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, 1996
____________________________
_____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)
(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 June 30, 1996
_____ ___________________
Common Stock, no par-value 2,000
Participating Stock, no par-value 24,500
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, June 30, 1996 and December 31,
1995.
2. Statements of Income and Retained Earnings for the
three month periods ended June 30, 1996 and 1995
and the six month periods ended June 30, 1996 and
1995.
3. Statements of Cash Flows for the six month periods
ended June 30, 1996 and 1995.
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 1995 financial statements have been reclassified
to conform with the 1996 presentation.
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
BALANCE SHEETS
(Expressed in U.S. Dollars)
June 30,1996 December 31,
(unaudited) 1995
_____________ ____________
ASSETS
Investments $58,271,378 $59,898,265
Cash and cash equivalents 11,185,096 7,093,106
Accrued investment income 1,763,458 2,532,813
Due from Motors Insurance Corporation 3,393,389 3,095,587
Deferred acquisition costs 20,471,787 18,907,205
Prepaid expenses 28,223 0
___________ ___________
Total Assets $95,113,331 $91,526,976
___________ ___________
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Unearned premiums $78,767,072 $72,752,532
Loss reserves 3,826,410 3,480,334
Accrued liabilities 163,444 117,447
___________ ___________
Total liabilities 82,756,926 76,350,313
___________ ___________
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 -
24,500 shares as of June 30,
1996 and 24,100 shares as of
December 31, 1995 1,837,500 1,807,500
___________ ___________
2,037,500 2,007,500
Retained Earnings 10,759,701 11,517,542
Unrealized (depreciation)
appreciation on investments (440,796) 1,651,621
___________ ___________
Total Stockholders' Equity 12,356,405 15,176,663
___________ ___________
Total Liabilities and Stockholders'
Equity $95,113,331 $91,526,976
___________ ___________
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE THREE
MONTH PERIODS ENDED JUNE 30, 1996 AND JUNE 30, 1995 AND THE
SIX MONTH PERIODS ENDED JUNE 30, 1996 AND JUNE 30, 1995
(UNAUDITED)
(Expressed in U.S. Dollars)
Three Month Periods Six Month Periods
Ended June 30, Ended June 30,
INCOME 1996 1995 1996 1995
____________ ____________ ____________ ____________
Reinsurance premiums
assumed $11,911,576 $10,763,438 $23,024,253 $20,406,164
Increase in unearned
premiums 3,139,214 3,914,790 6,014,540 7,245,127
__________ __________ __________ __________
Premiums earned 8,772,362 6,848,648 17,009,713 13,161,037
__________ __________ __________ __________
Investment income
Interest earned 1,375,216 977,405 2,359,328 1,876,395
Realized gains
(losses) on
investments (722,359) 1,121,995 31,102 592,286
__________ __________ __________ __________
Investment income 652,857 2,099,400 2,390,430 2,468,681
__________ __________ __________ __________
TOTAL INCOME 9,425,219 8,948,048 19,400,143 15,629,718
__________ __________ __________ __________
EXPENSES
Acquisition costs 2,280,495 1,780,169 4,421,789 3,420,943
Losses paid 5,455,423 4,230,423 10,989,772 8,502,072
Increase in
loss reserves 233,949 227,225 346,076 323,384
Administrative
expenses
- Related Parties 59,638 50,263 108,429 119,780
- Other 110,911 126,789 232,906 239,943
__________ __________ __________ __________
TOTAL EXPENSES 8,140,416 6,414,869 16,098,972 12,606,122
__________ __________ __________ __________
NET INCOME 1,284,803 2,533,179 3,301,171 3,023,596
RETAINED EARNINGS,
beginning of period 13,533,910 6,287,149 11,517,542 5,796,732
LESS: DIVIDENDS (4,007,483) (1,188,614) (4,007,483) (1,188,614)
LESS: REDEMPTIONS OF
PARTICIPATING STOCK (51,529) 0 (51,529) 0
__________ ___________ __________ __________
RETAINED EARNINGS,
end of period $10,759,701 $7,631,714 $10,759,701 $7,631,714
____________ ___________ ___________ __________
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
STATEMENTS OF CASH FLOWS FOR THE SIX MONTH PERIODS ENDED
