SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

  X      Annual Report Pursuant to Section 13 or 15(d) of
-----    The Securities Exchange Act of 1934

For the fiscal year ended December 31, 1997

                                       Or

         Transition Report Pursuant to Section 13 or 15(d) of
-----    The Securities Exchange Act of 1934

                         Commission file number 33-6534

                 MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
             (Exact name of registrant as specified in its charter)

         Barbados                               Not Applicable
(State or other jurisdiction             (I.R.S. employer identification
of incorporation or organization)                   number)


Financial Services Centre
Bishops Court Hill                              Not Applicable
St. Michael, Barbados, W.I.                       (Zip Code)
(Address of principal
executive offices)

Registrant's telephone number, including area code (246) 436-4895


Securities registered pursuant to Section 12(b) of the Act:

                                                 Name of each
Title of each class                       Exchange on which registered

       None                                          None


Securities registered pursuant to Section 12(g) of the Act:

                                      None


     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 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 by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]

     Aggregate  market value of the voting stock held by  non-affiliates  of the
registrant as of March 1, 1998, was $2,152,500.*

     Indicate  the  number of  shares  outstanding  of each of the  registrant's
classes of common stock, as of the latest practicable date.

                   Class                                As of March 1, 1998
                   -----                                -------------------

     Common Stock, no-par value                                 2,000
     Participating Stock, no-par value                         28,700


* Based on current offering price of $75 per share.


                                     PART I

Item 1.  BUSINESS

INTRODUCTION

Motors Mechanical Reinsurance Company, Limited (the "Company") was incorpo rated
in Barbados on June 12, 1986. It became  registered in Barbados as an insurer on
June 30, 1986 and commenced insurance operations on December 11, 1987.

The  business  of the  Company is the  assumption  of motor  vehicle  mechanical
service   agreements  arising  under  insurance  policies  reinsured  by  Motors
Insurance Corporation ("MIC") to the extent such policies are attributable to an
MIC  Mechanical  account  in  respect  of which a series of shares is issued and
outstanding (the "Policies"). These policies are issued either to General Motors
Corporation or affiliates ("GM") or to automobile dealers, reinsured by MIC, and
retroceded  to the Company.  Shares of the  Company's  Participating  Stock (the
"Shares")  are sold to  persons  designated  by  owners of motor  vehicle  sales
franchises  with respect to which MIC  maintains an MIC  Mechanical  Account.  A
separate series is created for Shares  relating to each MIC Mechanical  Account,
and a separate  "Subsidiary Capital Account" is maintained for each such series.
The  profitability  of the Company  reflects both  underwriting  and  investment
experience, which is allocated among the Subsidiary Capital Accounts.

THE RETROCESSION

The Retroceding  Company.  MIC, the retroceding  company under the  Retrocession
Agreement described below, is a stock insurance company organized under the laws
of New York. All of MIC's outstanding stock is owned by GMAC Insurance Holdings,
Inc., a subsidiary of General Motors Acceptance Corporation which, in turn, is a
wholly  owned  subsidiary  of GM. MIC,  directly  and through its  subsidiaries,
offers  property  and  casualty  coverages  in all 50 states and the District of
Columbia,  Canada,  Europe, Latin America and Asia Pacific. MIC consistently has
been awarded A.M. Best Company's  insurance  financial rating of A + (Superior),
one of the highest possible ratings.

The Retrocession Agreement -- Principal Agreement.  The Company has entered into
a "quota share" retrocession  agreement (the "Agreement") which became effective
as of December  11,  1987.  Pursuant to the  Agreement,  MIC  retrocedes  to the
Company,  and the  Company is  obligated  to assume,  MIC's  risks in respect of
policies  issued by any MIC  subsidiary  and  reinsured  by MIC that cover motor
vehicle  mechanical  service  agreements,  to the extent  that risks  under such
policies are  attributable  to an MIC  Mechanical  Account in respect of which a
series of Shares is issued and outstanding.  MIC retrocedes 100% of the risk and
the Company  receives  75% of the  original  gross  premium,  reduced by agents'
commissions, if any, and cancellations.  The remaining 25% of the net premium is
retained by MIC as a ceding commission. The Company assumes 75% of the risk with
respect to these policies and MIC pays 56.25% of the net premium at the time the
policies are written.  The remaining 25% of the risk is ceded to the Company and
MIC pays 18.75% of the net premium as the premiums are earned.  Net  settlements
between the Company and MIC are made  quarterly and  accordingly  will fluctuate
quarter to quarter.

The Agreement may be terminated at any time by mutual consent of the parties, or
by either party upon 30 days written notice.  Upon termination of the Agreement,
MIC and the Company will remain bound by their respective  obligations under the
Agreement with respect to risks retroceded prior to the close of business on the
date of termination.  However, risks not yet retroceded to the Company under the
Agreement shall remain risks of MIC.

The  Retrocession  Agreement --  Supplemental  Agreement.  MIC from time to time
enters into agreements with Franchise owners for which an MIC Mechanical Account
is  established,  pursuant  to which  MIC,  acting  for  itself and on behalf of
certain of its  subsidiaries,  agrees to cede or retrocede to another  insurance
company  mutually  satisfactory to MIC and the respective  Franchise  owners the
unexpired liability on service contracts, insured under the Policies, sold after
the date  specified  in each  such  agreement.  This  liability  can be ceded or
retroceded to dealer-owned  companies  organized  specifically with respect to a
particular  Franchise  or, if a series of Shares is issued which  relates to the
Franchise,   pursuant  to  an  agreement   between  MIC  and  the  Company  (the
"Supplemental  Retrocession Agreement").  For this purpose,  unexpired liability
means MIC's  liability in respect of the remaining  period of coverage under the
Policy  as of  the  effective  date  of  the  cession.  Under  the  Supplemental
Retrocession  Agreement,  unexpired  liability  in  respect of the  Policies  is
assumed on the same basis as risks retroceded to the Company under the principal
Retrocession Agreement.

Types of Risks Subject to  Retrocession.  Coverages  assumed under the Agreement
are limited to service  contracts or insurance  policies insured or reinsured by
MIC that provide  indemnification  against  specific  motor  vehicle  mechanical
repairs  not covered by  manufacturer's  new vehicle  warranties.  Such  service
contracts or insurance  policies  often provide  additional  coverages,  such as
towing and rental allowances.

Loss Reserves.  Reserves are balance sheet liabilities representing estimates of
amounts  needed in the future to pay claims with respect to insured events which
have occurred as of the balance sheet dates.

For purposes of establishing  loss reserves,  the Company relies upon the advice
of MIC. Loss reserves are established after periodic actuarial reviews, based on
judgments of the effects of technological change, manufacturers' warranties, and
MIC's historical  experience with motor vehicle mechanical  service  agreements.
Consequently,  the  determination  of loss reserves is an estimate and a process
inherently  subject to a number of highly variable  factors.  Any adjustments to
reserves are  reflected in the  operating  results for the periods in which they
become known.

The  Company's  incurred  loss ratios  (losses  incurred as a percentage  of net
premium  earned) on all  mechanical  business  for the years ended  December 31,
1997, 1996, and 1995 were 68.1%, 66.6% and 67.5% respectively.

The  following  table sets forth an analysis of changes in the loss reserves for
the years ended December 31, 1997, 1996 and 1995:

                                                   Year Ended
                                -----------------------------------------------
                                  12/31/97          12/31/96          12/31/95
                                  --------          --------          --------
Beginning balance in
reserves for losses.........    $ 4,284,304       $ 3,480,334       $ 2,660,270
                                -----------       -----------       -----------
Add-provision for losses
incurred related to:

  Current claim year........     31,904,950        24,080,078        19,540,192

  Prior claim years.........       (746,024)          (42,251)         (109,160)
                                -----------        ----------       -----------
      Total.................     31,158,926        24,037,827        19,431,032
                                -----------        ----------       -----------
Deduct-paid losses
attributable to:

  Current claim year........     27,024,981        20,330,269        16,461,768

  Prior claim years.........      2,997,089         2,903,588         2,149,200
                                -----------        ----------       -----------
      Total.................     30,022,070        23,233,857        18,610,968
                                -----------        ----------       -----------
Ending balance in reserves
for losses..................    $ 5,421,160       $ 4,284,304       $ 3,480,334
                                ===========       ===========       ===========


The  following  table  analyzes the  development  of losses and loss  adjustment
expenses from January 1, 1992 through December 31, 1997.

