10-Q 1 form10q.txt FORM 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 September 30, 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 ----------------------------------------------------------------- (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 principal 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, 2001 Common Stock, no par-value 2,000 Participating Stock, no par-value 25,100 1 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, 2001 and December 31, 2000. 2. Statements of Operations and Retained Earnings for the three month periods ended September 30, 2001 and 2000 and the nine month periods ended September 30, 2001 and 2000. 3. Statements of Cash Flows for the nine month periods ended September 30, 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. The information furnished for the three and nine month periods ended September 30, 2001 may not be indicative of results for the full year. 2

Certain amounts from 2000 have been reclassified to conform with 2001 classification 3

MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED STATEMENTS OF CASH FLOWS FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2001 AND SEPTEMBER 30, 2000 (Expressed in U.S. Dollars)

Certain amounts from 2000 have been reclassified to conform with 2001 classification 5 Item 2. Management's Discussion And Analysis of Financial Condition And Results of Operations Liquidity. It is anticipated that Motors Mechanical Reinsurance Company, Limited (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 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. 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 September 30, 2001 no new series of Participating Shares were added and 5 series were redeemed as a result of the business attributable to such series becoming fully earned, bringing the total number of series issued and outstanding to 251 at September 30, 2001. As of September 30, 2001 the share capital of the Company was $2,082,500 (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 $1,882,500 (compared with paid in capital with respect to Common Stock of $200,000 and paid in capital with respect to Participating Shares of $1,942,500 as of December 31, 2000). In addition, the Company had retained earnings in the amount of $16,108,321 as of September 30, 2001 compared with $16,247,004 as of December 31, 2000. The net decrease in retained earnings is attributable to the dividend payment of $3,083,096 during the first quarter of 2001 and payments made with respect to redeemed series of Participating Shares during the nine months ended September 30, 2001, offset by net income for the nine months ended September 30, 2001. Results of Operations. During the quarter ended September 30, 2001 the Company had net income of $923,510, compared with net income of $501,208 for the comparable period in 2000. For the nine month period ended September 30, 2001 the Company had net income of $3,305,311 compared with net income of $769,983 for the comparable period in 2000. As discussed below, the increases in net income for the quarter and nine month periods ended September 30, 2001 compared to the comparable periods of 2000 are the result of improved underwriting performance and increases in realized returns on the Company's investment portfolio. Premiums earned decreased slightly to $13,378,319 during the quarter ended September 30, 2001 compared to $13,759,089 for the comparable period in 2000. Expenses incurred during the quarter ended September 30, 2001 were $13,901,540 compared to $14,495,228 for the comparable period in 2000. The Company experienced a net underwriting loss for the quarter ended September 30, 2001 of $523,221 compared to an underwriting loss of $736,139 for the comparable period in 2000. The ratio of losses incurred to premiums earned for the quarter under review was 76.8% compared to 78.4% for the comparable period in 2000. Other than as noted above, there were no significant items to report for the quarter ended September 30, 2001. 6 For the nine month period ended September 30, 2001 the Company had earned premiums of $40,222,185 compared to $40,747,817 for the comparable period of 2000. Expenses incurred during the nine month period ended September 30, 2001 were $41,440,809 compared to $42,666,522 for the comparable period in 2000. The net underwriting loss for the Company was $1,218,624 for the nine month period ended September 30, 2001 compared to an underwriting loss of $1,918,705 for the comparable period in 2000. The ratio of losses incurred to premiums earned for the nine month period ended September 30, 2001 was 75.6% compared to 77.4% for the comparable period in 2000. Other than as noted above there were no unusual or significant items to report for the nine months ended September 30, 2001. The moderate decreases in earned premium and expenses as noted above for the quarter and nine month periods ended September 30, 2001 compared to the comparable periods of 2000, were in large part attributable to the fact that the number of active series of Participating Shares has been declining over that period and an increasing number of policies reinsured by the Company are reaching a fully earned position. The fluctuations in loss ratios for the quarter and nine month periods ended September 30, 2001 compared to the comparable periods of 2000 reflect normal variations in loss experience, which are expected for the type of business underwritten. The Company's loss ratios for the first nine months of 2001 have continued to reflect an improvement in performance by comparison to 2000 primarily as a result of continuing efforts by the ceding company to control losses. Investment income for the quarter ended September 30, 2001 was $1,446,731 compared to $1,237,347 for the comparable period of 2000. Investment income for the nine month period ended September 30, 2001 was $4,523,935 compared to $2,688,688 for the comparable period of 2000. During the quarter ended September 30, 2001 the Company realized gains on the sale of investment securities of $460,275 compared to realized gains of $275,544 during the comparable period of 2000. During the nine month period ended September 30, 2001 the Company realized gains on the sale of investment securities of $1,197,313 compared to realized losses of $891,474 during the comparable period of 2000. Also, during the nine month period ended September 30, 2001 the cash flows arising from purchases and sales of investments decreased from the comparable period of 2000 due to increased activity by the investment manager in investing in shorter term cash and cash equivalents during 2000. The Company realized gains on the sale of investment securities during the quarter and the nine month period ended September 30, 2001 as a result of sales of fixed income securities, the value of which had increased as a result of decreases in market interest rates. In addition, the Company realized losses during the nine month period ended September 30, 2000 as a result of management's decision to allow the newly appointed investment manager to sell off certain securities which had an unrealized loss position in order to reposition the fixed income portfolio in accordance with new investment guidelines adopted by the Company's Board of Directors. 7 The unrealized appreciation on investments was $622,243 at September 30, 2001 compared to $2,732,423 at December 31, 2000. This decrease is mainly due to a decrease in the market value of the Company's investment in an international equity fund, partially offset by an increase in the Company's unrealized gain position in its fixed income portfolio. For the quarter ended September 30, 2001 the Company had interest income of $986,456 compared to $961,803 for the comparable period of 2000. For the nine month period ended September 30, 2001 the Company had interest income of $3,326,622 compared to $3,580,162 for the comparable period of 2000. The decrease in the nine month period ended September 30, 2001 was largely attributable to corresponding decreases in coupon rates as the new investment guidelines were adopted in 2000 as noted above. Forward Looking Statements. The foregoing Management Discussion and Analysis contains various forward looking statements 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 from those anticipated. 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. 8 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: November 9, 2001 9

MOTORS MECHANICAL REINSURANCE CO LTD 10-Q