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 September 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 September 30, 2003
----- ------------------------
Common Stock, no par-value 2,000
Participating Stock, no par-value 21,000
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 September 30, 2003 and December 31, 2002;
2. Statements of Operations and Retained Earnings for the three
month and nine month periods ended September 30, 2003 and
2002; and
3. Statements of Cash Flows for the nine month periods ended
September 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 nine month period ended September
30, 2003 may not be indicative of results for the full year.
2
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
----------------------------------------------
BALANCE SHEETS
--------------
AT SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
-------------------------------------------
(Expressed in U.S. Dollars)
September 30, December 31,
2003 2002
(unaudited) (audited)
----------- ---------
ASSETS
Investments..................................................... $ 85,292,365 $ 86,991,416
Cash and cash equivalents....................................... 225,685 257,303
Accrued investment income....................................... 480,229 572,241
Due from Motors Insurance Corporation........................... 583,864 379,634
Deferred acquisition costs...................................... 18,028,132 19,810,917
Advances to participating shareholders.......................... 655,866 323,206
Prepaid expenses................................................ 625 44,779
------------------ ------------------
Total assets.................................................... $ 105,266,766 $ 108,379,496
================= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Unearned premiums........................................... $ 79,274,162 $ 83,482,170
Reserves for unpaid losses.................................. 2,859,193 3,650,641
Accrued liabilities......................................... 168,108 180,205
----------------- ------------------
Total liabilities........................................... 82,301,463 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 - 21,000 shares as of September 30,
2003 and 23,300 shares as of December 31, 2002..... 1,575,000 1,747,500
----------------- ------------------
1,775,000 1,947,500
Retained earnings........................................... 20,936,574 20,276,888
Accumulated other comprehensive income/(loss)............... 253,729 (1,157,908)
----------------- ------------------
Total stockholders' equity.................................. 22,965,303 21,066,480
----------------- ------------------
Total liabilities and stockholders' equity.................. $ 105,266,766 $ 108,379,496
================= ===================
3
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
----------------------------------------------
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS FOR THE
------------------------------------------------------
THREE MONTH AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------
(Expressed in U.S. Dollars)
Three Month Periods Nine Month Periods
Ended September 30, Ended September 30,
2003 2002 2003 2002
(unaudited) (unaudited) (unaudited) (unaudited)
----------- ----------- ----------- -----------
INCOME
Reinsurance premiums assumed $ 10,334,027 $ 10,973,506 $ 30,373,709 $ 32,527,494
Decrease in unearned premiums 1,103,650 1,515,512 4,208,008 5,115,120
------------------ ------------------ ------------------ ------------------
Premiums earned 11,437,677 12,489,018 34,581,717 37,642,614
------------------ ------------------ ----------------- ------------------
Investment income
Interest earned 861,578 1,010,392 2,629,417 3,261,568
Realized gains on
investments-net 133,058 146,082 804,460 1,709,352
------------------ ------------------ ------------------ ------------------
Investment income 994,636 1,156,474 3,433,877 4,970,920
------------------ ------------------ ------------------ ------------------
TOTAL INCOME 12,432,313 13,645,492 38,015,594 42,613,534
------------------ ------------------ ------------------ ------------------
EXPENSES
Acquisition costs 2,751,144 3,101,772 8,404,704 9,495,416
Losses paid 7,635,978 9,246,892 23,809,258 27,646,816
Decrease in reserves for
unpaid losses (20,689) (58,818) (791,448) (228,993)
Administrative expenses
- Related parties 64,971 49,997 212,785 168,293
- Other 88,080 72,815 402,784 315,826
------------------ ------------------ ------------------ ------------------
TOTAL EXPENSES 10,519,484 12,412,658 32,038,083 37,397,358
------------------ ------------------ ------------------ ------------------
NET INCOME 1,912,829 1,232,834 5,977,511 5,216,176
RETAINED EARNINGS, beginning of period 19,253,681 17,982,346 20,276,888 18,521,974
LESS: DIVIDENDS 0 0 (4,930,473) (4,318,225)
LESS: REDEMPTION OF PARTICIPATING
STOCK (229,936) (651,272) (387,352) (856,017)
------------------ ------------------- ------------------- -------------------
RETAINED EARNINGS, end of period $ 20,936,574 $ 18,563,908 $ 20,936,574 $ 18,563,908
================== ================== ================== ===================
4
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