<TABLE>
<CAPTION>
                                                        Years Ended
                           ----------------------------------------------------------------------
                            12/31/92    12/31/93    12/31/94    12/31/95    12/31/96    12/31/97
                            --------    --------    --------    --------    --------    --------
<S>                        <C>         <C>         <C>         <C>         <C>         <C>
Liability for unpaid
  claims and claims
  adjustment expense       $1,622,855  $1,910,030  $2,660,270  $3,480,334  $4,284,304  $5,421,160
                           ==========  ==========  ==========  ==========  ==========  ==========
Paid (cumulative) in
  subsequent year(s)       $1,261,788  $1,552,900  $2,149,200  $2,903,588   2,997,089

Estimated unpaid
  liability as of
  year end*                   226,818     293,406     401,910     534,495     541,191
                           ----------  ----------  ----------  ----------  ----------
Cumulative Deficiency
  (Redundancy)             $ (134,249) $  (63,724) $ (109,160) $  (42,251) $ (746,024)
                           ==========  ==========  ==========  ==========  ==========


*    Because  mechanical  breakdown  claims are generally paid within 90 days of
     when they are incurred, liability for unpaid claims incurred in prior years
     is  negligible.  Accordingly,  liability for unpaid claims  incurred in all
     prior years has been combined at each year end.
</TABLE>


The table shows initial  estimated  reserves at December 31, 1997,  1996,  1995,
1994,  1993, and 1992 and amounts paid on claims  unsettled at each prior period
end.  Claims  are  typically  processed  for  payment  at the time the  claim is
reported.  Therefore,  the recorded claim  liability at each year end represents
the  estimated  incurred  but not  reported  claims and claims in the process of
payment. The cumulative  deficiency or redundancy represents the total change in
reserve estimates covering prior years.

The policies  reinsured by the Company are written for multiple years (up to six
years) and losses do not occur  equally  over the period for which the policy is
written but tend to be clustered in the later years. Therefore,  loss experience
for prior years may not be indicative of that for future years.

INVESTMENT INCOME

A major  source of  income  to an  insurance  company  is  income  earned on the
investment  of amounts not  currently  required to meet losses or expenses.  The
principal  funds  available for investment by the Company come from  accumulated
capital  and the  cumulative  excess  of  premiums  collected  over  losses  and
operating expenses paid.

The  Company's  funds  are  invested  in a  manner  consistent  with  investment
guidelines  that are proposed by the  Investment  Committee  for adoption by the
Board.  The Company  invests  primarily  in U.S.  dollar-denominated  securities
issued outside of the United States by non-United States private or governmental
issuers  and U.S.  dollar-denominated  bank  certificates  of deposit  issued by
foreign banks and foreign branches of U.S. banks. Subject to the satisfaction of
certain conditions,  the Company may make limited investments in non-U.S. dollar
denominated bonds, on a fully currency-hedged basis. The Company may invest only
in securities and certificates which are rated at least Aa3 by Moody's or AA- by
Standard  & Poor's  or the  equivalent,  or are  guaranteed  by such an  issuer.
However,  certain unrated  securities may also be held if, in the opinion of the
investment  manager,  they have at least equivalent credit standing to the above
rating standard.  The Investment Committee reviews on a regular basis and, where
appropriate,   recommends  for  Board  approval   revisions  to  the  investment
objectives and guidelines for management of the Company's funds. There can be no
assurance,  however,  as to  whether a  particular  investment  objective,  once
adopted,  can be achieved or that adverse  factors would not cause a decrease in
the overall value of the Company's investment portfolio.

Investments  in  non-U.S.  securities,  particularly  those of  non-governmental
issuers, may involve  considerations not ordinarily  associated with investments
in U.S.  issuers.  These  considerations  include,  but are not  limited to, the
possibility of expropriation,  the  unavailability  of financial  information or
difficulty in  interpreting  such  information  when it is prepared  under local
accounting or regulatory  standards,  the possible negative impact of political,
social or diplomatic  developments,  and the possible  imposition of withholding
taxes by local taxing authorities.

Rothschild Asset Management  Limited  ("Rothschild")  manages the investment and
reinvestment of the Company's  funds in accordance with the investment  policies
and guidelines recommended by the Investment Committee and adopted by the Board.
Rothschild  is one of the  leading  institutions  engaged in the  management  of
offshore fixed-income  portfolios and has been providing this service since 1974
as an affiliate of NM Rothschild and Sons Limited,  a prominent merchant bank in
London which has been in the investment  management  business worldwide for more
than 100 years.  Rothschild  charges a management fee of 0.225% per annum on the
first  $20,000,000  of  assets  under  management,  0.20%  per annum on the next
$20,000,000  and 0.15% per annum on the excess thereof based on the market value
of the Company's investment portfolio at the end of each calendar quarter.

ALLOCATIONS TO SUBSIDIARY CAPITAL ACCOUNTS

The Company has  established  a Subsidiary  Capital  Account with respect to the
Common Stock as a class,  and  establishes  such an account with respect to each
series of Shares at the time a series is issued. Subsidiary Capital Accounts are
maintained solely for the purpose of the allocations described below, and do not
serve any other legal or accounting  function.  None of the Company's assets are
segregated or earmarked with respect to those accounts.

The  consideration  received by the Company  upon the  issuance of a  particular
series of Shares and the Common Stock as a class are allocated to the Subsidiary
Capital Account for that series or class. Items of income and expense and losses
attributable to insurance  underwriting  activities are determined and allocated
to the  Subsidiary  Capital  Accounts as of the end of each quarter.  Investment
experience,  and other  items of  income  and  expense,  gains  and  losses  and
distributions with respect to the Capital Stock, are determined and allocated to
the  Subsidiary  Capital  Accounts  as of the  end of  each  quarter.  All  such
accounting   determinations  are  made  using  accounting  principles  generally
accepted in the United States, unless otherwise required by the Articles.

For  purposes of the  following  description,  items shall be  "related"  to the
Subsidiary  Capital  Account for the series  identified  with the MIC Mechanical
Account to which such items can be attributed.

(1) Allocations with respect to underwriting activities are made as follows:

(a) With respect to premiums  ceded by MIC to the  Company,  100% to the related
Subsidiary Capital Account; provided, however, that an amount equal to 1-1/3% of
those  premiums,  net of related ceding  commissions,  are subtracted  from such
Subsidiary  Capital Account and allocated to the Subsidiary  Capital Account for
the Common Stock.

(b) With respect to any agents' or brokers' commissions, commissions recaptured,
unearned premiums, reinsurance premiums ceded, and any United States excise tax,
100% to the related Subsidiary Capital Account.

(c) With respect to losses incurred,  and any amount of losses recovered through
salvage,  subrogation,  reimbursement  or otherwise one hundred  percent  (100%)
shall be allocated to the related Subsidiary Capital Account. For the purpose of
this section (1)(c), losses incurred includes both paid and unpaid (reported and
unreported) losses.

(d) With respect to return premiums,  98-2/3% to the related  Subsidiary Capital
Account and 1-1/3% to the Subsidiary Capital Account for the Common Stock.

(2) Any expenses or liabilities  attributable to day-to-day Company  operations,
excluding any United States Federal income taxes,  shall be allocated  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.

(3) Any United States Federal income tax liability (and any interest  thereon or
any  penalties  related  thereto)  is  allocated  among the  Subsidiary  Capital
Accounts based upon the relative  contribution  of each of those accounts to the
taxable  income of the Company upon which the tax (or any interest or penalties)
is imposed.

(4) Any expenses or liabilities attributable to the sale and issuance of Shares,
including  but not  limited  to the costs of  compliance  with  regulations  and
requirements of the Securities and Exchange Commission and state securities laws
(but not  including  ongoing  periodic  reporting  costs),  are allocated to the
Subsidiary Capital Account for the Common Stock;  however,  MIC may undertake to
pay such expenses.

(5) Any  expenses or  liabilities  of the Company  not  allocable  in the manner
described in  paragraphs 2 through 4 above are  allocated  among the  Subsidiary
Capital  Accounts on the basis of the relative  balances of those accounts as of
the end of the quarter  preceding  the date on which the expense or liability is
incurred.

(6) (a) Investment  income, net of any direct investment  expense,  is allocated
among  the  Subsidiary  Capital  Accounts  pro  rata  based  upon  the  relative
Investment Asset Balance (as defined in subparagraph (b) below) of each of those
accounts as of the last day of the quarter  preceding  the quarter for which the
investment income is being allocated.  For these purposes, net investment income
includes realized (but not unrealized) gains and losses.

(b) The Investment Asset Balance of each Subsidiary  Capital Account is equal to
the capital and surplus of each account, increased by:

(i) the unearned  portions of the written  premiums that have been  collected by
the  Company  attributable  to those  accounts as of the last day of the quarter
preceding  the  quarter  for which the  income  is being  allocated,  net of any
applicable commissions and taxes;

(ii) the outstanding loss reserves  attributable to each of those accounts as of
the last day of the quarter  preceding the quarter for which the income is being
allocated; and

(iii) any other outstanding liability that has been charged to the account as of
the last day of the quarter  preceding the quarter for which the income is being
allocated.

(7) (a) If, after the credits and charges  described in paragraphs 1-6 above are
made to the Subsidiary Capital Accounts there exists a deficit in one or more of
the accounts, then each such deficit is allocated to and charged against:

(i) first, the Subsidiary  Capital Account for the Common Stock to the extent of
Restricted Earned Surplus (the phrase  "Restricted Earned Surplus" refers to the
portion of the earned surplus, if any, in the Subsidiary Capital Account for the
Common  Stock equal to that 1-1/3% of the premiums  ceded to the Company  during
the  immediately  preceding  five-year  period  which  was  subtracted  from the
Subsidiary  Capital  Accounts for the Shares pursuant to paragraph (1)(a) above,
net of losses  allocated  to that  account  during such  period  pursuant to the
allocation  procedure described in this paragraph (7) and net of return premiums
allocated  to  that  Account  during  such  period  pursuant  to the  allocation
procedure described in paragraph (1)(d) above);

(ii) then, the Subsidiary  Capital Accounts for the Shares, pro rata, based upon
the relative earned premiums  allocated to each such account for the quarter for
which the allocation is being made, provided,  however, that only accounts which
have positive balances are taken into account for purposes of this allocation;

(iii)  then,  the  remaining  Subsidiary  Capital  Accounts  for the Shares with
positive  balances as of the last day of the quarter for which the allocation is
being made, pro rata, based upon such balances; and

(iv)   then, to the extent necessary, the Subsidiary Capital Account for the
Common Stock.

