-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ZoZhAjBowfc3xdW0u7kKumYjvZN6O6YipbcdTsK9D1fOuEkxOGiOQvQdo+8rwOTf JMMAIel0gZn6iOULNiMG8A== 0000898080-94-000058.txt : 19940816 0000898080-94-000058.hdr.sgml : 19940816 ACCESSION NUMBER: 0000898080-94-000058 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940815 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: 1934 Act SEC FILE NUMBER: 033-06534 FILM NUMBER: 94544246 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 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 June 30, 1994 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 NA (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Bishops Court Hill, St. Michael, Barbados NA (Address of principle executive offices) (Zip Code) (809) 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, 1994 Common Stock, no par-value 2,000 Participating Stock, no par-value 20,100 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 I. FINANCIAL INFORMATION Item 1. Financial Statements 1. Balance Sheets, June 30, 1994 and December 31, 1993. 2. Statements of Income and Retained Earnings for the three month periods ended June 30, 1994 and June 30, 1993 and the six month periods ended June 30, 1994 and June 30, 1993. 3. Statements of Cash Flows for the six month periods ended June 30, 1994 and June 30, 1993. 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. Item 2. Management's Discussion And Analysis of Financial Condition And Results of Operations Part II. Other Information Item 2. Changes in Securities Item 4. Submission of Matters to a Vote of Security-Holders Item 6. Exhibits and Reports on Form 8-K MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED BALANCE SHEETS (Expressed in U.S. Dollars) June 30, 1994 December 31, (unaudited) 1993 _____________ ____________ ASSETS Investments $32,712,525 $29,882,488 Cash and cash equivalents 6,105,993 6,788,771 Accrued investment income 1,095,445 861,190 Due from ceding company 4,296,013 2,331,978 Deferred acquisition costs 12,907,568 10,495,206 Prepaid expenses 1,250 0 ___________ ___________ Total Assets $57,118,794 $50,359,633 ___________ ___________ LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Unearned premiums 49,687,936 40,413,058 Loss reserves 2,354,084 1,910,030 Accrued liabilities 135,321 107,181 ___________ ___________ Total liabilities 52,177,341 42,430,269 ___________ ___________ 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 outstand- ing - 20,100 shares as of June 30, 1994 and 18,900 shares as of December 31, 1993 1,507,500 1,417,500 ___________ ___________ 1,707,500 1,617,500 Retained Earnings 4,425,974 6,211,978 Unrealized appreciation (depreciation) on investments (1,192,021) 99,886 ___________ ___________ Total Stockholders' Equity 4,941,453 7,929,364 ___________ ___________ Total Liabilities and Stockholders' Equity $57,118,794 $50,359,633 ___________ ___________ MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE THREE MONTH PERIODS ENDED JUNE 30, 1994 AND JUNE 30, 1993 AND THE SIX MONTH PERIODS ENDED JUNE 30, 1994 AND JUNE 30, 1993 (UNAUDITED) (Expressed in U.S. Dollars) Three Month Periods Six Month Periods Ended June 30, Ended June 30, 1994 1993 1994 1993 __________ __________ __________ ___________ INCOME Reinsurance premiums assumed $10,152,109 $6,104,178 $18,968,440 $11,494,063 Increase in unearned premiums 5,030,453 2,443,204 9,274,878 4,260,261 __________ __________ __________ __________ Premiums earned 5,121,656 3,660,974 9,693,562 7,233,802 __________ __________ __________ __________ Investment income Interest earned 676,507 443,817 1,247,199 905,346 Realized gains/ (losses) on investments (741,750) 160,334 (1,045,139) 538,778 __________ __________ ___________ _________ Investment income/ (loss) (65,243) 604,151 202,060 1,444,124 __________ __________ __________ __________ TOTAL INCOME 5,056,413 4,265,125 9,895,622 8,677,926 __________ __________ __________ __________ EXPENSES Acquisition costs 1,331,276 951,296 2,519,485 1,879,562 Losses paid 3,297,976 2,428,156 6,299,826 5,055,172 Increase in loss reserves 256,845 61,608 444,054 45,747 Administrative expenses 145,334 172,242 284,457 312,497 __________ __________ __________ __________ TOTAL EXPENSES 5,031,431 3,613,302 9,547,822 7,292,978 __________ __________ __________ __________ NET INCOME 24,982 651,823 347,800 1,384,948 RETAINED EARNINGS, beginning of period 6,534,796 6,261,900 6,211,978 5,528,775 LESS: DIVIDENDS (2,156,304) (2,021,504) (2,156,304) (2,021,504) ADD: