UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON. D.C. 20549
-----------
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934
For quarterly period ended June 30, 2003
------------------
or
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
- --- Act of 1934
For the transition period from to
------------ ------------
Commission File Number 033-06534
--------------
Motors Mechanical Reinsurance Company, Limited
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Barbados N/A
- ------------------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Bishops Court Hill, St. Michael, Barbados N/A
- ------------------------------------------- -----------------------------------
(Address of principal executive offices) (Zip Code)
(246) 436-4895
----------------------------------------------------
(Registrant's telephone number, including area code)
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 for 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 whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
Yes No X
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
Class As of June 30, 2003
----- -------------------
Common Stock, no par-value 2,000
Participating Stock, no par-value 21,300
This quarterly report, filed pursuant to Rule 13a-13 of the General Rules
and Regulations under the Securities Exchange Act of 1934, consists of the
following information as specified in Form 10-Q:
Part I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
1. Balance Sheets as of June 30, 2003 and December 31, 2002.
2. Statements of Operations and Retained Earnings for the three month and
six month periods ended June 30, 2003 and 2002.
3. Statements of Cash Flows for the six month periods ended June 30, 2003
and 2002.
In the opinion of management, the accompanying financial statements reflect
all adjustments, consisting of normal recurring accruals, which are necessary
for a fair presentation of the results for the interim periods presented. The
information furnished for the six month period ended June 30, 2003 may not be
indicative of results for the full year.
-2-
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
BALANCE SHEETS
AT JUNE 30, 2003 AND DECEMBER 31, 2002
(Expressed in U.S. Dollars)
June 30, December 31,
2003 2002
(unaudited) (audited)
------------- ------------
ASSETS
Investments..................................................... $ 84,759,636 $ 86,991,416
Cash and cash equivalents....................................... 290,434 257,303
Accrued investment income....................................... 496,292 572,241
Due from Motors Insurance Corporation........................... 28,227 379,634
Deferred acquisition costs...................................... 18,533,246 19,810,917
Advances to participating shareholders.......................... 490,614 323,206
Prepaid expenses................................................ 1,250 44,779
------------- ------------
Total assets.................................................... $104,599,699 $108,379,496
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Unearned premiums........................................... $ 80,377,812 $ 83,482,170
Reserves for unpaid losses.................................. 2,879,883 3,650,641
Accrued liabilities......................................... 221,965 180,205
------------- ------------
Total liabilities........................................... 83,479,660 87,313,016
------------- ------------
STOCKHOLDERS' EQUITY
Share capital
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 - 21,300 shares as of June 30,
2003 and 23,300 shares as of December 31, 2002..... 1,597,500 1,747,500
------------- ------------
1,797,500 1,947,500
Retained earnings........................................... 19,253,681 20,276,888
Accumulated other comprehensive loss........................ 68,858 (1,157,908)
------------- ------------
Total stockholders' equity.................................. 21,120,039 21,066,480
------------- ------------
Total liabilities and stockholders' equity.................. $104,599,699 $108,379,496
============= ============
-3-
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS FOR THE
THREE MONTH AND SIX MONTH PERIODS ENDED JUNE 30, 2003 AND 2002
(Expressed in U.S. Dollars)
Three Month Periods Six Month Periods
Ended June 30, Ended June 30,
2003 2002 2003 2002
(unaudited) (unaudited) (unaudited) (unaudited)
------------- ------------- ------------- -------------
INCOME
Reinsurance premiums assumed $ 10,338,239 $ 10,667,591 $ 20,039,682 $ 21,553,988
Decrease in unearned premiums 1,182,221 1,928,762 3,104,358 3,599,608
------------- ------------- ------------- -------------
Premiums earned 11,520,460 12,596,353 23,144,040 25,153,596
------------- ------------- ------------- -------------
Investment income
Interest earned 824,807 1,096,433 1,767,839 2,251,176
Realized gains on
investments-net 384,309 1,304,094 671,402 1,563,270
------------- ------------- ------------- -------------
Investment income 1,209,116 2,400,527 2,439,241 3,814,446
