The Company's first year of full operation was the fiscal year ended January 31,
1989. In May of 1990, the Company changed its fiscal year end from January 31
to December 31. A full 12 months of underwriting activity are reflected in the
For the 11-month period ended December 31, 1989, the Company had $5,183,768 of earned premium, $673,785 of investment income and incurred $5,278,717 of losses and expenses. The net income of the Company for the period was $578,836.
1994, 1993, 1992, 1991 and the eleven month period ended December 31, 1990 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, 1994 and 1993 and for each of the three
December 31 ____________________________________________________________ 1994 1993 1992 1991 1990 ____ ____ ____ ____ ____
In May of 1990, the Company changed its fiscal year end from January 31 to December 31.
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
have also grown. Net cash provided by operating activities has increased from
believes that such funds will be sufficient to meet its liquidity requirements
in 1995 and in future years to which its reinsurance liabilities extend. No
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
expires. For new vehicles, the warranty generally covers 36 months or 36,000
miles. For used vehicles, the applicable warranty period depends on the
recognized as earned until such expiration. Since very little premium is
recognized as earned until the expiration of the underlying warranty, most of
See "Market For Registrant's Common Equity And Related Stockholder Matters" for
earnings retained for use in the business of $5,796,732. Barbados law requires
of the amount by which the earned premium exceeded $5,000,000 in the previous
Capital Account by retrocession or any other means to the extent necessary to
Results of Operations. During the fiscal year ended December 31, 1994, the
Company had net income of $1,718,558 compared to $2,704,707 and $3,507,214 for
in net income during 1993 compared to the previous year is the result primarily
$13,005,184 for the fiscal years ended December 31, 1993 and 1992, respectively.
Increased premium income has been generated by the issuance of additional series
reinsurance premiums from series issued in prior fiscal years. During 1994, the
Company issued 36 new series of Shares and redeemed 3 series of Shares for a net
increase of 33 series. There were 222 series of Shares outstanding at
December 31, 1994 of $20,825,943 compared with $15,425,146 and $12,020,682 for
the fiscal years ended December 31, 1993 and 1992, respectively. This was
ceding commissions and excise taxes of $5,540,539 and operating expenses of
$455,238. Losses incurred in 1993 and 1992 were $10,912,683 and $8,164,449,
1992, and the reduction in the Company's net income during 1993 compared to
under the manufacturer's warranties for certain 1992 model vehicles had a
the manufacturer's warranties from 50,000 to 36,000 miles for certain vehicles
beginning with the 1992 model year adversely affected 1993 and 1994 losses.
The Company incurred operating expenses during the fiscal year ended December
31, 1994 of $455,238 compared to $503,178 and $478,475 for the years ended
shares if such costs could not be allocated to the Subsidiary Capital Account
issuance costs which totalled $74,461 and $80,298, respectively, were paid by
the Company and allocated to the Subsidiary Capital Account for the Common
during 1994 compared to prior periods is primarily attributable to changes in
interest rates which adversely affected the market values of the Company's
Realized losses on the sale of investment securities in the year ended December
during 1994 resulted in large part from a repositioning of the Company's
$99,886. Unrealized losses as of December 31, 1994 include amounts attributable
to decreases in value of securities purchased at a premium. As of February 28,
denominated fixed-income securities. In the future, the Company may invest in
costs) than would be available in the market for similarly rated U.S.-dollar
Pursuant to the Retrocession Agreement, the Company must furnish to MIC
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.
in Debt and Equity Securities" is effective for years beginning after December
categories (trading, available for sale, and held to maturity). The Company
3. Statements of Income and Retained Earnings for the years ended December 31, 1994, 1993 and 1992 ............ 29
We have audited the accompanying balance sheets of Motors Mechanical Reinsurance Company, Limited as of December 31, 1994 and 1993 and the related statements of income and retained earnings and cash flows for each of the three years in the period ended December 31, 1994. 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.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Motors Mechanical Reinsurance Company, Limited as of December 31, 1994 and 1993 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1994 in conformity with accounting principles generally accepted in the United States of America.