JUNE 30, 1996 AND JUNE 30, 1995 (UNAUDITED)
(Expressed in U.S. Dollars)
Six Month Periods Ended
June 30,
1996 1995
____________ ____________
Cash flows from operating activities:
Reinsurance premiums assumed $22,232,098 $19,495,823
Losses and underwriting expenses paid (16,515,466) (13,396,827)
Administrative expenses paid (290,861) (361,447)
Investment income received 3,129,659 1,722,432
___________ ___________
Net cash provided by operating activities 8,555,430 7,459,981
___________ ___________
Cash flows from investing activities:
Purchases of investment securities (115,555,008) (85,402,614)
Sales and maturities of investment
securities 115,120,580 80,426,463
___________ ___________
Net cash invested (434,428) (4,976,151)
___________ ___________
Cash flows from financing activities:
Proceeds from issuance of Participating
stock 52,500 90,000
Redemptions of Participating stock (74,029) 0
Dividends paid (4,007,483) (1,188,614)
___________ ___________
Net cash used in financing activities (4,029,012) (1,098,614)
___________ ___________
Increase in cash and cash equivalents 4,091,990 1,385,216
Cash and cash equivalents, beginning
of period 7,093,106 3,303,060
___________ ___________
Cash and cash equivalents, end
of period $11,185,096 $ 4,688,276
___________ ___________
Reconciliation of net income to net cash
provided by operating activities:
Net income 3,301,171 3,023,596
Realized gains on investments (31,102) (592,286)
Foreign exchange losses on investments 0 (137,929)
Change in:
Accrued investment income 769,355 (19,534)
Due from Motors Insurance Corporation (297,802) (602,564)
Deferred acquisition costs (1,564,582) (1,884,713)
Prepaid expenses (28,223) (1,250)
Unearned premiums 6,014,540 7,245,127
Loss reserves 346,076 323,384
Accrued liabilities 45,997 106,150
__________ ___________
Net cash provided by operating activities $ 8,555,430 $ 7,459,981
___________ ___________
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
forseeable future.
On April 11, 1996, the Board of Directors authorized the payment
of dividends to eligible holders of Participating Shares
aggregating $4,007,483. In addition, the Board authorized the
redemption, for a total of $74,039, of 3 series of shares in run
off that were fully earned out.
Capital Resources. During the quarter ended June 30, 1996, 2 new
series of Shares were added bringing the total number of series
issued and outstanding to 245 as of the end of the quarter. As
of June 30, 1996, the share capital of the Company was $2,037,500
(compared with $2,007,500 as of December 31, 1995) comprised of
paid in capital with respect to the Common Stock of $200,000 and
paid in capital with respect to Participating Shares of
$1,837,500 (compared with $1,807,500 as of December 31, 1995).
In addition, the Company had surplus from retained earnings in
the amount of $10,759,701 as of June 30, 1996 compared with
$11,517,542 as of December 31, 1995.
Results of Operations. During the quarter ended June 30, 1996,
the Company had net income of $1,284,803, compared with net
income of $2,533,179 for the quarter ended June 30, 1995. For
the six month period ended June 30, 1996, the Company had net
income of $3,301,171, compared with net income of $3,023,596 for
the comparable period in 1995. As discussed below, the decrease
in net income for the quarter ended June 30, 1996 compared to the
comparable period of 1995 is the result of losses on the sale of
investment securities which offset increases in interest earned
and underwriting income.
Premiums earned increased to $8,772,362 during the quarter ended
June 30, 1996 compared to $6,848,648 for the same period in 1995.
Expenses incurred during the quarter ended June 30, 1996 were
$8,140,416 compared to $6,414,869 for the comparable quarter of
1995. Net underwriting income for the quarter ended June 30,
1996 was $631,946 compared to $433,779 for the comparable period
in 1995. The ratio of losses incurred to premiums earned for the
quarter under review was 64.9% compared to 65.1% for the
comparable period in 1995.