------------- ------------- ------------- -------------
TOTAL INCOME 12,729,576 14,996,880 25,583,281 28,968,042
------------- ------------- ------------- -------------
EXPENSES
Acquisition costs 2,798,551 3,186,040 5,653,560 6,393,644
Losses paid 8,116,193 8,994,114 16,173,280 18,399,924
Decrease in reserves for
unpaid losses (606,909) (16,454) (770,759) (170,175)
Administrative expenses
- Related parties 85,667 62,257 147,814 118,296
- Other 155,954 130,055 314,704 243,011
------------- ------------- ------------- -------------
TOTAL EXPENSES 10,549,456 12,356,012 21,518,599 24,984,700
------------- ------------- ------------- -------------
NET INCOME 2,180,120 2,640,868 4,064,682 3,983,342
RETAINED EARNINGS, beginning of period 22,084,057 15,433,298 20,276,888 18,521,974
LESS: DIVIDENDS (4,930,473) 0 (4,930,473) (4,318,225)
LESS: REDEMPTION OF PARTICIPATING
STOCK (80,023) (91,820) (157,416) (204,745)
------------- ------------- ------------- -------------
RETAINED EARNINGS, end of period $ 19,253,681 $ 17,982,346 $ 19,253,681 $ 17,982,346
============= ============= ============= =============
-4-
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
STATEMENTS OF CASH FLOWS FOR THE SIX MONTH PERIODS ENDED
JUNE 30, 2003 AND 2002
(Expressed in U.S. Dollars)
Six Month Periods
Ended June 30,
2003 2002
(unaudited) (unaudited)
-------------- --------------
Cash flows from operating activities:
Reinsurance premiums collected............................. $ 20,834,493 $ 24,807,622
Losses and acquisition expenses paid....................... (21,025,744) (24,446,030)
Administrative expenses paid............................... (325,659) (313,942)
Investment income received................................. 1,825,390 2,434,355
(Advances to)/repayments by participating shareholders..... (167,408) 90,000
-------------- --------------
Net cash provided by operating activities....................... 1,141,072 2,572,005
-------------- --------------
Cash flows from investing activities:
Purchases of investments................................... (260,469,706) (129,660,792)
Sales and maturities of investments........................ 264,599,654 131,648,808
-------------- --------------
Net cash provided by investing activities....................... 4,129,948 1,988,016
-------------- --------------
Cash flows from financing activities:
Redemption of Participating Stock.......................... (307,416) (249,745)
Dividends paid............................................. (4,930,473) (4,318,225)
-------------- --------------
Net cash used in financing activities........................... (5,237,889) (4,567,970)
-------------- --------------
Increase/(decrease) in cash and cash equivalents................ 33,131 (7,949)
Cash and cash equivalents, beginning of period.................. 257,303 142,992
-------------- --------------
Cash and cash equivalents, end of period........................ $ 290,434 $ 135,043
============== ==============
Reconciliation of net income to net cash provided by
operating activities:
Net income................................................. 4,064,682 3,983,342
Realized gains on investments.............................. (671,402) (1,563,270)
Change in:
Accrued investment income............................... 75,949 171,468
Due from Motors Insurance Corporation................... 351,407 2,016,164
Deferred acquisition costs.............................. 1,277,671 1,659,318
Advances to participating shareholders.................. (167,408) 90,000
Prepaid expenses........................................ 43,529 15,870
Unearned premiums....................................... (3,104,358) (3,599,608)
Reserves for unpaid losses.............................. (770,758) (170,175)
Accrued liabilities..................................... 41,760 (31,104)
-------------- --------------
Net cash provided by operating activities....................... $ 1,141,072 $ 2,572,005
============== ==============
-5-
Item 2. Management's Discussion And Analysis of Financial Condition And Results
of Operations
Critical Accounting Policies. During the six months ended June 30, 2003, Motors
Mechanical Reinsurance Company, Limited (the "Company") had no change in its
critical accounting policies as previously disclosed in the Company's Annual
Report on Form 10-K for the year ended December 31, 2002.
Liquidity. It is anticipated that the Company will generate sufficient funds
from operations to meet current liquidity needs. Premiums generated by the
Company's reinsurance business combined with investment earnings plus proceeds
from the sale of Participating Shares will continue to be the principal sources
of funds for investment by the Company. Such funds will be available to meet the
Company's liquidity requirements. No material capital expenditures are expected
in the foreseeable future.
On April 7, 2003, the Board of Directors authorized the payment of dividends to
eligible holders of Participating Shares in an aggregate total amount of
$4,930,473.
