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, 1998

                                       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


<PAGE>



     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, 1999, was $2,362,500.*


     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, 1999

         Common Stock, no-par value                              2,000
         Participating Stock, no-par value                      31,500







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


<PAGE>


                                     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 entities  selling motor
vehicles  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 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,
1998, 1997, and 1996 were 79.4%, 68.1% and 66.6% respectively.


The  following  table sets forth an analysis of changes in the loss reserves for
the years ended December 31, 1998, 1997 and 1996:


<TABLE>
<CAPTION>
                                                               Year Ended

                                                  12/31/98               12/31/97          12/31/96

<S>                                          <C>                    <C>               <C> 
Beginning balance in
reserves for losses.........                   $ 5,421,160             $ 4,284,304        $ 3,480,334
                                               -----------             -----------        -----------

Add-provision for losses incurred related to:

  Current claim year........                    45,843,093              31,904,950         24,080,078

  Prior claim years.........                      (290,547)               (746,024)           (42,251)
                                               -----------             -----------         ----------
         Total.................                 45,552,546              31,158,926         24,037,827
                                               -----------             -----------         ----------

Deduct-paid losses
attributable to:

  Current claim year........                    40,767,738              27,024,981         20,330,269

  Prior claim years.........                     4,812,150               2,997,089          2,903,588
                                               -----------             -----------         ----------
      Total.................                    45,579,888              30,022,070         23,233,857
                                               -----------             -----------         ----------

Ending balance in reserves
for losses..................                   $ 5,393,818             $ 5,421,160        $ 4,284,304
                                               ===========             ===========        ===========
</TABLE>




The  following  table  analyzes the  development  of losses and loss  adjustment
expenses from January 1, 1993 through December 31, 1998.


<TABLE>
<CAPTION>
                                                                    Years Ended

                            12/31/93    12/31/94    12/31/95    12/31/96     12/31/97    12/31/98
<S>                       <C>         <C>          <C>       <C>           <C>         <C>
Liability for unpaid
  claims and claims
  adjustment expense       $1,910,030  $2,660,270  $3,480,334  $4,284,304   $5,421,160  $5,393,818
                           ==========  ==========  ==========  ==========   ==========  ==========
Paid (cumulative) in
  subsequent year(s)       $1,552,900  $2,149,200  $2,903,588  $2,997,089   $4,812,150

Estimated unpaid
  liability as of
  year end*                   293,406     401,910     534,495     541,191      318,463
                           ----------  ----------  ----------  ----------   ----------
Cumulative Redundancy      $   63,724  $  109,160  $   42,251  $  746,024   $  290,547
                           ==========  ==========  ==========  ==========   ==========
</TABLE>





*/ 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.


The table shows initial  estimated  reserves at December 31, 1998,  1997,  1996,
1995,  1994, and 1993 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.  At present,  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
also may invest up to 20% of its portfolio in equities. 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 bond portfolio 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 at any time during the twelve  calendar  months  preceding the end of the
fiscal  quarter in which the expense or  liability  is incurred  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,  1998,  $2,626,787  of net
underwriting losses and $555,321 of administrative expenses were allocated among
the 315 series of Shares outstanding as of December 31, 1998, and $10,375,464 of
net investment  income was allocated  among such series of Shares and the Common
Stock.

As of December 31, 1998, 236 series of Shares  outstanding had balances  greater
than or equal to $7,500  (ranging from $7,672 to $809,892) and 79 of such series
had balances less than $7,500 (ranging from $7,453 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, 1998, an aggregate of
$3,530,320 had been advanced from the  Restricted  Earned Surplus (which forms a
portion of the  Account  established  for the Common  Stock  owned by MIC) to 67
Subsidiary Capital Accounts and remained  outstanding at that date including net
deficits of $946,174 associated with 7 series of Shares that have been redeemed.
As of December 31, 1998,  $2,702,259 of aggregate  deficits has been reallocated
among the Subsidiary Capital Accounts of the Shares and remained outstanding. Of
this amount $2,004,811 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, 1998, the Company  incurred
fees payable to the Manager in the amount of $228,968.

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 thirteen  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, 1998.


                                     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, 1999
there were 545 holders of Shares of record, representing 315 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
1999,  February of 1998,  March of 1997 and April of 1996, the Company  declared
dividends of $4,066,464,  $5,171,956,  $4,196,730  and $4,007,483  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, 1998,
1997, 1996, 1995 and 1994 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, 1998 and 1997 and
for each of the three years in the period  ended  December  31, 1998 is included
elsewhere herein.