(b) If, as a result of an allocation  of a deficit as described in  subparagraph
(ii) or (iii) of paragraph (a) above, a deficit is created in one or more of the
Subsidiary Capital Accounts, then the resulting deficit(s) are further allocated
in the  manner  provided  in that  subparagraph  before  applying  a  subsequent
subparagraph.

(c)  Notwithstanding  the  foregoing,  if any Subsidiary  Capital  Account for a
series of Shares had a deficit  that was  allocated  to and charged  against the
Restricted  Earned Surplus or, after January 1, 1995, to the Subsidiary  Capital
Account for any series of Shares,  then at the end of any succeeding quarter for
which that account  otherwise  would show an account  balance greater than zero,
the balance is reallocated to the Restricted Earned Surplus until all reductions
of that  surplus  attributable  to that  Subsidiary  Capital  Account  have been
restored and thereafter,  to the Subsidiary Capital Accounts for the Shares, pro
rata based on the relative amount of deficits allocated to such accounts,  until
all reductions of such  Subsidiary  Capital  Accounts after January 1, 1995 have
been restored.

Thus, a loss in a Subsidiary  Capital  Account which exceeds the balance in that
account is  absorbed  by other  Subsidiary  Capital  Accounts,  in  general,  as
follows:  The amount of such excess  losses is charged  first to the  Restricted
Earned Surplus  portion of the Subsidiary  Capital  Account of the Common Stock.
Any remaining  losses,  should the Restricted  Earned  Surplus be exhausted,  is
allocated among the Subsidiary Capital Accounts of other  participating  series.
Any then unabsorbed losses are charged to the Subsidiary  Capital Account of the
Common Stock.

Funds  drawn  from the  Restricted  Earned  Surplus  or the  Subsidiary  Capital
Accounts for the Shares in the manner  described above must be restored from the
Subsidiary  Capital  Account  that drew the funds if at any time it returns to a
positive balance.

(8) (a) Dividends,  payments upon redemption or liquidation  (described  below),
and any other  distributions  with respect to the Capital Stock are allocated to
the Subsidiary Capital Account for the class or series with respect to which the
dividend, payment or distribution was made.

(b) Where all Shares of a series are repurchased by the Company  pursuant to its
right of first refusal or redeemed in accordance  with the Company's  procedures
for  redemption,  the Subsidiary  Capital Account for that series is terminated.
Thereafter,  all  underwriting  income and expenses,  and losses that would have
been allocated to the  terminated  account,  are allocated  among the Subsidiary
Capital  Accounts of the existing  series of Shares pro rata based upon relative
earned premiums  attributable to each of those accounts for the calendar quarter
in which the item was earned or incurred;  provided, however, that a net deficit
for any such  period is  allocated  to the  Subsidiary  Capital  Account for the
Common Stock (to the extent of Restricted  Earned Surplus) before allocating any
remaining  deficits to the  Subsidiary  Capital  Accounts for the  participating
series.

Using the procedures  described  above,  the Company has allocated items of gain
and loss to the  Subsidiary  Capital  Account for each  series.  Initially  each
Account had a balance of $7,500  representing  the amount paid for the Shares of
that  series.  During  the year  ended  December  31,  1997,  $2,701,252  of net
underwriting gains and $503,020 of administrative  expenses were allocated among
the 282 series of Shares  outstanding as of December 31, 1997, and $5,704,678 of
net investment  income was allocated  among such series of Shares and the Common
Stock.

As of December 31, 1997, 223 series of Shares  outstanding had balances  greater
than or equal to $7,500  (ranging from $7,500 to $714,297) and 59 of such series
had balances less than $7,500 (ranging from $6,760 to zero). (The amounts in the
Subsidiary Capital Accounts can fluctuate substantially and therefore may not be
indicative of future accumulated amounts.) At December 31, 1997, an aggregate of
$2,808,551 had been advanced from the  Restricted  Earned Surplus (which forms a
portion of the  Account  established  for the Common  Stock  owned by MIC) to 46
Subsidiary Capital Accounts and remained  outstanding at that date including net
deficits of $589,940 associated with 4 series of Shares that have been redeemed.
As of December 31, 1997,  $1,278,936 of aggregate  deficits has been reallocated
among the Subsidiary Capital Accounts of the Shares and remained outstanding. Of
this amount  $581,488 is available to be recovered from deficit  accounts should
they return to  profitability  and to the extent that the risk fund is repaid in
full.

The  Subsidiary  Capital  Account  for the Common  Stock had, at the time it was
established, a balance of approximately $200,000,  representing the capital paid
in by MIC for the 2,000 shares of the Common Stock issued to it. That Subsidiary
Capital  Account  is not  affected  directly  by  underwriting  gains and losses
attributable to the various  Subsidiary  Capital  Accounts  related to series of
Shares,  but is affected by those gains and losses indirectly to the extent that
one of the Subsidiary  Capital Accounts for a series of Shares incurs a deficit,
in which case an allocation  to the  Subsidiary  Capital  Account for the Common
Stock will result, in the manner described above.

The  allocations  of income and  expense,  gains and losses,  and  distributions
described  above are subject to approval by the Board,  and when so approved are
considered final and conclusive and will be binding on all holders of Shares
for all purposes  including without limitation any redemption of Shares pursuant
to the Company's procedures for redemption.

Barbados  insurance law requires that the Company maintain certain levels of net
assets,  calculated without regard to unrealized gains or losses. The Company is
currently in compliance with these requirements.  However, in the event that the
Company is unable to comply with such  requirements  in the  future,  it has the
right to  reduce  the  business  related  to a  Subsidiary  Capital  Account  by
retrocession or any other means to the extent necessary to permit the Subsidiary
Capital Account to meet its pro rata share of the Company's required capital and
surplus.

EMPLOYEES

The Company does not have any full-time employees.  Rather, the Company relies
on Aon Insurance Managers (Barbados) Ltd. (the "Manager") to handle its
day-to-day operations.  (See "Business of the Company -- Insurance Management
Agreement," below.)  In addition, corporate secretarial services for the
Company are provided by Colybrand Company Services Limited of St. Michael,
Barbados.  The Company's Board of Directors and the committees thereof,
however, remain responsible for the establishment and implementation of policy
decisions.

COMPETITION

The insurance business is extremely competitive. MIC management believes that at
present, MIC and its subsidiaries are, as a group, one of the largest mechanical
repair  insurers of new GM vehicles in the United States.  There are other major
companies  offering  similar  coverage.  Because the  insurance  business of the
Company is limited to the assumption of certain motor vehicle mechanical service
agreement  reinsurance  business ceded by MIC, the  profitability of the Company
depends to a large degree on the success  experi enced by MIC and its affiliates
in competing with those other  insurers.  Many commercial  insurance  groups are
seeking to capture  additional  mechanical  insurance  business  by  offering to
assist automobile dealers in the formation of their own dealer-owned reinsurance
companies.  MIC has assisted in the establishment of such companies for a number
of qualified  dealers.  However,  MIC believes that participation in the Company
represents  a practical  alternative  for dealers who do not have the  available
capital,  insurance  management  expertise or time for the personal  involvement
necessary for their own reinsurance company.

INSURANCE MANAGEMENT AGREEMENT

The Company has entered into an Insurance  Management Agreement (the "Management
Agreement")  with the  Manager,  pursuant  to which  the  Manager  collects  and
disburses  funds  on  behalf  of the  Company,  provides  accounting,  clerical,
telephone, facsimile, information management and other services for the Company,
and  advises  and  consults  with the  Company  in regard to all  aspects of the
Company's  retrocession  activities.  The current Management  Agreement is for a
continuous  term  subject to  termination  by either  party upon 90 days advance
written notice.

Pursuant to the Management Agreement,  the Manager has undertaken to maintain an
office in  Barbados  to  perform  its  duties.  Further,  during the term of the
Management  Agreement  and generally  for a period of one year  thereafter,  the
Manager has agreed not to provide  management  or  accounting  services  for any
other company which, by the nature of its operations,  is offering,  insuring or
reinsuring motor vehicle  mechanical  service agreements or extended warranty or
related  coverages on a  multi-state  basis in the United  States or Canada with
respect to motor vehicles sold by franchised GM dealerships.  Under the terms of
the Management Agreement, the Company pays the Manager a fixed annual fee plus a
monthly variable fee based on the number of outstanding series of Shares at each
calendar month end. For the year ended  December 31, 1997, the Company  incurred
fees payable to the Manager in the amount of $217,969.

The Manager is  responsible  for the payment of the salaries of its officers and
employees and all office and staff overhead and other costs  attributable to its
services on the  Company's  behalf.  However,  out-of-pocket  expenses,  such as
telephone,  facsimile,  postage,  courier  delivery,  travel and other items are
borne by the Company on an expense reimbursement basis.