TRANSFERS FROM PARTICIPATING STOCK 22,500 0 22,500 0 ___________ __________ __________ __________ RETAINED EARNINGS, end of period $4,425,974 $4,892,219 $4,425,974 $4,892,219 __________ __________ __________ __________ MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED STATEMENTS OF CASH FLOWS FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1994 AND JUNE 30, 1993 (UNAUDITED) (Expressed in U.S. Dollars) Six month periods ended June 30, 1994 1993 ___________ ___________ Cash flows from operating activities: Reinsurance premiums assumed $15,878,476 $11,606,298 Losses and underwriting expenses paid (10,024,288) (7,888,425) Administrative expenses paid (339,020) (272,253) Investment income received 1,012,943 1,572,272 ___________ ___________ Net cash provided by operating activities 6,528,111 5,017,892 ___________ ___________ Cash flows from investing activities: Purchases of marketable securities (46,461,178) (29,258,460) Sales of marketable securities 41,294,093 30,705,817 ___________ ___________ Net cash invested (5,167,085) 1,447,357 ___________ ___________ Cash flows from financing activities: Proceeds from issuance of Participating stock 112,500 202,500 Dividends paid (2,156,304) (2,021,504) ___________ ___________ Net cash used in financing activities (2,043,804) (1,819,004) ___________ ___________ Increase (decrease) in cash and cash equivalents (682,778) 4,646,245 Cash and cash equivalents, beginning of period 6,788,771 1,710,738 ___________ ___________ Cash and cash equivalents, end of period $ 6,105,993 $ 6,356,983 ___________ ___________ Reconciliation of net income to net cash provided by operating activities: Net income 347,800 1,384,948 Change in: Accrued investment income 810,886 127,002 Due from ceding company (1,964,035) 267,557 Deferred acquisition costs (2,412,362) (1,109,012) Prepaid expenses (1,250) (1,250) Unearned premiums 9,274,878 4,260,261 Loss reserves 444,054 45,746 Accrued liabilities 28,140 42,640 ___________ ___________ Net cash provided by operating activities $ 6,528,111 $ 5,017,892 ___________ ___________ 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 during the next few years. The significant amounts of unearned premium on the balance sheet at each balance sheet date are attributable to the long-term nature of the contracts sold. The risk of loss to the Company under the contract arises primarily after the underlying manufacturer's warranty expires -- usually after 36 months or 36,000 miles, whichever occurs first. Since very little premium is recognized as earned until the expiration of the underlying warranty, most of the premium written in any period is recorded as unearned. Cash, cash equivalents and investments valued at market have increased from $36,671,259 at the beginning of the year to $38,818,518 at June 30, 1994. On April 8, 1994, the Board of Directors authorized the payment of dividends to eligible holders of Participating Shares aggregating $2,156,304. Capital Resources. As of June 30, 1994, the share capital of the Company was $1,707,500 (compared with $1,617,500 as of December 31, 1993) comprised of paid in capital with respect to the Common Stock of $200,000 and paid in capital with respect to Participating Shares of $1,507,500 (compared with $1,417,500 as of December 31, 1993). In addition, the Company had surplus from retained earnings in the amount of $4,425,974 compared with $6,211,978 as of December 31, 1993. Barbados law requires that the Company's net assets (excluding unrealized gains and losses) equal at least the aggregate of $1,000,000 and 10% of the amount by which the earned premium exceeded $5,000,000 in the previous fiscal year. At June 30, 1994, the Company's minimum required net assets computed in accordance with Barbados law was approximately $2,042,961, compared to total capital and retained earnings of $6,133,474. Results of Operations. In the six month period ended June 30, 1994, the Company reported premiums earned of $9,693,562, an increase of $2,459,760 over the six month period ended June 30, 1993. Net underwriting income in the first six months of 1994 was $145,740, which represents an increase of $204,916 compared to an underwriting loss of $59,176 in the six month period ended June 30, 1993. The loss ratio for the six month period ended June 30, 1994 was 69.6%, compared to 70.5% for the six month period ended June 30, 1993. In the three month period ended June 30, 1994, premiums earned increased $1,460,682 to $5,121,656, compared