-----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, FGXNdGqx8ZOakYMkySnENZn2iD6pH+DLbfV/X55ZMjJ1A70Pqt/skZyTITZAmppW 5v118w93z74Rt6wnsvNlpQ== 0000898080-94-000081.txt : 19941109 0000898080-94-000081.hdr.sgml : 19941109 ACCESSION NUMBER: 0000898080-94-000081 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941108 SROS: NONE 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: 94558042 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 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 September 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 September 30, 1994 Common Stock, no par-value 2,000 Participating Stock, no par-value 21,400 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, September 30, 1994 and December 31, 1993. 2. Statements of Income and Retained Earnings for the three month periods ended September 30, 1994 and September 30, 1993, and the nine month periods ended September 30, 1994 and September 30, 1993. 3. Statements of Cash Flows for the nine month periods ended September 30, 1994 and September 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. Certain amounts in the 1993 financial statements have been reclassified to conform with the 1994 presentation. MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED BALANCE SHEETS (Expressed in U.S. Dollars) September 30, 1994 December 31, (unaudited) 1993 ASSETS Investments $36,943,605 $29,882,488 Cash and cash equivalents 5,775,694 6,788,771 Accrued investment income 1,509,588 861,190 Due from ceding company 3,403,181 2,331,978 Deferred acquisition costs 13,951,296 10,495,206 Prepaid expenses 625 0 ___________ ___________ Total Assets $61,583,989 $50,359,633 ___________ ___________ LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Unearned premium 53,699,611 40,413,058 Loss reserves 2,549,583 1,910,030 Accrued liabilities 110,002 107,181 ___________ ___________ Total liabilities 56,359,196 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 - 21,400 shares as of September 30, 1994 and 18,900 shares as of December 31, 1993 1,605,000 1,417,500 ___________ ___________ 1,805,000 1,617,500 Retained Earnings 5,142,701 6,211,978 Unrealized (loss)/gain on investments (1,722,908) 99,886 ___________ ___________ Total Stockholders' Equity 5,224,793 7,929,364 ___________ ___________ Total Liabilities and Stockholders' Equity $61,583,989 $50,359,633 ___________ ___________ MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 1994 AND SEPTEMBER 30, 1993 AND THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1994 AND SEPTEMBER 30, 1993 (UNAUDITED) (Expressed in U.S. Dollars) Three Month Periods Nine Month Periods Ended September 30, Ended September 30, 1994 1993 1994 1993 INCOME Reinsurance premiums assumed $9,550,359 $9,222,855 $28,518,799 $20,716,918 Increase in unearned premiums 4,011,675 5,214,237 13,286,553 9,474,498 __________ __________ __________ __________ Premiums earned 5,538,684 4,008,618 15,232,246 11,242,420 __________ __________ __________ __________ Investment income Interest earned 691,237 444,096 1,938,436 1,349,442 Realized (losses)/ gains on investments (67,025) 276,514 (1,112,164) 815,292 __________ __________ __________ __________ Investment income - net 624,212 720,610 826,272 2,164,734 __________ __________ __________ __________ TOTAL INCOME 6,162,896 4,729,228 16,058,518 13,407,154 __________ __________ __________ __________ EXPENSES Acquisition costs 1,439,392 1,041,708 3,958,877 2,921,270 Losses paid 3,723,890 2,676,349 10,023,716 7,731,521 Increase in loss reserves 195,499 152,535 639,553 198,282 Administrative expenses: Related parties 37,625 38,118 138,779 153,439 Other 49,763 59,040 233,066 256,216 __________ __________ __________ __________ TOTAL EXPENSES 5,446,169 3,967,750 14,993,991 11,260,728 __________ __________ __________ __________ NET INCOME 716,727 761,478 1,064,527 2,146,426 RETAINED EARNINGS, beginning of period 4,425,974 4,892,219 6,211,978 5,528,775 LESS: DIVIDENDS PAID 0 0 (2,156,304) (2,021,504) ADD: TRANSFERS FROM PARTICIPATING STOCK 0 0 22,500 0 _________ _________ __________ __________ RETAINED EARNINGS, end of period 5,142,701 5,653,697 5,142,701 5,653,697 ___________ __________ __________ __________ MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED STATEMENTS OF CASH FLOWS FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1994 AND SEPTEMBER 30, 1993 (UNAUDITED) (Expressed in U.S. Dollars) Nine month periods ended September 30, 1994 1993 Cash flows from operating activities: Reinsurance premiums assumed $26,030,586 $17,710,476 Losses and underwriting expenses paid (15,961,841) (11,903,552) Administrative expenses paid (429,480) (418,815) Investment income received 1,290,037 1,713,009 ___________ ___________ Net cash provided by operating activities 10,929,302 7,101,118 ___________ ___________ Cash flows from investing activities: Purchases of marketable securities (52,638,048) (37,205,006) Sales of marketable securities 42,641,973 39,549,053 Maturities of marketable securities 0 0 ___________ ___________ Net cash provided by (used