The Manager  performs  services  similar to those  performed for the Company for
several  other  entities.  The Manager has twelve  employees.  In addition,  the
Manager may draw upon the  resources of its  affiliates as needed to provide the
services contemplated under the Management Agreement. No employee of the Manager
devotes all of his or her time to the  business  of the  Company.  However,  the
Manager  is  obligated  to devote  all  employee  time  necessary  to ensure the
performance of the Manager's duties under the Management Agreement.  The Manager
is subject to the control and direction of the Board.

The Manager has served in that capacity since 1986. The Manager was incorporated
in Barbados in 1984, and is an affiliate of the Aon Group of Companies  ("Aon"),
an international insurance brokerage and insurance consulting firm. Aon, through
its  subsidiaries,   offers  and  insures  motor  vehicle   mechanical   service
agreements,  extended  warranty and related  coverages  with respect to vehicles
sold by  automobile  dealerships  in the United  States.

Under  the  terms  of the  Management  Agreement  the  Manager  will  treat  all
information  concerning the business of the Company as confidential and will not
disclose such  information  to Aon or any Aon affiliate  without  consent of the
Company.

BARBADOS REGULATION AND TAXES

The  Company's  business  is subject to  regulation  under the  Barbados  Exempt
Insurance  Act,  1983, as amended (the "Exempt  Insurance  Act").  The principal
requirements  of the Exempt  Insurance  Act require the Company to maintain  its
principal office in Barbados, appoint various professional advisors, and to meet
certain  capitalization  and annual reporting  requirements  with respect to its
operating activities and solvency requirements.

Under the Exempt Insurance Act, no income tax, capital gains tax or other direct
tax or impost is levied in Barbados on the results of the  Company's  operations
(except as noted below),  or on transfers of securities or assets of the Company
to any person who is not a resident of  Barbados.  The  Company  has  received a
guarantee  from the  Minister  of Finance of  Barbados  that such  benefits  and
exemptions  will be available  for a period  ending  December  31,  2031.  Until
December 31, 2016 the Company will be required to pay an annual  licencing  fee,
which is currently  $2,500,  to obtain such guarantee.  Thereafter,  the Company
will be subject to tax at a rate of 2% on its taxable  income  provided that the
amount of such tax will not exceed $2,500 per annum.

Item 2.  PROPERTIES

The Company  neither owns nor maintains any office space or facilities.  Rather,
the business office for the Company is provided by the Manager and is located at
The Financial Services Centre,  Bishops Court Hill, St. Michael,  Barbados.  The
Company  believes  that  these  facilities  are  adequate  for its  current  and
anticipated  future needs. In addition,  the Manager  supplies all equipment for
the Company.

Item 3.  LEGAL PROCEEDINGS

The Company is not involved in any legal proceedings.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the quarter
ended December 31, 1997.

                                     PART II

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a) There is no public  market for the Shares or the other  capital stock of the
Company,  and none is expected to develop.  Transfer of the Shares is restricted
by the  terms  of a  Stock  Purchase  Agreement  and  requires  approval  by the
Supervisor of Insurance in Barbados.

(b) All of the common  stock of the  Company is held by MIC. As of March 1, 1998
there were 487 holders of Shares of record, representing 287 series of Shares.

(c) Under the Articles of  Incorporation,  the holders of Shares are entitled to
receive  minimum  dividends  equal to their  pro-rata share of 20% of net income
attributable  to the  associated  Subsidiary  Capital  Account  provided (i) the
Company meets the Barbados regulatory  requirements without regard to any letter
of credit or guarantee,  and (ii) the related  Subsidiary  Capital Account would
also meet those requirements after giving effect to the dividend. In February of
1998,  March of 1997,  April of 1996 and  April of 1995,  the  Company  declared
dividends of $5,171,956,  $4,196,730,  $4,007,483  and $1,188,614  respectively.
These  dividends  were  declared  as a  varying  percentage  of  earned  surplus
attributable to each series of Shares with the percentage  applicable  depending
on the amount of earned surplus attributable to such series.

(d) The Board considers the minimum regulatory capital requirement,  a provision
for  fluctuations  in the  value of the  Company's  investment  portfolio  and a
provision for adverse development of loss experience to determine an appropriate
minimum  capital  level and  therefore  the amount of dividends to be paid.  The
Board's objective is to maintain adequate capital to provide capacity for growth
in premium so that  dividends  may be paid  annually.  There can be no assurance
that a prior dividend amount will be paid in the future.

Item 6.  SELECTED FINANCIAL DATA

The following  selected  financial  data for the years ended  December 31, 1997,
1996, 1995, 1994 and 1993 have been derived from financial statements audited by
Deloitte & Touche, independent chartered accountants,  whose report with respect
to their audits of the financial statements as of December 31, 1997 and 1996 and
for each of the three years in the period  ended  December  31, 1997 is included
elsewhere herein.

<TABLE>
<CAPTION>
                                                    December 31
                      ---------------------------------------------------------------------
                          1997           1996          1995          1994          1993
                          ----           ----          ----          ----          ----
<S>                   <C>            <C>            <C>           <C>           <C>
Premiums Assumed      $ 57,071,313   $ 47,410,037   $44,084,952   $38,371,896   $27,779,063
                      ============   ============   ===========   ===========   ===========
Premiums Earned       $ 45,701,595     36,077,699   $28,800,689   $21,316,685   $15,429,611
Net Investment
  Income                 5,704,678      5,341,924     5,563,573     1,227,816     2,700,242
                      ------------   ------------   -----------   -----------   -----------
Total Income            51,406,273     41,419,623    34,364,262    22,544,501    18,129,853
Less Losses and
  Expenses              43,503,363     33,965,100    27,462,338    20,825,943    15,425,146
                      ------------   ------------   -----------   -----------   -----------
Net Income*           $  7,902,910   $  7,454,523  $  6,901,924   $ 1,718,558   $ 2,704,707
                      ============   ============  ============   ===========   ===========
Dividends Per
  Common Share                   0              0             0             0
Total Assets          $123,065,286   $106,041,164   $91,526,976   $66,012,284   $50,359,633
Total Policy
  Reserves and
  Other Liabilities    100,999,317     88,479,590    76,350,313    60,246,641    42,430,269
Stockholders' Equity    22,065,969     17,561,574    15,176,663     5,765,643     7,929,364
Dividends Paid on
  Participating Shares   4,196,730      4,007,483     1,188,614     2,156,304     2,021,504


*    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. See Note 2 to the financial statements.
</TABLE>

Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

Liquidity.  The Company expects to generate  sufficient funds from operations to
cover current liquidity needs. The Company's liquidity  requirements are related
to payment of insurance losses, administrative expenses, and dividends. 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 the  Company.  Although  losses are  expected to
increase due to the increased  level of premiums  assumed in each preceding year
and  the   anticipated   incidence  of  claims   following  the   expiration  of
manufacturers'  warranties,  available funds from the sources  identified  above
have also grown.  Net cash  provided by operating  activities  has  decreased to
$17,304,385  in 1997  from  $17,588,199  in 1996 and  $16,871,927  in 1995.  The
Company  believes  that such  funds  will be  sufficient  to meet its  liquidity
requirements  in 1998 and in future years to which its  reinsurance  liabilities
extend. No capital expenditures are expected during the next few years.

The Company had  unearned  premium  reserves of  $95,454,588  as of December 31,
1997, and $84,084,870 as of December 31, 1996. These amounts are attributable to
the long-term  nature of the contracts sold. Such contracts may extend for up to
72 months from date of issue. In addition, the risk of loss to the Company under
the contract  arises  primarily  after the  underlying  manufacturer's  warranty
expires.  For new vehicles,  the warranty  generally  covers 36 months or 36,000
miles.  For  used  vehicles,  the  applicable  warranty  period  depends  on the
unexpired  portion  of the  original  manufacturer's  warranty  at the  time  of
purchase of the  vehicle.  Because  the Company has limited  exposure to risk of
loss prior to expiration of the underlying manufacturer's warranty, most premium
is not recognized as earned until such expiration.  Since very little premium is
recognized as earned until the  expiration of the underlying  warranty,  most of
the premium written in any year is recorded as unearned.

On February 27, 1998, the Board of Directors authorized the payment of dividends
aggregating  $5,171,956 to eligible holders of Participating Shares. See "Market
For Registrant's Common Equity And Related Stockholder Matters" for a discussion
of dividends paid and legal restrictions on the payment of dividends.

Capital Resources.  Capitalization of the Company,  as of December 31, 1997, was
comprised  of paid-in  capital  with  respect to the Common  Stock of  $200,000,
paid-in  capital  with  respect  to the  Shares  of  $2,115,000  (compared  with
$1,905,000 and $1,807,500 as of December 31, 1996 and 1995,  respectively),  and
earnings retained for use in the business of $18,615,768.  Barbados law requires
that the Company's net assets 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
year.  If the  Company's  net assets are less than mandated by Barbados law, the
Company has the right to reduce the  business  related to a  Subsidiary  Capital
Account by retrocession or any other means to the extent necessary to permit the
Subsidiary  Capital Account to meet its pro rata share of the Company's required
capital and surplus.  At January 1, 1998,  the  Company's  required  minimum net
assets  computed in accordance with Barbados law was  approximately  $5,070,160,
compared to total capital and retained earnings computed for purpose of Barbados
law of $20,930,768.

