. The net underwriting loss for the Company was $1,182,566 for the six month period ended June 30, 2000 compared to $2,418,746 for the comparable period in 1999. The loss ratio for the six month period ended June 30, 2000 was 77%, compared to 80.5% for the six month period ended June 30, 1999. The decrease in earned premium and expenses for the quarter and six month period ended June 30, 2000 were in large part attributable to the Redemption and Recapture discussed below. The reduction in loss ratios for the quarter and six month period ended June 30, 2000 were atributable to the Redemption and Recapture as well as improved underwriting results for existing series. 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 June 30, 2000 was $1,121,427 compared to losses of $148,457 for the comparable period of 1999. Investment income for the six month period ended June 30, 2000 was $1,451,341 compared to $75,827 for the comparable period of 1999. During the quarter ended June 30, 2000, the Company realised losses on the sale of investment securities of $177,110, compared to realised losses of $1,550,151 during the comparable period of 1999. The Company realized losses on the sale of investment securities during the quarter and the six month period ended June 30, 2000 as a result of sales of fixed income securities, the value of which had decreased as a result of increases in interest rates. During the six month period ended June 30, 2000, the Company appointed a new investment manager and adopted new investment guidelines. The unrealised appreciation on investments was $1,061,520 at June 30, 2000 compared to unrealised depreciation on investments of $162,459 at December 31, 1999. This increase is mainly due to increases in the market value of the Company's investment in an international equity fund and the reduction in its unrealised loss position in its fixed income portfolio. For the quarter ended June 30, 2000, the Company had interest income of $1,298,537 compared to $1,401,694 for the comparable period of 1999. For the six month period ended June 30, 2000, the Company had interest income of $2,618,359 compared to $2,780,984 for the comparable period of 1999. These decreases were largely attributable to the reduction in the Company's portfolio of fixed income securities resulting from a -7- PAGE 8 significant return of premium to MIC during the first quarter of 2000 pursuant to the Recapture. Forward Looking Statements. The foregoing Management Discussion and Analysis contains various forward looking statements within the meaning of applicable federal securities laws and are based upon the 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 4. Submission of Matters to a Vote of Security-Holders At the annual meeting of shareholders of the Company held on May 10, 2000 (the "Annual Meeting") the holder of the Common Stock re-elected five directors, William B. Noll, John J. Dunn Jr., Thomas D. Callahan, Robert E. Capstack and Peter R.P. Evelyn. The holders of Participating Shares unanimously elected the sixth director, Haywood B. Hyman Jr.. The holder of the Common Stock also elected John Gressa and Robert Nelson as alternate directors for Messrs. Callahan and Capstack respectively. At the Annual Meeting, the shareholders of the Company unanimously approved amendments to the Company's Restated Articles of Incorporation to (i) permit transfers of shares by a shareholder without requiring the shareholder to first receive a bona fide written offer, (ii) exclude unrealised gains or losses on investments from the calculation of a share redemption price, and (iii) replace the requirement that minimum annual dividends be paid within 120 days of the beginning of the year with the requirement that such dividends be paid in the year declared. In addition, the Shareholders of the Company unanimously approved a change to the Company's By Law removing the requirement for the majority of meetings of the Directors and any Committees of the Directors to be held within Barbados. 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: August 11, 2000 -9- EX-27 2 0002.txt 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 June 30, 2000 and is qualified in its entirety by reference to such financial statements. 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 83,848,656 0 0 0 0 0 83,848,656 6,299,566 0 24,721,929 116,052,419 4,728,906 95,084,339 0 0 0 0 0 200,000 15,693,925 116,052,419 26,988,728 2,618,359 (1,167,018) 0 20,767,220 7,021,467 382,607 268,775 0 268,775 0 0 0 268,775 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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