----------------------------------------------
STATEMENTS OF CASH FLOWS FOR THE NINE MONTH PERIODS ENDED
---------------------------------------------------------
SEPTEMBER 30, 2003 AND 2002
---------------------------
(Expressed in U.S. Dollars)
Nine Month Periods
Ended September 30,
2003 2002
(unaudited) (unaudited)
----------- -----------
Cash flows from operating activities:
Reinsurance premiums collected.................................... $ 31,172,732 $ 35,475,213
Losses and acquisition expenses paid.............................. (31,393,339) (35,785,941)
Administrative expenses paid...................................... (606,205) (525,279)
Investment income received........................................ 2,703,031 3,462,560
(Advances to)/repayments by participating shareholders............ (332,660) 132,426
----------------- ------------------
Net cash provided by operating activities.............................. 1,543,559 2,758,979
----------------- ------------------
Cash flows from investing activities:
Purchases of investments.......................................... (308,586,679) (194,300,178)
Sales and maturities of investments............................... 312,501,827 197,005,902
----------------- ------------------
Net cash provided by investing activities.............................. 3,915,148 2,705,724
----------------- ------------------
Cash flows from financing activities:
Proceeds from issuance of Participating Stock 0 15,000
Redemption of Participating Stock................................. (559,852) (953,516)
Dividends paid.................................................... (4,930,473) (4,318,225)
----------------- ------------------
Net cash used in financing activities.................................. (5,490,325) (5,256,741)
----------------- ------------------
(Decrease)/increase in cash and cash equivalents....................... (31,618) 207,962
Cash and cash equivalents, beginning of period......................... 257,303 142,992
----------------- ------------------
Cash and cash equivalents, end of period............................... $ 225,685 $ 350,954
================== ==================
Reconciliation of net income to net cash provided by operating activities:
Net income........................................................ 5,977,511 5,216,176
Realized gains on investments--net................................ (804,460) (1,709,352)
Change in:
Accrued investment income...................................... 92,012 207,319
Due from Motors Insurance Corporation.......................... (204,230) 1,929,307
Deferred acquisition costs..................................... 1,782,785 2,420,192
Advances to participating shareholders......................... (332,660) 132,426
Prepaid expenses............................................... 44,154 8,199
Unearned premiums.............................................. (4,208,008) (5,115,120)
Reserves for unpaid losses..................................... (791,448) (228,993)
Accrued liabilities............................................ (12,097) (101,175)
------------------ ------------------
Net cash provided by operating activities.............................. $ 1,543,559 $ 2,758,979
================== ==================
5
Item 2. Management's Discussion And Analysis of Financial Condition And
---------------------------------------------------------------
Results of Operations
---------------------
Critical Accounting Policies. During the nine months ended September 30, 2003,
Motors Mechanical Reinsurance Company, Limited (the "Company") had no changes to
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 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.
Capital Resources. During the quarter ended September 30, 2003, no new series of
Participating Shares were issued and 3 series were redeemed, bringing the total
number of series issued and outstanding to 210 as of the end of the quarter. As
of September 30, 2003, the share capital of the Company was $1,775,000 (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 $1,575,000 (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 $20,936,574 as of September 30, 2003 compared
with $20,276,888 as of December 31, 2002. The net increase in retained earnings
is primarily attributable to investment income earned and the continued
improvement in underwriting performance during the nine months ended September
30, 2003 as discussed in greater detail below, partially offset by the payment
of the dividend on April 7, 2003 and the redemption of Participating Shares as
noted above.
Results of Operations. During the quarter ended September 30, 2003, the Company
had net income of $1,912,829, compared with net income of $1,232,834 for the
same period in 2002. For the nine month period ended September 30, 2003, the
Company had net income of $5,977,511 compared with net income of $5,216,176 for
the comparable period in 2002. As discussed below, the increase in net income
for the quarter ended September 30, 2003 compared to the same period in 2002 was
primarily as a result of the improved underwriting performance of the Company as
reflected by the reductions in incurred loss ratios and acquisition expenses for
the periods in question, partially offset by reductions in investment income.