Results of Operations.  During the year ended December 31, 1997, the Company had
net income of $7,902,910  compared to $7,454,523  and  $6,901,924  for the years
ended December 31, 1996 and 1995, respectively. As described below, the increase
in net income  during 1997  compared to the  previous  year was  primarily  as a
result of an increase in investment  income  combined with a slight  increase in
underwriting  income.  The increase in net income in 1996 compared to 1995 arose
from improved  underwriting  performance partially offset by a small decrease in
investment income.

The  Company  had net  underwriting  income of  $2,198,232  in 1997  compared to
$2,112,599  and  $1,338,351  for the years  ended  December  31,  1996 and 1995,
respectively.  The modest  increase in  underwriting  income during 1997 was the
result of an increase in the amount of premiums  earned  partially  offset by an
increase in the loss ratio (the ratio of losses incurred to premiums  earned) of
the Company. During 1997, the Company earned premiums of $45,701,595 compared to
$36,077,699  and  $28,800,689  during  1996 and  1995,  respectively.  Increased
premium income has been generated by the issuance of additional series of Shares
during the year ended December 31, 1997, and the continuing  flow of reinsurance
premiums from series issued in prior years.  During 1997,  the Company issued 29
new series of Shares and  redeemed 1 series of Shares for a net  increase  of 28
series.  There were a total of 282  series  outstanding  at  December  31,  1997
compared to 254 and 241 series of Shares  outstanding  at December  31, 1996 and
1995, respectively.

The Company  incurred losses and  administrative  expenses during the year ended
December 31, 1997 of $43,503,363  compared with  $33,965,100 and $27,462,338 for
the years ended December 31, 1996 and 1995, respectively.  Expenses in 1997 were
comprised  of losses paid and  provisions  for losses  incurred of  $31,118,622,
ceding  commissions  and excise taxes of $11,881,721  and operating  expenses of
$503,020.  Losses  incurred in 1996 and 1995 were  $24,037,827  and  $19,431,032
respectively.  The loss ratio for the year  ended  December  31,  1997 was 68.1%
compared  to 66.6% and 67.5% for the years  ended  December  31,  1996 and 1995,
respectively.

The Company incurred  operating expenses during the year ended December 31, 1997
of $503,020  compared to $548,525 and $544,837 for the years ended  December 31,
1996 and 1995,  respectively.  MIC has agreed to pay directly  certain  costs of
registering  and  issuing  shares  if such  costs  can not be  allocated  to the
Subsidiary  Capital Account for the Common Stock. In 1997, $77,239 of such costs
were paid  directly by MIC  compared to $64,848 and $171,079 for the years ended
December 31, 1996 and 1995, respectively.

Investment  income in 1997 was $5,704,678  compared to $5,341,924 and $5,563,573
for the years ended  December 31, 1996 and 1995,  respectively.  The increase in
investment  income during 1997 compared to 1996 was  attributable  to an overall
increase in funds available for investment and somewhat higher yields  available
in the U.S. and other global bond  markets.  The decrease in  investment  income
during 1996  compared to 1995 was  attributable  to the lower market yields that
resulted  from the sharp bond market  rally of the  previous  year.  The sale of
investment  securities for the year ended December 31, 1997 resulted in realized
gains of $750,923  compared to realized  gains of $64,244 and $1,404,232 for the
years ended December 31, 1996 and 1995, respectively.  The increases in realized
gains  during the year under  review  arise  primarily  as a result of increased
sales  of  investment  securities  to take  advantage  of  market  opportunities
presented by  fluctuations  in interest rates as well as the gains  generated by
the resumption of recent years trends of declining bond yields.  Interest earned
for the year ended December 31, 1997 was  $4,953,755  compared to $5,277,680 and
$4,159,341  for the years ended  December 31, 1996 and 1995,  respectively.  The
increase in interest  earnings during 1996 compared to 1995 was largely a result
of an increase in the amount of assets under management.  The decrease from 1996
compared to 1997 resulted from lower available yields.

Unrealized  appreciation on investment  securities held at December 31, 1997 was
$1,135,201 compared to unrealized appreciation at December 31, 1996 of $543,521.
The increase in  unrealized  appreciation  as of December  31, 1997  compared to
December 31, 1996  likewise  resulted  from the move  towards  lower yields that
occurred during 1997.

At December 31, 1997 and 1996,  100% of the Company's  investments  were in U.S.
dollar-denominated  fixed-income  securities.  The Company's  investment manager
seeks to identify  non-U.S.  dollar-denominated  investments that offer a higher
rate of return (net of currency  hedging  costs) than would be  available in the
market for similarly rated U.S.  dollar-denominated  bonds. The instruments used
to hedge non-U.S.  dollar-denominated  investments  involve, to varying degrees,
elements  of  credit  risk in the event a  counterparty  should  default  on its
obligation under the hedge  instrument.  Such credit risk is managed through the
selection  of  financially  sound  counterparties  and  periodic  monitoring  of
counterparty  financial condition.  The Company's  investment  guidelines do not
permit the use of derivatives in managing interest rate risk.

Pursuant  to  the  Retrocession  Agreement,  the  Company  must  furnish  to MIC
collateral in the form of an irrevocable  letter of credit of at least 12 months
duration equal in amount to the unearned  premium in respect of risks retroceded
and  unpaid  loss  reserves  (including  reserves  for losses  incurred  but not
reported) otherwise required to be maintained by MIC in respect of the Policies.
As of December 31, 1997,  the Company had  furnished  such a letter of credit in
the amount of $77,000,000.

In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting  Standards  ("SFAS") No. 130,  Reporting  Comprehensive
Income, effective for fiscal years beginning after December 15, 1997. Under this
statement all items  required to be  recognized  under  accounting  standards as
components  of  comprehensive  income must be reported in a financial  statement
that is displayed with the same  prominence as other financial  statements.  The
Company will adopt this  accounting  standard in 1998.  Adopting the  accounting
standard will not have an impact on reported net income.

The  foregoing  Management  Discussion  and Analysis  contains  various  forward
looking  statements within the meaning of applicable federal securities laws and
are based upon the 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.

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                                       Page
                                                       ----
1.  Independent Auditors' Report...................     32

2.  Balance Sheets, December 31 , 1997 and 1996....     33

3.  Statements of Income and Retained Earnings
      for the years ended December 31, 1997,
      1996 and 1995 ...............................     34

4.  Statements of Cash Flows for the years ended
      December 31, 1997, 1996 and 1995 ............     35

5.  Notes to Financial Statements..................   36 - 43


                          INDEPENDENT AUDITORS' REPORT


To the Stockholders of
Motors Mechanical Reinsurance Company, Limited
Financial Services Centre
Bishops Court Hill
St. Michael, Barbados


We have audited the accompanying balance sheets of Motors Mechanical Reinsurance
Company,  Limited as of December 31, 1997 and 1996 and the related statements of
income and  retained  earnings and cash flows for each of the three years in the
period  ended   December  31,  1997.   These   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our  opinion,  such  financial  statements  present  fairly,  in all material
respects,  the  financial  position of Motors  Mechanical  Reinsurance  Company,
Limited as of December 31, 1997 and 1996 and the results of its  operations  and
its cash flows for each of the three years in the period ended December 31, 1997
in conformity with accounting principles generally accepted in the United States
of America.


                                           s/DELOITTE & TOUCHE
                                           CHARTERED ACCOUNTANTS


Bridgetown, Barbados
February 16, 1998


                 MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
                                 BALANCE SHEETS
                           DECEMBER 31, 1997 AND 1996

                           (Expressed in U.S. Dollars)

                                                       1997            1996
                                                   ------------    ------------
ASSETS

   Investments                             3,7     $ 88,585,513    $ 66,647,930
   Cash and cash equivalents               7          5,645,482      12,926,272
   Accrued investment income                          3,178,446       1,453,691
   Due from Motors Insurance Corporation                841,927       3,158,064
   Deferred acquisition costs                        24,813,918      21,855,207
                                                   ------------    ------------
Total Assets                                       $123,065,286    $106,041,164
                                                   ============    ============
LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
   Unearned premiums                               $ 95,454,588    $ 84,084,870
   Loss reserves                           4          5,421,160       4,284,304
   Accrued liabilities                                  123,569         110,416
                                                   ------------    ------------
   Total Liabilities                                100,999,317      88,479,590
                                                   ------------    ------------
COMMITMENTS AND CONTINGENCIES              7

STOCKHOLDERS' EQUITY
   Share capital                           5
     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 outstanding -
         28,200 shares at December 31,
         1997 and 25,400 shares at
         December 31, 1996                            2,115,000       1,905,000
                                                   ------------    ------------
                                                      2,315,000       2,105,000

   Retained earnings                       8         18,615,768      14,913,053
   Unrealized appreciation on              3
     investments                                      1,135,201         543,521
                                                   ------------    ------------
   Total Stockholders' Equity                        22,065,969      17,561,574
                                                   ------------    ------------
Total Liabilities and
   Stockholders' Equity                            $123,065,286    $106,041,164
                                                   ============    ============

The accompanying notes form an integral part of these financial statements.