Capital Resources. During the quarter ended June 30, 2003, no new series of
Participating Shares were issued and 18 series were redeemed, bringing the total
number of series issued and outstanding to 213 as of the end of the quarter. As
of June 30, 2003, the share capital of the Company was $1,797,500 (compared with
$1,947,500 as of December 31, 2002) comprised of paid in capital with respect to
the Common Stock of $200,000 and paid in capital with respect to Participating
Shares of $1,597,500 (compared to paid in capital with respect to Common Stock
of $200,000 and paid in capital with respect to Participating Shares of
$1,747,500 as of December 31, 2002). In addition, the Company had retained
earnings in the amount of $19,253,681 as of June 30, 2003 compared with
$20,276,888 as of December 31, 2002. The net decrease in retained earnings is
primarily attributable to the payment of the dividend, as noted above, partially
offset by investment income earned during the six months ended June 30, 2003 and
continued improvement in underwriting performance as discussed in greater detail
below.
Results of Operations. During the quarter ended June 30, 2003, the Company had
net income of $2,180,120, compared with net income of $2,640,868 for the same
period in 2002. For the six month period ended June 30, 2003, the Company had
net income of $4,064,682 compared with net income of $3,983,342 for the
comparable period in 2002. As discussed below, the decrease in net income for
the quarter ended June 30, 2003 compared to the same period in 2002 was
primarily a result of a decrease in the amount of realized gains on sales of
investments partially offset by improvements in the underwriting performance of
the Company as reflected by the reductions in incurred loss ratios for the
periods in question. Premiums earned decreased to $11,520,460 during the quarter
ended June 30, 2003 compared to $12,596,353 for the same period in 2002.
Expenses incurred (including incurred losses) during the quarter ended June 30,
2003 were $10,549,456 compared to $12,356,012 for the same period in 2002. The
Company experienced net underwriting income for the quarter ended June 30, 2003
of $971,004, compared to $240,341 for the same period in 2002. The ratio of
losses incurred to premiums earned for the quarter under review was 65%,
compared to 71% for the same period in 2002.
-6-
For the six month period ended June 30, 2003, the Company had earned premiums of
$23,144,040 compared to $25,153,596 for the comparable period of 2002. Expenses
incurred (including incurred losses) during the six month period ended June 30,
2003 were $21,518,599 compared to $24,984,700 for the comparable period in 2002.
The net underwriting income for the Company was $1,625,441 for the six month
period ended June 30, 2002 compared to $168,896 for the comparable period in
2002. The loss ratio for the six month period ended June 30, 2003 was 67%
compared to 72% for the comparable period in 2002 and this favorable trend is
the primary reason for the increase in net underwriting income.
Other than as noted above, there were no material events to report for the six
months ended June 30, 2003.
The decreases in earned premiums and expenses for the quarter and six month
periods ended June 30, 2003, compared to the same period in 2002, were in large
part attributable to a decline in the number of policies reinsured by the
Company. In addition, the ongoing efforts of the ceding company to monitor and
control losses has had a positive impact on reducing losses incurred which are
an integral part of total company expenses.
The fluctuations in loss ratios for the quarter and six month periods ended June
30, 2003 compared to the same period in 2002 are a function of the frequency in
number of claims paid and the severity of the individual claims and may not
represent a trend or recur in future quarters.
Investment income for the quarter ended June 30, 2003 was $1,209,116 compared to
$2,400,527 for the same period in 2002. Investment income for the six month
period ended June 30, 2003 was $2,439,241 compared to $3,814,446 for the
comparable period of 2002. Investment income is derived solely from the
Company's investments in fixed income securities, equities, short-term
investments, cash and cash equivalents. During the quarter ended June 30, 2003,
the Company realized gains on the sale of investment securities of $384,309,
compared to realized gains of $1,304,094 during the same period in 2002. During
the six month period ended June 30, 2002, the Company realized gains on the sale
of investment securities of $671,402 compared to realized gains of $1,563,270
during the comparable period of 2002. Realized gains on the sale of investment
securities during the quarter and six month periods ended June 30, 2003 and June
30, 2002 were a result of sales of fixed income securities, the value of which
had increased as a result of decreases in market interest rates.