in) investing activities (9,996,075) 2,344,047 ___________ ___________ Cash flows from financing activities: Proceeds from issuance of Participating stock 210,000 292,500 Dividends paid (2,156,304) (2,021,504) ___________ ___________ Net cash used in financing activities (1,946,304) (1,729,004) ___________ ___________ Increase (decrease) in cash and cash equivalents (1,013,077) 7,716,161 Cash and cash equivalents, beginning of period 6,788,771 1,710,738 ___________ ___________ Cash and cash equivalents, end of period $ 5,775,694 $ 9,426,899 ___________ ___________ Reconciliation of net income to net cash provided by operating activities: Net income 1,064,527 2,146,426 Realized losses (gains) on investments 1,112,164 (815,292) Change in: Accrued investment income (648,398) 362,268 Due from ceding company (1,071,203) (1,792,014) Deferred acquisition costs (3,456,090) (2,465,188) Prepaid expenses (625) (625) Unearned premium 13,286,553 9,474,498 Loss reserves 639,553 198,282 Accrued liabilities 2,821 (7,237) ___________ ___________ Net cash provided by operating activities $10,929,302 $ 7,101,118 ___________ ___________ Item 2. Management's Discussion And Analysis of Financial Condition and Results of Operations Liquidity. It is anticipated that the Company will continue 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 unearned premiums on the balance sheet at each balance sheet date are attributable to the long-term nature of the motor vehicle mechanical breakdown insurance contracts that the Company reinsures. The risk of loss to the Company under new vehicle contracts 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, the new vehicle premiums assumed in any period are recorded as unearned. Cash, cash equivalents and investments valued at market have increased from $36,671,259 at the beginning of the year to $42,719,299 at September 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 September 30, 1994, the share capital of the Company was $1,805,000 (compared to $1,617,500 as of December 31, 1993) comprised of paid in capital with respect to Common Stock of $200,000 and paid in capital with respect to Participating Shares of $1,605,000 (compared with $1,417,500 as of December 31, 1993). In addition, the Company had surplus from retained earnings in the amount of $5,142,701, 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 September 30, 1994, the Company's minimum required net assets computed in accordance with Barbados law was $2,023,225, compared to total capital and retained earnings of $6,947,701. Results of Operations. In the nine month period ended September 30, 1994, the Company reported premiums earned of $15,232,246, an increase of $3,989,826 over the nine month period ended September 30, 1993. Net underwriting income in the first nine months of 1994 was $238,255, which represents an increase of $256,563 compared to an underwriting loss of $18,308 in the nine month period ended September 30, 1993. The loss ratio for the nine month period ended September 30, 1994 was 70.0%, compared to 70.5% for the nine month period ended September 30, 1993. In the three month period ended September 30, 1994, premiums earned increased $1,530,066 to $5,538,684, compared to $4,008,618 in the three month period ended September 30, 1993. Expenses including losses) increased $1,478,419, from $3,967,750 in the third quarter of 1993 to $5,446,169 in the third quarter of 1994. As a result, net underwriting income increased from $40,868 in the third quarter of 1993 to $92,515 in the third quarter of 1994. The loss ratio in the third quarter of 1994 was 70.8%, compared to 70.6% in the third quarter of 1993. The increase in net underwriting income was offset by a decline in investment income of $96,398 from $720,610 in the third quarter of 1993 to $624,212 in the comparable period of 1994, due to realized losses on the sale of invested assets. Although interest earnings in the third quarter increased by 56% over the third quarter of 1993, changes in interest rates in the nine month period ended September 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 nine month period ended September 30, 1993. Realized losses on the sale of investment securities in the nine month period ended September 30, 1994 were $1,112,164 compared to realized gains of $815,292 in the nine month period ended September 30, 1993 and resulted in large part from a repositioning of the Company's investment portfolio away from longer term issues toward medium term investments. Unrealized losses on investment securities held at September 30, 1994 were $1,722,908, compared to unrealized gains at December 31, 1993 of $99,886. Unrealized losses at September 30, 1994 include amounts attributable to decreases in value of securities purchased as 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 Investment 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 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 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: November 7, 1994 -----END PRIVACY-ENHANCED MESSAGE-----