                 MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
                   STATEMENTS OF INCOME AND RETAINED EARNINGS
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

                           (Expressed in U.S. Dollars)

                                                     Years Ended
                                      -----------------------------------------
                                         1997           1996           1995
                                      -----------    -----------    -----------
INCOME

   Reinsurance
     premiums assumed           6     $57,071,313    $47,410,037    $44,084,952
   Increase in
     unearned premiums                (11,369,718)   (11,332,338)   (15,284,263)
                                      -----------    -----------    -----------
   Premiums earned                     45,701,595     36,077,699     28,800,689
                                      -----------    -----------    -----------
   Investment income
     Interest earned                    4,953,755      5,277,680      4,159,341
     Realized gains
       on investments                     750,923         64,244      1,404,232
                                      -----------    -----------    -----------
   Investment income - net              5,704,678      5,341,924      5,563,573
                                       ----------    -----------    -----------
TOTAL INCOME                           51,406,273     41,419,623     34,364,262
                                      -----------    -----------    -----------
EXPENSES

   Acquisition costs                   11,881,721      9,378,748      7,486,469
   Losses paid                         29,981,766     23,233,857     18,610,968
   Increase in loss
     reserves                           1,136,856        803,970        820,064
   Administrative expenses
     Related Parties                      219,760        211,001        174,443
     Other                                283,260        337,524        370,394
                                      -----------    -----------    -----------

TOTAL EXPENSES                         43,503,363     33,965,100     27,462,338
                                      -----------    -----------    -----------

NET INCOME FOR THE YEAR                 7,902,910      7,454,523      6,901,924
RETAINED EARNINGS,
   beginning of year                   14,913,053     11,517,542      5,796,732

LESS: DIVIDENDS                        (4,196,730)    (4,007,483)    (1,188,614)

(DEDUCT) ADD: REDEMPTION OF
   PARTICIPATING STOCK                     (3,465)       (51,529)         7,500
                                      -----------    -----------    -----------
RETAINED EARNINGS, end of year        $18,615,768    $14,913,053    $11,517,542
                                      ===========    ===========    ===========


The accompanying notes form an integral part of these financial statements.


                 MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
                            STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995

                           (Expressed in U.S. dollars)

                                                      Years Ended
                                        ---------------------------------------
                                           1997          1996          1995
                                       ------------  ------------  ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
   Reinsurance premiums collected      $ 57,014,145  $ 46,031,997  $ 42,818,628
   Losses and acquisition
     expenses paid                      (42,436,530)  (34,302,453)  (28,599,428)
   Administrative expenses paid            (502,230)     (501,147)     (540,841)
   Investment income received             3,229,000     6,359,802     3,193,568
                                       ------------  ------------  ------------
Net cash provided by operating
      activities                         17,304,385    17,588,199    16,871,927
                                       ------------  ------------  ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of investments            (318,139,315) (232,194,343) (182,526,749)
   Sales and maturities of investments  297,544,335   224,400,822   170,483,482
                                       ------------  ------------  ------------
Net cash invested                       (20,594,980)   (7,793,521)  (12,043,267)
                                       ------------  ------------  ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuance of
     Participating Stock                    217,500       120,000       150,000
   Redemption of Participating Stock        (10,965)      (74,029)            0
   Dividends paid                        (4,196,730)   (4,007,483)   (1,188,614)
                                       ------------  ------------  ------------
Net cash used in financing activities    (3,990,195)   (3,961,512)   (1,038,614)
                                       ------------  ------------  ------------
(DECREASE) INCREASE IN CASH AND CASH
   EQUIVALENTS                           (7,280,790)    5,833,166     3,790,046

CASH AND CASH EQUIVALENTS, beginning
   of year                               12,926,272     7,093,106     3,303,060
                                       ------------  ------------  ------------
CASH AND CASH EQUIVALENTS, end of
   year                                $  5,645,482  $ 12,926,272  $  7,093,106
                                       ============  ============  ============
 RECONCILIATION OF NET INCOME TO
   NET CASH PROVIDED BY OPERATING
   ACTIVITIES:
   Net income                          $  7,902,910  $  7,454,523  $  6,901,924
   Realized gains on investments           (750,923)      (64,244)   (1,404,232)
   Change in:
     Accrued investment income           (1,724,755)    1,079,122      (973,618)
     Due from Motors Insurance
        Corporation                       2,316,137       (62,477)      219,919
     Deferred acquisition costs          (2,958,711)   (2,948,002)   (3,975,738)
     Unearned premiums                   11,369,718    11,332,338    15,284,263
     Loss reserves                        1,136,856       803,970       820,064
     Accrued liabilities                     13,153        (7,031)         (655)
                                       ------------  ------------  ------------
NET CASH PROVIDED BY OPERATING
   ACTIVITIES                          $ 17,304,385  $ 17,588,199  $ 16,871,927
                                       ============  ============  ============


The accompanying notes form an integral part of these financial statements.


                 MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
                        NOTES TO THE FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995

                           (Expressed in U.S. Dollars)

Note 1.   OPERATIONS

          The  Company  is  incorporated  under  the laws of  Barbados  and is a
          licensed  insurer under the Exempt Insurance Act, 1983, and amendments
          thereto.

          All of the common  stock of the  Company is owned by Motors  Insurance
          Corporation  ("MIC"),  a member of the GMAC Insurance Group. MIC is an
          indirect  wholly-owned  subsidiary of General Motors Corporation.  The
          principal  activity of the Company is the  assumption of motor vehicle
          mechanical   service   agreements  arising  under  insurance  policies
          reinsured  by MIC and  attributable  to an MIC  Mechanical  Account in
          respect  of  which  shares  of  Participating  Stock  are  issued  and
          outstanding. All premiums received were assumed from MIC.

Note 2.   SIGNIFICANT ACCOUNTING POLICIES

          Basis of Presentation

          The financial  statements  are stated in United States dollars and are
          prepared in conformity with accounting  principles  generally accepted
          within the United States of America.

          The  preparation of financial  statements in conformity with generally
          accepted  accounting  principles requires management to make estimates
          and  assumptions  that  affect  the  reported  amounts  of assets  and
          liabilities and disclosure at the date of the financial statements and
          the reported  amounts of revenues and  expenses  during the  reporting
          period. Actual results could differ from those estimates.

          Certain   amounts  in  the  1995   financial   statements   have  been
          reclassified to conform with the 1996 and 1997 presentation.

          Premium Income and Acquisition Costs

          Reinsurance  premiums are based on the Company  assuming (after ceding
          commission)  75% of the original  policy premium written by the direct
          insurer.  Of these  reinsurance  premiums,  75% is  retroceded  to the
          Company when written and 25% when earned.

          Premiums  are written on the basis of  quarterly  cessions  and earned
          relative to anticipated loss exposures.  Acquisition costs, consisting
          of ceding  commissions and excise taxes,  are taken into income on the
          same basis as premiums are earned.

          Investments

          Investments,  all of which are  available  for sale,  are comprised of
          interest-bearing marketable securities which are carried at fair value
          based on quoted  market  prices and  dealer  quotes  obtained  from an
          external pricing service. Investments with original maturities of less
          than  90  days  are   classified  as  cash   equivalents.   Unrealized
          appreciation (depreciation) is included in stockholders' equity.

          Realized gains and losses on the sale of  investments  are included as
          investment income and are calculated based on average costs.

          Loss Reserves

          The Company provides for unsettled, reported losses based on estimates
          of the final  settlement,  with an experience  factor added to provide
          for losses  incurred but not  reported.  The final  settlement  may be
          greater or less than the amounts provided. Any such differences,  when
          they become known, are recognized in current operations.

          Taxation

          The Company has received an undertaking  from the Barbados  Government
          exempting it from all local  income,  profits and capital  gains taxes
          for a period ending  December 31, 2016.  Thereafter and until December
          31,  2031,  the Company  will be subject to tax at a rate of 2% on its
          taxable  income  provided  that the amount of such tax will not exceed
          $2,500 per annum.

          Stockholders  who are United States  residents are taxed in the United
          States on their share of the Company's income on a deemed distribution
          basis.

          Earnings Per Share

          No amount has been  reported  as  earnings  per share as the  earnings
          applicable   to  the   Participating   Stockholders   vary   with  the
          underwriting  results of each series.  Retained earnings applicable to
          the  Common  Stockholder  include  allocated   investment  income  and
          operating   expenses   and   amounts   restricted   for   advances  to
          Participating Stockholders (see Note 8).

Note 3.   INVESTMENTS

          The cost  and fair  value of  investments  in debt  securities  are as
          follows:

                                         Gross          Gross
                                       Unrealized     Unrealized       Fair
                           Cost       Appreciation   Depreciation      Value
                        -----------   ------------   ------------   -----------
December 31, 1997:

Foreign governments
 and their agencies     $27,300,940    $  524,635     $(119,450)    $27,706,125

Corporations             46,527,723       714,077       (15,881)     47,225,919

Supranationals           13,621,649        31,820           -        13,653,469
                        -----------    ----------     ---------     -----------

     Total              $87,450,312    $1,270,532     $(135,331)    $88,585,513
                        ===========    ==========     =========     ===========

December 31, 1996:

Foreign governments
 and their agencies     $31,595,722    $  351,461    $ (206,151)    $31,741,032

Corporations             27,967,937       298,190       (37,604)     28,228,523

Supranationals            6,540,750       137,625           -         6,678,375
                        -----------    ----------    ----------     -----------

     Total              $66,104,409    $  787,276    $ (243,755)    $66,647,930
                        ===========    ==========    ==========     ===========

          The cost and fair value of debt  securities  at December 31, 1997,  by
          contractual maturity, are shown below. Expected maturities will differ
          from contractual  maturities  because  borrowers may have the right to
          call  or  prepay  obligations  with  or  without  call  or  prepayment
          penalties.