Also, during the six month period ended June 30, 2003, the cash flows from
purchases and sales of investments increased significantly from the cash flows
during the comparable period of 2002 due to increased activity by the investment
manager in buying and selling securities in the Company's fixed income portfolio
to realize gains resulting from increased market values and a result of
management's decision to take advantage of perceived favorable market
conditions. The increased activity in purchases and sales of investments does
not constitute a change in the underlying nature of the Company's investment
policy. Investments continue to be held and accounted for as "available for
sale".
The unrealized gain on investments was $68,858 at June 30, 2003, compared to an
unrealized loss of $1,157,908 at December 31, 2002. This decrease in unrealized
losses is mainly due to an increase in the market value of the Company's
investment in an international equity fund called
-7-
the Capital International Global Equity Fund (the "Fund"). As of June 30, 2003,
the Fund had an unrealized loss position of $2,286,952 compared to an unrealized
loss of $3,771,295 at December 31, 2002. The Company's fixed income portfolio
had a net unrealized gain of $2,355,810 at June 30, 2003, compared to a net
unrealized gain of $2,613,387 at December 31, 2002. The improvement in the
unrealized position on investments is largely due to the recovery of the equity
markets in the second quarter of 2003 from the low at March 31, 2003.
The Company continues to experience fluctuations in the value of its equity
portfolio and its unrealized loss position could increase in the future. At June
30, 2003 the unrealized loss position of the Company's investment in the Fund is
considered to be temporary in nature and no provision for other than temporary
losses has been made. Management will continue to monitor the value of the
Company's investment in the Fund in order to determine if losses in value, which
could be considered other than temporary, have occurred.
For the quarter ended June 30, 2003 the Company had interest earned of $824,807,
compared to $1,096,433 for the same period in 2002. For the six month period
ended June 30, 2003, the Company had interest income of $1,767,839 compared to
$2,251,176 for the comparable period of 2002. The reduction in interest earned
for the three and six month periods ended June 30, 2003 is primarily as a result
of lower coupon rates on its fixed income investments.
During the three months ended June 30, 2003, the Company recorded a realized
loss for other than temporary impairment on its fixed income portfolio of
$18,741 relative to one security. No losses for other than temporary impairment
were recorded in the equity portfolio. To determine the amounts recorded for
other than temporary impairment for its fixed income investments, the Company
evaluated, among other things, the length of time and the extent that the
security's market value has been valued at less than cost; the financial health
of the issuer, including any specific events which may influence the issuer; the
Company's intent and ability to hold the investment; and the security's rating
as determined by an independent rating agency. If an investment's unrealized
loss position was determined to be other than temporary in nature, the
underlying security's cost basis would have been written down to the market
value at the time that the impairment charge was recorded.
The Company's investment in the Fund was reviewed using the applicable criteria
described above and such review also included the following procedures to
determine whether any charge for other than temporary impairment was necessary:
o Reviewed the relationship between the Fund's market value compared to
its historical cost since its purchase. This included examining the
period of time that the Fund was consecutively in an unrecognized loss
position.
o Reviewed the volatility of the Fund to determine if there has been a
demonstrated ability for it to recover from an unrealized loss
position.
o Examined the concentration of the Fund from a geographical, industry,
and individual security standpoint.
-8-
As of June 30, 2003, the Company's investment in the Fund was in an unrealized
loss position of $2,286,952 or 13.9% of its historical cost. Utilizing the
procedures described above, no charge for other than temporary impairment was
recorded in the first six months of 2003 for the Company's investment in the
Fund. This conclusion was based on the procedures described above, the
volatility of the Fund over the last year and the ability to be able to recover
from unrealized loss positions in a reasonable period of time as evidenced by
its performance during the first six months of 2003. As of July 31, 2003, the
net unrealized loss position of the Fund was $1,733,324 million or 10.6% of its
historical cost. Management will continue to monitor the unrealized loss
position of this investment and may record an impairment charge in a future
period if necessary.
There are inherent uncertainties in applying methodology and procedures
described above with the primary uncertainty being the continued instability in
most international economies, geographic regions, and industries in which the
Fund invests. Should management determine in the future that a decline in the
value of any of its investment portfolio is other than temporary, the overall
impact on the Company's holdings of fixed income investments and its investment
in the Fund is estimated to be a gross loss of approximately $249,100 and
$2,287,000, respectively. This represents the gross unrealized loss position at
June 30, 2003 of the Company's fixed income and equity portfolios, respectively.
