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, 2001
/ / 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
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(Exact name of registrant as specified in its charter)
Barbados N/A
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Bishops Court Hill, St. Michael, Barbados N/A
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(Address of principle executive offices) (Zip Code)
(246) 436-4895
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(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, 2001
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Common Stock, no par-value 2,000
Participating Stock, no par-value 25,700
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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, 2001 and December 31, 2000.
2. Statements of Operations and Retained Earnings for the
three-month periods ended March 31, 2001 and 2000.
3. Statements of Cash Flows for the three-month periods ended March
31, 2001 and 2000.
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.
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MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
BALANCE SHEETS
(Expressed in U.S. Dollars)
March 31, 2001 December 31,
(unaudited 2001
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ASSETS
Investments $ 88,986,421 $ 92,121,679
Cash and cash equivalents 1,525,559 1,736,235
Accrued investment income 828,365 903,734
Deferred acquisition costs 23,683,210 23,898,021
Prepaid expenses 231,427 227,250
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Total Assets $115,254,982 $118,886,919
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LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Unearned premiums $ 91,089,267 $ 91,915,465
Loss reserves 4,726,077 4,754,710
Accrued liabilities 149,166 125,953
Due to Motors Insurance Corporation 783,540 968,864
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Total liabilities 96,748,050 97,764,992
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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 -
25,700 shares as of March 31, 2001
and 25,900 shares as of
December 31, 2000 1,927,500 1,942,500
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2,127,500 2,142,500
Retained Earnings 14,293,154 16,247,004
Accumulated other comprehensive income 2,086,278 2,732,423
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Total Stockholders' Equity 18,506,932 21,121,927
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Total Liabilities and
Stockholders' Equity $115,254,982 $118,886,919
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MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS FOR THE THREE
MONTH PERIODS ENDED MARCH 31, 2001 AND MARCH 31, 2000
(UNAUDITED)
(Expressed in U.S. Dollars)
Three Month Period
Ended March 31,
2001 2002
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INCOME
Reinsurance premiums assumed $12,703,111 $14,051,229
(Increase)\decrease in unearned premiums (826,198) 577,401
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Premiums earned 13,529,309 13,473,828
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Investment income
Interest earned 1,146,202 1,319,822
Realized gains\(losses)
on investments 444,682 (989,908)
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Investment income 1,590,884 329,914
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TOTAL INCOME 15,120,193 13,803,742
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EXPENSES
Acquisition costs 3,538,394 3,506,888
Losses paid 10,171,113 10,781,962
Decrease in loss reserves (28,633) (9,316)
Administrative expenses
- Related Parties 56,674 54,187
- Other 123,255 116,129
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TOTAL EXPENSES 13,860,803 14,449,850
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NET INCOME(LOSS) 1,259,390 (646,108)
RETAINED EARNINGS, beginning of period 16,247,004 13,190,576
LESS: DIVIDENDS (3,083,096) 0
REDEMPTION OF PARTICIPATING STOCK (130,144) (1,312)
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RETAINED EARNINGS, end of period $14,293,154 $12,543,156
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MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
STATEMENTS OF CASH FLOWS FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 2001 AND MARCH 31, 2000
UNAUDITED
(Expressed in U.S. Dollars)
Three Month Periods
Ended March 31,
2001 2002
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Cash flows from operating activities:
Reinsurance premiums collected $ 11,102,794 $ 23,374,340
Reinsurance premiums returned 0 (24,934,234)
Losses and acquisition expenses paid (12,090,711) (23,685,786)
Acquisition expenses reversed and
returned premium 0 6,842,901
Administrative expenses paid (136,885) (187,206)
Investment income received 1,208,571 2,170,308
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Net cash provided by\(used in)
operating activities 83,769 (16,419,677)
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Cash flows from investing activities:
Purchases of investments (19,573,823) (421,155,283)
Sales and maturities of investments 22,507,618 424,525,689
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Net cash provided 2,933,795 3,370,406
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Cash flows from financing activities:
Proceeds from issuance of
Participating Stock 0 0
Redemption of Participating Stock (145,144) (8,812)
Dividends paid (3,083,096) 0
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Net cash used in financing activities (3,228,240) (8,812)
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Decrease in cash and cash equivalents (210,676) (13,058,083)
Cash and cash equivalents,
beginning of period 1,736,235 26,602,226
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Cash and cash equivalents, end of period $ 1,525,559 $13,544,143
============ ============
Reconciliation of net income\(loss)
to net cash provided by operating
activities:
Net income\(loss) 1,259,390 (646,108)
Realized (gains)\losses on investments (444,682) 989,908
Change in:
Accrued investment income 75,369 944,508
Deferred acquisition costs 214,811 (156,309)
Prepaid expenses (4,177) (236)
Unearned premiums (826,198) 577,401
Loss reserves (28,633) (9,316)
Accrued liabilities 23,213 (141,562)
Due to Motors Insurance Corporation (185,324) (17,977,963)
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Net cash provided by\(used in) operating activities $ 83,769 $(16,419,677)
============ ============
Item 2. Management's Discussion And Analysis of Financial Condition
And Results of Operations
Liquidity. It is anticipated that the Company will 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
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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 March 21, 2001 the Board of Directors authorized the payment of dividends to
eligible holders of Participating Shares aggregating $3,083,096.