                                     Cost         Fair Value
                                  -----------     -----------
          Due after one year
            through five years    $71,184,911     $72,109,353

          Due after five years
            through ten years      16,265,401      16,476,160
                                  -----------     -----------
                                  $87,450,312     $88,585,513
                                  ===========     ===========

          In 1997,  gross gains of $1,494,878  and gross losses of $743,955 were
          realized.  In 1996,  gross  gains of  $1,997,197  and gross  losses of
          $1,932,953 were realized. In 1995, gross gains of $2,694,685 and gross
          losses of $1,290,453 were realized.

          The following summarizes net unrealized appreciation (depreciation) on
          investments:

          Balance, December 31, 1994        $(1,896,089)
          Net appreciation                    3,547,710
                                            -----------
          Balance, December 31, 1995        $ 1,651,621
          Net depreciation                   (1,108,100)
                                            -----------
          Balance, December 31, 1996        $   543,521
          Net appreciation                      591,680
                                            -----------
          Balance, December 31, 1997        $ 1,135,201
                                            ===========

          The investment portfolio is comprised of diverse debt securities which
          do not result in any  concentration  of credit  risk.  At December 31,
          1997,  100%  of the  Company's  investments  are  denominated  in U.S.
          dollars.

          The Company uses forward  currency  contracts to hedge its exposure to
          changes  in  currency  exchange  rates  relating  to  its  investments
          denominated in currencies  other than the U.S.  dollar.  The contracts
          provide for settlement in U.S.  dollars in the future.  Credit risk is
          managed by dealing with financially-sound counterparties.  Market risk
          is  mitigated  because  the  forward  contracts  hedge   corresponding
          non-U.S. dollar investments.

Note 4.   RESERVES FOR UNPAID LOSSES

          The  following  table  sets forth an  analysis  of changes in the loss
          reserves for the years ended December 31, 1997, 1996 and 1995:

                                     1997            1996            1995
                                     ----            ----            ----
Beginning balance in
reserves for losses              $ 4,284,304     $ 3,480,334     $ 2,660,270
                                 -----------     -----------     -----------
Add-provision for losses
incurred related to:

   Current claim year             31,904,950      24,080,078      19,540,192
   Prior claim years                (746,024)        (42,251)       (109,160)
                                 -----------     -----------     -----------
      Total                       31,158,926      24,037,827      19,431,032
                                 -----------     -----------     -----------
Deduct paid losses
attributable to:

   Current claim year             27,024,981      20,330,269      16,461,768
   Prior claim years               2,997,089       2,903,588       2,149,200
                                 -----------     -----------     -----------
      Total                       30,022,070      23,233,857      18,610,968
                                 -----------     -----------     -----------
Ending balance in
reserves for losses              $ 5,421,160     $ 4,284,304     $ 3,480,334
                                 ===========     ===========     ===========

As a result of change  in  estimates  of losses  incurred  in prior  years,  the
provisions  for losses  incurred in 1997,  1996 and 1995  decreased by $746,024,
$42,251 and $109,160 respectively, because of lower actual claims.

Note 5.   STOCKHOLDERS' EQUITY

          All of the Company's  Common Stock is held by MIC. A prospectus  dated
          April 21, 1997 is offering  12,000  shares of  Participating  Stock to
          persons certified by owners of certain motor vehicle  franchises.  The
          offering  consists  of 120 series of 100 shares each at a price of $75
          per share.

          During 1997, 29 additional series of 100 shares of Participating Stock
          were issued as compared with 16 for the year ended  December 31, 1996.
          In addition,  in 1997 the Board of Directors  redeemed 1 series of 100
          shares at the request of the  shareholders.  The  redeemed  series had
          been  previously  placed  in run off and had  reached  a fully  earned
          position during 1997.

          In the years ended  December  31,  1997,  1996 and 1995,  costs in the
          amount of $77,239, $64,484 and $171,079 respectively, were incurred in
          the sale of Participating Stock. The Common Stockholder reimbursed the
          Company directly for these expenses.

          The holder of Common  Stock is  entitled to elect five  directors,  at
          least one of whom must be a resident of Barbados. The holder of Common
          Stock has no right to vote with respect to liquidation of the Company.
          The  holder  generally  has the  sole  right  to vote on  matters  not
          specifically reserved to Participating Stock.

          The holders of  Participating  Stock as a class are  entitled to elect
          one director. Generally,  liquidation of the Company requires approval
          by at  least  75%  of  the  outstanding  shares  of  this  class.  Any
          redemption of a series of shares requires a vote of the Board provided
          that the  director  representing  holders of the  Participating  Stock
          votes  in  favor  of the  redemption.  Any  changes  in the  Company's
          Articles  of  Incorporation  or  By-Laws  require  the  approval  of a
          majority  of the  shares of  Participating  Stock  present  and voting
          together with a majority of the shares of Common Stock.

          From  time  to  time,   funds  are  held  in  escrow  on   account  of
          Participating  Stock  applications.  Such  amounts are not included in
          cash and cash equivalents in the accompanying financial statements. At
          December 31, 1997, there were no funds held in escrow.

Note 6.   REINSURANCE PREMIUMS

          Under the provisions of the retrocession  agreement,  the Company will
          assume additional cessions of $31,818,196 ($28,028,290 at December 31,
          1996) relating to premiums written by Motors Insurance Corporation but
          unearned at the  respective  period ends. The amounts will be received
          as the premiums are earned, net of related acquisition costs.

Note 7.   LETTER OF CREDIT

          The Company has  provided an  irrevocable  letter of credit to MIC, in
          the amount of $77,000,000  to  collateralize  the amounts  recoverable
          from the Company related to the business ceded to it. Cash equivalents
          and investments are assigned to collateralize the letter of credit.

Note 8.   RETAINED EARNINGS

          Items of income or loss and  premiums  and  expenses  attributable  to
          insurance underwriting activities are determined as of the end of each
          calendar quarter and are allocated to the Participating  Stockholders'
          capital accounts.

          An amount equal to 1-1/3  percent of assumed  premiums (net of related
          ceding  commissions) is allocated to the capital account of the Common
          Stockholder.   Such  allocations  accumulate  as  restricted  retained
          earnings  and may be  used to  advance  capital  to any  Participating
          Stockholders who incur a deficit in their capital  accounts;  any such
          advances are  repayable  out of future  profitable  operations  of the
          respective Participating Stockholder.  Amounts allocated to the Common
          Stockholder,  net  of  advances  to  Participating  Stockholders,  are
          presented in the table below as "net transfers."

          Dividends may be declared and paid at the  discretion of the Company's
          Board of  Directors  subject to the right of holders of  participating
          stock to  receive  minimum  dividends.  The  minimum  annual  dividend
          payable on each share  shall be such  share's  pro rata  portion of an
          amount  equal to twenty  percent of the net  income,  if any,  for the
          preceding  year   attributable  to  the  subsidiary   capital  account
          associated with the series of which that share is part.

          Barbados law requires  that the Company  maintain a minimum  margin of
          solvency  based  generally  on the  amount of  premiums  earned in the
          preceding  year. At January 1, 1998,  the Company's  required  minimum
          stockholders'  equity  computed in  accordance  with  Barbados law was
          approximately $5,070,000.

          Retained   earnings   applicable  to  the  Common  and   Participating
          Stockholders are comprised of the following:

                                  Common      Participating        Total
                                  ------      -------------        -----
Balance (Deficit),
  December 31, 1994             $ (53,220)     $ 5,849,952     $ 5,796,732

Net income for the year            18,627        6,883,297       6,901,924
Net transfers                      23,732          (23,732)           -
Dividends paid                        -         (1,188,614)     (1,188,614)
Redemption of participating
  stock                               -              7,500           7,500
                                ---------      -----------     -----------
Balance (Deficit),
  December 31, 1995               (10,861)      11,528,403      11,517,542

Net income for the year            14,131        7,440,392       7,454,523
Net transfers                       6,147           (6,147)           -
Dividends paid                        -         (4,007,483)     (4,007,483)
Redemption of participating
  stock                               -            (51,529)        (51,529)
                                ---------      -----------     -----------

Balance December 31, 1996           9,417       14,903,636      14,913,053

Net income for the year            12,304        7,890,606       7,902,910
Net transfers                     (29,881)          29,881            -
Dividends paid                        -         (4,196,730)     (4,196,730)
Redemption of participating
 stock                                -             (3,465)         (3,465)
                                ---------      -----------     -----------
Balance (Deficit),
December 31, 1997               $  (8,160)     $18,623,928     $18,615,768
                                =========      ===========     ===========


                                    PART III

Item 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE.

          None.

