-----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, CXWLpoKGIGaiWBHTEg37/++tSazW5wAhixNPwiiD/kh5CDChgL/UbuKtzzTOQ457 TKg4e4pZH/0jv8jkoRqfJw== 0000898080-02-000146.txt : 20020515 0000898080-02-000146.hdr.sgml : 20020515 ACCESSION NUMBER: 0000898080-02-000146 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020515 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: 1934 Act SEC FILE NUMBER: 033-06534 FILM NUMBER: 02648455 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 form10q.txt FORM 10-Q 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, 2002 ------------------------------ 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 principal 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, 2002 Common Stock, no par-value 2,000 Participating Stock, no par-value 24,700 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: Part 1. FINANCIAL INFORMATION Item 1. Financial Statements 1. Balance Sheets, March 31, 2002 and December 31, 2001. 2. Statements of Operations and Retained Earnings for the three month periods ended March 31, 2002 and 2001. 3. Statements of Cash Flows for the three month periods ended March 31, 2002 and 2001. 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. The information furnished for the three month period ended March 31, 2002 may not be indicative of results for the full year. -2- MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED BALANCE SHEETS (Expressed in U.S. Dollars) March 31, December 31, 2002 2001 (unaudited) (audited) ------------ ------------ ASSETS Investments $ 88,152,591 $ 90,433,369 Cash and cash equivalents 102,680 142,992 Accrued investment income 687,956 789,199 Due from Motors Insurance Corporation 0 1,390,278 Deferred acquisition costs 21,991,177 22,810,217 Advances to shareholders 437,500 527,500 Prepaid expenses 39,375 37,500 ------------ ------------ Total Assets $111,411,279 $116,131,055 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Unearned premiums $ 87,963,276 $ 89,634,122 Reserves for unpaid losses 3,795,869 3,949,590 Accrued liabilities 225,826 181,321 Due to Motors Insurance Corporation 1,020,165 0 ------------ ------------ Total liabilities 93,005,136 93,765,033 ------------ ------------ STOCKHOLDERS' EQUITY Share Capital Common Stock-no par value; Authorized - 2,000 shares; Issued and outstanding - 2,000 shares 200,000 200,000 Participating Stock-no par value; Authorized - 100,000 shares; Issued and outstanding - 24,700 shares as of March 31, 2002 and 25,000 shares as of December 31, 2001 1,852,500 1,875,000 ------------ ------------ 2,052,500 2,075,000 Retained Earnings 15,370,298 18,521,974 Accumulated other comprehensive income 983,345 1,769,048 ------------ ------------ Total Stockholders' Equity 18,406,143 22,366,022 ------------ ------------ Total Liabilities and Stockholders' Equity $111,411,279 $116,131,055 ============ ============ -3- MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2002 AND 2001 (Expressed in U.S. Dollars) Three Month Periods Ended March 31, 2002 2001 (unaudited) (unaudited) ------------ ------------ INCOME Reinsurance premiums assumed $ 10,886,397 $ 12,703,111 Decrease in unearned premiums 1,670,846 826,198 ------------ ------------ Premiums earned 12,557,243 13,529,309 ------------ ------------ Investment income Interest earned 1,154,743 1,146,202 Realized gains on investments-net 259,176 444,682 ------------ ------------ Investment income 1,413,919 1,590,884 ------------ ------------ TOTAL INCOME 13,971,162 15,120,193 ------------ ------------ EXPENSES Acquisition costs 3,207,604 3,538,394 Losses paid 9,405,810 10,171,113 Increase in reserves for unpaid losses (153,721) (28,633) Administrative expenses - Related Parties 56,039 56,674 - Other 112,956 123,255 ------------ ------------ TOTAL EXPENSES 12,628,688 13,860,803 ------------ ------------ NET INCOME 1,342,474 1,259,390 RETAINED EARNINGS, beginning of period 18,521,974 16,247,004 DIVIDENDS (4,381,225) (3,083,096) REDEMPTION OF PARTICIPATING STOCK (112,925) (130,144) ------------ ------------ RETAINED EARNINGS, end of period $ 15,370,298 $ 14,293,154 ============ ============ -4- MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED STATEMENTS OF CASH FLOWS FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2002 AND 2001 (Expressed in U.S. Dollars)
Three Month Periods Ended March 31, 2002 2001 (unaudited) (unaudited) ------------ -------------- Cash flows from operating activities: Reinsurance premiums collected $ 14,094,604 $ 11,102,794 Losses and acquisition expenses paid (12,572,120) (12,090,711) Administrative expenses paid (42,004) (136,885) Investment income received 1,241,607 1,208,571 ------------- ------------- Net cash provided by operating activities 2,722,087 83,769 ------------- ------------- Cash flows from investing activities: Purchases of investments (35,744,063) (19,573,823) Sales and maturities of investments 37,498,314 22,507,618 ------------- ------------- Net cash provided by investing activities 1,754,251 2,933,795 ------------- ------------- Cash flows from financing activities: Proceeds from issuance of Participating Stock 0 0 Redemption of Participating Stock (135,425) (145,144) Dividends paid (4,381,225) (3,083,096) ------------- ------------- Net cash used in financing activities (4,516,650) (3,228,240) ------------- ------------- Decrease in cash and cash equivalents (40,312) (210,676) Cash and cash equivalents, beginning of period 142,992 1,736,235 ------------- ------------- Cash and cash equivalents, end of period $ 102,680 $ 1,525,559 ============= ============= Reconciliation of net income to net cash provided by operating activities: Net income 1,342,474 1,259,390 Realized gains on investments (259,176) (444,682) Change in: Accrued investment income 101,243 75,369 Deferred acquisition costs 819,040 214,811 Advances to shareholders 90,000 0 Prepaid expenses (1,875) (4,177) Unearned premiums (1,670,846) (826,198) Reserves for unpaid losses (153,721) (28,633) Accrued liabilities 44,505 23,213 Due to Motors Insurance Corporation, net 2,410,443 (185,324) ------------- ------------- Net cash provided by operating activities $ 2,722,087 $ 83,769 ============= =============