<TABLE>
<CAPTION>
                                                                 December 31

                              1998                1997                1996               1995                 1994
                              ----                ----                ----               ----                 ----
<S>                     <C>                <C>                <C>                  <C>                 <C> 
Premiums Assumed         $ 72,634,160        $ 57,071,313        $ 47,410,037        $ 44,084,952        $ 38,371,896
                         =============       ============        ============        ============        ============
Premiums Earned          $ 57,845,674        $ 45,701,595          36,077,699        $ 28,800,689        $ 21,316,685
Net Investment
  Income                   10,375,464           5,704,678           5,341,924           5,563,573           1,227,816
                         ------------        ------------        ------------        ------------        ------------
Total Income               68,221,138          51,406,273          41,419,623          34,364,262          22,544,501
Less Losses and
  Expenses                 61,027,782          43,503,363          33,965,100          27,462,338          20,825,943
                         ------------        ------------        ------------        ------------        ------------
Net Income*              $  7,193,356        $  7,902,910        $  7,454,523        $  6,901,924        $  1,718,558
                         ============        ============        ============        ============        ============
Dividends Per
  Common Share                      0                   0                   0                   0                   0
Total Assets             $139,312,516        $123,065,286        $106,041,164        $ 91,526,976        $ 66,012,284
Total Policy
  Reserves and
  Other Liabilities       115,786,948         100,999,317          88,479,590          76,350,313          60,246,641
Stockholders' Equity       23,525,568          22,065,969          17,561,574          15,176,663           5,765,643
Dividends Paid on
  Participating Shares      5,171,956           4,196,730           4,007,483           1,188,614           2,156,304

</TABLE>


*/ 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.


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
$16,077,051  in 1998  from  $17,304,385  in 1997 and  $17,588,199  in 1996.  The
Company  believes  that such  funds  will be  sufficient  to meet its  liquidity
requirements  in 1999 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  $110,243,074  as of December 31,
1998, and $95,454,588 as of December 31, 1997. 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 26, 1999, the Board of Directors authorized the payment of dividends
aggregating  $4,066,464 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, 1998, was
comprised  of paid-in  capital  with  respect to the Common  Stock of  $200,000,
paid-in  capital  with  respect  to the  Shares  of  $2,362,500  (compared  with
$2,115,000 and $1,905,000 as of December 31, 1997 and 1996,  respectively),  and
earnings retained for use in the business of $20,629,009.  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, 1999,  the  Company's  required  minimum net
assets  computed in accordance with Barbados law was  approximately  $6,284,567,
compared  to total  capital  and  retained  earnings  computed  for  purposes of
Barbados law of $23,191,509.

Results of Operations.  During the year ended December 31, 1998, the Company had
net income of $7,193,356  compared to $7,902,910  and  $7,454,523  for the years
ended December 31, 1997 and 1996, respectively. As described below, the decrease
in net income  during 1998  compared to the previous year was primarily a result
of an underwriting loss which partially offset an increase in investment income.
The increase in net income in 1997 compared to 1996 was primarily a result of an
increase in investment  income  combined with a modest  increase in underwriting
income.

The Company had a net  underwriting  loss of  $3,182,108 in 1998 compared to net
underwriting  income of $2,198,232  and  $2,112,599 for the years ended December
31, 1997 and 1996, respectively.  The net underwriting loss recorded during 1998
reflected an increase in the Company's loss ratio (the ratio of losses  incurred
to  premiums  earned) as more fully  described  below.  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 of the
Company.  During 1998,  the Company earned  premiums of $57,845,674  compared to
$45,701,595 and $36,077,699 during 1997 and 1996, respectively.

Increased premium income has been generated by the issuance of additional series
of Shares during the year ended December 31, 1998,  and the  continuing  flow of
reinsurance premiums from series issued in prior years. During 1998, the Company
issued 37 new  series  of  Shares  and  redeemed  4 series  of Shares  for a net
increase of 33 series.  There were a total of 315 series outstanding at December
31, 1998  compared to 282 and 254 series of Shares  outstanding  at December 31,
1997 and 1996, respectively.