Capital Resources. During the quarter ended March 31, 2001, no new series of
Shares were added and 2 series were redeemed bringing the total number of series
issued and outstanding to 257 as of the end of the quarter. As of March 31,
2001, the share capital of the Company was $2,127,500 (compared with $2,142,500
as of December 31, 2000) comprised of paid in capital with respect to the Common
Stock of $200,000 and paid in capital with respect to Participating Shares of
$1,927,500 (compared with $1,942,500 as of December 31, 2000). In addition, the
Company had surplus from retained earnings in the amount of $14,293,154 as of
March 31, 2001 compared with $16,247,004 as of December 31, 2000. The net
decrease in retained earnings is attributable to the dividend payment on March
21, 2001.
Results of Operations. During the quarter ended March 31, 2001, the Company had
a net income of $1,259,390, compared with a net loss of $646,108 for the quarter
ended March 31, 2000. As discussed below, the increase in net income for the
quarter ended March 31, 2001 compared to the comparable period of 2000 is the
result of significantly improved underwriting performance and investment
returns.
Premiums earned increased to $13,529,309 during the quarter ended March 31, 2001
compared to $13,473,828 for the same period in 2000. Expenses incurred during
the quarter ended March 31, 2001 were $13,860,803 compared to $14,449,850 for
the comparable quarter of 2000. The decrease in expenses incurred was
attributable to a decrease in losses incurred. The net underwriting loss for the
quarter ended March 31, 2001 was $331,494 compared to $976,022 for the
comparable period in 2000. The ratio of losses incurred to premiums earned for
the quarter under review was 75% compared to 80% for the comparable period in
2000.
Investment income for the quarter ended March 31, 2001 was $1,590,884 compared
to $329,914 for the comparable period of 2000. During the quarter under review,
the Company realized gains on the sale of its fixed-income securities of
$444,682 compared to losses of $989,908, during the comparable period of 2000.
As of March 31, 2001, the Company had net unrealized appreciation of $2,086,278
on its investments compared to $2,732,423 as of December 31, 2000. The change in
the amount of the unrealized position on the portfolio as of March 31, 2001
compared to December 31, 2000 is attributable to the sale of fixed income
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securities plus an unrealized decrease on the Company's investment in an
international equity fund due to continued uncertainty in the equity markets.
For the quarter ended March 31, 2001 the Company had interest income of
$1,146,202 compared to $1,319,822 for the comparable period of 2000. This
decrease is in large part attributable to the transfer of $6 million of the
Company's investment portfolio from fixed-income securities to equity securities
prior to the quarter ended March 31, 2001 and subsequent to the comparable
period in 2000.
Forward Looking Statements. The foregoing Management Discussion and Analysis
contains various forward looking statement 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 form those
anticipated.
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PART II. OTHER INFORMATION
Item 6. 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
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Ronald W. Jones
Vice President, Finance
Signing on behalf of
the Registrant, and
Principal Financial Officer
Dated: May 14, 2001
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