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED BALANCE SHEETS DECEMBER 31, 1994 AND 1993
Investment income: Interest earned 2,771,174 1,827,929 1,658,430 Realized (losses) gains on investments (1,543,358) 872,313 864,282 ___________ ___________ __________
Acquisition costs 5,540,539 4,009,285 3,377,758 Losses paid 14,079,926 10,625,508 7,938,136 Increase in loss reserves 750,240 287,175 226,313 Administrative expenses: Related Parties 171,135 168,933 160,858 Other 284,103 334,245 317,617 ___________ ___________ __________
NET INCOME 1,718,558 2,704,707 3,507,214 RETAINED EARNINGS, beginning of year 6,211,978 5,528,775 3,043,266
RETAINED EARNINGS, end of year $ 5,796,732 $ 6,211,978 $ 5,528,775 ___________ ___________ ___________
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of Participating Stock 270,000 345,000 255,000 Dividends paid (2,156,304) (2,021,504) (1,021,705) ___________ ___________ ____________
Net cash used in financing activities (1,886,304) (1,676,504) (766,705) ___________ ___________ ___________
CASH AND CASH EQUIVALENTS, beginning of year 6,788,771 1,710,738 3,589,433 ___________ ___________ ___________
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net income $ 1,718,558 $ 2,704,707 $ 3,507,214 Realized losses (gains) on investments 1,543,358 (872,313) (864,282) Change in: Accrued investment income (698,005) 254,177 (222,446) Due from ceding company (983,528) 24,630 (653,270) Deferred acquisition costs (4,436,261) (3,213,352) (1,662,778) Prepaid expenses - - - Unearned premiums 17,055,211 12,349,452 6,381,271 Loss reserves 750,240 287,175 226,313 Accrued liabilities 10,921 15,859 22,196 ___________ ___________ ___________
All of the common stock of the Company is owned by Motors Insurance Corporation ("MIC"). MIC is an indirect wholly-owned subsidiary of General Motors Corporation. The principal activity of the Company is the assumption of certain automobile mechanical breakdown risks arising under insurance policies reinsured by MIC and attributable to an MIC Agency Account in respect of which shares of Participating Stock are issued and outstanding. All premiums received were derived from MIC.
Certain amounts in the 1993 and 1992 financial statements have been reclassified to conform with the 1994 presentation.
Premiums are taken into income on the basis of quarterly cessions and are related to anticipated loss exposures. Acquisition costs, consisting of ceding commissions and excise taxes, are taken into income on the basis of premiums earned.
Investments are comprised of interest-bearing marketable securities which are carried at fair value based on quoted market prices and dealer quotes obtained from an external pricing service. Investments with original maturities of less than 90 days are classified as cash equivalents. Unrealized appreciation (depreciation) is included in stockholders' equity.
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, 2001.
Gross Gross Estimated Unrealized Unrealized Fair Cost Appreciation Depreciation Value _________ ____________ ____________ ___________
Debt securities issued by foreign governments and their agencies $31,233,934 $23,323 $(1,324,106) $29,933,151
In 1994, gross gains of $150,704 and gross losses of $1,694,062 were realized. In 1993, gross gains of $964,613 and gross losses of $92,300 were realized. In 1992, gross gains of $1,008,932 and gross losses of $144,650 were realized.
Beginning balance in reserves for losses $ 1,910,030 $ 1,622,855 $1,396,542 ____________ ____________ __________
Prior claim years $ 1,552,900 $ 1,261,788 $ 912,465 ____________ ____________ __________
As a result of change in estimates of losses incurred in prior years, the provisions for losses incurred in 1994, 1993 and 1992 decreased by $63,724, $134,249, and $297,535, respectively, because of lower than expected claims.
In the years ended December 31, 1994, 1993 and 1992, costs in the amount of $162,989, $74,461 and $80,298, respectively, were incurred in the sale of Participating Stock. The Common Stockholder reimbursed the Company directly for these expenses in 1994. During 1993 and 1992, these amounts were expensed by the Company and allocated to the account of the Common Stockholder.
The holders of Common Stock as a class are entitled to elect five directors, at least one of whom must be a resident of Barbados. They have no right to vote with respect to liquidation of the Company. As a class, these holders generally have the sole right to vote on matters not specifically reserved to Participating Stock.
Under the provisions of the retrocession agreement, the Company will receive additional cessions of $19,156,090 ($13,471,019 at December 31, 1993) relating to premiums written by the ceding insurer but unearned at the respective period ends. The amounts will be received as the premiums are earned, net of related acquisition costs.
As of December 31, 1994, the Company has provided an irrevocable letter of credit to MIC, in the amount of $42,900,000 to secure the amounts recoverable from the Company related to the business ceded. Cash equivalents and investments are assigned to secure the letter of credit.