-----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, Dm1htdeWki6H6c046SzNCchSDuICVNCvn0Azg7AU1IPJU+cu2NyBHX+eYvdG+6IZ pZvfwtS0D0HVp9Pf5PrQnQ== 0000898080-98-000273.txt : 19981123 0000898080-98-000273.hdr.sgml : 19981123 ACCESSION NUMBER: 0000898080-98-000273 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 DATE AS OF CHANGE: 19981120 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: 98752997 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 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, 1998 ------------------ [ ] 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 September 30, 1998 ----- ------------------------ Common Stock, no par-value 2,000 Participating Stock, no par-value 31,100 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 1. FINANCIAL INFORMATION Item 1. Financial Statements 1. Balance Sheets, September 30, 1998 and December 31, 1997. 2. Statements of Income and Retained Earnings for the three month periods ended September 30, 1998 and 1997 and the nine month periods ended September 30, 1998 and 1997. 3. Statements of Cash Flows for the nine month periods ended September 30, 1998 and 1997. 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.
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED BALANCE SHEETS (Expressed in U.S. Dollars) September 30, 1998 December 31, (unaudited) 1997 ------------------ ------------ ASSETS Investments $ 88,287,656 $ 88,585,513 Cash and cash equivalents 19,136,437 5,645,482 Accrued investment income 1,168,863 3,178,446 Due from Motors Insurance Corporation 1,535,532 841,927 Deferred acquisition costs 28,019,552 24,813,918 Prepaid expense 3,769 0 Total Assets $138,151,809 $123,065,286 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Unearned premiums $107,780,771 $ 95,454,588 Loss reserves 5,159,932 5,421,160 Accrued liabilities 77,768 123,569 ------------ ------------ Total liabilities 113,018,471 100,999,317 ------------ ------------ 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 - 31,100 shares as of September 30, 1998 and 28,200 shares as of December 31, 1997 2,332,500 2,115,000 ------------ ------------ 2,532,500 2,315,000 Retained Earnings 20,493,809 18,615,768 Unrealized appreciation on investments 2,107,029 1,135,201 ------------ ------------ Total Stockholders' Equity 25,133,338 22,065,969 ------------ ------------ Total Liabilities and Stockholders' Equity $138,151,809 $123,065,286 ============ ============
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997 AND THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997 (UNAUDITED) (Expressed in U.S. Dollars)
Three Month Periods Nine Month Periods Ended September 30, Ended September 30, 1998 1997 1998 1997 ---------- ---------- ---------- ---------- INCOME Reinsurance premiums assumed $18,680,819 $16,624,973 $54,738,752 $44,516,682 Increase in unearned premiums 3,890,487 4,980,043 12,326,183 11,285,385 ----------- ----------- ----------- ----------- Premiums earned 14,790,332 11,644,930 42,412,569 33,231,297 ----------- ----------- ----------- ----------- Investment income Interest earned 1,714,696 1,322,355 4,520,786 3,797,281 Realized gains on investments 2,269,101 802,776 3,374,836 191,518 ----------- ----------- ----------- ----------- Investment income 3,983,797 2,125,131 7,895,622 3,988,799 ----------- ----------- ----------- ----------- TOTAL INCOME 18,774,129 13,770,061 50,308,191 37,220,096 ----------- ----------- ----------- ----------- EXPENSES Acquisition costs 3,845,398 3,027,845 10,908,226 8,639,707 Losses paid 12,337,811 8,213,214 32,154,572 21,510,756 Increase/(decrease) in loss reserves 305,166 233,745 (261,228) 922,406 Administrative expenses - Related Parties 57,764 53,356 167,996 164,934 - Other 67,425 63,981 265,469 226,825 ----------- ----------- ----------- ----------- TOTAL EXPENSES 16,613,564 11,592,141 43,235,035 31,464,628 ----------- ----------- ----------- ----------- NET INCOME 2,160,565 2,177,920 7,073,156 5,755,468 RETAINED EARNINGS, beginning of period 18,356,403 14,293,871 18,615,768 14,913,053 LESS: DIVIDENDS 0 0 (5,171,956) (4,196,730) LESS: REDEMPTION OF PARTICIPATING STOCK (23,159) 0 (23,159) 0 ----------- ----------- ----------- ----------- RETAINED EARNINGS, end of period $20,493,809 $16,471,791 $20,493,809 $16,471,791 =========== =========== =========== ===========
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED STATEMENTS OF CASH FLOWS FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997 (UNAUDITED) (Expressed in U.S. Dollars)