The Company  incurred losses and  administrative  expenses during the year ended
December 31, 1998 of $61,027,782  compared with  $43,503,363 and $33,965,100 for
the years ended December 31, 1997 and 1996, respectively.  Expenses in 1998 were
comprised  of losses paid and  provisions  for losses  incurred of  $45,552,545,
ceding  commissions  and excise taxes of $14,919,916  and operating  expenses of
$555,321.  Losses  incurred in 1997 and 1996 were  $31,118,622  and  $24,037,827
respectively.  The loss ratio for the year  ended  December  31,  1998 was 78.7%
compared  to 68.1% and 66.6% for the years  ended  December  31,  1997 and 1996,
respectively.

The  loss  ratio  in 1998  resulted  from  loss  experience  which  was  heavily
influenced by the type of repairs and price of repaired parts. During the second
and third  quarters  1998  unusually  hot weather in certain areas of the United
States resulted in a higher number of covered repairs for mechanical  components
such as air conditioners and water pumps which contributed to higher loss costs.
Loss experience in 1998 also reflected,  in part,  implementation  of previously
announced increases in suggested list prices of parts to dealers.

The ceding company, MIC, believes that dealer management is a key factor in loss
experience. Many of the dealerships producing mechanical business assumed by the
Company  are  profitable.   At  dealerships   where  loss  experience  has  been
unprofitable,  MIC has  recently  implemented  loss  cost  procedures  including
on-site adjusters and/or empowerment restrictions.  MIC believes these loss cost
procedures  should  have  a  favourable  effect  on  the  performance  of  those
unprofitable accounts. However, there can be no assurance that such results will
be achieved.

The Company incurred  operating expenses during the year ended December 31, 1998
of $555,321  compared to $503,020 and $548,525 for the years ended  December 31,
1997 and 1996,  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 1998, $69,280 of such costs
were paid  directly  by MIC  compared to $77,329 and $64,848 for the years ended
December 31, 1997 and 1996, respectively.

Investment income in 1998 was $10,375,464  compared to $5,704,678 and $5,341,924
for the years ended  December 31, 1997 and 1996,  respectively.  The increase in
investment  income during 1998 arose primarily as a result of increases in gains
on sale of investment  securities as more fully described below. 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 sale of investment  securities for the year ended December 31, 1998 resulted
in realized  gains of  $4,404,651  compared to  realized  gains of $750,923  and
$64,244  for the years  ended  December  31,  1997 and 1996,  respectively.  The
increases in realized  gains  during the year under review arose  primarily as a
result of increased  sales of investment  securities to take advantage of market
opportunities   presented  by  uncertainty  in  the  U.S.   dollar   denominated
international  equity  markets.  Interest earned for the year ended December 31,
1998 was  $5,970,813  compared to $4,953,755  and $5,277,680 for the years ended
December 31, 1997 and 1996, respectively. The increase in interest earned during
1998  compared  to 1997 was  largely a result of an  increase  in the  amount of
assets under  management  combined with a slight increase in the overall rate of
return.  The decrease from 1996  compared to 1997 resulted from lower  available
yields.

Unrealized  appreciation on investment  securities held at December 31, 1998 was
$334,059 compared to unrealized appreciation at December 31, 1997 of $1,135,201.
The decrease in  unrealized  appreciation  as of December  31, 1998  compared to
December 31, 1997 resulted from sales of investment  securities during the third
and fourth quarters of 1998 to take advantage of market conditions.

Although at December 31, 1998 and 1997, 100% of the Company's  investments  were
in U.S.  dollar-denominated  fixed-income securities, the Company's fixed income
investment  manager  seeks on occasion 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. 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, 1998,  the Company had  furnished  such a letter of credit in
the amount of $88,075,000.

In June  1997,  the  Financial  Accounting  Standards  Board  ("FASB")  issued a
Statement  of  Financial   Accounting  Standards  ("FASB")  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 has adopted this accounting  standard in 1998. Adopting
the accounting standard has no impact on reported net income of the Company.

Year 2000

Many  computerized  systems and  microprocessors  that are used by the Company's
Manager have the potential for operational  problems if they lack the ability to
handle the  transition to the Year 2000.  The effects of the Year 2000 issue are
also  complicated by the Company's  dependence on its common  shareholder,  from
whom the Company assumes all of its business, as well as other service providers
such as  investment  advisors  and  custodians.  The  Year  2000  issue  has the
potential to cause  disruption to the business of the Company and its customers.
In early 1998, the Company initiated  communications  with its Manager and other
service and technology providers in order to assess and reduce the risk that the
Company's  operations could be adversely  affected by the failure of these third
parties to adequately address the Year 2000 issue. Motors Insurance Corporation,
the Company's key retroceding company and common shareholder,  has completed its
Year 2000 assessment  phase and is in the remediation  phase with respect to its
critical systems.