The fair value of the Company's investments that are in an unrealized loss
position at June 30, 2003 are as follows:
Unrealized
Expressed in ($000s) Unrealized Loss As %
Security Type Cost Market Loss of Cost
------------ ------------ ------------ -----------
Equity Securities
CIF Mutual Fund............... $16,410.4 $14,123.4 $(2,287.0) 13.9%
Fixed Income Securities
U.S. Government............... 1,241.8 1,238.8 (3.0) 0.2%
U.S. Government Agencies
& Asset Backed............. 8,574.2 8,389.5 (184.7) 2.2%
Corporate..................... 313.6 310.8 (2.8) 0.9%
Corporate Asset Backed........ 2,761.1 2,704.3 (56.8) 2.1%
Foreign Corporate............. 74.6 72.9 (1.7) 2.3%
Other Debt Securities......... 3,209.6 3,209.5 (0.1) 0.0%
--------- --------- ----------
Subtotal-Fixed Income Securities.. $16,174.9 $15,925.8 $ (249.1)
TOTAL............................. $32,585.3 $30,049.2 $(2,536.1)
All of the fixed income securities included in the above table are considered
investment grade and have maturity dates ranging from October 2003 to July 2033.
Excluding the Fund, the Company held positions in 29 fixed income securities
with an unrealized loss ranging from
-9-
approximately $94 to $21,869 (or between 0.0% and 14.1% of cost) at June 30,
2003. Of the above, all fixed income securities were in an unrealized loss
position for less than 12 consecutive months at June 30, 2003. The Fund has been
in an unrealized loss position for 15 consecutive months at June 30, 2003
however, its unrealized loss position as a percentage of historical cost has
fallen below 20% for the two consecutive months prior to June 30, 2003. In
addition, the unrealized loss position of the Fund has improved by 50% since
March 31, 2003 and by approximately 39% since December 31, 2002.
At June 30, 2003, the Company's investments are concentrated in the following
industries:
% of Mkt. Value % of Total Mkt.
Number of of Value of
Holdings Investment Portfolio
--------------- --------------- ---------------
Equity Securities:
CIF Mutual Fund(1): 1
Information Technology.................... 22.5%
Financial Services........................ 18.9%
Consumer Discretionary.................... 14.5%
Health Care............................... 13.2%
Energy.................................... 8.0%
Telecommunications........................ 6.2%
Industrials............................... 5.1%
Materials................................. 4.4%
Cash & Equivalents........................ 4.1%
Consumer Staples.......................... 2.4%
Utilities................................. 0.7%
--------------- --------------- ---------------
Subtotal-Equity Securities......................... 1 100.0% 16.7%
--------------- --------------- ---------------
Fixed Income Securities:
U.S. Government Agencies & Asset Backed....... 52 48.3% 40.3%
Corporate Asset Backed........................ 22 13.9% 11.5%
Corporate..................................... 80 18.7% 15.5%
U.S. Government Securities.................... 12 5.2% 4.4%
State & Municipal............................. 3 2.0% 1.6%
Other Debt.................................... 2 4.6% 3.8%
Foreign Corporate............................. 1 0.1% 0.1%
Short Term and Other.......................... 2 7.2% 6.1%
--------------- --------------- ---------------
Subtotal - Fixed Income Securities................. 174 100.0% 83.3%
--------------- --------------- ---------------
TOTAL INVESTMENT PORTFOLIO......................... 175 100.0%
=============== =============== ===============
(1) Represents interests in a mutual fund called the Capital International
Global Equity Fund comprised of numerous securities. The Company does not own
individual positions in the securities that comprise the Fund. At June 30, 2003
there were 204 different securities comprising the Fund.
-10-
Reserves for Unpaid Losses
Reserves for unpaid losses are balance sheet liabilities representing estimates
of amounts needed in the future to pay claims under policies with respect to
insured events, which have occurred as of the balance sheet dates.