Nine Month Periods Ended September 30, 1998 1997 ------------- ------------- Cash flows from operating activities: Reinsurance premiums collected $48,612,563 $40,389,171 Losses and acquisition expenses paid (40,809,121) (29,899,413) Administrative expenses paid (514,762) (497,066) Investment income received 6,535,369 3,184,690 ------------- ------------- Net cash provided by operating activities 13,824,049 13,177,382 ------------- ------------- Cash flows from investing activities: Purchases of investments (253,594,219) (229,247,631) Sales and maturities of investments 258,238,740 213,050,231 ------------- ------------- Net cash provided by (used in) investing activities 4,644,521 (16,197,400) ------------- ------------- Cash flows from financing activities: Proceeds from issuance of Participating Stock 232,500 187,500 Redemption of participating stock (38,159) 0 Dividends paid (5,171,956) (4,196,730) ------------- ------------- Net cash used in financing activities (4,977,615) (4,009,230) ------------- ------------- Increase/(decrease)in cash and cash equivalents 13,490,955 (7,029,248) Cash and cash equivalents, beginning of period 5,645,482 12,926,272 Cash and cash equivalents, end of period $19,136,437 $5,897,024 ============= ============= Reconciliation of net income to net cash provided by operating activities: Net income 7,073,156 5,755,468 Realized gains on investments (3,374,836) (191,518) Change in: Accrued investment income 2,009,583 (616,591) Due from Motors Insurance Corporation (693,605) (1,008,092) Deferred acquisition costs (3,205,634) (2,936,124) Prepaid expenses (3,769) (34,085) Unearned premiums 12,326,183 11,285,385 Loss reserves (261,228) 922,406 Accrued liabilities (45,801) 533 ------------- ------------- Net cash provided by operating activities $13,824,049 $13,177,382 ============= =============
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. Capital Resources. During the quarter ended September 30, 1998, 6 new series of Shares were added and 2 series were redeemed bringing the total number of series issued and outstanding to 311 as of the end of the quarter. As of September 30, 1998, the share capital of the Company was $2,532,500 (compared with $2,315,000 as of December 31, 1997) comprised of paid in capital with respect to the Common Stock of $200,000 and paid in capital with respect to Participating Shares of $2,332,500 (compared with $2,115,000 as of December 31, 1997). In addition, the Company had surplus from retained earnings in the amount of $20,493,809 as of September 30, 1998 compared with $18,615,768 as of December 31, 1997. Results of Operations. During the quarter ended September 30, 1998, the Company had net income of $2,160,565, compared with net income of $2,177,920 for the quarter ended September 30, 1997. For the nine month period ended September 30, 1998, the Company had net income of $7,073,156, compared with net income of $5,755,468 for the comparable period in 1997. Premiums earned increased to $14,790,332 during the quarter ended September 30, 1998 compared to $11,644,930 for the same period in 1997. Expenses incurred during the quarter ended September 30, 1998 were $16,613,564 compared to $11,592,141 for the comparable quarter of 1997. The Company experienced a net underwriting loss for the quarter ended September 30, 1998 of $1,823,232 compared to an underwriting gain of $52,790 for the comparable period in 1997. The ratio of losses incurred to premiums earned for the quarter ended September 30, 1998 was 85.5% compared to 72.5% for the comparable period in 1997 primarily as a result of increases in losses paid. For the nine month period ended September 30, 1998, the Company had earned premiums of $42,412,569 compared to $33,231,297 for the comparable period of 1997. Expenses incurred during the nine month period ended September 30, 1998 were $43,235,035 compared to $31,464,628 for the comparable period in 1997. Net underwriting loss for the Company was $822,466 for the nine month period ended September 30, 1998 compared to a net underwriting gain of $1,766,669 for the comparable period in 1997. The loss ratio for the nine month period ended September 30, 1998 was 76.0%, compared to 67.5% for the nine month period ended September 30, 1997. Losses during each quarter arise from contracts issued by the ceding company during the preceding six year period. The increase in the loss ratio of the Company during 1998 reflect changes in the pricing of contracts during the preceding six year period. The loss ratio is also influenced by loss experience which in turn is heavily influenced by the type of repairs and price of repaired parts. During the second and third quarters of 1998, many areas of the United States experienced unusually hot weather. These weather patterns resulted in a higher number of covered repairs