The  Company  does not  separately  own or license  any  computers  or  computer
software  applications,  instead it has outsourced  these  functions  through an
Insurance Management Agreement. To date, the Company has not incurred,  expensed
or capitalized  amounts related to the Year 2000  remediation.  The Company does
not  expect to incur  incremental  expenses  or to  forego or delay  information
technology projects due to Year 2000. In view of the foregoing, the Company does
not currently anticipate that it will experience a significant disruption of its
business as a result of the Year 2000 issue. However, there is still uncertainty
about the broader  scope of the Year 2000 issue as it may affect the Company and
third parties that are critical to the Company's  operations.  In the event that
the Company or its service  providers are unable to complete remedial actions or
are unable to implement  adequate  contingency  plans in the event that problems
are  encountered,  there  could be a material  adverse  effect on the  Company's
business, results of operations or financial condition.

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...................     34

2.   Balance Sheets, December 31 , 1998 and 1997....     35

3.   Statements of Income and Retained Earnings
       for the years ended December 31, 1998,
       1997 and 1996 ...............................     36

4.   Statements of Cash Flows for the years ended
       December 31, 1998, 1997 and 1996 ............     37

5.   Statement of Changes in Shareholders Equity....     38

5.   Notes to Financial Statements..................   39 - 46


<PAGE>


                          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, 1998 and 1997 and the related statements of
income and retained  earnings,  and cash flows and changes for each of the three
years in the period ended December 31, 1998. 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, 1998 and 1997 and the results of its  operations  and
its cash flows and its changes  for each of the three years in the period  ended
December 31, 1998 in conformity with accounting principles generally accepted in
the United States of America.



                                                  s/DELOITTE & TOUCHE
                                                  CHARTERED ACCOUNTANTS



Bridgetown, Barbados
February 12, 1999


<PAGE>


                 MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
                                 BALANCE SHEETS
                           DECEMBER 31, 1998 AND 1997

                           (Expressed in U.S. Dollars)


<TABLE>
<CAPTION>
                                         Notes                 1998                   1997
                                         -----             ------------           ------------
<S>                                    <C>              <C>                      <C> 
ASSETS
   Investments                             3,7             $ 89,474,377           $ 88,585,513
   Cash and cash equivalents               7                 19,504,563              5,645,482
   Accrued investment income                                  1,788,490              3,178,446
   Due (to)/from Motors Insurance Corporation                  (115,667)               841,927
   Deferred acquisition costs                                28,660,753             24,813,918
                                                           ------------           ------------
Total Assets                                                139,312,516            123,065,286
                                                           ============          =============

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
   Unearned premiums                                       $110,243,074           $ 95,454,588
   Loss reserves                           4                  5,393,818              5,421,160
   Accrued liabilities                                          150,056                123,569
                                                           ------------           ------------
   Total Liabilities                                        115,786,948            100,999,317
                                                           ------------           ------------

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 -
         31,500 shares at December 31,
         1998 and 28,200 shares at
         December 31, 1997                                    2,362,500              2,115,000
                                                           ------------            -----------
                                                              2,562,500              2,315,000

   Retained earnings                       8                 20,629,009             18,615,768
   Accumulated other comprehensive         3
     income                                                     334,059              1,135,201
                                                           ------------            -----------
   Total Stockholders' Equity                                23,525,568             22,065,969
                                                           ------------           ------------
Total Liabilities and
   Stockholders' Equity                                    $139,312,516           $123,065,286
                                                           ============           ============
</TABLE>


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


<PAGE>


                 MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
                   STATEMENTS OF INCOME AND RETAINED EARNINGS
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

                           (Expressed in U.S. Dollars)

<TABLE>
<CAPTION>

                                Notes                            Years Ended December 31
                                -----             --------------------------------------------------
                                                      1998                1997                1996
                                                  -----------         -----------        -----------
<S>                           <C>               <C>                 <C>               <C>
INCOME

