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 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, and maintains all insurance records for the Company.
The following selected financial data for the years ended December 31, 1995, 1994, 1993, 1992 and 1991 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, 1995 and 1994 and for each of the three years in the period ended December 31, 1995 is included elsewhere herein.
Total Policy Reserves and Other Liabilities 76,350,313 60,246,641 42,430,269 29,777,783 23,148,003
Dividends Paid on Particip- ating Shares 1,188,614 2,156,304 2,021,504 1,021,705 150,317
Capital Resources. Capitalization of the Company, as of December 31, 1995, was comprised of paid-in capital with respect to the Common Stock of $200,000, paid-in capital with respect to the Shares of $1,807,500 (compared with $1,665,000 and $1,417,500 as of December 31, 1994 and 1993, respectively), and earnings retained for use in the business of $11,517,542. 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, 1996, the Company's required minimum net assets computed in accordance with Barbados law was approximately $3,380,069, compared to total capital and retained earnings computed for purpose of Barbados law of $ 13,525,042.
Results of Operations. During the year ended December 31, 1995, the Company had net income of $6,901,924 compared to $1,718,558 and $2,704,707 for the years ended December 31, 1994 and 1993, respectively. As described below, the increase in net income during 1995 compared to the previous year was the result of realized gains on the sale of investments, increases in interest earned and improved underwriting results. The reduction in net income during 1994 compared to the previous year was the result primarily of realized losses on the sale of investments.
3. Statements of Income and Retained Earnings for the years ended December 31, 1995, 1994 and 1993 ............
We have audited the accompanying balance sheets of Motors Mechanical Reinsurance Company, Limited as of December 31, 1995 and 1994 and the related statements of income and retained earnings and cash flows for each of the three years in the period ended December 31, 1995. 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.
Total Stockholders' Equity 15,176,663 5,765,643 __________ _________ Total Liabilities and Stockholders' Equity $91,526,976 $66,012,284
Increase in unearned premiums (15,284,263) (17,055,211) (12,349,452) ____________ ____________ ____________ Premiums earned 28,800,689 21,316,685 15,429,611 __________ __________ __________
Realized gains (losses) on investments 1,857,519 (1,543,358) 872,313 _________ ___________ _______ Investment income - net 5,563,573 1,227,816 2,700,242 _________ _________ _________
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
CASH AND CASH EQUIVALENTS, beginning of year 3,303,060 6,788,771 1,710,738 _________ _________ _________
CASH AND CASH EQUIVALENTS, end of year $ 7,093,106 $ 3,303,060 $ 6,788,771
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
The financial statements are stated in United States dollars and are prepared in conformity with accounting principles generally accepted in the United States of America.
Debt securities issued by foreign governments and their agencies $56,243,544 $1,711,611 $(135,765) $57,819,390
Debt securities issued by supra- nationals 2,003,100 75,775 -- 2,078,875 _________ ______ __ _________
Debt securities issued by supra- nationals 13,565,211 -- (595,306) $12,969,905 __________ __ _________ ___________
The cost and fair value of debt securities at December 31, 1995, 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.
The investment portfolio is comprised of diverse debt securities which do not result in any concentration of credit risk. At December 31, 1995, approximately 78.5% of the Company's investments are denominated in U.S. dollars and 21.5% are in non- U.S. dollar denominated securities on a currency- hedged basis.
As a result of change in estimates of losses incurred in prior years, the provisions for losses incurred in 1995, 1994 and 1993 decreased by $109,160, $63,724 and $134,249, respectively, because of lower than expected claims.
All of the Company's Common Stock is held by MIC. A prospectus dated July 12, 1994 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.
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.
Barbados law requires that the Company maintain a minimum capitalization based generally on the amount of premiums earned in the preceding year. At January 1, 1996, the Company's required minimum capital computed in accordance with Barbados law was approximately $3,380,000.
Redemption of participating stock -- 22,500 22,500 _____ ______ ______ Balance (Deficit) December 31, 1994 (53,220) 5,849,952 5,796,732