For purposes of establishing reserves for unpaid losses, the Company relies upon
the advice of Motors Insurance Corporation ("MIC"). At June 30, 2003 and
December 31, 2002, the Company's reserves for unpaid losses were calculated as a
percentage of earned premiums for the corresponding quarter. This calculation is
compared to an acceptable range for the reserves developed by actuaries of the
ceding company. At June 30, 2003 and December 31, 2002, the reserves for unpaid
losses were $2,879,883 and $3,650,641, respectively. At June 30, 2003, the
estimated range of reserves for unpaid losses prepared for the Company by the
ceding company's actuaries was as follows:
Low end of range: $2,088,768
High end of range: $3,123,768
The recorded reserves at June 30, 2003 are within the range of estimated
reserves. However, there is inherent volatility in reserve estimates. Management
will continue to evaluate the estimates of reserves for unpaid losses and will,
if necessary, adjust them accordingly as trends fully emerge and are confirmed
by the underlying claims history.
Reserves for unpaid losses are established after periodic actuarial reviews,
based on judgments of the effects of technological change, manufacturers'
warranties, and the ceding company's historical experience with mechanical motor
vehicle service agreements. Consequently, the determination of reserves for
unpaid losses is an estimate and a process inherently subject to a number of
highly variable factors. Ultimate losses could exceed reserves for unpaid losses
and cause the Company to adjust such reserves. Any adjustments to reserves for
unpaid losses are reflected in the operating results for the periods in which
they become known.
Prior to the quarter ended June 30, 2003, reserves for unpaid losses were
recorded based on a higher percentage of earned premiums for the corresponding
quarter. The reduction in the loss factor utilized at June 30, 2003 reflects
improvements in the claim payment process of the ceding company, which have now
more fully emerged and are confirmed by claim history. The loss reserve factor
change resulted in a benefit in the quarter ended June 30, 2003 of approximately
$576,000. Such efficiencies included, among other things, the greater
utilization of electronic claim settlement processes, including the ability to
submit many types of claims electronically and the improvement in the overall
handling time of claims requiring adjustment.
Since March 31, 2003, there have been no other changes to the key assumptions
made to estimate the reserves for unpaid losses and there has been no change in
the nature and timing of the change in the estimate of reserves for unpaid
losses.
Key assumptions made in determining the actuarial range of reserves for unpaid
losses include the following:
-11-
o Loss development factors for the direct business of the ceding company
were utilized due to the larger volume and greater stability.
o The loss development factors were weighted based on the mix of new and
used vehicle business in the latest calendar year.
o Loss development factors were set equal to selected ratios for the new
and used business. These selections reflect reductions due to
efficiencies gained in the claims payment process that have been
realized over the past several years. Such efficiencies resulted in
the quicker payment of claims, resulting in fewer open claims at a
given point in time.
The Company's incurred loss ratios (losses incurred as a percentage of net
premium earned) on all business for the six month periods ended June 30, 2003
and 2002 were 67% and 72%, respectively.
The policies reinsured by the Company are written for multiple years (up to
seven years) and losses do not occur equally over the period for which the
policies are written, but tend to be clustered in the later years. Therefore,
loss experience for prior periods may not be indicative of results for future
periods.
Forward Looking Statements
This document contains "forward-looking statements" that anticipate results
based on management's plans that are subject to uncertainty. These statements
are made subject to the safe-harbor provisions of the Private Securities
Litigation Reform Act of 1995.
Forward-looking statements do not relate strictly to historical or current facts
and may be identified by their use of words like "plans," "will," "anticipates,"
"estimates," "intends," "believes" and other words with similar meanings. These
statements may address, among other things, our strategy for growth, product
development, regulatory approvals, market position, expenses, financial results
and reserves. Forward-looking statements are based on management's current
expectations of future events. We cannot guarantee that any forward-looking
statements will be accurate. However, we believe that our forward-looking
statements are based on reasonable, current expectations and assumptions.
Whether or not actual results differ materially from forward-looking statements
may depend on numerous foreseeable and unforeseeable risks and uncertainties,
some of which relate particularly to our business, such as our ability to set
adequate premium rates and maintain adequate reserves, our ability to compete
effectively, and our ability to grow our business through internal growth as
well as though acquisitions. Other risks and uncertainties may be related to the
insurance industry in general or the overall economy, such as regulatory
developments, industry consolidation and, general economic conditions and
interest rates. We assume no obligation to update any forward-looking statements
as a result of new information or future events or developments.
If the expectations or assumptions underlying our forward-looking statements
prove inaccurate or if risks or uncertainties arise, actual results could differ
materially from those predicted in our forward-looking statements.