   Reinsurance
     premiums assumed               6             $72,634,160         $57,071,313        $47,410,037
   Increase in
     unearned premiums                            (14,788,486)        (11,369,718)       (11,332,338)
                                                  -----------         -----------        -----------
   Premiums earned                                 57,845,674          45,701,595         36,077,699
                                                  -----------         -----------        -----------
   Investment income
     Interest earned                                5,970,813           4,953,755          5,277,680
     Realized gains
       on investments - net                         4,404,651             750,923             64,244
                                                  -----------         -----------        -----------
   Investment income                               10,375,464           5,704,678          5,341,924
                                                  -----------         -----------        -----------
TOTAL INCOME                                       68,221,138          51,406,273         41,419,623
                                                  -----------         -----------        -----------
EXPENSES

   Acquisition costs                               14,919,916          11,881,721          9,378,748
   Losses paid                                     45,579,887          29,981,766         23,233,857
   (Decrease)/Increase
     in loss reserves                                 (27,342)          1,136,856            803,970
   Administrative expenses
     Related Parties                                  225,922             219,760            211,001
     Other                                            329,399             283,260            337,524
                                                  -----------         -----------        -----------
TOTAL EXPENSES                                     61,027,782          43,503,363         33,965,100
                                                  -----------         -----------        -----------
NET INCOME FOR THE YEAR                             7,193,356           7,902,910          7,454,523
RETAINED EARNINGS,
   beginning of year                               18,615,768          14,913,053         11,517,542

LESS: DIVIDENDS                                    (5,171,956)         (4,196,730)        (4,007,483)

DEDUCT REDEMPTION OF
   PARTICIPATING STOCK                                 (8,159)             (3,465)           (51,529)
                                                  -----------         -----------        -----------
RETAINED EARNINGS, end of year                    $20,629,009         $18,615,768        $14,913,053
                                                  ===========         ===========        ===========
</TABLE>



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


<PAGE>

                 MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
                            STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

                           (Expressed in U.S. dollars)


<TABLE>
<CAPTION>
                                                                      Years Ended December 31
                                                     -----------------------------------------------------
                                                         1998                 1997                 1996
                                                     ------------         ------------       -------------
<S>                                                <C>                 <C>                 <C> 
CASH FLOWS FROM OPERATING ACTIVITIES:
   Reinsurance premiums collected                     $67,293,382         $57,014,145          $46,031,997
   Losses and acquisition
     expenses paid                                    (58,004,044)        (42,436,530)         (34,302,453)
   Administrative expenses paid                          (581,648)           (502,230)            (501,147)
   Investment income received                           7,369,361           3,229,000            6,359,802
                                                      -----------         -----------          -----------
Net cash provided by operating
      activities                                       16,077,051          17,304,385           17,588,199
                                                      -----------         -----------          -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of investments                          (324,678,378)       (318,139,315)        (232,194,343)
   Sales and maturities of investments                327,393,023         297,544,335          224,400,822
                                                     ------------         -----------         ------------
Net cash from/(used) in investing
      activities                                        2,714,645         (20,594,980)          (7,793,521)
                                                     ------------         -----------         ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuance of
     Participating Stock                                  277,500             217,500              120,000
   Redemption of Participating Stock                      (38,159)            (10,965)             (74,029)
   Dividends paid                                      (5,171,956)         (4,196,730)          (4,007,483)
                                                      -----------         -----------          -----------
Net cash used in financing activities                  (4,932,615)         (3,990,195)          (3,961,512)
                                                      -----------         -----------          -----------

INCREASE/(DECREASE) IN CASH AND CASH
     EQUIVALENTS                                       13,859,081          (7,280,790)           5,833,166

CASH AND CASH EQUIVALENTS, beginning
   of year                                              5,645,482          12,926,272            7,093,106
                                                      -----------         -----------          -----------
CASH AND CASH EQUIVALENTS, end of
   year                                               $19,504,563         $ 5,645,482          $12,926,272
                                                      ===========         ===========          ===========
 RECONCILIATION OF NET INCOME TO
   NET CASH PROVIDED BY OPERATING
   ACTIVITIES:
   Net income                                         $ 7,193,356          $7,902,910          $ 7,454,523
   Realized gains on investments                       (4,404,651)           (750,923)             (64,244)
   Change in:
     Accrued investment income                          1,389,956          (1,724,755)           1,079,122
     Due from Motors Insurance
        Corporation                                       957,594           2,316,137              (62,477)
     Deferred acquisition costs                        (3,846,835)         (2,958,711)          (2,948,002)
     Unearned premiums                                  14,788,486         11,369,718           11,332,338
     Loss reserves                                        (27,342)          1,136,856              803,970
     Accrued liabilities                                   26,487              13,153               (7,031)
                                                      -----------        ------------          -----------
NET CASH PROVIDED BY OPERATING
   ACTIVITIES                                         $ 16,077,051       $ 17,304,385         $ 17,588,199
                                                      ============       ============         ============
</TABLE>