-5- Item 2. Management's Discussion And Analysis of Financial Condition And Results of Operations Critical Accounting Policies. During the quarter ended March 31, 2002, Motors Mechanical Reinsurance Company, Limited (the "Company") had no change in its critical accounting policies as previously disclosed within the Company's Annual Report on Form 10-K for the year ended December 31, 2001. Liquidity. It is anticipated that the Company will generate sufficient funds from operations to meet current liquidity needs. Liquidity requirements will relate to payment of insurance losses, administrative expenses and dividends. Premiums generated by the Company's reinsurance business, combined with investment earnings plus proceeds from the sale of the Company's Participating Shares, will be its principal sources of funds. The Company believes that such funds will be sufficient to meet its liquidity requirements in 2002 and in future years to which its reinsurance liabilities will extend. No capital expenditures are expected during the next few years. On March 5, 2002 the Board of Directors authorized the payment of dividends to eligible holders of Participating Shares aggregating $4,381,225. Such dividends were paid during the first quarter of 2002. Capital Resources. During the quarter ended March 31, 2002 no new series of Participating Shares were issued and 3 series were redeemed as a result of the business attributable to such series becoming fully earned, bringing the total number of series issued and outstanding to 247 at March 31, 2002. As of March 31, 2002 the share capital of the Company was $2,052,500 (compared to $2,075,000 as of December 31, 2001) comprised of paid in capital with respect to the Common Stock of $200,000 and paid in capital with respect to Participating Shares of $1,852,500 (compared with paid in capital with respect to Common Stock of $200,000 and paid in capital with respect to Participating Shares of $1,875,000 as of December 31, 2001). In addition, the Company had retained earnings in the amount of $15,370,298 as of March 31, 2002 compared with $18,521,974 as of December 31, 2001. The net decrease in retained earnings is attributable to the dividend payment of $4,381,225 during the first quarter partially offset by net income for the same period. Results of Operations. During the quarter ended March 31, 2002 the Company had net income of $1,342,474, compared with net income of $1,259,390 for the comparable period in 2001. Premiums earned decreased slightly to $12,557,243 during the quarter ended March 31, 2002 compared to $13,529,309 for the comparable period in 2001. Expenses incurred during the quarter ended March 31, 2002 were $12,628,688 compared to $13,860,803 for -6- the comparable period in 2001. The Company experienced a net underwriting loss for the quarter ended March 31, 2002 of $71,445 compared to an underwriting loss of $331,494 for the comparable period in 2001. The ratio of losses incurred to premiums earned for the quarter under review was 73.7% compared to 75.0% for the comparable period in 2001. The decrease in reserves for unpaid losses is primarily attributable to a change in the estimate of the actuarially required reserves as of December 31, 2001. Effective October 1, 2001 the ceding commission charged by the ceding company was reduced from 25% to 20% on all new business written on and after that date. Other than as noted above, there were no significant items to report for the quarter ended March 31, 2002. The moderate decrease in earned premium and expenses as noted above for the quarter ended March 31, 2002 compared to the comparable period of 2001, was in large part attributable to the fact that the number of active series of Participating Shares has been declining over that period and an increasing number of policies reinsured by the Company are reaching a fully earned position. The reduction in the loss ratio for the quarter ended March 31, 2002 compared to the comparable period of 2001 is attributable , in part, to the continuing efforts made by the ceding company to control losses. Otherwise, fluctuations in loss ratios reflect normal variations in loss experience, which are expected for the type of business underwritten by the Company. Investment income for the quarter ended March 31, 2002 was $1,413,919 compared to $1,590,884 for the comparable period of 2001. During the quarter ended March 31, 2002, the Company realized gains on the sale of investment securities of $259,176 compared to realized gains of $444,682 during the comparable period of 2001. The Company realized gains on the sale of investment securities during the quarter ended March 31, 2002 as a result of sales of fixed income securities, the value of which had increased as a result of decreases in market interest rates. The unrealized appreciation on investments was $983,345 at March 31, 2002 compared to $1,769,048 at December 31, 2001. This decrease is primarily due to a fall in the market value of fixed income securities as interest rates rose during March 2002 in response to strengthening economic indicators combined with the sale of investment securities with unrealized appreciation. For the quarter ended March 31, 2002, the Company had interest income of $1,154,743 compared to $1,146,202 for the comparable period of 2001. The total value of interest earning investments and their related coupon rates remained relatively unchanged for the periods under review. -7- 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 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 from those anticipated. PART II. OTHER INFORMATION Item Exhibits and Reports on Form 8-K (a) Exhibits (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: May 14, 2002 -----END PRIVACY-ENHANCED MESSAGE-----