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

          Five of the  current  directors  of the  Company  were  elected by MIC
          through its ownership of the Common Stock at the Annual  Shareholders'
          Meeting  held on March 27,  1997 and one  director  was elected by the
          holders of the Shares at such  meeting.  The directors and officers of
          the Company are as follows:

                                          POSITION WITH THE COMPANY
                                          (AND OTHER EMPLOYMENT DURING
    NAME                     AGE          PAST FIVE YEARS)

William B. Noll.............  55      Chairman, Chief Executive Officer,
                                      President and Director (President, GMAC
                                      Insurance Holdings, 1997, Executive Vice
                                      President & Chief Financial Officer,
                                      Motors Insurance Corporation ("MIC") March
                                      1993; Group Vice-President, MIC, 1991-
                                      1993; Vice President, MIC, 1989-1990).

                                      Mr. Noll became President and Director in
                                      1995.

Louis S. Carrio, Jr........   54      Vice-President and Director (Vice-Pres-
                                      ident, MIC).

                                      Mr. Carrio became Vice-President and
                                      Director in 1991.

Bernard J. Buselmeier.......  42      Vice-President and Director (Vice-
                                      President and Treasurer, MIC, March 1993;
                                      Treasurer, MIC, 1989-1993)

                                      Mr. Buselmeier became Vice-President and
                                      Director in 1995.

John J. Dunn, Jr............  39      Vice-President and Director (Assistant
                                      Treasurer, MIC, 1995; previously manager,
                                      Coopers & Lybrand, L.L.P.)

                                      Mr. Dunn became Vice-President and
                                      Director in 1996.

Peter R. P. Evelyn ........   56      Director (Attorney, Evelyn, Gittens &
                                      Farmer, a Barbados law firm).

                                      Mr. Evelyn became a Director in 1986.

Gregory Greenwood .........   39      Director (President, Greenwood Chevrolet
                                      Inc., Youngstown, OH)

                                      Mr. Greenwood became a Director in 1997.

Ronald W. Jones ...........   45      Vice-President, Finance (Managing
                                      Director, Aon Insurance Managers
                                      (Barbados) Ltd.).

                                      Mr. Jones has served as Vice-President,
                                      Finance since 1987.

Michael B. Boyce...........   57      Secretary (Principal, Colybrand Company
                                      Services, Limited, Barbados, since 1993;
                                      previously principal, Price Waterhouse,
                                      Eastern Caribbean).

                                      Mr. Boyce has served as Secretary since
                                      1994.  Mr. Boyce served previously as
                                      Assistant Secretary to the Company.

          The directors and officers named above serve in those capacities until
          the annual meeting of shareholders next following their election.

Item 11.  EXECUTIVE COMPENSATION

          No  director  or officer of the Company is  compensated  directly  for
          services as such. However, each director and officer of the Company is
          reimbursed for expenses  incurred for attendance at Board,  committee,
          and shareholder meetings. In addition,  Mr. Jones is an officer of the
          Manager, which receives management fees and compensation for financial
          and administrative services. Mr. Evelyn is a member of the law firm of
          Evelyn,  Gittens & Farmer,  which  serves  as the  Company's  Barbados
          counsel;  and Mr. Boyce is affiliated with Colybrand  Company Services
          Limited,  St.  Michael,  Barbados,  which  receives  compensation  for
          corporate secretarial services provided to the Company.

Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

          MIC owns all of the issued and outstanding  shares of the Common Stock
          of the Company,  which consists of 2,000 shares.  Gregory Greenwood, a
          director, owns 100 shares of Participating Stock.

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

          See Item 1, THE RETROCESSION,  INSURANCE MANAGEMENT AGREEMENT and Item
          11, EXECUTIVE COMPENSATION


                                     Part IV

Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

      (a)  Index to Document List

           (1)  Financial Statements

                       The following are included in Item 8:

                       (i)   Independent Auditors' Report.

                      (ii)   Balance Sheets, December 31,
                             1997 and 1996.

                     (iii)   Statements of Income and Retained
                             Earnings for the years ended
                             December 31, 1997, 1996 and 1995.

                      (iv)   Statements of Cash Flows for the
                             years ended December 31, 1997,
                             1996, and 1995.

                       (v)   Notes to Financial Statements.

           (2)  Financial Statement Schedules.  Schedules are omitted because
                of the absence of the conditions under which they are required
                or because the information required is presented in the
                financial statements or related notes.

           (3)  Exhibits.  The following exhibits are included in response to
                Item 14(c):

                3(a)     Restated    Articles   of   Incorporation   and
                         amendments   thereto   filed  by  reference  to
                         Exhibit  3(i) to  Quarterly  Report on Form 10Q
                         File No. 33-6534 for the quarterly period ended
                         June 30, 1996.

                3(b)     By-laws of the Company dated June 6, 1986 filed by
                         reference to Exhibit 3(b) of the Registration Statement
                         on Form S-1, File No. 33-6534, dated June 18, 1986.

                4        Specimen Participating Stock Certificate filed by
                         reference to Exhibit 4 of Amendment No. 1 to
                         Registration Statement on Form S-1, File No. 33-6534,
                         dated February 12, 1987.

                10(a)    Form  of   Principal   Retrocession   Agreement
                         between  Motors   Insurance   Corporation   and
                         Registrant  filed by reference to Exhibit 10(a)
                         of the Registration Statement on Form S-1, File
                         No. 33-6534, dated June 18, 1986.

                10(b)    Form  of  Supplemental  Retrocession  Agreement
                         between  Motors   Insurance   Corporation   and
                         Registrant  filed by reference to Exhibit 10(b)
                         of the Registration Statement on Form S-1, File
                         No. 33-6534 dated June 18, 1986.

                10(c)    Specimen Stock Purchase Agreement filed by reference to
                         Exhibit 10(c) to Amendment No. 2 to Registration
                         Statement on Form S-1, File No. 33-6534, dated May 22,
                         1987.

                10(d)    Amended and Restated Stock Purchase Agreement between
                         Registrant and Motors Insurance Corporation filed by
                         reference to Exhibit 10(d) to Amendment No. 1 to
                         Registration Statement on Form S-1, File No. 33-6534,
                         dated February 12, 1987.

                10(e)    Insurance    Management    Agreement    between
                         Registrant   and   Aon   (formerly   Alexander)
                         Insurance Managers  (Barbados) Ltd.,  effective
                         January 1, 1996 filed by  reference  to Exhibit
                         10(e) to Annual  Report  on Form 10K,  File No.
                         33-6534 for the year ended December 31, 1996.

                10(f)    Investment Management Agreement between Registrant and
                         N.M. Rothschild Asset Management Limited, effective
                         January 26, 1988.

                20(a)    Proxy   solicitation   materials  sent  to shareholders
                         in  connection with  annual meeting  held on  March 27,
                         1997,  filed by  reference to  Exhibit 20(b)  to Annual
                         Report on  Form 10-K,  File No. 33-6534,  for the  year
                         ended December 31, 1996.

                20(b)    Proxy   solicitation   materials  sent  to shareholders
                         in connection with  annual meeting to be held April 23,
                         1998

                27       Financial Data Schedule.

                28(c)    Certificate of Barbados Residency filed by reference to
                         Exhibit 28(c) to Amendment No. 1 to Registration
                         Statement on Form S-1, File No. 33-6534, dated June 18,
                         1986.

                99(a)    Certification Form filed by reference to Exhibit 28(a)
                         to Amendment No. 2 to Registration Statement on Form
                         S-1, File No. 33-6534, dated June 18, 1986.

                99(b)    Guarantee issued by the Minister of Finance of Barbados
                         filed by reference to Exhibit 99(b) to Amendment No. 2
                         to Registration Statement on Form S-2, File No.
                         33-60105, dated April 23, 1996.

      (b)  Reports on Form 8-K. No reports on Form 8-K for the quarter ended
           December 31, 1997 have been filed.


                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) 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


                              Date: March 20, 1998


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities indicated.


   Signature                           Title                          Date


s/William B. Noll             Chairman, Chief Executive          March 30, 1990
  William B. Noll             Officer, President and
                              Director


s/Louis S. Carrio, Jr.        Vice-President and                 March 23, 1998
  Louis S. Carrio, Jr.        Director


s/John J. Dunn, Jr.           Vice-President and                 March 30, 1998
  John J. Dunn, Jr.           Director


s/Bernard J. Buselmeier       Vice-President and                 March 25, 1998
  Bernard J. Buselmeier       Director

                              Director
  Gregory Greenwood

s/Peter R. P. Evelyn          Director                           March 23, 1998
  Peter R. P. Evelyn


s/Ronald W. Jones             Vice-President,                    March 20, 1998
  Ronald W. Jones             Finance, Principal
                              Financial and
                              Accounting Officer


     SUPPLEMENTAL  INFORMATION  TO BE FURNISHED  WITH REPORTS FILED  PURSUANT TO
SECTION  15(d) OF THE ACT BY  REGISTRANT  WHICH HAVE NOT  REGISTERED  SECURITIES
PURSUANT TO SECTION 12 OF THE ACT

     Proxy  solicitation  materials were sent to shareholders in connection with
the annual meeting held on March 27, 1997 and in connection with the 1998 annual
meeting, to be held on April 23, 1998.