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


<PAGE>


                 MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
                  STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
                           (Expressed in U.S. Dollars)


<TABLE>
<CAPTION>

                                                                       December 31, 1998
                                          ------------------------------------------------------------------------------------------
                                                                                           Accumulated
                                              Total                                           Other
                                          Shareholders'    Comprehensive     Retained     Comprehensive      Common    Participating
                                             Equity           Income         Earnings        Income           Stock        Stock
                                             ------           ------         --------        ------           -----        -----
<S>                                      <C>             <C>             <C>              <C>             <C>          <C>
Balance at December 31, 1997                $22,065,969    $     -         $18,615,768     $1,135,201       $200,000    $2,115,000
Comprehensive Income:
   Net income                                 7,193,356     7,193,356        7,193,356             -              -             -
                                                           ----------
   Other comprehensive income,
    net of tax:
  Unrealized loss on securities-
    net of reclassification                    (801,142)     (801,142)           -           (801,142)            -             -
                                                            ----------
  Comprehensive income                             -       $6,392,214            -                 -              -             -
                                                           ===========
Dividends declared on participating stock    (5,171,956)                    (5,171,956)            -              -             -
Participating stock
   Issued                                       285,000                           -                -              -        285,000
   Redeemed                                     (45,659)                        (8,159)            -              -        (37,500)
                                             -----------                    -----------    ----------       ---------   -----------
Balance at December 31, 1998                $23,525,568                    $20,629,009     $  334,059       $200,000    $2,362,500
                                            ============                   ============    ==========       =========   ===========

Disclosure of reclassification amount
   Unrealized holding gains arising
    during period                             3,603,509
   Less: reclassification adjustment
    for gains included in net income         (4,404,651)
                                             -----------

   Net unrealized loss on securities           (801,142)
</TABLE>


<TABLE>
<CAPTION>
                                                                       December 31, 1997
                                          ------------------------------------------------------------------------------------------
                                                                                           Accumulated
                                              Total                                           Other
                                          Shareholders'    Comprehensive     Retained     Comprehensive      Common    Participating
                                             Equity           Income         Earnings        Income           Stock        Stock
                                             ------           ------         --------        ------           -----        -----
<S>                                      <C>             <C>             <C>              <C>             <C>          <C>
Balance at December 31, 1996                $17,561,574    $     -         $14,913,053     $  543,521       $200,000     $1,905,000
Comprehensive Income:
   Net income                                 7,902,910      7,902,910       7,902,910             -              -              -
                                                            ----------
   Other comprehensive income,
      net of tax:
   Unrealized loss on securities-
   net of reclassification                      591,680        591,680                        591,680             -              -
                                                            ----------
   Comprehensive income                              -      $8,494,590              -              -              -              -
                                                            ==========
Dividends declared on participating stock    (4,196,730)                     (4,196,730)           -              -              -
Participating Stock
   Issued                                       225,000                             -              -              -         225,000
   Redeemed                                     (18,465)                         (3,465)           -              -         (15,000)
                                            ------------                   -------------   -----------      ---------    -----------
Balance at December 31, 1997                $22,065,969                     $18,615,768    $1,135,201       $200,000     $2,115,000
                                            ============                   =============   ===========      =========    ===========

Disclosure of reclassification amount
   Unrealized holding gains arising
    during period                             1,342,603
   Less: reclassification adjustment
    for gains included in net income           (750,923)
                                            ------------
   Net unrealized gain on securities            591,680
                                            ============
</TABLE>