for mechanical components such as air conditioners and water pumps which contributed to higher loss costs. Losses in the third quarter also reflect, in part, implementation of previously announced increases in suggested list prices of parts to dealers. Investment income for the quarter ended September 30, 1998 was $3,983,797 compared to $2,125,131 for the comparable period of 1997. Investment income for the nine month period ended September 30, 1998 was $7,895,622 compared to $3,988,799 for the comparable period of 1997. During the quarter ended September 30, 1998, the Company realised gains on the sale of investment securities of $2,269,101, compared to realised gains of $802,776 during the comparable period of 1997. The significant increase in realised gains during the quarter ended September 30, 1998 is primarily due to the uncertainty in the US stock market which precipitated a move by investors to the more stable US$ bond markets. The Asian crisis which commenced in the fourth quarter 1997 and which has affected global stock markets throughout the first nine months of 1998 has generally led to a move in capital from these markets to the more secure bond markets. The Company's bond portfolio was well positioned to take advantage of opportunities to realise gains on sales of investment during this period. As of September 30, 1998, the Company had net unrealised appreciation of $2,107,029 on its investments compared to $1,135,201 as of December 31, 1997. For the quarter ended September 30, 1998, the Company had interest income of $1,714,696 compared to $1,322,355 for the comparable period of 1997. For the nine month period ended September 30, 1998, the Company had interest income of $4,520,786 compared to $3,797,281 for the comparable period of 1997. These increases were largely attributable to an increase in funds available for investment. Year 2000 Many computerized systems and microprocessors that are used by the Company's Manager have the potential for operational problems if they lack the ability to handle the transition to the Year 2000. The effects of the Year 2000 issue are also complicated by the Company's dependence on its common shareholder, from whom the Company assumes all of its business, as well as other service providers such as investment advisors and custodians. The Year 2000 issue has the potential to cause disruption to the business of the Company and its customers. In early 1998, the Company initiated communications with its Manager and other service and technology providers in order to assess and reduce the risk that the Company's operations could be adversely affected by the failure of these third parties to adequately address the Year 2000 issue. Motors Insurance Corporation, the Company's key retroceding company and common shareholder, has completed its Year 2000 assessment phase and is targeting the end of 1998 for remediation of its critical systems. The Company does not separately own or license any computers or computer software applications, instead it has outsourced these functions through an Insurance Management Agreement. To date, the Company has not incurred, expensed or capitalized amounts related to the Year 2000 remediation. The Company does not expect to incur incremental expenses or to forego or delay information technology projects due to Year 2000. In view of the foregoing, the Company does not currently anticipate that it will experience a significant disruption of its business as a result of the Year 2000 issue. However, there is still uncertainty about the broader scope of the Year 2000 issue as it may affect the Company and third parties that are critical to the Company's operations. In the event that the Company or its service providers are unable to complete remedial actions or are unable to implement adequate contingency plans in the event that problems are encountered, there could be a material adverse effect on the Company's business, results of operations or financial condition. 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. 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: October 20, 1998 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 quarter ended September 30, 1998 and is qualified in its entirety by reference to such financial statements. 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 88,287,656 0 0 0 0 0 88,287,656 19,136,437 0 28,019,552 138,151,809 5,159,932 107,780,771 0 0 0 0 0 200,000 24,933,338 138,151,809 42,412,569 4,520,786 3,374,836 0 31,893,344 10,908,226 433,465 7,073,156 0 7,073,156 0 0 0 7,073,156 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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