The following selected financial data for the fiscal years ended December 31,
with respect to their audits of the financial statements as of December 31,
*/ 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(f) to the financial statements.
Liquidity. The Company expects to generate sufficient funds from operations to
Capital Resources. Capitalization of the Company, as of December 31, 1993, is
$1,072,500 and $817,500 as of December 31, 1992 and 1991, respectively), and
earnings retained for use in the business. Barbados law requires that the
Company's net assets equal at least the aggregate of $1,000,000 and 10% of the
year. If the Company's net asset ratio is less than mandated by Barbados law,
ended January 31, 1988. The Company's first year of full operation was the
31, 1990, however, include only 11 months' investment income and administrative
$2,704,707 compared to $3,507,214 and $1,920,385 for the fiscal years ended
December 31, 1992 and 1991, respectively. The reduction in net income during
1993 compared to the previous year is the result primarily of an increase in
$15,429,611 compared to $13,005,184 and $10,292,788 for the fiscal years ended
1993, and the continuing flow of reinsurance premiums from series issued in
totaled $2,700,242 compared to $2,522,712 and $1,792,947 for the fiscal years
the fiscal years ended December 31, 1992 and 1991, respectively. This was
comprised of provisions for losses incurred during the period of $10,912,683,
ceding commissions and excise taxes of $4,009,285 and operating expenses of
believes the Company's increased loss experience in 1993 reflects the effects
expiration during that year of certain unlimited mileage mechanical plans that
31, 1992 and $307,301 in 1991. In 1993 and 1992, the Company paid share
issuance costs and allocated such costs to the Subsidiary Capital Account for
until such costs could be allocated to the Subsidiary Capital Account for the
Common Stock. Share issuance costs for the fiscal year ended December 31,
1993, which were paid by the Company and charged to the Subsidiary Capital
reported) otherwise required to be maintained by MIC in respect of the
Securities" is effective for years beginning after December 15, 1993 and will
require the Company to classify its securities holdings into three categories
4. Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991............. __
STOCKHOLDERS' EQUITY Share capital Common stock - no par value; Authorized - 2,000 shares; issued and outstanding - 2,000 shares 200,000 200,000
Participating - no par value; Authorized - 100,000 shares; issued and outstanding - 18,900 shares at December 31, 1993 and 14,300 shares at December 31, 1992 4 1,417,500 1,072,500 1,617,500 1,272,500
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
Reinsurance premiums assumed 2(b),5 $27,779,063 $19,386,455 $16,784,405 Increase in unearned premiums (12,349,452) (6,381,271) (6,491,617)
Investment income: Interest earned 1,827,955 1,658,430 1,300,603 Realized gains on investments 872,287 864,282 492,344
Acquisition costs 2(b) 4,009,285 3,377,758 2,839,121 Losses paid 10,625,508 7,938,136 6,697,509 Increase in loss reserves 287,175 226,313 321,419 Administrative expenses 503,178 478,475 307,301
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
Cash flows from operating activities: Reinsurance premiums collected $26,933,330 $17,624,088 $14,709,039 Losses and underwriting expenses paid (16,977,784) (11,898,682) (10,575,830) Administrative expenses paid (490,616) (429,735) (288,593) Investment income received 2,957,718 2,302,829 1,542,361
Cash flows from investing activities: Purchases of investment securities (49,834,608) (60,877,408) (32,306,550) Sales of investment securities 44,166,497 52,166,918 30,252,467
Cash flows from financing activities: Proceeds from issuance of Participating Stock 345,000 255,000 120,000 Dividends paid (2,021,504) (1,021,705) (150,317)
Cash and cash equivalents, end of period $ 6,788,771 $ 1,710,738 $ 3,589,433
Realized gains and losses on the sale of investments are included as investment income. During 1991, the basis of determining the cost of securities sold was changed from the specific identification method to the average cost method. The effect of the change was not material.
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 January 31, 2001.
Stockholders who are United States residents are taxed on their share of the Company's income on a deemed distribution basis.
Debt securities issued by foreign governments and their agencies $16,327,184 $72,332 $(135,761) $16,263,755 Debt securities issued by supra-nationals 7,182,454 103,034 (25,925) 7,259,563
FASB Statement No. 115, "Accounting for Certain Investments in Debt and Equity Securities" is effective for years beginning after December 15, 1993 and will require the Company to classify its securities holdings into three categories (trading, available for sale, and held to maturity). The Company intends to adopt Statement No. 115 in 1994 and believes that the Statement will not have a material effect on the Company's financial position and results of operations.
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 generally have no right to vote with respect to liquidation of the Company, but can effect a liquidation in certain circumstances. As a class, these holders generally have the sole right to vote on matters not specifically reserved to Participating Stock. Any redemption of Common Stock must be approved by a majority of the holders of Participating Stock issued and outstanding and by the Board.
From time to time, funds are held in escrow on account of Participat- ing Stock applications. Such amounts are not included in cash and cash equivalents in the accompanying financial statements. At December 31, 1993 and 1992, there were no amounts held in escrow.
As of December 31, 1993, the Company has provided an irrevocable letter of credit to MIC, in the sum of $32,250,000 which is secured by cash equivalents and investments to secure the amounts recoverable from the Company related to the business ceded.
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.