<TABLE>
<CAPTION>
                                                                       December 31, 1996
                                          ------------------------------------------------------------------------------------------
                                                                                           Accumulated
                                              Total                                           Other
                                          Shareholders'    Comprehensive     Retained     Comprehensive      Common    Participating
                                             Equity           Income         Earnings        Income           Stock        Stock
                                             ------           ------         --------        ------           -----        -----
<S>                                      <C>             <C>             <C>              <C>             <C>          <C>
Balance at December 31, 1995                $15,176,663     $   -           $11,517,542    $1,651,621       $200,000     $1,807,500
Comprehensive Income:
   Net income                                 7,454,523      7,454,523        7,454,523            -              -              -
                                                            ----------
   Other comprehensive income,
    net of tax:
   Unrealized loss on securities-
     net of reclassification                 (1,108,100)    (1,108,100)             -      (1,108,100)            -              -
                                                            -----------
   Comprehensive income                              -      $6,346,423              -              -              -              -
                                                            ===========
Dividends declared on participating stock    (4,007,483)                     (4,007,483)           -              -              -
Participating stock
   Issued                                       120,000                             -              -              -         120,000
   Redeemed                                     (74,029)                        (51,529)           -              -         (22,500)
                                             -----------                    ------------   -----------      ---------    -----------
Balance at December 31, 1996                $17,561,574                     $14,913,053    $  543,521       $200,000     $1,905,000
                                            ============                    ============   ===========      =========    ===========

Disclosure of reclassification amount
   Unrealized holding loss arising
    during period                            (1,043,856)
   Less: reclassification adjustment
    for gains included in net income            (64,244)
                                             -----------
   Net unrealized loss on securities         (1,108,100)
                                            ============
</TABLE>


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


<PAGE>


                 MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
                        NOTES TO THE FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996

                           (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
          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  1996   financial   statements   have  been
          reclassified to conform with the 1997 and 1998 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
          basis of premiums 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.   Unrealised
          appreciation   (depreciation)   is  included  in   accumulated   other
          comprehensive income.

          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:

<TABLE>
<CAPTION>

                                                        Gross                 Gross
                                                      Unrealized           Unrealized              Fair
                                    Cost             Appreciation         Depreciation             Value
                                 -----------         ------------         ------------          -----------
<S>                            <C>                 <C>                 <C>                    <C>
December 31, 1998:

Foreign governments
   and their agencies            $27,522,957          $   43,649            $(290,075)          $27,276,531

Corporations                      25,150,984             538,236               (2,142)           25,687,078

Supranationals                    36,466,377             154,367             (109,976)           36,510,768
                                 -----------          ----------            ---------            ----------
   Total                         $89,140,318          $  736,252            $(402,193)          $89,474,377
                                 ===========          ==========            =========           ===========
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
                                 ===========          ==========           ==========           ===========
</TABLE>


Note 3.   INVESTMENTS (Cont'd)

          The cost and fair value of debt  securities  at December 31, 1998,  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          $58,087,649           $57,989,686

          Due after five years
            through ten years            31,052,669            31,484,691
                                        -----------           -----------

                                        $89,140,318           $89,474,377
                                        ===========           ===========

          In 1998, gross gains of $6,253,358 and gross losses of $1,848,707 were
          realized.  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.

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

             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
             Net depreciation                                (801,142)
                                                          -----------

             Balance, December 31, 1998                   $   334,059
                                                          ===========

          The investment portfolio is comprised of diverse debt securities which
          do not result in any  concentration  of credit  risk.  At December 31,
          1998,  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, 1998, 1997 and 1996:


<TABLE>
<CAPTION>

                                                     1998                  1997                   1996
                                                     ----                  ----                   ----
<S>                                             <C>                    <C>                  <C> 
Beginning balance in
reserves for losses                               $ 5,421,160           $ 4,284,304           $ 3,480,334
                                                  -----------           -----------           -----------
Add/(deduct)-provision for
losses incurred related to:

       Current claim year                          45,843,093            31,904,950            24,080,078
       Prior claim years                             (290,547)             (746,024)              (42,251)
                                                  -----------           -----------           -----------
             Total                                 45,552,546            31,158,926            24,037,827
                                                  -----------           -----------           -----------
Deduct paid losses attributable to:

       Current claim year                          40,767,738            27,024,981            20,330,269
       Prior claim years                            4,812,150             2,997,089             2,903,588
                                                   ----------           -----------           -----------
             Total                                 45,579,888            30,022,070            23,233,857
                                                  -----------           -----------          ------------
Ending balance in
reserves for losses                               $ 5,393,818           $ 5,421,160           $ 4,284,304
                                                  ===========           ===========           ===========
</TABLE>



As a result of change  in  estimates  of losses  incurred  in prior  years,  the
provisions  for losses  incurred in 1998,  1997 and 1996  decreased by $290,547,
$746,024 and $42,251 respectively, because of lower actual claims.