to $3,660,974 in the three month period ended June 30, 1993. Expenses (including losses) increased $1,418,129, from $3,613,302 in the second quarter of 1993 to $5,031,431 in the second quarter of 1994. As a result, net underwriting income increased from $47,672 in the second quarter of 1993 to $90,225 in the second quarter of 1994. The loss ratio in the second quarter of 1994 was 69.4%, compared to 68.0% in the second quarter of 1993. Administrative expenses include amounts paid to the Company's Manager for professional services. During the six months ended June 30, 1994 the amount paid to the Manager was $101,840 compared to $115,321 for the six months ended June 30, 1993. The increase in net underwriting income was offset by a decline in investment income of $669,394, from $604,151 in the second quarter of 1993 to a loss of $65,243 in the comparable period of 1994, due to realized losses on the sale of invested assets. Although interest earnings in the second quarter increased by 50% over the second quarter of 1993, changes in interest rates in the six month period ended June 30, 1994 adversely affected the market values of the Company's investment portfolio at that date and its investment income in the period then ended as compared with the six month period ended June 30, 1993. Realized losses on the sale of investment securities in the six month period ended June 30, 1994 were $1,045,139 compared to realized gains of $538,778 in the six month period ended June 30, 1993. Unrealized losses on investment securities held at June 30, 1994 were $1,192,021 compared to unrealized gains at December 31, 1993 of $99,886. The realized losses resulted in large part from a repositioning of the Company's investment portfolio away from longer term issues toward medium term investments. Unrealized losses at June 30, 1994 include amounts attributable to decreases in value of securities purchased at a premium. The Company's investment guidelines do not permit the use of financial instrument derivatives in managing interest rate risk. FASB Statement No. 115 "Accounting for Certain Investments in Debt and Equity Securities" is effective for years beginning after December 15, 1993 and requires the Company to classify its securities holdings into categories (trading, available for sale, and held to maturity). The Company adopted Statement No. 115 effective January 1, 1994 and classified its securities portfolio as available for sale. Adoption of the Statement did not have a material effect on the Company's financial position and results of operations. PART II. OTHER INFORMATION Item 2. Changes in Securities Pursuant to amendment of the Restated Articles of Incorporation effected by vote of the shareholders, the Common Stock of the Company is now nonredeemable in all circumstances. (See Item 4.) Item 4. Submission of Matters to a Vote of Security-Holders On April 8, 1994, the holder of the Common Stock re-elected five of the six directors of the Company: Robert T. O'Connell, Joseph J. Pero, Vincent K. Quinn, Louis S. Carrio, Jr., and Peter R.P. Evelyn. The holders of Participating Shares unanimously elected the sixth director, Donald C. Mealey. In addition, the holder of the Common Shares elected two alternate directors: Richard N. Carlson was elected as the alternate director for Mr. Quinn, and Robert E. Capstack was elected as alternate director for Mr. Carrio. The shareholders also voted unanimously to amend the Restated Articles of Incorporation of the Company. Upon redemption by the Board of a series of Participating Shares, the Board now has the authority to make redemption effective at any time prior to year end, and to allocate any net deficit attributable to that series to the subsidiary capital account for the Common Stock (to the extent of earned surplus) before allocating any remaining deficit to the accounts for the Participating Shares. Also, in order to ensure compliance with Barbados law, which requires that Common Stock be nonredeemable in all circumstances, the shareholders voted to remove from the Articles provisions which allowed for the redemption of Common Stock and which gave the common shareholder the right to force liquidation of the Company in the event its request for redemption was not granted. Item 6. Exhibits and Reports on Form 8-K 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 Signing on behalf of the Registrant, and Principal Financial Officer Dated: August 15, 1994 -----END PRIVACY-ENHANCED MESSAGE-----