-12-
Item 4. Controls and Procedures
The Company currently has in place systems relating to disclosure controls and
procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of
1934). The Company's management, including the principal executive officer and
the principal financial officer, evaluated the effectiveness of these disclosure
controls and procedures in connection with the preparation of this report and
concluded that the controls and procedures were effective and adequate as of the
end of the quarter covered by this report. The Company's management, including
the principal executive officer and the principal financial officer, also
evaluated the Company's internal control over financial reporting to determine
whether any changes occurred during the quarter covered by this report that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting. Based on that evaluation,
there have been no such changes during the quarter covered by this report.
-13-
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The following matters were submitted to a vote of our shareholders at the
annual meeting of shareholders held on May 14, 2003:
1. Election of six (6) Directors to hold office until the annual meeting of
shareholders to be held in 2004. The nominees and the tabulation of votes are
listed as follows:
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Nominee Votes For Votes Against or Withheld Abstain
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
William B. Noll 2,000 - -
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Thomas D. Callahan 2,000 - -
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
John J. Dunn, Jr. 2,000 - -
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Robert E. Capstack 2,000 - -
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Peter R.P. Evelyn 2,000 - -
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Harvey J. Koning 5,258 - -
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
2. Election of Independent Auditors. Deloitte & Touche, Bridgetown,
Barbados, was elected as independent auditors of the Company for the year ending
December 31, 2003. There were 7,258 votes for, no votes against or withheld and
no votes abstained.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit 31.1 Rule 13a-14a/15d-14a Certification of the Principal Executive
Officer of the Registrant.
Exhibit 31.2 Rule 13a-14a/15d-14a Certification of the Principal Financial
Officer of the Registrant.
Exhibit 32.1 Section 1350 Certification of Principal Executive Officer of
the Registrant.
Exhibit 32.2 Section 1350 Certification of Principal Financial Officer of
the Registrant.
(b) No reports on Form 8-K were filed during the quarter for which this report
is filed.
-14-
SIGNATURES
Pursuant to the requirements 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
Signing on behalf of
the Registrant, and
Principal Financial Officer
Dated: August 12, 2003
EXHIBIT INDEX
Description of Document Exhibit No.
- ----------------------- -----------
Rule 13a-14a/15d-14a Certification of the Principal Executive
Officer of the Registrant. 31.1
Rule 13a-14a/15d-14a Certification of the Principal Financial
Officer of the Registrant. 31.2
Section 1350 Certification of Principal Executive Officer of the Registrant. 32.1
Section 1350 Certification of Principal Financial Officer of the Registrant. 32.2
Exhibit 31.1
CERTIFICATION
I, Thomas D. Callahan, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Motors Mechanical
Reinsurance Company, Limited;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c. Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 12, 2003
/s/ Thomas D. Callahan
---------------------------------
Name: Thomas D. Callahan
Title: President, Chairman, Chief
Executive Officer and Director
Exhibit 31.2
CERTIFICATION
I, Ronald W. Jones, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Motors Mechanical
Reinsurance Company, Limited;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c. Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 12, 2003
/s/ Ronald W. Jones
---------------------------------
Name: Ronald W. Jones
Title: Vice President, Finance and
Principal Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Thomas D. Callahan, Chief Executive Officer of Motors Mechanical
Reinsurance Company, Limited (the "Company"), hereby certify, to the best of my
knowledge, that the Company's quarterly report on Form 10-Q for the period ended
June 30, 2003 (the "Report") fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d))
and that the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Date: August 12, 2003
/s/ Thomas D. Callahan
------------------------------
Name: Thomas D. Callahan
Title: Chief Executive Officer
A signed original of this written statement required by Section 906 has been
provided to Motors Mechanical Reinsurance Company, Limited and will be retained
by Motors Mechanical Reinsurance Company, Limited and furnished to the
Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Ronald W. Jones, Principal Financial Officer of Motors Mechanical
Reinsurance Company, Limited (the "Company"), hereby certify, to the best of my
knowledge, that the Company's quarterly report on Form 10-Q for the period ended
June 30, 2003 (the "Report") fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d))
and that the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Date: August 12, 2003
/s/ Ronald W. Jones
------------------------------------
Name: Ronald W. Jones
Title: Principal Financial Officer
A signed original of this written statement required by Section 906 has been
provided to Motors Mechanical Reinsurance Company, Limited and will be retained
by Motors Mechanical Reinsurance Company, Limited and furnished to the
Securities and Exchange Commission or its staff upon request.