Premiums earned decreased to $11,437,677 during the quarter ended September 30,
2003 compared to $12,489,018 for the same period in 2002. Expenses incurred
(including incurred losses) during the quarter ended September 30, 2003 were
$10,519,484 compared to $12,412,658 for the same period in 2002. The Company
experienced net underwriting income (premiums earned net of total expenses) for
the quarter ended September 30, 2003 of $918,193, compared to $76,360 for the
same period in 2002. The ratio of losses incurred to premiums earned for the
quarter under review was 67%, compared to 74% for the same period in 2002.
For the nine month period ended September 30, 2003, the Company had earned
premiums of $34,581,717 compared to $37,642,614 for the comparable period of
2002. Expenses incurred (including incurred losses) during the nine month period
ended September 30, 2003 were $32,038,083 compared to $37,397,358 for the
comparable period in 2002. The net underwriting income for the Company was
$2,543,634 for the nine month period ended September 30, 2002 compared to
6
$245,256 for the comparable period in 2002. The loss ratio for the nine month
period ended September 30, 2003 was 67% compared to 73% for the comparable
period in 2002. This 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 nine
months ended September 30, 2003.
The decreases in earned premiums and expenses for the quarter and nine month
periods ended September 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 nine month periods ended
September 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 September 30, 2003 was $994,636 compared
to $1,156,474 for the same period in 2002. Investment income for the nine month
period ended September 30, 2003 was $3,433,877 compared to $4,970,920 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 September 30,
2003, the Company realized gains on the sale of investment securities of
$133,058, compared to realized gains of $146,082 during the same period in 2002.
During the nine month period ended September 30, 2003, the Company realized
gains on the sale of investment securities of $804,460 compared to realized
gains of $1,709,352 during the comparable period of 2002. Realized gains on the
sale of investment securities during the quarter and nine month periods ended
September 30, 2003 and September 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 nine month period ended September 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 as a result of the
investment manager'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 $253,729 at September 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 the Capital
International Global Equity Fund (the "Fund"). As of September 30, 2003, the
Fund had an unrealized loss position of $1,226,033 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 $1,479,762 at September 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 and third quarters of 2003.
7
The Company continues to experience fluctuations in the value of its equity
portfolio and its unrealized loss position could increase in the future. At
September 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 September 30, 2003 the Company had interest earned of
$861,578, compared to $1,010,392 for the same period in 2002. For the nine month
period ended September 30, 2003, the Company had interest income of $2,629,417
compared to $3,261,568 for the comparable period of 2002. The reduction in
interest earned for the three and nine month periods ended September 30, 2003 is
primarily a result of lower coupon rates on fixed income investments.
During the three months ended September 30, 2003, the Company did not record any
realized losses for other than temporary impairment on its fixed income
portfolio or on its 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.
As of September 30, 2003, the Company's investment in the Fund was in an
unrealized loss position of $1,226,033 or 7.5% of its historical cost. Utilizing
the procedures described above, no charge for other than temporary impairment
was recorded in the first nine 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 nine months of 2003. As of October 31, 2003,
the net unrealized loss position of the Fund was $69,882 or 0.4% of its
historical cost. Management will continue to monitor the unrealized loss
position of investments and may record an impairment charge in a future period
if necessary.
8
There are inherent uncertainties in applying methodology and procedures
described above with the primary uncertainty being the continued volatility 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 $451,400 and
$1,226,000, respectively. This represents the gross unrealized loss position at
September 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 September 30, 2003 are as follows:
Unrealized
Expressed in ($000s) Loss As %
Security Type Cost Market Unrealized Loss of Cost
- ------------- ---- ------ --------------- -------
Equity Securities
CIF Mutual Fund........................ $ 16,432.9 $ 15,206.9 $ (1,226.0) 7.5%
------------ ------------ -------------
Fixed Income Securities
U.S. Government........................ 579.6 572.9 (6.7) 1.2%
U.S. Government Agencies
& Asset Backed...................... 22,982.0 22,653.0 (329.0) 1.4%
Corporate.............................. 929.0 919.0 (10.0) 1.1%
Corporate Asset Backed................. 3,858.4 3,768.2 (90.2) 2.3%
Foreign Corporate...................... 74.7 70.5 (4.2) 5.5%
Other Debt Securities.................. 350.0 338.7 (11.3) 3.2%
Subtotal-Fixed Income Securities........... $ 28,773.7 $ 28,322.3 $ (451.4)
------------ ------------ -------------
TOTAL...................................... $ 45,206.6 $ 43,529.2 $ (1,677.4)
============ ============ =============
All of the fixed income securities included in the above table are considered
investment grade and have maturity dates ranging from October 1, 2003 to April
15, 2034. Excluding the Fund, the Company held positions in 50 fixed income
securities with an unrealized loss ranging from approximately $194 to $49,389
(or between 0.1% and 1.6% of cost) at September 30, 2003. Of the above, all
fixed income securities were in an unrealized loss position for less than 12
consecutive months at September 30, 2003. The Fund has been in an unrealized
loss position for 18 consecutive months at September 30, 2003 however, its
unrealized loss position as a percentage of historical cost has fallen below 10%
for the two consecutive months as of September 30, 2003. In addition, the
unrealized loss position of the Fund has improved by 21 percentage points (or
73.6%) since March 31, 2003 and by approximately 16 percentage points (or 67.5%)
since December 31, 2002.