For the six month period ended June 30, 1996, the Company had
earned premiums of $17,009,713 compared to $13,161,037 for the
comparable period of 1995. Expenses incurred during the six
month period under review were $16,098,972 compared to
$12,606,122 for the comparable period in 1995. The increase in
expenses is attributable to higher claims costs and increased
policy acquisition costs resulting from increased premium
volumes. As a result, net underwriting income for the Company
was $910,741 for the six month period under review compared to
$554,915 for the comparable period in 1995. The loss ratio for
the six month period ended June 30, 1996 was 66.6%, compared to
67.1% for the six month period ended June 30, 1995.
Investment income for the quarter ended June 30, 1996 was
$652,857 compared to $2,099,400 for the comparable period of
1995. Investment income for the six month period under review
was $2,390,430 compared to $2,468,681 for the comparable period
of 1995. During the quarter under review, the Company incurred
losses on the sale of investment securities of $722,359, compared
to gains of $1,121,995 during the comparable period of 1995.
During the six month period under review, the Company realized
net gains on the sale of investment securities of $31,102,
compared to $592,286 during the comparable period of 1995. As of
June 30, 1996, the Company had net unrealized depreciation of
$440,796 on its investments compared to unrealized appreciation
of $1,651,621 as of December 31, 1995. The losses on the sale of
investment assets during the quarter and the decrease in net
gains during the six month period under review compared to the
corresponding periods in 1995 and the change in the unrealized
appreciation (depreciation) as of June 30, 1996 compared to
December 31, 1995 are in large part attributable to increases in
long term interest rates during the second quarter of 1996 which
resulted in decreases in the market value of the Company's
investment portfolio.
For the quarter ended June 30, 1996, the Company had interest
income of $1,375,216 compared to $977,405 for the comparable
period of 1995. For the six month period under review, the
Company had interest income of $2,359,328 compared to $1,876,395
for the comparable period of 1995. These increases were largely
attributable to increases in the amount of assets under
management combined with higher interest rates.
PART II. OTHER INFORMATION
Item 2. Changes in Securities
(a) At the annual meeting of shareholders of the Company held
on April 11, 1996, the Company's Restated Articles of
Incorporation were amended to provide that each series of
shares will directly bear, to the extent of available
balances, 100% of losses incurred with respect to
business attributable to that series.
(b) At a special meeting of shareholders of the Company held
on June 21, 1996, the Company's Restated Articles of
Incorporation were amended to provide that any expenses
or liabilities attributable to ordinary day-to-day
Company operations, excluding any United States Federal
income taxes, shall be allocated beginning July 1, 1996,
among all Subsidiary Capital Accounts for the Shares pro
rata in accordance with the number of series issued and
outstanding at the end of the fiscal quarter immediately
preceding the fiscal quarter in which the expense or
liability is incurred, provided, that for purposes of
such allocation, series of shares issued during the
current calendar year and series with respect to which
unearned premium is zero as of the date of such
allocation, shall be excluded. (See Item 4.)
Item 4. Submission of Matters to a Vote of Security-Holders
At the annual meeting of shareholders of the Company held on April
11, 1996, the holder of the Common Stock elected one director, John
J. Dunn, Jr., and re-elected four directors, William B. Noll, Louis
S. Carrio, Jr., Bernard J. Buselmeier, and Peter R.P. Evelyn. The
holders of Participating Shares unanimously elected the sixth
director, Warren R. Weidner. The holder of the Common Shares also
re-elected Robert E. Capstack as alternative director for Mr.
Carrio. In addition, the shareholders also voted unanimously (i)
to approve an amendment of the Company's By-laws to permit non-
directors to serve on committees established by the board of
directors, and (ii) to approve an amendment of the Company's
Restated Articles of Incorporation as discussed in paragraph (a) of
Item 2 of this Part II.
At the special meeting of shareholders of the Company held on June
21, 1996, the shareholders voted to amend the Restated Articles of
Incorporation of the Company as discussed in paragraph (b) of Item
2 of this Part II. All shares of Common Stock were voted in favor
of the amendment and 5,441 Participating Shares were voted in favor
of the amendment while 100 Participating Shares were voted against
the amendment. There were no abstentions or broker non-votes with
respect to the amendment.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(3(i)) Restated Articles of Incorporation and Amendments Thereto
(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: July 24, 1996