Note 5.   STOCKHOLDERS' EQUITY

          All of the Company's  Common Stock is held by MIC. A prospectus  dated
          May 12,  1998 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 1998, 37 additional series of 100 shares of Participating Stock
          were issued as compared with 29 for the year ended  December 31, 1997.
          In addition,  in 1998 the Board of Directors  redeemed 4 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 1998.

          In the years ended  December  31,  1998,  1997 and 1996,  costs in the
          amount of $69,280, $77,239 and $64,848 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, 1998, 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 $36,747,691 ($31,818,196 at December 31,
          1997) 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 $88,075,000  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, 1999,  the Company's  required  minimum
          stockholders'  equity  computed in  accordance  with  Barbados law was
          approximately $6,284,567.

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

                                   Common    Participating      Total
                                -----------  -------------   -----------
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 (Deficit),
  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)      18,623,938    18,615,768

Net income for the year            20,970        7,172,386     7,193,356
Net transfers                     (21,529)          21,529         -
Dividends paid                        -         (5,171,956)   (5,171,956)
Redemption of participating
 stock                                -             (8,159)       (8,159)
                                -----------    ------------  ------------
Balance (Deficit),
  December 31, 1998             $   (8,719)    $20,637,728   $20,629,009
                                ===========    ============  ============

<PAGE>
                                    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 April
23,  1998 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............. 56       Chairman, Chief Executive Officer,
                                      President and Director (President, Motors
                                      Insurance Corporation ("MIC"), 1998;
                                      President, GMAC Insurance Holdings, 1997,
                                      Executive Vice President & Chief Financial
                                      Officer, MIC, 1993-1998; Group Vice-
                                      President, MIC, 1991-1993; Vice President,
                                      MIC, 1989-1990).

                                      Mr. Noll became President and Director in
                                      1995.

Louis S. Carrio, Jr........   55      Vice-President and Director (Vice-Pres-
                                      ident, MIC).

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

Bernard J. Buselmeier.......  43      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............  40      Vice-President and Director (Vice
                                      President & Treasurer, MIC, 1998,
                                      Assistant Treasurer, MIC 1995-1998;
                                      previously manager, Coopers & Lybrand,
                                      L.L.P.)

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

Peter R. P. Evelyn ........   57      Director (Attorney, Evelyn, Gittens &
                                      Farmer, a Barbados law firm).

                                      Mr. Evelyn became a Director in 1986.

William Bradshaw .........    49      Director (Bradshaw Automotive Group)
                                      Mr. Bradshaw became a Director in 1998.

Ronald W. Jones ...........   46      Vice-President, Finance (Managing
                                      Director, Aon Insurance Managers
                                      (Barbados) Ltd.).

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

Michael B. Boyce...........   58      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. William Bradshaw, 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

               (i)  Financial Statements

                    The following are included in Item 8:

                    (i)  Independent Auditors' Report.

                    (ii) Balance Sheets, December 31, 1998 and 1997.

                    (iii)Statements  of Income  and  Retained  Earnings  for the
                         years ended December 31, 1998, 1997 and 1996.

                    (iv) Statements  of Cash Flows for the years ended  December
                         31, 1998, 1997, and 1996.

                    (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 April 23, 1998, filed by reference to
               Exhibit  20(b) to Annual Report on Form 10-K,  File No.  33-6534,
               for the year ended December 31, 1997.

          20(b)Proxy  solicitation  materials sent to shareholders in connection
               with annual meeting to be held on April 22, 1999.


          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, 1998 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 24, 1999

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 26, 1999
-------------------------        Officer, President and
  William B. Noll                Director 

s/Louis S. Carrio, Jr.           Vice-President and               March 26, 1999
-------------------------        Director
  Louis S. Carrio, Jr.


s/John J. Dunn, Jr.              Vice-President and               March 26, 1999
-------------------------        Director
  John J. Dunn, Jr.


s/Bernard J. Buselmeier          Vice-President and               March 26, 1999
-------------------------        Director
  Bernard J. Buselmeier


-------------------------        Director
  William Bradshaw


s/Peter R. P. Evelyn
-------------------------        Director                         March 30, 1999
  Peter R. P. Evelyn


s/Ronald W. Jones                Vice-President                   March 24, 1999
-------------------------        Finance, Principal
  Ronald W. Jones                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 April 23,1998 and in connection  with the 1999 annual
meeting, to be held on April 22, 1999.