9
At September 30, 2003, the Company's investments are concentrated in the
following industries:
% of Total Mkt.
Number of % of Mkt. Value Value of
Holdings of Investment Portfolio
-------- ------------- ---------
Equity Securities:
CIF Mutual Fund(1): 1
Information Technology........................ 22.2%
Financial Services............................ 18.2%
Consumer Discretionary........................ 13.5%
Health Care................................... 13.2%
Energy........................................ 7.9%
Materials..................................... 5.9%
Telecommunications............................ 5.5%
Consumer Staples.............................. 4.7%
Industrials................................... 4.4%
Cash & Equivalents............................ 3.5%
Utilities..................................... 1.0%
------- ---------
Subtotal-Equity Securities............................. 1 100.0% 17.8%
------- --------- ----------
Fixed Income Securities:
U.S. Government Agencies & Asset Backed........... 60 60.2% 49.5%
Corporate Asset Backed............................ 21 13.5 % 11.1%
Corporate......................................... 84 18.2% 15.0%
U.S. Government Securities........................ 16 6.4% 5.3%
State & Municipal................................. 4 2.7% 2.2%
Other Debt........................................ 1 0.1% 0.0%
Foreign Corporate................................. 1 0.1% 0.1%
Short Term and Other.............................. 0 -1.2% -1.0%
------- --------- ----------
Subtotal - Fixed Income Securities..................... 187 100.0% 82.2%
------- --------- ----------
TOTAL INVESTMENT PORTFOLIO............................. 188 100.0%
======= ========= ===========
(1) Represents interests in a mutual fund called the Capital International
Global Equity Fund, or the Fund, comprised of numerous securities. The Company
does not own individual positions in the securities that comprise the Fund. At
September 30, 2003 there were 208 different securities comprising the Fund.
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. The Company's
incurred loss ratios (losses incurred as a percentage of net premium earned) on
all business for the nine month periods ended September 30, 2003 and 2002 were
67% and 73%, respectively.
10
For purposes of establishing reserves for unpaid losses, the Company relies upon
the advice of the ceding company, Motors Insurance Corporation ("MIC"). At
September 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 September 30, 2003 and December
31, 2002, the reserves for unpaid losses were $2,859,193 and $3,650,641,
respectively. At September 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: $1,893,783
High end of range $2,838,783
Although the recorded reserves at September 30, 2003 are higher than the
high-end of the range of estimated reserves, 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 claim 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. The estimate of ultimate losses could be revised and
cause the Company to adjust the reserves for unpaid losses. 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 reflects improvements in the
claim payment process of the ceding company, which have now more fully emerged
and are confirmed by claim history. 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 June 30, 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:
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 vehicle business. These selections reflect
reductions due to efficiencies gained in the claims payment
11
process that have been realized over the past several years.
Such efficiencies result in the quicker payment of claims,
leading to fewer open claims at a given point in time.
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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
There have been no material changes in the Company's market risk, interest rate
risk, credit risk, or equity price risk since December 31, 2002. Please see the
Company's Annual Report on Form 10-K for the year ended December 31, 2002 for
more information concerning Quantitative and Qualitative Disclosures About
Market Risk.
Item 4. Controls and Procedures
-----------------------
The Company currently has in place systems relating to disclosure controls and
procedures (as defined in Rule 13a-15e 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
12
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
could 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.
Part II. OTHER INFORMATION
-----------------
Item 1: Legal Proceedings
-----------------
The Company is not involved in any pending legal proceedings.
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.
13
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 as
Principal Financial Officer
Dated: November 12, 2003
14
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
15